Proposed Satellite Radio Merger Could Set Off Sparks at Hearing

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http://www.politico.com/news/stories/0207/2895.html

Proposed Satellite Radio Merger Could Set Off Sparks at Hearing

By: Andrew Glass
February 26, 2007 02:12 PM EST


Up in the sky 22,500 miles above Earth, separate sets of satellites beam hundreds of music, news and sports radio programs to almost 14 million U.S. subscribers in homes, offices and cars. Down on the ground in the nation's capital, a legion of lawyers and lobbyists has launched a multipronged campaign to let them merge.

The proposal calls for XM Satellite Radio Holdings and Sirius Satellite Radio Inc. to combine their programming. They will try to persuade the U.S. Department of Justice and the Federal Communications Commission to sanction the union and to do it quickly. The initial skirmish will occur Wednesday on Capitol Hill. While Congress cannot block the deal, it could influence the outcome.

The key issue before the lawmakers is the same one that faces the regulators: What is the scope of the market? If it is satellite radio, as critics allege, a merger would spawn an illegal unregulated monopoly. But Mel Karmazin, Sirius' CEO, will testify that the market should also include the 223 million weekly listeners to about 10,000 AM and FM domestic radio stations, the 219 million Americans with access to the Internet and millions more who own iPods and other hand-held music players.

The projected XM-Sirius merger, announced Feb. 19, will be the first item to come before the newly created House Antitrust Task Force. House Judiciary Chairman John Conyers Jr., D-Mich., who set it up on a provisional basis, said, "We are holding this hearing to allow members to probe whether this merger will enhance or diminish competition in the digital music distribution industry."

Karmazin will argue that the merger would allow automakers to mount receivers without having to choose between the two incompatible systems. Post-merger subscribers could listen to both Howard Stern (Sirius) and Oprah Winfrey (XM). They could tune into National Football League and National Basketball Association games (Sirius) and Major League Baseball games (XM), too. Karmazin will also say that dropping duplicate channels and replacing them with a wider range of niche programming would benefit consumers.

Over the last eight years, the two firms have lost a combined $7 billion. They don't see a way to profitability. In 2006, their collective losses will exceed $1.5 billion. But no matter how the congressional session goes, the would-be partners must still surmount high regulatory hurdles in attaining a governmnt-sanctioned bailout.

Conyers plans to question Karmazin about why his company, being in such dire financial straits, signed Stern, the nation's most sexually explicit shock jock, to a five-year $500 million contract. "Bad management is no excuse for a monopoly," said Mark Cooper, director of research at the Consumer Federation of America (CFA), who will also testify.

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