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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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Satelitte Radio
By bnme on 1/23/2007 2:09:36 PM , Rating: 3
The real competition is not each other, but against other forms of getting music into your car (or wherever you use your satellite radio). Traditional radio, iPods, CD's all compete for your ear.

It's almost like the whole cable companies vs. telephone companies, and the reason why AT&T is allowed to get back to being Ma Bell.

The fact that their are two different solutions for satellite radio alone is a pain to even move to it (sorta like Blu-ray vs. HD-DVD).

RE: Satelitte Radio
By masher2 on 1/23/2007 2:21:39 PM , Rating: 2
> "The real competition is not each other, but against other forms of getting music into your car ..."

Exactly so, which is why this merger makes sense. The FCC needs to reverse their stance.

RE: Satelitte Radio
By JeffDM on 1/23/2007 5:54:28 PM , Rating: 2
Exactly so, which is why this merger makes sense. The FCC needs to reverse their stance.

I don't really understand what they stand to gain by merging.

The satellites are very expensive and unless they can dump one of the two sets of satellites, then there's probably little cost reduction that can happen. Maybe they can reduce some of the licensing costs.

I don't know if a Sirius radio can tune XM, or if an XM radio can tune Sirius, but even if they can, they'll have to have them reconfigured before they can dump one of the satellite groups. If they can't be reconfigured, then I'd think that the new company would have to spend money replacing half the radios in the field or risk losing an untold number of customers.

RE: Satelitte Radio
By masher2 on 1/23/2007 8:29:26 PM , Rating: 2
> "I don't really understand what they stand to gain by merging"

Simple. That stops the bidding war they're in for content. Sirius paid $500M for Stern and $200M+ for the NFL. XM outbid them and paid $650M for MLB. They also have to fight each other for OEM deals with Automakers, distribution deals with vendors, etc, etc.

RE: Satelitte Radio
By mgambrell on 1/23/2007 8:52:32 PM , Rating: 1
They could stop that by everyone involved not being asshats. Is the only reason to carry MLB so you have a service your competitors don't? Why the exclusive arrangements? Theyre asshats for defining their service in terms of having things their competitor doesnt, when any moron can see that they are therefore going to lack things their competitor has. Since theres no real reason for one company to bid lower than another on something that should be valued the same to customers of either service (since the services are, all things considered, so indistinguishable that the customers are basically the same--in fact the customers get one or the other in their cars and have no CHOICE), the only reason one company gets the contract is because they gamed the situation differently. This chaotic gaming results in skewed valuations for different services and incredible wastes of money and enormous windfall for MLB.

Theyre asshats because theyre lazy and uncreative and the easiest thing they can think of to differentiate their products is in which big brand name services they carry. (Actually theyre quite different in sound quality, in my opinion, not objectively but just so that I prefer one crappy compressed sound to another--but try explaining that to a consumer)

Quit being asshats. Exclusion is pissing off consumers more and more every day. Define your service in terms of providing the coziest experience possible to your users. I understand that its a prisoner's dilemma, as to who makes the first move, which can be resolved by merging. But if you werent both asshats you could resolve it like gentlemen.

Actually, its probably for the best. Each service doesnt have the bandwidth for everything. Some of it needs to be only on one network, just to leave room.

RE: Satelitte Radio
By mgambrell on 1/23/2007 8:58:04 PM , Rating: 1
I would like to clarify. The only time the typical consumer understands the difference between the two services is when he discovers that what he wants to hear isnt on he service he has, or when he makes an original purchasing decision.

I hope I am just conspiratorially cynical when I propose that the reason for this arms race in exclusive content is that they each hope to clutch as many new subscribers as they can in each grab while neglecting the ones they already have who are mostly addicted and at their mercy. Once you have invested in a satellite radio and getting acquainted with it, there is a certain hesitancy to change. It costs a satellite provider less to lose a sweet exclusive deal than it does for them to pass the opportunity to grab a hot new one.

Strange how it works out, with the customers needs so completely contrary to the needs of the business model.

RE: Satelitte Radio
By masher2 on 1/23/2007 9:58:22 PM , Rating: 2
> "Why the exclusive arrangements? Theyre asshats for defining their service in terms of having things their competitor doesnt..."

Never owned a business, have you? You get ahead by differentiating yourself from your competition...not by offering exactly what they do.

If XM didn't offer a high-priced exclusive contract, then Sirius would, and lock it up. Worse, if they held talks and agreed to not bid each other up, then the government would step in, fine both for collusion and antitrust violations, and likely arrest a few execs for good measure.

RE: Satelitte Radio
By FITCamaro on 1/24/2007 6:54:48 AM , Rating: 2
Uh...thats what every company out there does. You differentiate yourself by having something the others don't.

I agree that the merger could potentially be good. Instead of competing you offer lower cost service by everyone being able to get everything and you don't need as many satellites which makes the service cheaper. The more customers to split the cost of a service the cheaper it is.

RE: Satelitte Radio
By othercents on 1/23/2007 3:54:53 PM , Rating: 2
Well the FCC actually hasn't ruled anything, but the chairman did say that it was unlikely to allow them to merge. This is because there will be markets in the US that would be monopolized because there isn't another radio option. In those areas the Satellite radio option could then charge a premium.

However if XM and Sirus can show that they are loosing customers and those customers are not buying a different Satellite system, then I don't see why the FCC wouldn't approve it.


RE: Satelitte Radio
By mgambrell on 1/23/2007 7:28:12 PM , Rating: 2
I don't buy it. If they got caught charging those customers any more than everyone else, they would have hell to pay, one way or another.

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