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Regulators' Satellite Radio decision gets criticism

Written by James Delahunty (Google+) @ 03 Apr 2008 0:34 User comments (6)

Regulators' Satellite Radio decision gets criticism The recent decision by antitrust regulators to approve the proposed merger of XM Satellite Radio and Sirius Satellite Radio in the United States has gained criticism due to its reasoning. In 1997, when the Federal Communications Commission (FCC) approved rules to create the new services, it insisted that both XM and Sirius certify that radio equipment can pick up signals from both providers.
"At the very least, consumers should be able to access the services from all licensed satellite DARS (digital audio radio service) systems and our rule on receiver inter-operability accomplishes this," the FCC's 1997 decision reads. While this rule aims to make it easier for a consumer to switch between services, no such interoperable radio equipment is readily available to consumers.

The important thing about this fact is that it was cited by the Justice Department as a reason to clear the merger. Basically, since the goal of making and selling interoperable equipment to consumers failed, the regulators found that both companies don't compete as much as previously thought.

Users of XM buy one type of radio and users of Sirius buy another, and automakers pre-install systems based on whichever company they have an exclusive contract with. Therefore, users of each service are unlikely to change to its competitor as it would need different equipment. Then, of course, there is also the claims from both providers that satellite radio has different competition in this decade including iPods and HD Radio.

"If the DOJ truly believes the failure to develop an inter-operable radio is diminishing competition between XM and Sirius, it should be promoting aggressive steps to market that inter-operable radio rather than allow the two companies to combine into a monopoly," Gene Kimmelman, vice president for federal and international affairs for Consumers Union, said.

Both companies did actually make an effort to develop interoperable equipment, but there are reasons why consumers didn't get offered any. The companies subsidize the cost of the equipment to keep prices down for subscribers, and so if an interoperable radio is more expensive, it is more expensive for them too. Additionally, it is unclear how subsidizing could remain fair in this case.

In other words, why would XM want to subsidize the cost of an interoperable radio for a consumer to subscribe to Sirius, and vice versa? The $5 billion buyout of XM by Sirius still needs approval from the Federal Communications Commission (FCC). In 1997, the FCC prohibited a possible merger of the companies but now both argue that the prohibition was a "policy statement" rather than a "binding commission rule."

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6 user comments

13.4.2008 3:01

i am still amazed that clear channel who owns XM is selling it?! maybe they are just cutting there losses?

24.4.2008 13:03

how about the FCC just writes them the f#cking check right now?

hd radio sucks so hard right now its not a competitor to anything, and how are ipods competitions to a live radio service? hey fcc, wanna let dish network and direct tv merge?

and uh... where were the federal regulators when xm and serius decided to totally go against their federally mandated order to make the receivers inter-operable and thus get us into this hideously wasteful mess we are in today as far as sat radio? The fcc has got to be one of the most worthless government institutions ever.

34.4.2008 17:41

ipods are competition in the same way that things like file sharing, streaming music, radio etc. are competitors of itunes. just because the content is delivered through different avenues doesnt make it less competitive.
This merger is different than something like directv and dish because sirius and xm CREATE their own programming, whereas directv and dish simply deliver the same channels found everywhere else(just like cable tv for example). There is programming on satellite radio that cannot be found anywhere else.
I really dont see what all the fuss is about this merger because if you dont like the service, YOU DONT HAVE TO SUBSCRIBE. There are several other ways to get music. thats why this isnt a monopoly.
directv and dish would be a monopoly because there are a lot of rural areas where cable isnt available and the only way to get tv is through satellite. if these companies merged you would have no other choice but to do business with the one company.
there is nowhere in the US that satellite radio is the only choice to listen to music.

48.4.2008 10:09

what amazes me is just a few years ago the merger of Dish and DiretTv was not allowed. Are the radio services that much of a different situation?

58.4.2008 10:09

what amazes me is just a few years ago the merger of Dish and DiretTv was not allowed. Are the radio services that much of a different situation?

68.4.2008 10:09

what amazes me is just a few years ago the merger of Dish and DiretTv was not allowed. Are the radio services that much of a different situation?

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