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Play Fair, Satellite Radio

The proposed merger of separated-at-birth satellite-radio twins XM and Sirius is making me mad.

The reason: Conventional wisdom is heading toward the belief that a merger will go through, even though both companies (and their investors) knew going in that the Federal Communications Commission created two slots for two independent license holders when it created the Satellite Digital Audio Radio Service category of spectrum use. Its belief: By having two licensees, there would be “an incentive to diversify programming.”

The companies claim that this merger, the prospect of which has already benefited their stocks, is essential for their survival, despite the 1997 rule about two independent licensees.

Sounds like a government bailout to me. One that would diminish competition while enriching investment bankers and the corporate fat cats that hire them.

I’m not a satellite-radio subscriber. Satellite radios are typically installed in new vehicles; my elderly car has an analog radio with five buttons and a knob. People shopping for satellite-radio service might get excited by the merger if they have trouble choosing and don’t want to buy both. Think of all those 20-something males having to pick between Howard Stern on Sirius and Major League Baseball on XM. Decision, decisions.

Of course, if the monthly fee – now $12.95 – goes up for new customers, as Sirius’ blustery CEO, Mel Karmazin, has indicated, maybe subscribers won’t be that thrilled about the new monopoly.

Monopoly’s a harsh word. It gets applied to cable-TV operators often, even though two direct-broadcast satellite TV companies provide alternatives across the country and new entrants such as Verizon Communications and rural IPTV firms are gaining ground daily.

But there are only so many satellite-TV or satellite-radio orbital locations that can serve the whole country.

That’s why the federal rule stipulated that there be two providers for each of those services. And the FCC picked two winners out of four applicants.

XM and Sirius, which have just 13 million subscribers combined, said the competitive question can’t be judged so narrowly. Consumers have many, many choices of audio programming to help distract them from driving. In addition to free over-the-air radio, they can plug in a CD or rig their MP3 players to run through the car speakers.

So what? Ask EchoStar Communications chairman Charlie Ergen about non-satellite-TV competition. He still couldn’t get the government to let him buy DirecTV. Good. Let there be choices between satellite-TV players and between satellite-TV and wired multichannel-video systems.

If the satellite-radio companies spent like drunken sailors on the likes of Stern and Oprah Winfrey and MLB and the National Football League, trying to distinguish themselves against each other and against all those other audio options, that was their choice. The government doesn’t need to provide them a way of sharing those bloated expenses.

They knew what they were getting into.

DirecTV and EchoStar’s Dish Network have successfully created different identities and don’t seem in any danger of going out of business. DirecTV is willing to pay up for exclusive sports packages – first with the NFL and now, it hopes, with MLB. Sports fans know that. Now DirecTV, to cable’s chagrin, is staking a claim to HDTV leadership. Dish Network is for the more cost-conscious consumer, and smartly targeted immigrant communities with ethnic programming. It’s also been an interactive-TV leader.

These are good choices for consumers, as are the distinctions between XM and Sirius, even if they aren’t as familiar to consumers as satellite TV is.

Can satellite radio survive if its two providers aren’t permitted to merge, after piling investment-banking expenses onto what they’re paying Stern and Winfrey? Who knows. But mergers like these benefit the companies more than consumers.

Remember when SBC Communications promised when it was merging with Ameritech that it would build fiber-optic networks in 30 cities outside its regions? According to Bruce Kushnick’s tome, $200 Billion Broadband Scandal, SBC told the government it fulfilled that obligation by building networks in 22 cities that had at least three customers each. That’s 66 customers.

Karmazin said this week he believes the FCC commissioners’ evaluation of whether the merger qualifies as “in the public interest” would center on consumer choice and control. If consumers can use an a la carte approach – buying basically only the programming they want, or at least opting out of high-priced programming by taking a low-cost package – that’s in the public interest, he indicated.

If that’s predicated on combining their menus in order to let consumers order fewer items, I say: pass.