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FCC OKs Liberty's DirecTV Stake

U.S. cable operators are one step closer to having to compete with Dr. John Malone, a cable pioneer who was behind many of the deals that shaped the sector’s modern era.

That’s because the Federal Communications Commission (FCC) gave its blessing Monday to a $12 billion deal that will shift News Corp. (NYSE: NWS)’s 38.85 percent stake in DirecTV Group Inc. (NYSE: DTV) to Malone’s Liberty Media Corp. (NYSE: LMC) -- but with a few strings attached.

The agency’s order on the deal requires that Liberty and DirecTV abide by the same program access, carriage, and retransmission consent conditions imposed in 2003 when ownership of the satellite TV company was transferred from Hughes Electronics Corp. (NYSE: GMH) to News Corp.

The FCC is also requiring Liberty to cede control of DirecTV-Puerto Rico and Liberty Cablevision, a cable operator based in Puerto Rico, within one year.

The FCC unanimously voted in favor of the deal, though two commissioners spelled out some concerns.

Commissioner Michael Copps concurred, but was “disappointed” that the FCC did not apply a condition that DirecTV provide local-into-local service to all of the U.S.’s 210 TV markets, including rural areas.

“In the end, this transaction is hardly an occasion to jump for joy,” Copps said in his statement.

Commissioner Jonathan Adelstein approved the deal in part as it “deconsolidate[s] a major vertically-integrated media and entertainment company,” but also dissented on the local-into-local programming issue.

“Scores of markets throughout the country have been ignored by DirecTV. The commission should not neglect these markets, regulating them to second-class video citizenship,” he said.

Universal local-into-local service “should be an imperative for DirecTV,” Adelstein added.

Under the original deal, announced in December 2006, Liberty agreed to exchange its 16.3 percent stake in News Corp. for News Corp.’s stake in DirecTV, as well as regional sports networks in Denver, Pittsburgh, and Seattle. (See Liberty Acquires DirecTV.)

Liberty Media has a significant cable presence outside the U.S. Its Liberty Global Inc. (Nasdaq: LBTY) division supports 30 million homes passed and 16.1 million subs in parts of Europe, Asia, and Latin America. Those numbers also include Liberty’s stake in Austar, the largest satellite TV operator in Australia.

In addition to Liberty Cablevision, some of the unit’s other cable holdings include UPC Broadband (Europe), Telenet (Belgium), Jupiter Telecommunications Co. Ltd. (J:COM) (Japan), and VTR Globalcom S.A. (Chile).

— Jeff Baumgartner, Site Editor, Cable Digital News

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