Why the FCC's treatment of the XM-Sirius merger is an abomination

Don Reisinger thinks the FCC has treated XM and Sirius terribly over the past year. Is he right?

After a process that took more than a year and officially set the record for the most ridiculous merger mulling in the history of the United States, the FCC finally approved the XM-Sirius merger by a 3-2 vote down party lines.

And although its treatment of this deal was bad enough over the past year and a half, the final outcome is even worse. It not only solidifies my belief that NAB has the ear of the FCC, but that both organizations are extremely concerned that satellite radio will finally become a major force in radio.

According to reports, "the companies agreed to a three-year cap on prices, set aside 8 percent of their channel capacity for minority and noncommercial programming, and agreed to pay $19.7 million for past FCC rule violations. The companies also agreed to bring interoperable radios to the market within a year."

On top of that, the FCC will embark on a new initiative to explore the possibility of including HD radio functionality into the XM and Sirius radios. That said, it didn't go so far as to make it a requirement just yet.

And while some believe that this deal is a major blow to terrestrial radio, I think that argument is hogwash. The reality of the situation is that XM and Sirius were led around by the nose while the FCC and companies like Clear Channel did everything they could to weaken the two firms.

Is an XM-Sirius merger creating a monopoly? Not a chance. Instead of droning on about this simple fact, suffice it to say that the iPod and countless other radio stations all across the United States are enough competition to prove that this merger doesn't create a monopoly.

The fact of the matter is this: if terrestrial radio and satellite radio are competing for the same listeners in the same places, there is no monopoly. And last time I checked, I can switch between Sirius and FM in my car anytime I want.

And what about this three-year price freeze? What a load of garbage. Why are we now forcing these two companies to keep pricing levels the same as expenses and other operating procedures continue to be a hindrance?

The FCC believes the newly-combined company would raise prices in seconds to address its financial troubles and thus, hurt consumers. But if you ask me, I don't think the federal government should get in the way of how these companies run their business. If it fails because of its own wrong-doing, so be it. But if it fails because the government said it couldn't raise the price when it needed it most, that's unacceptable.

I'm not saying that the company should raise prices to a ridiculous level, but I do believe that it probably does need to increase them a bit to add cash flow as it tries to reduce expenses and refinance debt. Not to mention, I'm a firm believer in the value of supply and demand and if prices get too high and demand drops off, the companies will find a happy medium that reflects the desires of both consumers and themselves.

And perhaps that's where I take issue. It's not that we have self-righteous politicians pretending that they actually care about the consumers, but it's the fact that those politicians have a thinly-veiled agenda to ensure that satellite radio is kept in check so as to not harm terrestrial radio.

Sure, the NAB wanted more regulations, but lets not forget that as these companies waited well over a year for this decision to come down, they've bled money and become far less stable in the process. And although some look at this like a win for satellite, I don't believe it.

Going forward, XM and Sirius will face the overzealous eye of the FCC and hear complaints from all sides that they didn't hold up their end of the bargain. All the while, Clear Channel and the rest of these companies will do evertyhing they can -- and that's a lot -- to ensure XM and Sirius never become a viable organization.

XM and Sirius may have emerged the victor today, but they have a long and arduous battle ahead. And based on the way the FCC and the NAB have acted over the past year, things will only get worse from here. And sadly, that's totally unwarranted.

Check out Don's Digital Home podcast, Twitter feed, and FriendFeed!

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About the author

Don Reisinger is a technology columnist who has covered everything from HDTVs to computers to Flowbee Haircut Systems. Besides his work with CNET, Don's work has been featured in a variety of other publications including PC World and a host of Ziff-Davis publications.

 

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