• by Erik Sass  @eriksass1, June 16, 2008

Kevin Martin, chairman of the Federal Communications Commission, has recommended the commission approve the merger of Sirius Satellite and XM Satellite Radio, taking the roughly $5 billion deal another step closer to reality. However, Martin also named two conditions for allowing it to proceed, according to the Associated Press, which reported the news late Sunday: a three-year price freeze, and the cession of 24 channels to non-commercial and minority broadcasters.

The second condition seems designed to satisfy a demand made by four state attorneys general in a letter to the FCC in late April. In it, the top prosecutors of Connecticut, Maryland, Ohio and Washington wrote to express their opposition to the merger -- but added that if it were to be approved, the FCC should set aside part of the satellite-accessible spectrum for a free service to be started by a new third-party company.

One such service has already been proposed by Georgetown Partners, which invests in minority-controlled media companies. Meanwhile another company, Primosphere Limited Partners, wants to revive an earlier bid for part of the satellite spectrum; Primosphere competed for FCC satellite licenses against Sirius and XM in the 1990s, but couldn't match their bids.

Martin's public recommendation gives a big boost to the proposed merger of Sirius and XM, after months of lobbying by the satcasters for approval in Washington, D.C. In the face of fierce opposition from earthbound radio broadcasters, led by the National Association of Broadcasters, in late March the merger got a green light from the U.S. Department of Justice, which found it didn't violate antitrust laws. But final approval must come from the FCC, which granted the companies licenses in 1997.

Recent FCC votes have pitted its three Republican commissioners (led by Martin) against two Democrats. But the commissioners have been unusually reticent about the merger, keeping their discussions private and issuing few public statements. In an election year, they are also being pressured by members of Congress, which oversees their work, on a wide range of issues. So in this case, even with Martin's endorsement, there's no guarantee of approval by a party-line vote or another combination.

Nonetheless, Martin's recommendation counts as a strong endorsement of the merger, increasing the likelihood of approval based on the two conditions he named. Significantly, Martin apparently chose to ignore other petitions, chiefly a demand from the HD Digital Radio Alliance that all satellite radio sets include receivers for terrestrial digital signals.