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XM/Sirius Merger Gets a Boost

Former FCC chair says merger would spark competition

By Joseph S. Enoch
ConsumerAffairs.com

September 7, 2007 
Former Federal Communications Commission chairman Mark Fowler has come out in support of the proposed XM/Sirius merger, which could be approved before the end of the year.

Fowler voiced his support in a column in the New York Sun, whose parent company, Hearst Corporation, owns a stake in XM.

"In spite of the fact that satellite radio constitutes only 3.4 percent of radio listening today, traditional over-the-air radio operators have understood the potential threat and have had no choice but to compete, and have been dragged, albeit kicking and screaming, into the digital age," Fowler wrote.

Fowler, who chaired the FCC during the Reagan administration, generally favored deregulation during his tenure.

The main argument that may prevent the current commissioners from allowing the merger is that it would create what critics say would be a monopoly. The National Association of Broadcasters (NAB), an industry group that lobbies on behalf of terrestrial radio broadcasters, has been by far the most vehement opponent.

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

But Sirius' chief executive officer and president, Mel Karmazin, who would take over the merged company, has repeatedly promised lower prices.

Speaking at the National Press Club in July, Karmazin unveiled pricing plans for the merged companies which not only included a la carte options, but generally reflected lower prices.

Fowler agreed.

"Although traditional over-the-air radio remains the most dominant audio entertainment platform, continued technological innovation has forced broadcasters to confront that they must offer better service and more choices to consumers if they are to compete and survive," Fowler wrote.

"The broadcast industry recently introduced and is pushing its own "HD Radio" initiative to allow radio stations across the country to offer multiple new, high-quality digital channels," Fowler continued.

The merger has been hung up in the legislative processes of the FCC.

In fact, 106 days lapsed between when the companies submitted their merger application and when the commission began to review it. That's the longest lapse of that kind in history, eclipsing the Time Warner/AOL merger which took 44 days to enter the review period.

Aside from the FCC, the merger also must be approved by the Justice Department.

It could be late this year or early next year before the FCC approves or rejects the merger and "another month or two" before the Justice Department rules, said Blair Levin, a regulatory analyst with Stifel Nicolaus, a financial analysis group.

Levin, who served as a chief of staff at the FCC for four years said the merger was a "very close call" with odds "slightly favoring approval."

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