Review of Industrial Organization 16: 193–209, 2000.
© 2000 Kluwer Academic Publishers. Printed in the Netherlands.
The Primestar Acquisition of the News Corp./MCI
Direct Broadcast Satellite Assets
DANIEL L. RUBINFELD
Boalt School of Law, University of California, Berkeley, CA 94720, U.S.A.
On May 12, 1998 the Department of Justice ﬁled suit to block Primestar Inc.
(“Primestar”) from acquiring the direct broadcast satellite assets of The News Cor-
poration Limited (“News Corp.”) and MCI Communications Corporation (“MCI”).
Direct broadcast satellite (“DBS”) uses orbiting satellites to transmit video pro-
gramming directly to subscribers’ homes. The Antitrust Division took the action
because it believed that the consortium of owners controlling Primestar, which
included ﬁve of the largest cable companies in the United States, would have “little
incentive to use the satellite service assets to compete aggressively against cable
television”. The possibility of higher (than otherwise) cable rates, less innovation,
and lower quality in the highly concentrated cable industry was an immediate
source of concern to the Division. The parties strongly disagreed, claiming that the
acquisition would be procompetitive – it would introduce as quickly as possible a
third vigorous competitor into the DBS business, a competitor that would have a
strong incentive to compete against cable operators as well as DBS competitors.
The parties eventually abandoned the proposed deal before the commencement
of trial, leaving in question whether the Antitrust Division’s suit would have been
successful, and how News Corp./MCI would have chosen to use its satellite assets.
The author is Robert L. Bridges Professor of Law and Professor of Economics at the University
of California, Berkeley. He served as Deputy Assistant Attorney General, Antitrust Division, U.S.
Department of Justice from June 1997 through December 1998. This paper relies heavily on the
talented efforts by the those involved in the Primestar investigation. Jim Wade (working under the
supervision of Don Russell) led the legal team, while Will Gillespie (working under the supervision
of George Rozanski) was responsible for a signiﬁcant portion of the economic analysis. The analysis
described here relies heavily on the work of Will Gillespie. Patrick Greenlee and Scott Thompson
also made substantial contributions. The author appreciates the helpful comments of Cindy Alexan-
der, Will Gillespie, Lewis Kornhauser, and Steven Salop. The views and any errors contained in the
paper are mine.
On November 30, 1998 Echostar Communications Corporation announced a deal to acquire the
direct broadcast satellite (DBS) assets from News Corp. and MCI WorldCom (including two satellites