Editorial: The FCC Gets it Right

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  Space News Business

Editorial: The FCC Gets it Right

posted: 05 August 2008
05:47 pm ET






It took too long, but almost a year and a half after the two U.S. satellite radio providers formally sought permission to merge – and four months after antitrust regulators at the U.S. Department of Justice gave their blessing – the Federal Communications Commission (FCC) did the right thing and approved the transaction.

Sirius Satellite Radio and XM Satellite Radio officially became one company July 28, just three days after the FCC cleared the deal in a three-to-two vote split along party lines. The newly created Sirius XM Radio can now begin the difficult task of consolidating its operations and infrastructure, a process that by necessity will occur over a period years, not months.

In the near term, the focus will be on meeting the conditions the FCC imposed on the deal, which include bringing radios compatible with both legacy services to market within nine months. Ultimately the company likely will have to map out and execute a smooth transition to a single satellite system, a process complicated by the fact that the Sirius and XM space architectures are very different.

That the FCC took so long to vote on the matter is testimony to the controversy involved. Democrat commission members sided with consumer groups in opposing the deal on grounds that it would create a monopoly leading to fewer choices, higher prices and lousy service.

In a dissenting statement following the vote, FCC commissioner Michael Copps said his Republican colleagues had bought into the notion that a regulated monopoly will better serve satellite radio consumers than marketplace competition. He noted that the FCC rejected that concept in 2002, when it opposed the proposed merger of
U.S.
satellite television providers DirecTV and EchoStar, now Dish Network.

That the Sirius-XM merger has created a
U.S.
monopoly in satellite radio cannot be disputed. But Mr. Copps is on shakier ground in suggesting satellite television is directly analogous to satellite radio. For millions of rural households across the
United States
, cable is unavailable, leaving satellite as the only pay-television option. While the Sirius-XM merger for all intents and purposes leaves consumers with one choice for nationwide subscription radio, the subscriber statistics clearly show that this service – in stark contrast to pay TV – is viewed as a luxury by most American consumers.

Moreover, also unlike subscription TV, there currently are viable and expanding alternatives to satellite radio for audio entertainment and information, including traditional and high-definition radio, Internet media and portable audio devices such as iPods. These services, some of them available free of charge, help define the landscape in which Sirius XM Radio will have to compete.

Consumers can take solace in some of the conditions the FCC has placed on the merged company, including a three-year subscription price cap, a requirement to offer programming on an a la carte basis and prohibitions on certain practices designed to eliminate local competition.

One also can make the argument that the FCC has helped strengthen competition in the audio entertainment marketplace by giving satellite radio its best chance to succeed; given the amount of money XM and Sirius were spending relative to their revenue growth, their long-term viability as separate entities was very much in question.

Even in the absence of a satellite-based competitor, Sirius XM Radio’s survivability is by no means assured: Much will depend on the company’s ability to consolidate its operations, become more efficient and adapt in an increasingly crowded and dynamic marketplace. It seems unlikely that consumers will get trampled in the process.