WASHINGTON — When it comes to building a competitive marketplace, cable is a trouble spot, and that is why the Justice Dept. is going to court to block cabler-controlled Primestar from getting into the high-powered DBS business, said the DOJ’s antitrust topper Joel Klein on Tuesday.
“Cable companies have much less incentive to go after their installed base than a new entrant,” said Klein. He was speaking at the monthly meeting of the Washington-based Media Institute.
Klein also praised a federal judge for setting a Feb. 1. court date for the lawsuit brought by the Justice Dept. against Primestar. Klein said the trial date should allow a speedy resolution of the case.
In its complaint, the Justice Dept. argued that Primestar, which is jointly owned by the nation’s five largest cable companies including Time Warner, Comcast, Cox, MediaOne and Telecommunications Inc. spin-off TCI Satellite Entertainment, had little incentive to compete with its owners’ core business.
Klein did say said that he is open to a settlement with Primestar. “Any litigation we are in is open to an approved settlement,” said Klein.
In order to meet Justice Dept. concerns, Primestar is currently scrambling to replace its cable investors which own a combined 60% of the company; most observers said the cablers would have to eliminate any stake in Primestar in order to win the Justice Dept.’s approval.
Ironically, all of this scrambling could come to naught, because Primestar does not hold a DBS license; the only one available is up for grabs from MCI, and there are at least two other suitors said to be interested in acquiring it: EchoStar and defense industry giant Loral. The telco bought the license at a government auction for $682.5 million, and it is a major asset of its failed joint venture with News Corp. News Corp. is now trying to peddle the license to other buyers.
Although Klein praised the Telecommunications Act which deregulated portions of the telephone, broadcast and cable industries, he did say there are significant problems in the cable marketplace. Klein said he was particularly concerned that most consumers have only one choice when it comes to multichannel pay TV providers. “I do think the structure is problematic in terms of competition,” said Klein, adding, “We are generally unhappy when there is only one outlet.”
Klein refused to comment on the pending merger of AT&T and TCI other than to say the deal would get close scrutiny. Other regulators in Washington, including FCC chairman Bill Kennard, have said the AT&T/TCI deal could benefit consumers if it spurred competition in the local telephone marketplace.