(Source: Bloomberg)
FCC changes its tune

As expected, the United States government approved a long-running proposal to merge competing satellite radio services XM and Sirius. The two companies combined will have a membership base of 18 million subscribers and the deal is valued at approximately $3.3 billion.

The approval process was held up by a deadlock among FCC top brass, where commissioners’ votes split along party lines except for that of republican Commissioner Deborah Taylor Tate. She announced her support in favor of the merger Thursday, with a final deal gaining approval Friday night.

In order to assuage fears of a monopoly, XM-Sirius will be held to a number of restrictions governing the way it operates. Subscription prices will be capped for three years after joining and the company is required to offer interoperable radios compatible with both XM and Sirius networks.

Other restrictions include a stipulation to dedicate 8 percent of its capacity -- approximately 24 channels -- to alternative and educational programming, designed to “enhance the diversity of programming available to consumers.” Within the next three months, consumers will also receive a “number of new programming packages,” including the ability to select stations on an a la carte basis, when combined with an appropriate receiver (also ordered to be available within three months).

In an unusual turn of events, the agreement (PDF) directs the merger all the way down to an exact price for subscription offerings. XM-Sirius’ price cap for basic programming is $12.95 a month, and a combined “best of” package will be available for $16.99. A “mostly music” package will be available for $9.99 per month, and a family-friendly programming package will be prices at $11.95 or $14.95 per month, depending on their provider.

“The applications of XM and Sirius satellite radio to merge did not present the Commission with an easy case,” said FCC Chairman Kevin J. Martin in a statement (PDF) released Monday. “I said at the time that the two companies announced their intent to merge that I thought they had a high hurdle to meet … It has taken some time, but I do believe that with the essential voluntary commitments they have made, the parties have met this burden.”

Dissenting Commissioner Michael J. Copps spoke out against the decision (PDF), accusing the FCC of “[stacking] up enough ‘conditions’ on the merged entity … to tip the scale in favor of approval.”

“After cutting through all the heat and noise and lobbying this proceeding has generated,” he said, “we are left with the unshakable reality of a merger-to-monopoly in a market that could sustain competition.”

Both XM and Sirius received their satellite radio licenses in 1997, on condition that they never merge. Despite that, the merger gained the Justice Department’s blessings in March, and FCC Chairman announced his support last June.

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