More Satellite Silliness

According to this article from Radio Ink, Ed Markey, Chairman of the House Telecommunications Subcommittee, wants the FCC to force Sirius and XM to freeze their rates for six years as a condition of their merger. National Public Radio has also chimed in--they want the firms to set aside 25% of their spectrum for noncommercial, emergency and minority-controlled programming. Both Markey and NPR want the combined companies to add HD Radio capability to their satellite receivers, an idea that was first proposed last year by iBiquity, the company that developed and licenses HD Radio.

Let's go down the list: Freeze their rates for six years. How can anyone agree to freeze their prices for six years? (Sirius and XM have already agreed to freeze their prices for three years.) If prices get too high, consumers will drop the service and the company will have to respond. Let the market decide.

Next, NPR's 25% programming set-aside (this from a network that claims to serve the entire population but that broadcasts, to my knowledge, exactly one weekly Hispanic-related and one daily African-American-related program.) If a music channel is commercial-free, as many already are on XM and Sirius, does that count? If that's the case, they may already be at the 25% mark. And, I guarantee you that XM already programs at least ten times as much minority-oriented programming a day as NPR, if not far more than that.

Finally, let's touch on the requirement to add HD Radio to satellite receivers. As I've written about previously, that's like requiring Comcast to put DirecTV receivers into their set-top boxes, or vice-versa. Now, however, we learn that it's iBiquity that originally floated the proposal. Of course iBiquity wants HD Radio in every satellite receiver: They'd get licensing fees for every satellite receiver sold, sell more equipment to broadcasters and, in turn, spur more sales of conventional HD Radio receivers, which means even more licensing revenue for iBiquity.

It's broadcasters who have the burden of making HD Radio successful, by giving consumers a reason to buy a receiver and by convincing automobile manufacturers to include HD Radio receivers in their cars, just as Sirius and XM did years ago. Making Sirius and XM subsidize HD Radio is ridiculous.

Here's what I really think is happening: Broadcasters are putting pressure on legislators to float all kinds of different restrictions on the Sirius-XM merger, which will delay the decision. Assuming that a deal is struck and the merger goes through, the civil lawsuits will begin in order to keep the companies from unifying their operations. The hope is that, eventually, either Sirius or XM will wave a white flag, the merger will be dropped, and one or both companies will go under. Consumers will lose an incredibly valuable choice (regardless of whether it's one or two companies).

Loony Advice from Our Legislators

I rarely cover satellite radio, but I've been following the Sirius/XM merger and the related governmental sideshow. I've been an XM subscriber for a long time, and I'm frankly disappointed by the merger; nevertheless, it's clear to me that XM and Sirius are probably never going to get to critical mass separately. The U.S. Justice Department has approved the merger, and the Federal Communications Commission has yet to rule, but FCC Chairman Kevin Martin has said that he's ready to approve the merger with some restrictions on the new company.

Today, three U.S. Senators (Claire McCaskill (D-MO), Ben Cardin (D-MD) and John "Snatching defeat from the jaws of victory" Kerry (D-MA)) asked Martin to impose two restrictions on the merger: First, the merged company would have to allocate no less than 20%, and preferably 50%, of its channels for leasing to minority and noncommercial information programmers. Second, satellite receivers would have to include electronics for receiving terrestrial HD Radio signals.

There's no question that the merger will create a monopoly in satellite radio, but the vast majority of consumers in the U.S. get their audio entertainment from terrestrial radio, CDs and digital media players such as iPods, not satellite radio. The Justice Department decided that the relevant market for determining whether or not a monopoly exists is audio entertainment, not satellite radio. Requiring the merged company to make as much as 50% of its channels available for leasing would effectively destroy its ability to reach profitability in any reasonable time. As for making the merged company's receivers also receive HD Radio, that would be like demanding that Comcast modify its set-top boxes so that they could also be used by DirecTV, or vice versa. It's up to terrestrial broadcasters, and not Sirius and XM, to make HD Radio successful.

As I said, I'm not a fan of the Sirius/XM merger; I think that it will reduce competition and consumer choice. Nevertheless, the remedy suggested by Senators Cardin, Kerry and McCaskill doesn't address these issues at all; it simply cripples the competitiveness of satellite radio versus terrestrial broadcasters.