• by Erik Sass  @eriksass1, July 21, 2008

The proposed merger of Sirius and XM Satellite Radio got a big boost last week when Jonathan Adelstein, one of two Democratic commissioners on the five-member Federal Communications Commission, said he would support the merger--provided that the satcasters agree to a number of conditions more stringent than they said they would accept one month ago.

Adelstein and his Democratic colleague Michael Copps were widely expected to oppose the merger because of concern that it will have a negative impact on consumers. Adelstein's support, even with conditions, is a victory for Sirius and XM.

Adelstein's conditional support appears to secure majority support for the merger on the five-member FCC--albeit with a surprising political twist. In recent votes, the commission has typically split along party lines, with Republican commissioners Robert McDowell and Deborah Taylor Tate joining Republican chairman Martin to overrule Adelstein and Copps, the two Democrats.

Generally speaking, the Democrats have opposed decisions allowing more consolidation of media companies, which the Republicans passed. (For example, the December revision of a decades-old rule forbidding the cross-ownership of newspapers and broadcast stations in the top 20 media markets.)

This time around, however, the commission appears to be mixing it up. Up until last Thursday, the satcasters could only be confident of support from Martin and McDowell, as Tate has expressed reservations about the merger, and the Democrats were viewed as likely to oppose it. Now, Adelstein's conditional support would give the satcasters the necessary three-fifths majority--provided they agree to his conditions.

Adelstein's demands, first reported by the Associated Press last Thursday, include a six-year price cap, including any "pass-through programming costs that could be added to a satellite radio subscriber's bill." That means the companies would have to absorb the programming costs associated with, for example, recruiting a high-profile personality like Howard Stern or Oprah, or securing the rights to popular sporting events.

He also demanded that the satcasters cede one-quarter of the satellite spectrum, or roughly 75 of 300 channels, to minority broadcasters and a public satellite service. Third, he said that all new satellite receivers be required to include hardware that makes them compatible with HD digital radio signals from terrestrial broadcasters.

All these demands echo conditions set by a number of Congressmen in letters to FCC chairman Kevin Martin, as well as petitions from lobbyists representing minority media investors and HD digital radio broadcasters.

Last month, the satcasters agreed to several milder conditions, including leasing 8% of the satellite spectrum to minority broadcasters and a public satellite radio service, and a three-year price cap. It's unclear whether they will accept Adelstein's demand to multiply both concessions. And they have already objected to the idea of requiring manufacturers to include HD receivers in satellite radios, with support from manufacturers like Pioneer.

Pioneer said last month that forcing manufacturers to include HD receivers would result in a number of technical problems. Two major carmakers, GM and Toyota, also objected to the proposed requirement.