Sirius-XM: What Does the FCC Want?

Sirius Satellite Radio and XM Satellite Radio got their biggest boost to date on Monday with the Department of Justice's approval of their proposed merger, which removes one of the last remaining regulatory hurdles for the deal. However, the merger still requires approval from the Federal Communications Commission--whose chairman Kevin Martin has blown hot and cold on the subject, and may make a couple of demands of his own.

During its deliberations, the FCC has come under intense pressure from Congress and lobbying groups like the National Association of Broadcasters, which is bitterly opposed to the deal. It argues that the satcasters' merger is monopolistic and won't benefit consumers.

Chairman Martin has been castigated by members of Congress and consumer advocates for taking an overly permissive stance on media consolidation in general over the last year. He's already in the political doghouse for rushing through rule changes that relax restrictions on cross-media ownership, and faces an ongoing investigation by the House of Representatives' Energy and Commerce Committee. The investigation was instigated, in part, by the complaints of Martin's two Democratic colleagues on the five-person FCC--a hint of how rancorous deliberations have become behind closed doors.



So while Martin is unlikely to go against the DOJ decision, it's quite possible that he will append some conditions that will mollify his opponents in Congress and fellow commissioners.

While the NAB continues to oppose the merger outright, terrestrial broadcasters are hedging their bets with a somewhat softer compromise offer. As a condition for the merger, the HD Digital Radio Alliance has demanded that Sirius and XM receivers be required to include chips to pick up HD broadcasts. While Sirus CEO Mel Karmazin opposes this plan, Martin could sell it to Congress and the public as a victory for consumer choice.

Martin could also demand even greater flexibility in the satcasters' proposed a la carte subscription plan--allowing consumers more choice, lower fees, or both.

Finally, Martin could also support another HD Digital Radio Alliance demand that both satcasters cancel their exclusive agreements with automakers, which represent the main future growth area for satellite radio. This would open up opportunities for HD radio manufacturers to push their own product, thus building their "installed base" of receivers.

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