The FCC decided that the only way to consider the merger of XM and Sirius was under a worst case scenario; taken in that light, concessions from the merging entities are a condition of approval to protect the interests of consumers. The basics are fairly well known. There is a three-year cap on subscription prices (although there are provisions for certain pass-through increases within a year) and before the three-year period is up, the Commission will consider whether an extension is necessary; the merged entity must offer tiered and a la carte service packages to subscribers within three months; 8% of capacity is being split between “qualified entities” and noncommercial services; the merged entity will have nine months to make interoperable receivers available; any company that wishes must be allowed to make receivers, and they cannot be barred from add-ons like HD reception capability, iPod ports, etc. Consent decrees involving problems with FM modulators and terrestrial repeaters will be forthcoming, with XM paying $17.4M and Sirius paying $2.2M to the US Treasury. Finally, a separate proceeding will be opened to decide if HD radio capability should be mandated in SDARS receivers.
Chairman Kevin Martin highlighted the promise to offer a la carte as a major reason for his approval (he has been a proponent of a la carte channel selection on CATV). “I have long believed that consumers should be able to buy and pay for only those channels that they want,” he wrote. “Such a free market approach to programming – whether its music or television – would benefit consumers through lower prices and more control.”
Robert McDowell cited the argument that XM/Sirius are but two players in a much larger audio marketplace. “Competition in the audio market has grown substantially in the past few years. Barely one generation removed from AM and FM radio and vinyl albums, we now have a still vibrant AM/FM dial, full of music, news and talk radio of all stripes, HD radio with its multicast streams of content, mp3 players, Internet radio and much more. When discussing this merger, it is important to keep in mind that satellite radio – both XM and Sirius combined – comprises only five percent of that audio marketplace.”
Jonathan Adelstein seemed surprised that merger approval was given to serial rules violators. “The brazen nature of these violations indeed warrants this substantial monetary contribution and rigorous oversight and reporting obligations. It is my hope that the Commission will vigorously enforce all elements of today’s Order and Consent Decree, but history suggests otherwise. “
Michael Copps cited the logic for approving the merger with conditions as the primary reason not to approve it. “(1) We must assume that this is a merger to monopoly; (2) The merged company will possess the incentive and ability to impose monopoly price hikes on consumers; (3) Consumers will need protection for the foreseeable future because (a) the merged company’s incentive and ability to impose monopoly price hikes will only grow over time, and (b) the emergence of another satellite radio competitor is unlikely; and (4) The pricing restrictions imposed on the merged company will expire in three years.”
RBR/TVBR observation: Copps has it right – the fact that conditions are necessary means they should either be permanent or the entire merger should be nixed. Maybe the press release should have gone something like this: “Today we create a monopoly. Although there is no reason to believe the new monopoly will have any more regard for its customers and business associates than its merging partners have demonstrated for FCC rules and regulations, consumers may rejoice that we have provided a three-year moratorium before the new monopoly can fully behave like one. After that, you’re on your own.”
