FCC approves satellite radio merger
WASHINGTON (AP) - July 25, 2008 Sirius Satellite Radio Inc.'s $3.3 billion buyout of rival XM
Satellite Radio Holdings Inc. will mean 18 million-plus subscribers
will be able to receive programming from both services. Executives
say it will mean huge cost savings that will lead to a first-ever
profit for the relatively nascent industry.
The Federal Communications Commission voted 3-2 to approve the
buyout, with the tiebreaker coming Friday night from Republican
commissioner Deborah Taylor Tate.
Tate had insisted that the companies settle charges that they
violated FCC rules before she would approve the deal. The companies
agreed this week to pay $19.7 million to the U.S. Treasury for
violations related to radio receivers and ground-based signal
repeaters.
FCC Chairman Kevin Martin confirmed the final vote Friday night.
"I think it's going to be, in the end, a good thing for
consumers and be in the public interest," Martin told The
Associated Press. "Consumers will enjoy a variety of programming
at reduced prices and more diversified programming choices."
Subscribers will not have to buy new radios to receive a mix of
programming from both services, according to the companies. But if
they want to pursue a special pay-per-channel a la carte option,
they will need new sets.
The approval appeared to hit a glitch on Friday when a dispute
surfaced between the chairman and Tate over the enforcement issue,
but differences were quickly resolved.
The long-running regulatory review was watched closely by
exasperated investors anxious for a resolution as well as satellite
radio customers with questions about what impact the merger would
have on their service.
The approval was a major blow for the land-based radio industry,
which lobbied hard against the buyout. It was also opposed by
consumer groups, various members of Congress and state attorneys
general, all of whom argued a satellite radio merger would hurt
consumers and was not in the public interest.
"They kept each other on their toes," Democratic commissioner
Jonathan Adelstein said of the two companies. "I hope they keep
their edge and don't become a fat and happy monopoly."
Adelstein voted against the buyout as did fellow Democrat
Michael Copps. Joining Martin and Tate in approving the deal was
Republican commissioner Robert McDowell.
The companies said the combination would create hundreds of
millions of dollars in cost savings and lead to greater choice in
programming for subscribers and flexible pricing options.
Tate released a statement Friday night praising the commission's
decision to punish the companies for rules violations before acting
on the merger and supporting pro-consumer conditions imposed on the
deal.
Under the terms of the consent decree, XM will pay $17.5 million
and Sirius will pay $2.2 million to resolve interference complaints
and violations related to land-based signal repeaters the companies
operate to deliver programming.
The final merger agreement did not require the combined company
to include a chip in its radios that will allow customers to
receive digital signals from land-based radio stations, which would
have helped the land-based radio industry.
Tate, who was lobbied intensely by the industry in the final
weeks, said she "could not in good conscience support a
government-mandated requirement on the backs of American consumers
at this time."
Martin said the agreement is nearly identical to what he
circulated among other commissioners when he first recommended
approval for the deal more than a month ago.
The companies first applied for permission to combine in March
2007. The Justice Department approved the deal in March of this
year without conditions, saying the companies don't really compete
because customers must buy equipment that is exclusive to either XM
or Sirius, and subscribers rarely switch providers.
DOJ also agreed with the companies' argument that they compete
with other forms of audio entertainment, including digital radio,
Internet-based radio stations and even devices like Apple Inc.'s
iPod.
FCC approval faced a steeper climb because the companies were
prohibited from combining under terms of their licenses. The agency
struggled to come up with a way to show that allowing a satellite
radio monopoly was in the public interest.
The companies voluntarily agreed to a set of conditions,
including a three-year price cap and an 8 percent set-aside of
"full-time audio channels" for public interest and minority
programming. They will also adopt an "open radio" standard that
may lead to a greater variety of features in radios and greater
competition among manufacturers.
Sirius and XM also have promised to include a limited "a la
carte" offering that would be available within three months of the
close of the deal and allow listeners to pay only for the channels
they want to receive.