PHILADELPHIA (CN) – After nearly a decade of legal wrangling, Comcast faces a jury trial to sort out claims that it stifled premium cable competition in the mid-Atlantic area.
At issue in the case are a series of swaps and acquisitions Comcast made with cable providers from 1998 to 2007.
As a result of the transactions, Comcast’s share of the “multichannel video programming” market in greater Philadelphia allegedly increased from 23.9 percent in 1998 to 69.5 percent in 2007.
Comcast picked up millions of subscribers by buying the assets of companies such as AT&T, Patriot Media & Communications and Lenfest Communications, and by swapping cable systems with Time Warner Cable.
In a class action originally filed in 2003, consumers called Comcast’s swaps and acquisitions the calling card of an illegal market-allocation scheme.
They say Comcast fortified its presence in the greater Philadelphia market by participating with other large cable companies in a plan to avoid competing with each other “by allocating the nation’s regional markets among themselves.”
That “clustering” scheme allowed cable companies to create regional markets “dominated by a single cable provider, with no effective competition,” according to the third amended complaint.
But Comcast says cable firms have legitimate, competitive reasons for clustering operations, and that the Federal Communications Commission has acknowledged as much.
Clustering allows cable providers to create economies of scale, and Comcast’s clustering actions in greater Philadelphia allowed the company to offer more channels and new products, such as high-speed Internet, digital cable and pay-per-view, Comcast says.
In light of that claim, U.S. District Judge John Padova said Comcast’s swaps and acquisitions cannot be treated as a “plainly anticompetitive,” per se violation of antitrust law.
But Padova green-lit certain Sherman Act and monopolization claims for trial.
Comcast wanted summary judgment on the Sherman Act claim, arguing that the companies involved in the swaps and acquisitions should not be considered Comcast’s competitors because they never directly competed with Comcast.
The firms never offered services to the same subscribers, Comcast said.
That argument highlights a critical issue in the case: how to conceptualize and define the market for non-basic cable television services in greater Philadelphia, which includes parts of New Jersey and Delaware.
Comcast said cable providers shouldn’t be seen as operating in a single, regional market encompassing millions of subscribers in three states and a slew of counties.
It said providers operate in much narrower slices of territory, and that greater Philadelphia contains multiple, generally non-overlapping cable-television markets.
Finding that precedent already forecloses this definition, however, Padova directed the class in 2010 to argue its case based on the sweeping, regional market-definition.
A jury will also hear monopoly claims that Comcast targeted RCN Telecom Services to prevent it from encroaching on Comcast’s turf.
A scheduling conference is set for next week.