U.S. to put PrimeStar sale under microscope

WASHINGTON — The Clinton administration’s top telecom official said Tuesday that government regulators should take a very close look at Rupert Murdoch’s plan to sell his DBS license to a group of cable companies.

The deal, which would hand cabler controlled PrimeStar Partners a license to get into the high powered DBS business needs “more than a first look, at least a second and probably a third look,” said asst. Secretary of Commerce Larry Irving during a discussion with reporters Tuesday.

PrimeStar is jointly owned by Cox, Comcast, Time Warner MediaOne and Tele Communications Inc.’s spin off TCI Satellite Entertainment. If the deal is approved, it would give PrimeStar the last of three high powered satcasting licenses with full coverage of the continental U.S.

Irving said the deal should be looked at “very, very closely” because the “most likely competitor to cable is the DBS industry.”

As cablers raise their subscriber fees at four times the rate of inflation, Washington is looking desperately for some kind of competitive counterbalance. The rate hikes are particularly embarrassing in Washington given that the now two year old Telecommunications Act has failed to stimulate the competitive forces that everyone but consumer groups had predicted it would.

In addition to the Clinton administration, Congress and the FCC have also expressed frustration with the lack of competition to the cable industry. A recent FCC report found that cable still dominated the subscription television business with an 87% market share.

Given the lack of vibrant competition to cable, regulators should question the wisdom of handing the last DBS slot to PrimeStar Partners, said Irving.

FCC staffers are already conducting a close look at the News Corp.’s proposal to sell the license it controls jointly with MCI to PrimeStar. MCI purchased the license at a government auction for $682.5 million 2 years ago when it was planing to enter the DBS business in partnership with News Corp. But MCI, itself the target of a corporate takeover, has lost interest in the DBS business, forcing News Corp. to seek out other partners.

For a short time, News Corp. had proposed a deal with EchoStar, a Denver based satcaster. EchoStar charges that its deal with News Corp. fell apart after PrimeStar’s owners threatened to deny carriage to Murdoch’s cable services. EchoStar is now suing News Corp. for $5 billion. EchoStar is also now urging the FCC to reject the PrimeStar deal. The FCC says it does not expect to reach any conclusions before April. That delay is itself a setback for PrimeStar, which had been hoping to wrap up the transaction by last December.

The Justice Department’s antitrust division is also giving the PrimeStar/News Corp. proposed deal a close look. Justice Dept. lawyers are wading through hundreds of boxes worth of documents filed by PrimeStar. Several key execs including Murdoch and TCI’s John Malone have been deposed by the Justice Dept.

PrimeStar already operates a medium powered DBS service, but says that it needs the high powered license to stay competitive. The medium powered DBS satellite service requires the use of a larger sized reception dish that urban and suburban subscribers find less attractive than the 18 inch high power dish.

Irving said the Clinton administration will weigh in with comments of its own at the Federal Communications Commission. “We will work within the structure of the FCC,” said Irving.

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