Blog Post: XM/Sirius merger predictions

What will the Federal Communications Commission decide regarding the proposed XM/Sirius merger? The hell if I know.

But it's fun to come up with predictions, especially if you live 3,000 miles away from Washington, D.C. and mostly get your information via the Internet. One thing is for sure, the path is open to a decision. The Department of Justice has ok'd the union. It's up to the FCC now.

Possibility #1: The FCC will reject the merger outright

This isn't likely, I suspect, but you never know. The FCC's 1997 Order did stipulate that one entity could not own all the spectrum on the Digital Audio Radio Satellite (DARS) band. And XM and Sirius have, after all, flagrantly ignored the agency's requirement that they create an interoperable receiver that could pick up both services. And boatloads of Congresspeople have told the FCC that they hate the idea, including lots of Republicans.

So the Commissions could, in the end, simply reject the union outright, wish XM and Sirius lots of luck, and just move on to the next matter, of which there are many.

Possibility #2: The FCC will accepts the merger

The opposite prospect is that the agency will simply give the union approval without any conditions. They could get around the 1997 anti-monopoly rule by issuing a waiver, as the Commission so often does with its newspaper/TV station cross ownership ban.

But my guess is that the chances of this happening are zero to nothing. The Commissioners, both Republican and Democratic, have too many agendas: localism, non-commerciality, diversity, open platform, indecency, just to name a few items, to let a merged XM/Sirius go completely unmolested by some regulatory oversight.

Possibility #3: The Commission will approve the merger and impose conditions

This is very, very possible. Such conditions might include:

1. An open platform. Expect some kind of rule that says that developers who create receivers for XM/Sirius can make them any way they want, without interference from the newly married entity. Plus they can jimmy up the applications to include other goodies: mp3 player, HD radio, Internet connection, whatever. No messing with the developers, the FCC could say.
2. A spectrum set aside. Lots of public interest groups want the FCC to shave off about five percent of the merged entity's spectrum and give that over to some non-commercial somethingorother that distributes the channels to educational, non-profit groups. Amazingly, even Clear Channel has given the ok to this idea (probably because the radio giant wants to weaken the merged entity in any way it can).
3. Channel leasing. This would involve requiring XM/Sirius to lease channels to independent commercial companies. The FCC would also stipulate that XM/Sirius could have no editorial control over the content that these indies broadcast.
4. A new auction. The agency could shave off some spectrum from the newly merged company and pass it off to some other buys in a competitive sale. You never know.
5. Pricing requirements. XM/Sirus have proposed a series of prices for their new products (once they merge). The Commission may hold them to those figures for some given period of time—say, five years or so.
6. Indecency rules. Clear Channel has also proposed that the FCC apply its indecency standards to a married XM/Sirius. This is probably a way of getting back at Howard Stern, who, after he was fired by various Clear Channel stations some years ago, fled to Sirius radio. It is probably, again, a Clear Channel scheme to make XM/Sirius less appealing, and therefore less competitive to terrestrial radio.
7. Diversity. One minority entrepreneur has proposed a 20 percent spectrum set aside, to go to a minority owned satellite radio provider. A lot of minority advocacy groups, especially black groups, support this plan. I'm not sure it will go through, but not because of lack of lobbying.

If you insist on my making a specific sets of predictions, I'll go with Possibility #3 and options number one and three, at minimum. The Commission has already attached the open platform principle to its latest broadband auction. And the channel leasing requirement is already a fact of life in the wonderful world of cable TV, although the cable companies don't make it very easy to lease channels. The rest of the options are pretty advanced for the agency's Republican majority, although they might go for the indecency provision if they're feeling frisky.

There is, of course, the possibility that they will never make a decision on this matter—that the Commissioners will not be able to come to a consensus, and that as a consequence, XM and Sirius will give up on the merger. But the two services have recently cancelled their annual meetings, which is a sign that they expect otherwise. Hope springs eternal, even while waiting for the FCC to make up its mind.