Satellite Radio Merger Gaining Ground

Federal Communications Commissioner Jonathan Adelstein, a fierce critic of government policies that allow big media companies to get bigger, made a surprising move when he put forth a proposal that would allow the nation’s only two satellite radio companies to merge.

Adelstein, one of the Democratic Commissioners and the potential deciding vote, said that he would support Sirius Satellite Radio Inc’s $3.1 billion buyout of XM Satellite Radio Holdings Inc. as long as the companies agree to a six-year price cap and make one-quarter of their satellite capacity available for public interest and minority programming, plus other conditions.

Two of the five members of the commission have voted to approve the satellite radio deal, one vote shy of a majority.

Republican Deborah Taylor Tate, who is expected ultimately to vote in favor of the deal, but as a friend to the broadcast industry that opposes it, has been under intense pressure to reject it.

Tate’s delay in casting the deciding vote created an opportunity for Adelstein to extract further conditions from the companies.

"It’s critical that if we’re going to allow a monopoly, that we put in adequate consumer protections and make sure they’re enforced," said Adelstein.
 
Adelstein wants stronger concessions than the companies voluntarily offered one month ago.

FCC Chairman Kevin Martin then recommended that the deal be approved. Robert McDowell, also a Republican, has voted in favor, too. A “no” vote is expected from Democrat Michael Copps.

The Commissioners have the option to vote on items "on circulation," meaning by way of computer, rather than at a public meeting. Such votes are generally not released to the public until all have been counted.

None of the other Commissioner’s were available for comment.

Last year, XM and Sirius announced plans to merge. The Justice Department cleared the combination in March. Martin made his recommendation for approval last month.

The FCC, in creating the satellite radio industry in 1997, prohibited the only two licensees from merging””creating the current headache the two companies have been experiencing on getting one approved.
In an attempt to prove the merger is in the public interest, lawyers for the companies volunteered to submit to a number of conditions, including a three-year price cap, a time frame Adelstein would like to see doubled.

Both companies also agreed to grant 24 channels to noncommercial and minority programming.

In order to move things along, Adelstein is seeking 25 percent of the companies’ satellite capacity for public interest programming – 10 percent for noncommercial programming and 15 percent for minority programming. That potentially would work out to about 75 channels.

XM broadcasts more than 170 channels, Sirius over 130 channels.

Both have also offered to adopt an "open radio" standard, meant to create competition among manufacturers of satellite radios.

However, the condition was met with skepticism because the companies subsidize the price of radios, making it unlikely that competitors will get into the business.

One controversial proposal from Adelstein, would require the companies be required to include a digital radio tuner in any radios they subsidize that also include regular, non-digital AM-FM service.

The Commissioner also wants to set up an enforcement regime to make sure the companies adhere to the conditions, something that was not outlined in the previous voluntary offer.

An "a la carte" offering that would be available within three months of the close of the deal, according to both Sirius and XM. In addition, they have pledged to offer radios that are capable of receiving both XM and Sirius service within one year.

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