FCC Says No to Sirius and XM Satellite Radio Merger
January 23, 2007 1:42 PM
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A monopoly in satellite radio is a big no says FCC
According to several reports, FCC chairman Kevin Martin said that it is
very unlikely the FCC will allow Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. to merge
. Both companies represent the two leading satellite radio entities currently in business in the U.S. and unfortunately, a merger in the eyes of the FCC is an obvious road to anti-competitive grounds.
Both Sirius and XM have been battling it out for the last several years, and in 2006 both companies saw their revenues drop as well as subscriber numbers drop. This peaked a notion in the industry that it was very possible that the two companies were in negotiations to go through a merger.
Share prices from both companies had dropped significantly in 2006, with Sirius shares dropping roughly 38-percent and XM shares dropping a whopping 46-percent of their value. Despite the shares dropping, the two companies continue to operate on speculation of a merger, which was also fueled by remarks made by XM CEO Mel Karmazin and chairman Gary Parsons. With their remarks, shares of both companies jumped last month but have since declined.
It is very unlikely, less than 50-percent chance, that Sirius and XM will receive FCC approval for merger, according to Martin. Even so, both companies will have to pass anti-trust regulations and audits. "There is a prohibition on one entity owning both of these businesses," said Martin.
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Didn't they *create* the market?
1/24/2007 9:34:40 AM
I'm curious. Before either started, and they were talking about upcoming satellite radio, I remember a lot of people saying "PAY for radio? Why?" Yet one company created a product and a completely new market. A second follows. Then they find either the market isn't big enough for two, or one has done a much better job than the other and it makes financial sense to collapse back down to one as the other throws in the towel but does what it can to get some money out for its investors (and maintain service for its customers).
Yet this is giving one company a "monopoly"? On a market that did not exist previously?
I'd think anti-trust monopoly measures should be reserved for things that people absolutely need. Admittedly the definition of 'need' can change (no one 'needed' computers in the 1950s outside of a very small number of government and academic realms, yet today clearly the processor market does require some competition to prevent monopolistic practices, given the prevalance of computers in modern society). But does satellite radio really rate that category?? Unless terrestrial broadcast radio has ceased to exist in the corresponding areas (and depending on your opinion of ClearChannel, maybe you think it is indeed dead and gone <grin>), I sincerely don't understand the concern.
RE: Didn't they *create* the market?
1/24/2007 3:46:54 PM
The monopoly play here by the FCC is just pandering to the major radio ownership groups. It does not pass the "reasonable man" test and the FCC knows it. Should Apple be cited for monopoly status in the MP3 industry? No mention of monopoly status whenever giant oil / gas companies want to merge....its just regular old free market economics then.......
The FCC is growing increasingly irrelevant with nonsense like this. The major radio ownership groups could easily step in and invest in stock equity in either XM or Sirius, if XM (they did with Clear Channel) or Sirius would let them or as normal arbitrage type investors.....and would the FCC step in then? Not likely that I can see.
I'm quite sure that the FCC would lose a court case in this matter. They remain hung up on a few points over satellite and one of which is clearly and bizarrely, Howard Stern. It seems that they cant live with the guy no matter where he is, and neither can the radio groups. Its just sad.
"A politician stumbles over himself... Then they pick it out. They edit it. He runs the clip, and then he makes a funny face, and the whole audience has a Pavlovian response." -- Joe Scarborough on John Stewart over Jim Cramer
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