By David Hatch
(Wednesday, May 23) A key senator urged the Justice Department and FCC to block the proposed $13 billion combination of the XM and Sirius satellite radio services, siding with broadcasters in expressing his opposition.
"The lack of a viable competitive alternative existing today to the satellite radio monopoly created by this merger is a sufficient independent reason to block this merger," wrote Judiciary Antitrust Subcommittee Chairman Herb Kohl, D-Wis.
Kohl's letter was sent to Thomas Barnett, head of the Justice Department’s Antitrust Division, and FCC Chairman Kevin Martin, both Republicans. Their agencies are reviewing the transaction, which has divided Washington over its impact on consumers and terrestrial radio stations.
The National Association of Broadcasters issued a statement applauding the letter and warning that the deal would harm consumers. But even some broadcast sources privately acknowledge that NAB walks a fine line in opposing the merger while seeking to relax FCC media ownership rules governing its members.
"I don't think it tips the balance," said Blair Levin, managing director at the investment firm Stifel Nicolaus, of the Kohl letter, noting that the senator already has raised these concerns at hearings.
Levin said the Justice Department is beginning its inquiry and would consider a range of opinions from radio manufacturers, retailers, car companies that outfit vehicles with satellite radio and other lawmakers. "This is where the economic data [to be provided by the merger parties] is going to be very, very important," he said.
Sirius Chief Executive Officer Mel Karmazin has testified that the merger is necessary for the survival of both services, which he argues compete with over-the-air radio and new technologies such as MP3 players and iPods.
He insists the deal would benefit subscribers by eliminating redundancies and freeing up capacity for diverse programming, and has promised lower prices and consumer protections if it is approved.
But Kohl countered in his letter that satellite radio, which features dozens of music channels in a variety of formats, is distinct from broadcast transmissions. As a result, the combination would create a monopoly by combining the two satellite providers into one, he argues.
The senator also contended there is no viable alternative to satellite radio in the near future and explains that only new competitors capable of entering the market on a "timely" basis are considered alternatives under antitrust law.
"Timely means likely to be on the market within the next two years. No new technology satisfies this requirement," he wrote. He dismissed approval with consumer-oriented conditions, arguing that none "would be sufficient to ameliorate the substantial harm to competition caused by this merger."
Martin has previously said the transaction faces a high regulatory hurdle because his agency barred the companies from combining when it originally licensed them.