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Primestar deal met by skeptics in D.C.

Justice Dept.'s suit against satcaster concerns solons

WASHINGTON — Talks between TCI topper John Malone and News Corp.’s Rupert Murdoch to take control of Primestar may have briefly cheered some on Wall Street, but the tete-a-tete was met in Washington with great skepticism.

“This is fantasyland as far as I am concerned,” said Media Access Project’s Andrew Schwartzman, a critic of the deal that would bring in TCI subsidiary United Video Satellite Group and News Corp. to buy out the interests of Primestar’s current partners, which include Time Warner, Cox, Comcast, MediaOne and TCI Satellite Entertainment.

Prime concern

Schwartzman pointed out that the Justice Dept. has filed a lawsuit against Primestar blocking its acquisition of the DBS licenses now controlled by News Corp. and MCI. Justice wants to block the deal because the satcaster is controlled by cablers. It is not clear why the Justice Dept. would approve a deal that would give Malone, a dominant figure in the cable industry, a large influence over Primestar.

Malone could exert his influence on the satcasting company through his significant personal stake in Liberty, which in turn owns a significant stake of USVG. Referring to Justice Dept. officials, Schwartzman said, “It is incredible to me that they would go for this.”

Justice Dept. reps did not return calls, but usually do not comment on pending litigation. Unless a settlement can be reached, Primestar will face off against Justice Dept. antitrust officials in federal court on Feb. 1.

Rates still ballooning

The Justice Dept. argues that Primestar’s cable industry owners are the worst possible candidates for the valuable DBS slot. Justice Dept. antitrust chief Joel Klein says the DBS license could be an effective tool to combat cable’s monopolistic hold on U.S. consumers. Regulators are desperate for a remedy to cable’s hold on the pay TV marketplace. At last count, average cable rates were rising eight times faster than inflation.

Shares of TCI Satellite Entertainment, which is a major shareholder in Primestar, were up slightly after news of the talks were first reported, but they retreated along with much of the rest of the market Tuesday.

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