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Consumer Groups, Investors Oppose XM-Sirius Merger

Objections raised to lack of competition

by Martin H. Bosworth
ConsumerAffairs.com

November 27, 2007 

The Consumer Federation of America, Consumers Union, and Free Press filed a report opposing the merger with the Federal Communications Commission (FCC).

In their report, the consumer groups reiterate their claim that allowing the merger to pass will "unleash the market power of the satellite digital radio service providers at the expense of the public."

The report analyzes the proposed "a la carte" programming tiers offered by XM-Sirius as a condition of the merger, claiming that there are still too many unknowns about the requirements for the new packages to use "a la carte" as a justification for the merger.

"When does the offer start? When does it end? What is included? How much will the equipment cost? The Commission would have to engage in detailed regulation of the XM-Sirius product offerings to answer these questions so that it could claim it was promoting the public interest," wrote the report authors.

Even if those questions were answered, the report argued, the proposed a la carte packages would actually cost consumers more by forcing them to purchase channels they want in "bundles," rather than on a truly one-for-one, a la carte basis.

"Here the consumer cannot buy individually priced items from the menu, but large bundles and we will pay more per item," the report said. "In fact, using this mixed menu of bundles and true a la carte, it would cost the consumer between about $43 to get what used to cost $12.95."

Consumer Federation of America's Dr. Mark Cooper, lead author of the report, urged the FCC to reject the merger.

"The proposed XM-Sirius merger is not in the interest of American consumers," he said. "Leaving one company to monopolize the satellite radio industry would result in higher prices and fewer choices -- with no foreseeable public benefit."

Mollifying a monopoly

Meanwhile, Georgetown Partners, a minority-owned private equity investment firm, sent its own filing to the FCC opposing the XM-Sirius merger.

Georgetown Partners argued that the merger as currently proposed would have "unprecedented adverse competitive effects," and would effectively lock minority broadcasters out of satellite radio competition.

Georgetown Partners proposed that the combined company lease its broadcast infrastructure and 20% of its channel capacity to a minority-controlled satellite broadcaster in order to ensure "diversity of programming." The firm noted that their proposal had received support from members of the Congressional Black Caucus and the Black Leadership Forum, the latter of which amended its initial opposition to the merger to support the Georgetown Partners proposal.

XM and Sirius opposed the proposal, claiming the firm was attempting to “manipulate the regulatory process for private gain." The companies also noted that their merger commanded support from groups such as the NAACP.

"There is not a single entity on the record of this proceeding that opposes [the proposal] other than [XM and Sirius] themselves," wrote Georgetown Partners' managing director Chester Davenport in response.

"One would imagine that entities devoted to serving the best interests of minorities and other underserved communities would recognize a bad deal for their constituencies when they see it."

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