Sirius Promises Lower Prices in XM Combo

The Associated Press
Wednesday, March 21, 2007; 3:37 PM

NEW YORK -- Sirius Satellite Radio Inc. is promising more programming choices and lower pricing options as part of an effort to convince federal regulators to approve its proposed acquisition of rival XM Satellite Radio Holdings Inc.

The deal still faces opposition from several consumer groups, however, and what's certain to be a tough regulatory review in Washington by antitrust authorities and the Federal Communications Commission.

In an application submitted to the FCC on Tuesday and disclosed in a regulatory filing on Wednesday, Sirius said that the combined company would allow subscribers greater flexibility in choosing programming options, including a lower price if they elect to receive fewer channels.

Customers of both Sirius and XM already can block out adult-themed channels such as Playboy, adult humor and urban music, but they don't receive any discount for doing so.

In their filing with the FCC, the companies said that customers could elect to receive fewer channels for a rate lower than the current monthly fee of $12.95 offered by both companies.

Customers could also continue to receive the standard Sirius package or XM package for the same rate, or they could choose a best-of selection of channels from both services for what the companies said would be a "modest premium" to the cost of one service.

Sirius and XM have said that all customers will be able to continue using the radios they currently have even after the deal closes.

The FCC filing came on the same day that Sirius' CEO Mel Karmazin made his third appearance in front of lawmakers to answer questions about the proposed transaction, to be paid for with stock valued at $4.7 billion when the deal was announced Feb. 19.

During the hearing, Sen. Herb Kohl, D-Wis., questioned Karmazin's stance that the combined company would face competition from terrestrial radio, MP3 players and Internet radio.

Kohl also voiced concern that the combined company would raise prices in the future, particularly if it signed exclusive contracts with sports leagues or popular entertainment providers. Karmazin said he was open to regulatory oversight of price increases as a condition of the merger.

Sirius and XM were explicitly forbidden from merging when their licenses were granted a decade ago, but the companies are arguing that much has changed since then, and that the companies now face increased competition in audio entertainment from iPods and Internet radio, as well as traditional terrestrial radio.

On Tuesday, a group of six consumer and advocacy groups asked the Senate panel to call for a tough regulatory review of the transaction, which would eliminate one of the only two competitors in the emerging satellite radio business.

The statement from Consumers Union, the Consumer Federation of America and others said that the deal would reduce competition, decrease choices for consumers and possibly lead to higher prices.

© 2007 The Associated Press