Satellite Radio merger in the Senate

Satellite merger?We’ve told you before about the proposed merger of the two satellite radio providers, Sirius and XM. Previously the House of Representatives had inquired into the deal, now the Senate is doing so. The main objection to the action is the creation of a monopoly resulting in increased costs for consumers.

Chief executive of Sirius, Mel Karmazin, has testified, saying that he feels the combined satellite provider would still face robust competition from other sources, such as terrestrial radio, iPods, and internet radio (despite recent efforts involving the satellite providers that appears to be directed toward killing, or at least severely crippling, that industry’s ability to compete in the marketplace). Karmazin went on to promise there would be no increase in price due to the merger. In response to that argument, Senator Herb Kohl, D-Wis, said the following.

We must view these claims with a healthy degree of skepticism…Over-the-air radio does not come close to duplicating the impressive array of program offerings of satellite radio.

The National Association of Broadcasters has testified at the hearings to the effect that they feel they would be unable to compete with a monopoly in the satellite market. has the full story.

Even though they are holding hearings, neither house of Congress has announced plans to prevent the merger at this point. Assuming they don’t, the satellite companies will still undergo antitrust reviews by both the Federal Communications Commission (FCC) and the Justice Department. In 1997 when the FCC created the industry and issued licenses to both providers, it stipulated that the two companies could not merge to create a monopoly. It is yet to be seen if the FCC will overrule itself and allow the merger.

An interesting side argument that has arisen surrounding the merger, is the question of a la carte programming. While Karmazin told the House committee that an a la carte subscription model couldn’t be done for technical reasons, he has since suggested that it may be possible to some degree.

What we have said in our [FCC merger] application is that anybody who chooses not to receive any content, any adult content, not only has the ability to block it, but there would be a cost reduction to their bill in a more a la carte way.

What is not made clear by this statement is will subscribers has the ability to block any content they want, or only certain channels? Karmazin did say “any adult content.” One would hope that will include both content such as the Playboy channel, as well as the Howard Stern show.

The amount of rebate offered for blocking such content has not been specified at this time.

Offering the ability to block content like this, and receive a rebate, could be very appealing to consumers who have shied away from satellite radio. I know it would interest me.