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America Channel Sues to Block Adelphia Deal

The America Channel filed a federal antitrust suit Tuesday designed to block the $16.9 billion purchase of Adelphia Communications Corp. by Comcast Corp. and Time Warner Inc., in part because the two cable companies have allegedly refused to sign carriage deals with the start-up niche programmer.

The suit, filed in U.S. District Court in Minnesota, alleged that Comcast and Time Warner exercise monopoly power in the programming-distribution market that will grow more formidable if the two MSOs are allow to purchase Adelphia’s 5 million subscribers and bolster their regional market shares through a series of system swaps.

TAC attorney Joseph Alioto said the case could cost Comcast and Time Warner $1 billion-$3 billion if they were to lose.

Comcast declined to comment while it was reviewing the case. Time Warner dismissed it as meritless.

“The allegations in this complaint are entirely frivolous, and we are confident that this matter will not impede closing the Adelphia transaction,” said Susan Duffy, Time Warner’s vice president of corporate communications.

If the deal fails to close by July 31, Comcast and Time Warner could walk away and perhaps collect a $440 million termination fee.

After an accounting-fraud scandal four years ago, Adelphia tumbled into bankruptcy. Comcast and Time Warner offered their high bid last year, but Adelphia creditors continue to battle over the division of proceeds.

In January, The Federal Trade Commission approved the Adelphia deal without conditions. Alioto blasted the FTC’s approval as “worse that a police department taking a vacation during a riot.”

The Adelphia merger has lingered for nearly one year at the Federal Communications Commission, where TAC, DirecTV Inc., EchoStar Communications Corp. and public-interest groups have constantly attacked it on a number of fronts related to programming. Time Warner chairman and CEO Richard Parsons said his company didn't mind the delay because it wanted to wait for the Senate to confirm Robert McDowell and give the FCC a 3-2 GOP majority. The Senate confirmed McDowell last Friday.

Founded in January 2003, TAC describes itself in the suit as “a new 24-hour, seven-day-a-week … niche entertainment programming channel that explores and celebrates America in the 21st Century.”

The company repeated in the suit charges made at the FCC that Comcast and Time Warner have refused to sign carriage deals because the two discriminate against independent cable channels. Without access to the 33 million subscribers served by Comcast and Time Warner combined, TAC has said that any new programmer is doomed to fail.

In the suit, TAC alleged that Comcast and Time Warner engaged in “bid rigging and price fixing” by combining to acquire Adelphia instead of bidding separately, as did Cablevision Systems Corp. The joint bid, the suit said, depressed the value of Adelphia.

The suit is seeking a temporary and permanent injunction to stop the Adelphia deal from closing. TAC also wants to be compensated for his litigation expenses and treble damages as provided under the Clayton Act of 1914.

The case was filed in Minnesota because system swaps resulting from the Adelphia deal would leave Comcast as the only incumbent cable operator in the Minneapolis-St. Paul market.

“It’s a microcosm of what’s going on,” Alioto said.