The definition of the market is going to be a huge key to the success of the proposed merger between rival DARS services XM and Sirius. DARS says it competes with all other audio services; broadcasters and consumer advocates says its much more a two-company market that wants to monopolize. Yesterday's hearing on the future of radio hosted by Ed Markey (D-MA) and the Subcommittee on Telecommunications and the Internet had much in common with an earlier one hosted by John Conyers (D-MI) and the Judiciary Committee's Antitrust Task Force. The fact that the proposed XM/Sirius merger was the main event was the most obvious, and the presence of Sirius honcho Mel Karmazin went right along with that focus. The other panelists were different, but Greater Media's Peter Smyth was effectively a stand-in for NAB's David Rehr, and Consumer Union's Gene Kimmelman was effectively a stand-in for the Consumer Federation of America's Mark Cooper. Also on hand were Geoffrey C. Blackwell of Chickasaw Nations Industries and RealNetworks' Robert Kimball. As before, Karmazin said that the merger made sense to the boards of both merging companies, and that he thought he could make the case that it is not anti-competitive, and that it is in the public interest. Smyth repeated the arguments made by Rehr the previous week, that it would be a monopoly, bad for consumers, and that the merging entities cannot be trusted to follow the rules.
RBR observation:
The New York Times reports that FCC Chairman Kevin Martin (R) has privately expressed skepticism about the merger. Since Martin is firmly entrenched in the deregulatory wing of the Commission, this would appear to be a major hurdle to be overcome. But this one has a long way to go. Stay tuned.
Statement summaries
* Peter Smyth, Greater Media, on behalf of the NAB: On the future of terrestrial radio: Localism is our franchise, and ours alone. Reject XM/Sirius. 1) It's a national service, there are only two, and they compete with one another. 2) Both have track record of violating or ignoring FCC rules, including content bleeds of x-rated programming onto noncommercial stations. 3). Consumers lose by loss of competition. 4) Both companies claim they are succeeding as things are - and were licensed to compete with one another. Local terrestrial does not compete with, nor is it a substitute for, satellite radio. And a similar DBS merger was rejected.
* Mel Karmazin, Sirius: XM/Sirius need to make sure merger is not anti-competitive. This is not a duopoly becoming a monopoly, and to say it doesn't compete with all other audio services is ludicrous. Says that NAB in other filings does consider DARS to be a competitor. Also must prove merger is in the public interest. Confusion on pricing: 1) Because we compete with free, the market decides the price, and we're willing to be held to pricing controls, and won't exceed 12.95. 2) We'll offer both services for less than combined total of 25.90.
* Gene Kimmelman, Consumer Union: LPFMs should be increased. Minority/female ownership needs to be increased, and marketplace impediments need to be addressed. Large owner addressing a market segment is no replacement for diverse ownership doing the same thing. On XM/Sirius: Market definition is key. DARS is very different than traditional radio, and iPods are no replacement either. It does offer unique content, and a merger would be anti-competitive and anti-consumer. Alternative: Is there only need for one DARS, so could the other be shut down and could its spectrum be repurposed?
* Robert Kimball, RealNetworks: Good news and bad about Internet radio. Good: rich diverse music experience that helps sell to enthusiastic consumers. Bad: Forced to pay higher copyright fees, which damages Internet radio's ability to compete. Sirius/XM should be put on hold until Congress creates a level playing field for all audio services. Very concerned about the new Internet copyright rates now in the news, asks for new regime to be overturned or Internet diversity may be killed off. Also, DARS and Internet face possible 150K fine for guessing wrong on a copyright rule.
* Geoffrey C. Blackwell of Chickasaw Nations Industries, National Federation of Community Broadcasters and Native Public Media. Thinks Native American programming and other public channels should have room on satellite radio. Also wants new rules to address barriers to Native American broadcast ownership - now hold only 0.3% of existing licenses.
