By Truman Lewis
ConsumerAffairs.com
June 16, 2008
Federal Communications Commission Chairman Kevin J. Martin has decided to support the merger of XM and Sirius, the nation's only satellite radio operators, The Washington Post reports. That removes the last regulatory hurdle to the merger, which has been roundly denounced by consumer organizations.
Martin's decision reportedly came after the companies made several concessions that will -- at least temporarily -- block the merged entity from raising subscription prices and stifling competition among receiver makers.
Martin is expected to issue his order approving the merger this week. It's unclear if the other four commissioners will support Martin's decision. At least two must do so for the merger to go forward.
The concessions the companies have made include price caps, open technical standards and interoperable radios. They have also agreed to set aside 12 channels for educational and public safety programming and another 12 for programming featuring minorities and women.
When the companies were granted their licenses to operate, each agreed they would not attempt to merge. They occupy the only satellite-to-ground frequencies available and there is no opportunity for any newcomer to compete with them.
The Consumer Federation of America, Consumers Union and Free Press have all urged the Federal Communications Commission to reject the proposed XM-Sirius merger.
The Department of Justice signed off on the deal without attaching any conditions, saying that satellite radio is part of a larger audio market, one that includes iPods, CD players, Internet radio and other devices..
However, consumer groups -- using the FCC's own data on radio stations -- have argued that satellite radio and terrestrial radio are not close substitutes. The groups argue that satellite radio represents a unique consumer product that does not compete with iTunes or Internet radio.
"Protecting consumers should be the FCC's first priority," said Chris Murray, senior counsel of Consumers Union. "Allowing one company to monopolize the satellite radio industry would leave consumers with higher prices and fewer choices but no real benefits. Rejecting this deal should be a no-brainer."
"The Justice Department tossed all tenets of antitrust out the window in its rush to rubber stamp this merger-to-monopoly," said Mark Cooper, director of research for the Consumer Federation of America.
"The FCC should not buy into the flawed reasoning that led to the DOJ's disastrous decision. Consumers are depending on the commission to stop this dangerous deal dead in its tracks," he said.
States oppose merger
Earlier, eleven states called on the Federal Communications Commission (FCC) to consider blocking the proposed merger of the nation's only two satellite radio companies, saying the deal would create an illegal monopoly.
"A merger of XM Radio and Sirius radio meets the textbook definition of monopoly: a product controlled by one party," said Connecticut Attorney General Richard Blumenthal. "The Justice Department's inaction regarding this combination defies law, reason and common sense. Even a child understands that owning every property from Baltic Avenue to Boardwalk is a monopoly.
"This monopoly-making merger will leave Connecticut consumers at the mercy of a single company, leading to skyrocketing prices and diminished service. Customers unhappy with their service will have nowhere to go. The Justice Department's message to satellite radio consumers: Go pound sand.
Among the opponents is the state of Wisconsin, whose attorney general, J.B. Van Hollen, said the proposed merger is anti-competitive and anti-consumer. He said its impacts will be felt in Wisconsin, particularly in rural communities, where he predicts a significant reduction in the availability of sports and other programming.
The proposed merger would eliminate competition in the satellite radio industry and the combined XM-Sirius companies would be free to raise prices, stifle innovation, and reduce program diversity, Van Hollen said late last year, when he wrote to Barnett asking that the merger be blocked.
