Department of Justice Clears Sirius/XM Merger

On March 24, the Department of Justice's Antitrust Division stated that, "after thorough and careful review" (translation: more than one year) Sirius Satellite Radio's $5 billion offer to purchase XM Satellite Radio "is not likely to harm consumers."

Actually, the complete statement went into great detail, but the pertinent section concerned the affect of the merger on competition in the retail channel: "Because XM and Sirius would no longer compete with one another in the retail channel following the merger, the Division examined what alternatives, if any, were available to consumers interested in purchasing satellite radio service, and specifically whether the relevant market was limited to the two satellite radio providers, such that their combination would create a monopoly. The parties contended that they compete with a variety of other sources of audio entertainment, including traditional AM/FM radio, HD Radio, MP3 players (eg, iPods), and audio offerings delivered through wireless telephones. Those options, used individually or in combination, offer many consumers attributes of satellite radio service that they may find attractive. The parties further contended that these audio entertainment alternatives were sufficient to prevent the merged company from profitably raising prices to consumers in the retail channel—for example, through less discounting of equipment prices, increased subscription prices, or reductions in the quality of equipment or service."

Now that the DOJ has signed off on the merger, the final hurdle is FCC approval. On March 21, FCC chairman Kevin Martin asked his staff to draft documents concerning the proposed merger incorporating, The Wall Street Journal said, "a variety of outcomes." Martin declined to specify what situations he envisioned and said that he hadn't reached a decision. There are reports circulating today that a decision is imminent.

It darn well ought to be, said Silicon Alley Insider blogger Henry Blodget writing in November 2007: "It's time to put an end to this ridiculous deliberation. By now, the FCC should have all the information it could possibly need. The idea that the government should block a merger of two small, desperate, cash-burning businesses on anti-trust grounds is preposterous. The FCC should just ignore the screaming, rubber-stamp the deal, and go home."

Perhaps the clearest sign that the merger might finally be consummated came from terrestrial broadcast giant Clear Channel on March 11, when it petitioned the FCC to make satellite radio adhere to the same conditions as broadcast radio. "One of the primary potential dangers to free, over-the-air radio posed by this merger is siphoning popular, including 'edgy' content, with consequent loss of advertising revenue," the petition read. "That potential harm is mitigated if broadcast decency rules were to apply to the merged entity. There is no constitutional bar to such a condition."

Clear Channel was undoubtedly referring to ex-Clear Channel shock-jock, Howard Stern, who has his own pair of Sirius channels. In 2004, six Clear Channel stations were fined $500,000 by the FCC for broadcasting a Stern show deemed exceptionally indecent. After the broadcaster settled with the FCC for that show and other content deemed offensive, it retired the Stern show from its stations, prompting Stern to leave earthbound radio for Sirius.

This isn't the first time Clear Channel has requested that the FCC establish its control over satellite radio, while also requesting its relaxation of rules that bind terrestrial radio, including the cap on how many radio stations conglomerates can own in a single market. What is new is its demand that the FCC create a new satellite radio competitor by allocating 50% of satellite spectra to such an entity. Also new is a demand that satellite radio set aside 5% of its programming for "the public interest," without defining that term. ("If the public interest test for grant of the license transfer is to be met, there must be a reservation of satellite capacity dedicated to the public interest.")

Finally, Clear Channel demands that satellite radio be barred from broadcasting local programming or soliciting local advertising, saying, "Siphoning local advertising would pose a direct threat to the ability of terrestrial broadcast radio to fulfill its core missions."

That's your moment of Web zen, folks. The broadcasting juggernaut that wiped out entire local radio markets is crying foul because an under-funded, under-subscribed competitor might "pose a direct threat to the ability of terrestrial radio to fulfill its core mission."

Wait, I have an idea! If it is crucial that a merged Sirius/XM have competition and it's such a great idea, and there's 50% of the satellite spectra still unallocated, what would prevent some large company with commercial broadcasting experience from launching its own satellites? It's not exactly as if it were rocket science.

Oh wait, maybe it is at least, as far as Clear Channel is concerned.

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