Opinions Rise on XM-Sirius Plan

With the recent release of two studies, research firms join the debate over the proposed XM-Sirius merger.
With the recent release of two studies, research firms join the debate over the proposed XM-Sirius merger. (By Daniel Acker -- Bloomberg News)
By Sam Diaz
Washington Post Staff Writer
Wednesday, April 11, 2007

Industry experts and consumers are starting to chime in on the proposed merger of the nation's two satellite radio companies, using research studies to try to sway opinion in Washington, where Congress will hold another hearing on the matter next week.

One of the studies -- by research firm Carmel Group hired by the National Association of Broadcasters and released last week -- said a merger would harm consumers, citing the potential for higher prices and less content. But late Monday, an independent report by TMF Associates, another research firm, blasted that study, referring to some of its arguments as "ludicrous."

Separately, in a filing yesterday, XM Satellite Radio said it amended the employment contracts with its Chairman Gary M. Parsons, chief executive Hugh Panero and President and Chief Operating Officer Nathaniel Davis. If the merger is approved and if Parsons and Davis leave the company within the following year, trading limitations on their restricted shares and stock options would go away, according to documents filed with the Securities and Exchange Commission. Panero's trading restrictions would be removed immediately upon the close of the merger if he leaves the company.

As the Senate Committee on Commerce, Science and Transportation gears up for the fourth Capitol Hill hearing on the merger since it was proposed in February, the companies and their opponents are pressing arguments in support of their positions on the state of audio competition. Both sides are pointing to blogger debate on the issue, as well as expert opinions that take their sides.

Such regulators as the Department of Justice and the Federal Communications Commission must decide whether Internet radio, MP3 players and traditional AM and FM radio compete with satellite radio, and whether a single satellite radio provider would harm consumers.

One of the main arguments against the merger, according to the Carmel Group, is that consumers' audio options, particularly in the car, are limited. While some technology firms promise great advances that could bring more choice -- such as in-car, high-definition radio and built-in MP3 technology -- regulators should consider only what's available now, the group says.

"The FCC and DOJ aren't in the business of looking into some crystal ball and predicting some technology in the future," said Jimmy Shaeffler, Carmel Group senior analyst and author of the group's report released last week. "Somewhere down the line, maybe 5 years, 7 years or more, XM and Sirius can come back to this argument and possibly prevail."

But Tim Farrar, who authored the competing report by TMF Associates, argued that consumers do have choices in their cars -- and regularly exercise their options with their wallets.

"My view is that the criticism . . . doesn't jibe with the reality of the market," Farrar said, noting that almost 50 percent of iPod users have purchased accessories to allow for in-car playback.

Farrar's group did not take a position for or against the merger but said that consumers have choices, including not to subscribe to satellite radio at all.

"There is a choice between paying or not paying," Farrar said. "Terrestrial radio is an alternative. I may not feel it's worth paying $12.95 for satellite radio, because terrestrial radio gives me what I want."

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