THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Thursday, August 11, 1994 TAG: 9408110517
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY PAUL FARHI, THE WASHINGTON POST
DATELINE: WASHINGTON LENGTH: Medium: 80 lines
John C. Malone, the cable TV industry's irresistible force, may be about to run up against an immovable object - the U.S. government.
Federal antitrust officials say a recent flurry of dealmaking by Malone and his company, Tele-Communications Inc., is raising concerns about TCI's growing power within the cable industry. While stressing that no decisions have been made, these officials say Malone's recent deals could incite antitrust action aimed at limiting TCI's clout. A TCI attorney, however, saw no antitrust issues arising in Malone's deals.
TCI, based in suburban Denver, is the nation's largest owner of cable systems, serving about one in four subscribers. It is also a major force in cable programming, owning shares of more than 30 cable networks, including Turner Broadcasting System, Court TV, Washington-based Black Entertainment Television and Bethesda, Md.-based Discovery Communications.
These assets - worth more than $18 billion - are the result of two decades of relentless acquisition and investment by Malone, TCI's chief executive. By one count, Malone and TCI have acquired, invested in or become partners with more than 650 companies since 1973, the year he took over the company.
And Malone, TCI's chief executive, may be entering his most frenetic period yet. In the past week, Malone has moved to dramatically expand both TCI's programming and systems businesses through a series of transactions.
On Monday, TCI agreed to pay $1.25 billion in stock for TeleCable Corp., a Norfolk-based company with cable systems in 15 states. With that action, TCI added 740,000 homes to the 10.4 million it already serves.
TeleCable chairman Frank Batten and his family own a controlling interest in the company. Batten is also chairman of Norfolk-based Landmark Communications Inc., parent of The Virginian-Pilot and The Ledger-Star.
Malone's moves in the entertainment and programming area - not the cable systems purchases - are what have caught Washington's attention. Last week, TCI and cable company Comcast Corp. agreed to buy QVC Inc. in a $1.4 billion deal that will raise TCI's stake in the home shopping company from 22 percent to 43 percent. The same day, TCI reacquired Liberty Media Corp., which TCI spun off in 1991 to hold many of its cable programming investments.
Meanwhile, TCI has been negotiating a merger of its Encore and Starz pay-movie channels with Viacom Inc.'s Showtime, a combination that would create a strong challenger to the leading pay channel, Time Warner Inc.'s HBO.
In interviews, federal officials expressed concern that TCI's bigger stake in QVC may enable it to exert too much power over the cable home shopping market because TCI also controls 80 percent of the votes in Home Shopping Network Inc., QVC's main rival.
At the same time, the prospect of a merger between the movie channels could have ``an anti-competitive effect'' on the premium movie channel market, one government source said, because TCI not only would control a major player in the market but also could decline to air a competing movie service on its many cable systems.
``Let me just say that the concern is there,'' said a government attorney who asked not to be identified. ``The (antitrust) theories that have applied to TCI in the past are thought to be serious and could be pursued in the future.''
The attorney was referring to a settlement agreement between TCI and the Federal Trade Commission last fall that effectively removed TCI as a participant in the bidding war for Paramount Communications Inc.
In that case, TCI was supporting QVC's hostile bid for Paramount. The FTC found that if it succeeded, TCI would gain too much control over the pay-movie market, since Paramount is a major supplier of films to pay-cable services. The settlement became moot, however, when Viacom won the battle to buy Paramount.
Washington attorney Joe Sims, who represents TCI, said the FTC will have a tough time proving that either the QVC deal or the reported Encore-Showtime deal presents any anti-competitive issues. TCI, he pointed out, already held 22 percent of QVC, and boosting that to 43 percent would still leave another company, Comcast, in control. ILLUSTRATION: Photo
John Malone
by CNB