XM-Sirius Merger Encounters Serious Opposition

House Panel Skeptical as Karmazin Says His Monopoly Would Be Competitive

By Joseph S. Enoch
ConsumerAffairs.com Congressional Correspondent

March 1, 2007

• Internet Radio Reaches Deal On Royalties • Sirius XM Near Bankruptcy • Poor Reception for XM-Sirius Shuffle • House Passes New Internet Radio Legislation • No Surprise: FCC Chair Decides to OK Sirius-XM Merger • Consumer Groups Urge FCC to Reject XM-Sirius Merger • States Raise Questions about XM-Sirius Merger • XM-Sirius Merger Gets Antitrust OK • Senate, FCC Chairman Spar Over Media Consolidation • Wisconsin Seeks To Block Satellite Radio Merger • XM/Sirius Merger Gets a Boost • Webcasters, Music Industry Reach Accord On Royalties • Karmazin "Clarifies" XM-Sirius Merger Plans • Last Minute Stay Of Execution For Web Radio • Dead Air Ahead: Court Denies Webcasters' Appeal • Notes From The Future Of Radio • Senators Throw Support Behind Internet Radio • Internet Radio Gets a Reprieve • Web Broadcasters Lose Music License Appeal • Feds Agree To Rethink Internet Radio Royalties • Reception Poor at Senate Sirius-XM Hearing • XM-Sirius Merger May Encounter Technical Difficulties • The End Of Internet Radio As We Know It • XM-Sirius Merger Encounters Serious Opposition • XM, Sirius Agree to Merge • Record Companies, Congress Take On Satellite Radio • Satellite Radio Looks Wobbly --- Consumer Comments • Sirius • XM Radio

XM and Sirius Satellite Radio are feeling the urge to merge but the plan got a cool reception from consumer advocates and members of Congress at an Antitrust Task Force Subcommittee hearing in the House of Representatives.

Critics said the merger would be monopolistic and bad for consumers, while Sirius chief executive officer, Mel Karmazin, contended that going from two competing services to one would provide consumers "more choice" and lead to lower prices.

Currently Both XM and Sirius charge $12.95 per month. But the two different services provide exclusive sports, music stations and disc jockeys such as Sirius' Howard Stern.

"We want subscribers on both systems to be able to listen to both the NFL and Major League Baseball," Karmazin said. "Both the PGA and NCAA basketball; both Oprah Winfrey and Martha Stewart."

Karmazin never delved into the specifics of how a single service would generate savings for consumers.

After the hearing, Karmazin bolted out a side door. ConsumerAffairs.com was the only publication that got to ask him a question: "What sort of savings can consumers expect?"

"A lot," he replied with a laugh, then exited the room.

Although Congress aired the issue at yesterday's hearing, the Federal Communications Commission (FCC) will most likely have the final say on whether the companies can merge.

The FCC would have to reverse its 1995 mandate, when it allocated satellite radio spectrum, that "one (satellite radio) licensee will not be permitted to acquire control of the other."

That ruling originally was intended to prevent any potential Sirius-XM monopoly and if the companies receive the same bruising from the FCC as they got from Congress, the merger's prospects don't look good.

Of the almost 20 bipartisan Representatives in attendance, only one, Rep. Anthony Weiner (D-N.Y.), defended the merger.

Weiner said satellite radio as a whole is in competition with terrestrial AM and FM broadcasts and thus a combined Sirius-XM would not hold a monopoly.

National Association of Broadcasters (NAB) president and chief executive officer David Rehr disagreed. He said consumers would suffer if the merger is approved.

"The national satellite radio market currently is a two-company duopoly trying to become a government-sanctioned monopoly," Rehr said. "The fact is, this monopoly would reduce innovation for services and equipment for consumers since there will be no competition in their defined market."

History does not favor Karmazin's plan, which is similar to the failed merger attempt of satellite TV providers DirecTV and Echostar in 2002.

The terms of that past failed merger are very similar. DirecTV and Echostar were the only satellite TV providers and those companies said at the time that they face competition from cable providers and terrestrial broadcasts. However, the FCC ruled that the satellite TV market is separate from the TV market as a whole.

Not does history favor those who dare to challenge the NAB, one of the most powerful lobbies in Washington. Congressmen are seldom eager to alienate their local television and radio stations.

Karmazin said XM and Sirius would work with the government to make their merger consumer-friendly. He suggested the government could fix prices for the company for a set period of time after the merger.

Rehr said the companies cannot be trusted to maintain their promises because they "have a pattern and practice of violating their FCC licenses."

"Both companies certified 10 years ago that they would comply with an FCC rule to develop a device that works with both services," Rehr continued. "Still today, no consumer device is available."

As it is, current XM and Sirius customers will probably have to buy new equipment that is compatible with both the companies' signals should they merge, he said.

Rehr also said that the companies broke receiver production and distribution rules and "both companies routinely and regularly violate FCC technical rules."

"XM operated more than 142 repeaters at unauthorized locations and at least 19 of its repeaters without any FCC authorization at all," Rehr said.

Local broadcasters have also been up in arms about the satellite services' attempts to provide local information such as weather and traffic.

The FCC has not set a date to decide the fate of the merger.

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