Bit Players XM, Sirius Hold A High-Stakes Merger Game

Additionally, the Democratic takeover of Congress has brought a new set of lawmakers and staffers to the forefront. Interests eager to persuade these new powerbrokers have regularly spent their lobbying dollars freely to make sure all possible fronts are covered.

"There's a void about how to deal with these Democrats and a generational change of among the staff on the Hill," said a veteran Democratic lobbyist, who declined to be identified because he did not wish to anger contacts in Congress. "The natural reaction is overkill, the scattershot hiring of everybody and just trying to overwhelm the place."

The precise cost of the XM-Sirius fight is difficult to calculate, but both sides agree it has reached several million dollars since the merger plan was announced in February.

By combining through a stock swap, XM and Sirius hope to stem their losses, and offer an even larger variety of music, talk and sports than they do now. They have each been trying to woo pay-for-service customers by paying big salaries to celebrity talent. Sirius spent $500 million over five years to employ Howard Stern.

The obstacles to their merger are significant. The Justice Department and the Federal Communications Commission are reviewing the proposed combination. At the moment, the FCC's rules bar a single company from controlling the satellite-radio market.

FCC Chairman Kevin J. Martin has said that those rules can be changed, but he added that the hurdle "would be high. . . . The companies would need to demonstrate that consumers would clearly be better off with both more choice and affordable prices."

The broadcasters, which represent free radio services such as AM and FM, do not want to have a strengthened competitor in satellite radio. So, like XM and Sirius, broadcasters have fielded an array of lobbying expertise, much of it from within their own organization.

The broadcasters have hammered home the claim that consumers would be harmed by a merged XM-Sirius -- in advertisements, on Web sites, and in meetings and filings at the FCC and on Capitol Hill. The NAB has hung a banner on its headquarters overlooking Connecticut Avenue NW that reads, "XM + Sirius = Monopoly."

"Most people know instinctively that turning two hotly competitive companies into a monopoly is bad for consumers and bad public policy," Wharton said.

XM and Sirius, working in tandem, have asserted that the opposite is true in their ads, on their Web sites and in meetings and filings with the government. They say that the merger would be in the public interest because consumers would have more programming choices and lower prices. On Monday, Sirius chief executive Mel Karmazin came to Washington to elaborate on that pitch by saying the merged companies would offer new pricing plans to allow consumers to pay only for the stations they wanted.

They also contend that the merged company would not constitute a monopoly because of the proliferation of ways that people get their audio entertainment these days -- via the Internet, portable music players and the radio.

In Washington, conveying these views can be complicated. Each side has hired consultants to find allies among unaffiliated groups that can make their case to lawmakers and regulators more credibly than they can make it themselves.

The NAB, for example, often turns to the Consumer Federation of America and Consumers Union to help persuade government officials that the merger would hurt consumers by boosting prices. XM and Sirius have lined up their own groups to give a different view, including the League of Rural Voters and the NAACP.

Each side also has lobbyists to make sure they can target a wide variety of lawmakers in the House and Senate. The NAB retained lobbyists close to House Republicans (Daniel Mattoon, a former aide to House Speaker J. Dennis Hastert (R-Ill.), to House Democrats with an interest in telecommunications (David Leach, a former aide to a Democratic chairman of the House Energy and Commerce Committee) and to conservative House Democrats (former House member Max Sandlin, D-Tex., an ex-member of the Blue Dog Caucus).

XM and Sirius have covered their bases as well, with Democratic firms such as Raben Group and Ricchetti Inc., and GOP-leaning firms including the Paul Laxalt Group.

Both sides are trying to persuade the public as well, as a way to pressure lawmakers indirectly. The NAB has run print ads, produced in-house, in Washington publications. XM and Sirius, which do not have a trade association, have hired outside advertising agencies to produce their commercials: National Media, McCarthy Marcus Hennings, and Della Femina/Rothschild/Jeary Partners.

"This strikes us as normal," XM's Patterson said. "We want to insure there's broad support for the merger and to insure that lawmakers and policy makers are educated on its benefits."

Staff researcher Richard Drezen contributed to this report.