XM-Sirius Vote Hangs on New Conditions

By Cecilia Kang
Washington Post Staff Writer
Saturday, July 19, 2008

A long-delayed merger between the nation's two satellite radio providers may be facing another hurdle after a key regulator yesterday told the companies they would need to make stronger concessions on pricing and minority programming to gain his support.

Federal Communications Commission member Jonathan Adelstein, a Democrat, who said he discussed his plan with XM and Sirius satellite radio this week, could hold the swing vote in the five-member commission, with two votes already cast in favor of the deal.

He told the companies that they would have to agree to cap prices for their service for six years after the merger, set aside one-quarter of their radio spectrum for noncommercial and minority programming and equip satellite receivers with high-definition over-the-air radio signals to ensure that traditional radio will be able to compete with the monopoly.

Adelstein has also told XM of the District and Sirius of New York that they would have to agree to an independent monitor to ensure they live up to the agreement.

Sirius and XM declined to comment on Adelstein's proposal.

The companies announced their merger plans more than a year ago, but the union has been held up by labored regulatory reviews by the Department of Justice and FCC. The Justice Department passed the merger last March, saying the satellite radio operators face increased competition from Internet radio, terrestrial radio and iPods so a merger would not harm consumers.

Yet dozens of lawmakers have expressed concern about the merger and several state attorneys general have asked the FCC to block the deal, saying the combined company would hurt consumers who could face higher prices and fewer choices with the monopoly satellite radio provider.

Under Adelstein's proposal, the companies would have to disclose technical specifications so that independent radio receivers could operate their programming and would have to promise not to pass on increased programming costs to customers.

"If they are allowed to merge, they would have more spectrum than the AM and FM bands combined," Adelstein said. "With that much market power, we need to make sure consumers are the winners and not just the company."

Adelstein's plan would go beyond that announced last month by FCC Chairman Kevin J. Martin, a Republican, who voted to approve the merger after XM and Sirius agreed to offer a la carte programming, cap prices for three years, provide interoperable receivers for both technologies and set aside 8 percent of their capacity for minority-owned and noncommercial programming.

Republican Commissioner Robert McDowell has voted in favor of the merger. Republican commissioner, Deborah Tate, has not indicated how she will vote on the merger. There are three Republican and two Democratic commissioners at the agency.

Earlier in week, Rep. Edward J. Markey (D-Mass.), chairman of the House subcommittee for telecommunications and the Internet, sent Martin a letter asking for tougher restrictions, similar to those proposed by Adelstein, placed on the companies if their merger is approved.

Clyde Ensslin, a spokesman for Martin said he would work with other commissioners to advance the merger. "He's always open to changes suggested by his fellow commissioners in order to get three votes needed for approval," he said.

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