XM-Sirius Debate Comes Down to Competition

By Sam Diaz
Washington Post Staff Writer
Saturday, March 31, 2007

The National Association of Broadcasters and the Consumers Union say they will issue formal statements to the Federal Communications Commission in the coming weeks, urging rejection of the proposed merger between the XM and Sirius satellite radio companies when the agency solicits public comment.

The groups argue that an XM-Sirius merger would amount to a government bailout of two money-losing ventures that paid hundreds of millions of dollars for big-name talent to lure subscribers. They also claim that a merger would result in higher prices for subscribers, countering the companies' claim that combining their operations would mean lower prices and more options for consumers.

How Congress and government regulators frame the debate over a merger -- specifically, whether they consider new gadgets and services such as iPods, music-playing cellphones and high-definition radio to be in competition with satellite radio -- could have a profound impact on the future of other media businesses.

The NAB, which lobbies for traditional radio and television companies, is in an awkward position, some government officials say. On one hand, NAB members argue that satellite radio's national coverage does not compete with traditional radio stations' local presence.

"I don't see how anyone can say that Clear Channel competes head-to-head with satellite radio in a national market," said NAB spokesman Dennis Wharton, referring to the radio company that owns hundreds of local stations. "It doesn't have a national footprint in every market in America like satellite radio."

But separately, the NAB is trying to make a case with the FCC that traditional radio companies do compete with satellite radio and therefore should be allowed to own more local stations than current rules permit.

Sirius chief executive Mel Karmazin, who testified before Congress this month, defines the market differently. He maintains that satellite radio is only one player in an broader "audio entertainment" market that has changed dramatically since the FCC approved the licensing of satellite-radio providers 10 years ago.

Car stereo systems, he said, are equipped to play music from iPods, while cellphone companies sell sports programming and music downloads. "I can't imagine who could say we're not competing with some of those things," Karmazin said in an interview yesterday. "If you're listening to music on an iPod while driving in your car, you're not listening to satellite radio."

Consumer advocates can't agree on whether radio listeners would be better off if XM and Sirius merged.

Gigi B. Sohn, president of Public Knowledge, a public interest advocacy group, said traditional broadcasters have long monopolized local programming and that a merger of satellite radio companies -- with conditions of price freezes, tiered programming packages and dedicated channels to serve the public interest -- would provide much-needed competition to local stations.

"Nothing would make the broadcast industry happier than to see this merger fail," Sohn said. "I do believe XM and Sirius do compete with over-the-air broadcasters, and that's only going to get more true as they roll out HD radio."

And while satellite radio can reach places local stations cannot because of technical limitations, local stations are broadening their reach to a global, not just national, audience by streaming broadcasts over the Internet.

Jeannine Kenney, a senior policy analyst at Consumers Union in Washington, disagreed. She said consumers enjoy having multiple options -- satellite radio, local radio and digital music players -- and there's little data to show that one replaces another. "These are different products used in different ways," she said.

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