Can XM-Sirius merger stand up to Washington politics?

After well over a year of scrutiny, the proposed merger between the country's two satellite radio providers - XM and Sirius - is finally on the home stretch, set for an approval vote as early as Aug. 1.
Written by Sam Diaz, Inactive

After well over a year of scrutiny, the proposed merger between the country's two satellite radio providers - XM and Sirius - is finally on the home stretch, set for an approval vote as early as Aug. 1. But wait. This week, one of the FCC commissioners proposed even more conditions - beyond what chairman Kevin Martin has already suggested and what XM/Sirius execs have offered. With Washington politics at play, could the last mile to a vote be delayed even further?

From the beginning, XM and Sirius faced an uphill battle to get this merger approved, notably the matter of a no-merging-in-the-future clause that was established when the two companies received their licenses. But through it all, Sirius CEO Mel Karmazin - the primary spokesman for all things related to the merger - has kept fighting, offering concessions that would merge the channel lineups, protect consumers from price hikes, keep the old radios from becoming useless bricks, set aside a fixed number of channels for non-commercial and minority programming and even establish an a la carte pricing structure.

Finally, FCC chairman Martin - who appeared to be the one who might need the hardest sell on the merger - said last month that he would recommend approval under certain conditions, many of which Karmazin had already OK'd. But it turns out that Commissioner Jonathan Adelstein, one of the two Democrats on the five-member commission, could be the one to hold things up even further. He says he'll approve the merger if the cap on subscription prices is increased from three years to six; the merged company sets aside 25 percent of the channel lineup (instead of the set 24 channels) for non-commercial and minority programming and that new satellite radio receivers be built with technology that allows them to receive the new HD Radio signals.

Ah-ha. Now, this is all starting to make sense. HD Radio, high-quality niche programming that plays only on special receivers, is the newest offering from the terrestrial radio stations to get listeners back. You see, with all the alternatives to radio out there, listeners have choices - iPods, CDs, streaming radio over the Internet and, of course, satellite radio. And yet, when the satellite radio guys used the same argument to show how a merger of the two wouldn't create a monopoly, the National Association of Broadcasters, a powerful Washington lobbying group that represents the radio stations, cried foul. (This is the famous you-compete-with-us-but-we-don't-compete-with-you argument that the NAB was spewing last year.)

Since HD Radio hasn't really taken off in the mainstream market, maybe forcing the satellite companies to push that technology on to its subscribers is one way to make listeners discover it. (I wonder if Adelstein thought of this himself or if the folks at the NAB whispered it in his ear.)

Now, more than ever, consumers have choices in how they're entertained. There are a number of mp3 players beyond the iPod that are on the market today, as well as music download services. Consumers can choose between movie download services, video game consoles, cable and satellite TV and even what songs are on a CD. Oh yeah, and anyone can abandon all of the expensive extras and stick to free entertainment - basic TV or AM/FM radio.

Enough is enough. The FCC should take the recommendation of Chairman Martin and approve this merger already. Adelstein's suggestions are too much - especially when you consider how quickly technology can turn an industry upside down. (Take a look at what's happened to music, TV and newspapers in recent years.) Why on earth would a satellite radio company make it easier to tune in to a competitor? And a six-year cap on pricing? Six years is a long time and a lot can - and will - happen between now and 2014. (Ask yourself this: Back in 2002, was anyone watching YouTube over a Web-enabled cell phone or playing video games over the Web with people in other parts of the world? Hmmm. I rest my case.)

This is yet another example of Washington politics trying to control technological innovation. Imagine the sort of breakthroughs that a company like the new XM-Sirius might make if they're able to streamline their expenses and merge their subscriber lists. Imagine the advancements we'll miss if they're not.

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