NEW DETAILS ON SIRIUS/XM PRICING AFTER MERGER

Newly filed FCC documents show that IF, and that is a big IF, the merger between Sirius and XM is approved, prices for some services will increase, others will remain the same, and some will be lower. Here is the breakdown from an AP story at The New York Times.

Lower Price
For customers who choose to receive fewer channels than they currently receive, prices will decrease from the $12.95 monthly rate. Which channels and how much the price will drop is not detailed. Currently, customers can choose to block certain channels like the Playboy channel, but they do not receive a discount for doing so.

Same Price
For customers who choose to keep their same service, expect the price to remain the same.

Higher Price
Customers who choose a "best-0f" service from both providers can expect to pay a "modest premium" above the regular $12.95 fee.

Also from the article:

Sirius and XM were explicitly forbidden from merging when their licenses were granted a decade ago, but the companies are arguing that much has changed since then, and that the companies now face increased competition in audio entertainment from iPods and Internet radio, as well as traditional terrestrial radio.

On Tuesday, a group of six consumer and advocacy groups asked the Senate panel to call for a tough regulatory review of the transaction, which would eliminate one of the only two competitors in the emerging satellite radio business.

The statement from Consumers Union, the Consumer Federation of America and others said that the deal would reduce competition, decrease choices for consumers and possibly lead to higher prices.

SIRIUS CEO TESTIFIES BEFORE THE HOUSE JUDICIARY COMMITTEE

Sirius Satellite Radio CEO Mel Karmazin testified Wednesday before the House Judiciary Committee in a review of the proposed merger between XM and Sirius. In his testimony, Karmazin vowed not to raise subscription fees, but rather to lower them, which at least one member of the committee found unbelievable. From The Wall Street Journal:

Rep. John Conyers (D., Mich.), chairman of both the Judiciary Committee and the task force, was skeptical. "We don't have too good a record of satellite companies keeping their promises," Mr. Conyers said. "'Trust me' isn't going to work here, not just today, but in the longer-term examinations you will be going through."

Other members thought the deal might receive approval, but only if Sirius and XM agree to:

1. allow customers to choose stations on a channel-by-channel basis or a tiered format similar to cable TV.



2. make 5% of the channel capacity available for noncommercial, educational purposes.



3. freeze prices for at least three years.

Karmazin did not seem to think that it would be possible to allow channel-by-channel or tiered subscriptions, and was noncommittal on how long rates could be frozen, suggesting a possible maximum of four years.

XM AND SIRIUS SATELLITE RADIO TO MERGE?

On Tuesday the rumors that had swirled for more than a year regarding a possible merger between the two satellite radio companies in the United States, XM and Sirius Satellite Radio, were confirmed when both companies announced they are interested in a "merger of equals". There will be numerous hurdles to overcome before the companies can merge.

1. The Federal Communications Commission will have to approve the merger. They will take into consideration what is in the best interest of the public and if they do green light the merger, they might require concessions such as being able to regulate satellite radio like the currently do with terrestrial radio and requiring XM and Sirius to give back some of the radio spectrum issued to them by the FCC.
2. The Federal Trade Commission's Bureau of Competition seeks to prevent business practices that restrain trade. They get their charge and power from the FTC Act and Clayton Act, both of 1914. If the Bureau of Competition determines that consumers could lose in a scenario in which there was only one provider of satellite radio, the merger would likely not be approved.
3. The Antitrust Division of the Department of Justice will look closely at the proposed merger, consulting with the FTC to streamline the process and avoid duplication. If the DOJ believes that the merger would be a violation of the Sherman Antitrust Act of 1890 and/or the Clayton Act of 1914, the merger would likely not be approved.

Going from two competing satellite radio companies to one merged company seems to violate antitrust laws - one provider of a good or service that lacks a viable substitute - but XM and Sirius will argue that they do have competitors and substitutes in terrestrial radio, internet radio, and iPods and other portable music devices including mobile phones.

Most proposed mergers take a few months to clear all of the hurdles, but this one will likely take much longer, possibly going into 2008 before a final decision is rendered.

WSJ.com
USA Today

SIRIUS & XM SATELLITE RADIO CONSIDERING MERGER?

According to The Wall Street Journal, rivals Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. seem to be considering a merger, but any combination of the only satellite radio providers would face serious legal and regulatory antitrust hurdles from the Justice Department Antitrust Division, the Federal Trade Commission and the Federal Communications Commission. According to Reuters, FCC Chairman Kevin Martin today said, "There's a prohibition on one entity owning both of those licenses," making a merger seem unlikely, but he did leave the door open by saying that the FCC would review any transaction submitted to it.

While Sirius and XM are the only satellite radio providers in the United States, they might be able to get over most antitrust and competition hurdles by arguing that satellite radio competes with traditional terrestrial radio, MP3s, Internet radio, and even cellphones.

While both Sirius and XM have added millions of users, totalling more than 12 million, neither has approached profitability. In the past 12 months, Sirius stock price has fallen more than 35% while XM has dropped more than 40%.