Comcast Corp. has filed suit against Starz Encore Group LLC, claiming that
it shouldn't inherit or be bound by a controversial 25-year carriage deal
AT&T Broadband has with the programmer.
The complaint, filed under seal, was lodged in the U.S. District Court in the Eastern District of Pennsylvania.
According to a press release issued by Starz Encore, the complaint argued that the postmerger distribution of Starz Encore programming by former AT&T Broadband systems should be governed by Comcast's affiliation deals with the programmer, and not by AT&T Broadband's old deals.
Starz Encore said the claims made in Comcast's complaint are without merit, and it will "vigorously contest them."
The programmer was served with the complaint Tuesday.
Comcast -- which finalized its acquisition of AT&T Broadband Monday -- declined to talk about its suit in any detail.
But it did issue a brief statement.
"Comcast is prepared to work toward resolution of its dispute with Starz," a
Comcast spokeswoman said Wednesday. "Comcast's declaratory-judgment action
against Starz was filed to preserve our legal rights."
Starz Encore has its own, separate lawsuit pending against AT&T Broadband over their carriage deal, which mandates that the MSO will owe the programmer a $360 million flat fee next year.
The pact also has an escalator clause mandating that AT&T Broadband had
to help foot the bill for some of the theatricals Starz Encore buys.
Action on that lawsuit -- which Starz Encore filed against AT&T Broadband a year-and-a-half ago -- has been stayed by a judge until Jan. 31 so both sides can try to settle the dispute.
Starz Encore filed the suit when AT&T Broadband balked at complying with the affiliation deal it inherited from Tele-Communications Inc. -- a pact done under ex-TCI chairman John Malone's watch that calls for the MSO to pay the programmer huge fixed annual fees.
Those fees started in 1998 at $270 million, and they were to rise to $360
million in 2003, increasing at the rate of inflation after that.
When the affiliation deal was done in 1997, Starz's owner, Liberty Media Corp., was a unit of TCI, now AT&T Broadband.
Liberty's recently filed 10-Q referred to the Starz Encore-AT&T Broadband affiliation deal and said, "The payment from AT&T Broadband can be adjusted if AT&T acquires or disposes of cable systems."
The filing with the Securities and Exchange Commission
also noted that "AT&T Broadband raised certain issues concerning
interpretations of the contractual requirements associated with the treatment of
acquisitions and dispositions. Starz Encore believes the position expressed by
AT&T Broadband to be without merit."