Senator Presses Sirius Chief on Radio Merger
Wednesday, March 21, 2007
The proposed merger of the nation's two satellite radio companies came under sharp criticism yesterday from the chairman of a Senate panel that monitors antitrust matters, who said consumers probably would suffer if the deal goes through.
"You'd be virtually unrivaled, unchallenged in this area," said Sen. Herb Kohl (D-Wis.), chairman of the Judiciary subcommittee on antitrust, competition policy and consumer rights. "You'd have no competition -- what a business!" he told Mel Karmazin, chief executive of Sirius Satellite Radio, at a two-hour hearing.
Karmazin, who wants federal permission to merge his company with Washington's XM Satellite Radio Holdings, fought back. Subscriber-based satellite radio, he said, competes fiercely with AM and FM stations, Internet radio, digital-music players, cellphones, and other products that transmit music, talk and sports.
"It is bizarre" to say a Sirius-XM merger would result in a monopoly, Karmazin said, because of the many options consumers enjoy. A merged company would find it difficult to raise prices, he said, because listeners could easily turn to free radio or play music through their car radios from devices such as iPods.
After years of competing for customers and losing millions of dollars, XM and Sirius, which is in New York, announced plans Feb. 19 to merge. The Justice Department will rule on antitrust questions, and the Federal Communications Commission will decide whether to overturn the 1997 stipulation that the two companies remain independent of each other.
Congress has no official role in approving the deal. Still, comments from Congress resonate in the executive branch, and Karmazin appeared eager to convince lawmakers that the audio-entertainment industry has changed so dramatically in 10 years that the merger should be allowed.
Executives say it will take months for the FCC and the Justice Department to wade through documents and hearings before ruling.
Both companies charge subscribers $12.95 a month to receive more than 100 channels of music, sports, talk and other content. Company executives say customers would enjoy more options -- priced above or below the current fee, depending on the level of content. But some consumer advocates say prices are far more likely to go up than down.
The satellite radio firms found an ally in the top Republican on the subcommittee, Sen. Orrin G. Hatch of Utah. "I personally don't believe there will be a lack of competition if you are successful," Hatch said.
Yesterday's hearing focused mainly on whether AM and FM radio, MP3 players, Internet radio, and other services are similar enough to satellite radio to constitute meaningful competition. Karmazin argued that they are, but two other witnesses disagreed.
Mary Quass, chief executive of NRG Media, a radio company in Iowa, said local AM and FM stations cannot match Sirius's and XM's ability to send scores of channels to every corner of the country. Listeners and advertisers might abandon local stations, she said, and "consumers will be the losers."
David Balto, a former antitrust lawyer for the Justice Department and Federal Trade Commission, opposed the merger, saying it would lead to increased prices. Gigi B. Sohn, president of the advocacy group Public Knowledge, urged the government to set price caps and other restrictions on the merger. "We believe that a properly conditioned merger would be in the public interest," she said.