Feds to probe sat pact

WASHINGTON — Federal regulators will take a close look at the combination of the News Corp./MCI assets and Primestar, focusing on the ability of the new company to suppress competition in the DBS marketplace.

The deal will be of particular concern to antitrust investigators because of Primestar’s cable industry ownership. Both Congress and the FCC have pushed for the development of the DBS market in recent years as a counter to cable’s near monopoly in the multichannel video delivery business.

Federal regulators, including the Federal Communications Commission, may also raise questions about Australia-based News Corp.’s 30%stake in the company. FCC Intl. Bureau chief Peter Cowey promised Wednesday that the deal would “get close scrutiny.”

Under current rules, foreign companies are allowed to own satellite companies, but the Clinton administration recently asked the FCC to revisit its policy on alien ownership. The order from the White House was the direct result of lobbying by Time Warner, which opposed News Corp.’s previous plan to combine with satellite company Echostar.

Like every deal larger than $15 million, either the Justice Dept. or the Federal Trade Commission must sign off on the acquisition. Unlike the FCC, which is primarily concerned about the deal’s compliance with U.S. law and regulations, FTC and Justice investigations focus on the potential anticompetitive behavior of a new company.

In addition, Primestar is currently subject to federal and state consent decrees that focus on the ability of its cable company owners to monopolize programming. (The state decree was signed by attorneys general by more than a dozen states.) Several Washington sources familiar with the deal predicted that dozens of state attorneys general would want to take a look at the deal before allowing it to move forward.

But antitrust attorney Joe Sims, who has negotiated the federal and state consent decrees on behalf of Primestar, said neither the federal or state decrees will slow the deal down. If the deal closes after Oct. 1, when the state decree is set to expire, any potential objections raised by the attorneys general will be moot.

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