FCC to approve XM Sirius Merger

July 24, 2008
Lexero LLC



 

The FCC, after being deadlocked along party lines, is expected to clear a merger between satellite radio providers XM and Sirius, so long as the firms meet certain conditions, reportedly the firms' payment of $20 million in fines for violations regarding tower locations and power limits.


The approval of the merger comes as a disappointment to consumer groups and Democratic FCC Commissioners, who had heavily opposed the merger based on monopoly concerns. These interests were of the opinion that the combination of the only two satellite radio providers would be the definition of a monopoly. Others, such as Republican FCC Commissioners and the firms themselves, felt that the varied choices in audio programming, such as HD Radio, analog radio, podcasts and similar alternatives were sufficient to restrict any potential price gouging by the new combined firm. The Department of Justice’s Antitrust Department had previously cleared the merger on similar grounds.

This was the classic “close call.” XM and Sirius have been struggling with profitability from the beginning of their existence and there were legitimate questions as to whether satellite radio would be viable at all. On the other hand, the technology is very new. There are equally legitimate questions as to whether allowing a merger of such new technology is a sound long-term choice.

All is not lost even if the DOJ and FCC’s decisions are proven to be wrong as the years pass The Federal Government has the power to break up monopolies when the need arises. While the “break up” process is substantially more problematic than the “prevention” powers, the option does remain. More likely, market powers will be sufficient to keep the XM-Sirius entity in check, at least in the short term.


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