Sirius/XM Merger Faces Senate Skeptics

By Amy Gilroy -- TWICE, 4/23/2007

WASHINGTON — Several senators and industry experts expressed skepticism that a merged Sirius/XM would benefit consumers during a hearing here last week.

As Sirius CEO Mel Karmazin presented testimony in favor of a merger before the Committee on Commerce, Science and Transportation last Tuesday, some senators stated concerns that a merger would further the consolidation already taking place in the media sector.

Committee chairman Daniel K. Inouye (D-Hawaii) said he believes the "merger proponents, in this case, have a steep hill to climb," because of "the public interest in promoting competition and maximizing diversity of media outlets."

Vice chairman Ted Stevens (R-Alaska) said he was concerned about the impact of the merger on rural America, particularly in remote locations where no local radio broadcasts are available and satellite radio is the only option.

Similarly Gene Kimmelman, federal and international affairs VP for Consumer Union, which publishes Consumer Reports testified before the Committee claiming, "Our concern is the logic here could open a floodgate of very dangerous consolidation in the media."

Gigi Sohn, president of Public Knowledge, as well as David Black, equity research managing director at RBC Capital Markets, testified in favor of the merger.

Sohn told the Committee, "I believe one strong company subject to conditions would best serve consumers," and suggested that the merged company should set aside 5 percent of its capacity for non-commercial programming over which it has no control.

A fifth industry expert, Withers Broadcasting Companies, which owns dozens of radio and TV stations, also testified against the merger.

Both Karmazin and Sohn lashed out against broadcasters for playing both sides of the fence in their arguments against the merger.

Sohn accused broadcasters of being hypocritical because that industry has undergone significant consolidation. "It is interesting that the person testifying owns 30 stations and not 300 stations," she said in reference to Withers Broadcasting representing broadcasters at the hearing rather than Clear Channel Communications.

Similarly, Karmazin accused broadcasters of changing their stance on the scope of competition in the audio market to suit their interests. He said when broadcasters are seeking to consolidate they argue that radio competes with MP3 players, Internet radio, etc., but when XM and Sirius seek to merge, they claim that radio and satellite radio are discrete markets that do not compete with MP3 players.

"In an attempt to cast doubt on the merits of a Sirius/XM merger, some broadcasters now appear to be reversing course and questioning whether satellite radio fully competes with AM/FM radio and other audio services," Karmazin stated in documents presented to the Committee.

The issue was also raised at the National Association of Broadcasters (NAB) convention that took place concurrent to the Senate hearings. According to Broadcasting & Cable, a sister publication of TWICE, Federal Communications Commission (FCC) commissioner Michael Copps said at the NAB convention that there seems to be some disconnect between NAB's argument that broadcasters did not compete with satellite radio when it came to this merger, and the argument that it was "one big happy competitive family" when it came to seeking media ownership rule changes.

The story also quoted Copps as noting that FCC chairman Kevin Martin had said the merger was "a significant climb" for him, and that it was a "pretty steep climb" for Copps as well.

At the Senate hearing, Sohn and legislators also noted that if the merger was permitted, it might be in the public interest to require that the company return some of the 25MHz of spectrum that it would own.