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Sirius, XM 'Stepped Forward' To Get FCC Support Of Merger

6/16/2008 04:43:00 PM Eastern

Washington — Sirius and XM “voluntarily stepped forward” with multiple new service and hardware commitments to win support for their proposed merger from the Federal Communications Commission (FCC) staff and commission chairman Kevin Martin, an FCC staff member told TWICE.




Kevin Martin

The conditions will be detailed in a proposed FCC order that Martin will distribute as early as this week to the other FCC commissioners. Many details, nonetheless, are still “to be worked out,” one FCC staffer said. “We have no indication on how the votes will go and whether this will be approved as proposed,” the staffer added. “This proposal will start the discussion on what the transaction will look like if approved.”

Another FCC staffer noted, “This really begins a starting point for discussions.”

XM declined comment. Sirius didn’t return requests for comments.

Under the new conditions, the merged satellite radio company would have to:

  • promote manufacturing and marketing of radios by companies other than XM and Sirius;

  •  accelerate the availability of previously promised reduced-price subscription plans and a la carte (channel-by-channel) subscription plans;

  • freeze the rates of current subscription-plan pricing for three years; and

  • set aside channels for noncommercial educational programming and minority programming.

The agreement also imposes a timetable on the satellite companies’ previous promise to offer interoperable radios, which would receive signals from both companies’ satellites and thus offer more channels than XM- or Sirius-only radios. The radios would have to be available within one year of the date on which the commission approves the merger.

Martin hopes the commissioners will vote before the FCC’s next regular monthly meeting, which will be scheduled for sometime in July, a spokesman said.

Said Martin in a prepared statement, “I am recommending that with the voluntary commitments they've offered, on balance, this transaction would be in the public interest.” The satellite companies, he said, “have voluntarily committed to setting forth price constraints, so the prices for consumers do not increase; smaller packages at lower prices; an open standard for radios; the sale of interoperable radios; and additional public interest programming for noncommercial use and for qualified entities who have not been traditionally represented."

Specifically, the new conditions would require “smaller,” lower-priced subscription packages to be available immediately to owners of existing radios upon FCC approval of the merger. Previously, the satellite companies promised within six months to offer four lower cost subscription packages.

The conditions would also require the availability of a la carte subscriptions within three months of approval along with the availability of the new radios needed to receive a la carte subscriptions, which would enable consumers to pick the channels they want and pay only for those channels. These radios would receive a la carte programming from only one provider’s satellites until the arrival of interoperable radios.

Previously, the companies promised to offer a la carte plans within a year of merger approval.

Other new conditions include:

  • the availability of interoperable radios within a year of merger approval. Previously, the satellites companies promised to offer interoperable radios but would only say the product would be put on a fast track once a merger were approved.

  • a minimum three-year continuation of current $12.95/month subscription prices. Previously, the companies promised to continue offering plans at $12.95 but didn’t specify for how long.

  • an “open standard” for manufacturing satellite radios to stimulate device competition by encouraging companies other than XM and Sirius to make and market radios. Either the open standard itself, or radios conforming to the standard, would have to be available within a year after the FCC approves the merger, but staff members contacted by TWICE weren’t sure. Staffers were also unable to clarify the definition of open standard.

Currently, XM and Sirius design many of the radios for their services and contract out manufacturing. Companies that design and build their own radios incorporate tuner/decoding modules designed by the satellite companies and manufactured by approved factories, one supplier added.

The conditions would also include a combined 24 channels set aside for a mix of noncommercial public-education programming and minority programming traditionally not available on satellite radio. Each service would set aside six channels for education and another six for minority programming. The start date is “still being worked on,” a staffer said. And availability of service in Puerto Rico would be included.

Clarifications of the proposal might be included in the written proposal that will be circulated to other commissioners, but the written proposal won’t be made public, a staffer said.

It has taken the FCC longer than usual to act on the merger, already approved by the Department of Justice, “because of the uniqueness of the situation,” another staffer said. When the FCC auctioned satellite radio spectrum in the 1990s, the staffer pointed out, the commission ruled that one licensee would not be able to acquire control of the other satellite radio license. But “with these [new] commitments in place,” the staffer contended, “it would be in the public interest to allow the merger.”

The proposal won the tentative endorsement of public advocacy group Public Knowledge, which said the proposal appears to incorporate many of the recommendations it proposed.

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