Correction to This Article
An earlier version of this article incorrectly said that radio receivers can be purchased only through the companies XM and Sirius. Satellite radios are available at retail stores.

FCC Chair To Support XM-Sirius Merger

By Cecilia Kang
Washington Post Staff Writer
Monday, June 16, 2008

Federal Communications Commission Chairman Kevin J. Martin said yesterday that he will support a merger between the nation's sole satellite radio operators, XM and Sirius, a decision that could remove the last regulatory hurdle in the lengthy and heavily criticized move to make the companies one.

Martin came to the decision after the companies agreed last week to several commitments intended to prevent the monopoly from raising programming prices and from stifling competition among radio makers, aides to the chairman said in an interview yesterday. Critics have argued that a merger of District-based XM and Sirius of New York would hurt consumers, who would have fewer choices of programming and radio transmitters and who would be charged higher prices because of a lack of rivals.

As early as this week, Martin is expected to issue an order that the commission vote to approve the merger, which at least two of the remaining four commissioners must also agree to, the aides said.

"As I have indicated before, this is an unusual situation," Martin said in a statement. "I am recommending that with the voluntary commitments [Sirius and XM] have offered, on balance, this transaction would be in the public interest."

It is unclear how the other commissioners would vote. FCC Commissioner Michael J. Copps, a Democrat, has been cautious about the merger, saying he didn't see how it would benefit consumers. He and several lawmakers have, however, pushed for conditions similar to those agreed upon by Sirius and XM.

The companies have agreed to:

· Place price caps on programming and offer a la carte programming so that subscribers could pick programs they want and not have to subscribe to all channels or certain packages. Officials with XM and Sirius said they would offer radios configured for a la carte programming within three months of the merger.

· Open their technology standards to any radio-device manufacturer, paving the way for consumers to buy radio transmitters from retail stores. Currently, subscribers must buy directly from XM and Sirius, or through car manufacturers that have installed the devices in new cars.

· Provide interoperable radios. Current subscribers have radios that deliver programming from either XM or Sirius. Within one year of the merger, these listeners will receive radios that could access programming from both providers.

· Each set aside 4 percent of their radio spectrums, or 12 channels, for noncommercial services such as educational and public safety programming. They would lease another 12 channels for programming run by minorities and women, groups that are underrepresented in entertainment broadcasting.

If the merger is approved, it would be a major reversal of FCC rules. The agency distributed licenses to XM and Sirius in 1997 on the condition the two satellite companies never merge.

But both companies have struggled financially, with heavy operating costs for contracts with such celebrity hosts as Howard Stern and Martha Stewart. Seventeen months ago, XM and Sirius announced they would merge, saying it was their best chance at surviving an increasingly competitive marketplace with Internet radio, MP3 music players and terrestrial radio. If they combined, the companies would have 17 million subscribers.

After a lengthy review, the Justice Department approved the merger in March, saying a monopoly satellite radio provider would not harm consumers because there are other alternatives for consumers.

Several lawmakers, including Sen. Herb Kohl (D-Wis.), chairman of the Judiciary Committee's subcommittee on antitrust and consumer rights, balked at the Justice Department's decision and urged the FCC to reject the merger.

Consumer interest group Public Knowledge had pushed for the FCC to pass the merger only if the companies adopted conditions that would give all radio manufacturers open access to its technology and give some of its airwaves to educational programming. The most vocal critic of the merger has been the National Association of Broadcasters, which said having just one satellite radio company would hamper competition.

The merger also is expected to allow the company to begin servicing Puerto Rico, where neither currently operates.

© 2008 The Washington Post Company