OpEd: A One Way Street to Nowhere

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  Space News Business

OpEd: A One Way Street to Nowhere

By CHRIS REALE

posted: 31 January 2007
03:35 pm ET



In an interview in 2006 promoting his new show on Sirius Satellite Radio, Howard Stern posed this question on CNN’s Larry King Live: “Where do you get this much content for $12.95?” The answer – as I have come to find out – is nowhere else. Nowhere else today, either in your car or home, can you receive such an around-the-clock, diverse mixture of music, sports, talk radio and news. The same might be said about content offerings on XM Satellite Radio. However, a potential merger between the only two satellite radio providers, which is being discussed from
Main Street
to Wall Street, would destroy the diversity and choices millions of
U.S.
consumers now enjoy.

 

Competition is good for consumers. That is a fact and it is especially true in satellite radio. Its consumers, totaling more than 13 million subscribers, now have a choice between the two providers. Existing subscribers also have some assurance that monthly subscription fees and service will remain competitive, driven by market differences among XM and Sirius in programming, features and price. Today, a subscriber can avoid Howard Stern and the Playboy Channel by choosing XM, although there might be equally undesirable choices on XM and some may prefer Sirius. Unfortunately, a monopoly provider resulting from the merger of XM and Sirius would put this consumer choice at risk, eliminating options in programming, eradicating consumer price competition and significantly diminishing the value of the consumer’s investment in receivers.

 

Nothing about the merger suggests that subscribers will continue to receive the benefits promised when they chose one provider over the other. Indeed, the final price for the total channel offerings of either Sirius or XM service is likely to increase after a merger, as monopoly power naturally leads to such a result.

 

In a merger, the total number of channels offered may be reduced, or current channels may disappear and be replaced by others. All of this would depend on the judgment of a monopolist, not necessarily on the preferences of the subscribers. Also, Wall Street investors are reveling in the potential revenue growth from this merger – an estimated $7 billion in cost savings – as they expect subscriber growth through subsidized bundles of service and receivers, as well as new, subsidized services.

 

In sum, satellite radio subscribers would be presented with take-it-or-leave-it choices that would result in eliminating access to individual customer-preferred programming or would force customers to pay additional fees for programming or services that they do not want. Predictably, Oprah Winfrey and Howard Stern respectively attract different fan bases to XM and Sirius. Should an Oprah fan with a multiyear XM subscription be expected to contribute to Howard Stern’s reported $800 million in compensation? The appeal of satellite radio – the freedom of choice and the freedom of expression Stern so adamantly and publicly fought for in radio – will likely disappear with a monopoly.

 

The proposed merger is simply bad for consumers. Competition between the two service providers has kept downward pressure on equipment costs and subscription fees. All in all, current subscribers, like me, would have no choice but to continue with the service at the increased rate, or lose the value of the equipment investment.

 

Only time will tell if Sirius and XM actually pursue a merger. If investors have their way, however, a merger agreement is almost certain to happen within the next year. To be sure, analysts and investors have rushed to qualify FCC Chairman Kevin Martin’s recent confirmation that, in his opinion, there is currently a prohibition on one entity owning both satellite radio licenses.

 

While a merger presents its own complex problems, such as how to reconcile the different operating platforms and how to structure the merger itself, the prospects of monopoly power in one of the fastest growing radio services seems too attractive for investors and executives to avoid. If consumers are not properly represented over the coming months, the answer to Mr. Stern’s question may change from “nowhere else,” to “nowhere.”

 

To counter these potentially dim prospects facing subscribers of satellite radio, a group of concerned Sirius and XM subscribers have formed the Consumer Coalition for Competition in Satellite Radio (“C3SR”). Through the participation and support of subscribers and volunteers, C3SR-the only consumer group in existence today solely dedicated to advocating on behalf of satellite radio subscribers – is committed to opposing the creation of a monopoly in satellite radio, and ensuring continued consumer choice and competition.

 

Chris Reale is a cofounder of the Consumer Coalition for Competition in Satellite Radio and a second-year law student at
George
Washington
University
in
Washington
.