Satellites in Love

I haven't done any actual reporting yet on the pending merger of the nation's only two satellite radio companies, but I thought I'd link to some of the commentary that has appeared since the XM/Sirius engagement was announced. Adam Thierer has defended the deal with gusto, arguing that it might be necessary if satellite radio is to survive at all. Doc Searls is more cautious, arguing the amalgamation might lead to declining program quality and other problems (but adding that he isn't necessarily opposed to the merger). Skip Oliva and Gigi Sohn have posted sharp critiques of the National Association of Broadcasters' opposition to the deal, with Sohn calling out the NAB for its "unmitigated gall." (My favorite line in the NAB's statement: "In coming weeks, policymakers will have to weigh whether an industry that makes Howard Stern its poster child should be rewarded with a monopoly platform for offensive programming." Yeah, I could never imagine a terrestrial station giving Stern a microphone.)

Will the deal be good for consumers? If you're already a satellite subscriber, it's hard to say: You might have more channels to choose from, but the people programming them will have one less reason to look over their shoulder. (As Thierer would point out, of course, you'll still be better off than if there aren't any channels left at all.) If you aren't a satellite subscriber, on the other hand, the merger will almost certainly be good for you: The fact that the NAB is so opposed to the deal is a good sign that AM and FM outlets expect the competition to get tougher.

As for the policy questions, the most important issue isn't whether the merger should be approved. It's the fact that the FCC has licensed only two companies to go into the satellite radio business, giving the new combo a government-enforced monopoly. (There is a third satellite radio operation, called Worldspace, but aside from four channels it shares with XM it doesn't broadcast within the U.S.)

It may well be the case that the market will only support one American satellite service. The fact that Sirius and XM feel the need to merge lends support to that thesis. Then again, we only know what two companies, with two business plans, have been able to do with this technology; with other entrepreneurs locked out of the race -- starting with the two enterprises that bid for licenses a decade ago but weren't able to get them -- we don't know if a different approach would have been more successful. That isn't an argument for the government to block the merger. It's an argument for a freer market in spectrum.

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  • KipEsquire||

    "Will the deal be good for consumers?"

    Given that one bigger non-bankrupt company is better than two smaller bankrupt companies, I'd go with "yes."

  • Dave W.||

    That isn't an argument for the government to block the merger. It's an argument for a freer market in spectrum.

    Then the sensible rule is that more consolidated companies get less spectrum on a per subscriber basis.

    Market share (within the satellite radio market specifically here I mean) and per subscriber spectrum should be inversely related so that getting more market share automatically, and by operation of law, frees spectrum for new entrants.

    For example, under this proposal, if the number of subscribers stayed the same after the merger as before, then the merged entity would have half as much spectrum as the aggregate of the separate entities do today. in exchange for allowing the merger the public would get half its spectrum back in return. Sounds like a fair deal all 'round.

    Now if we could just find a political system that would enact such sensible proposals.

  • Dave W.||

    For example, under this proposal, if the number of subscribers stayed the same after the merger as before, then the merged entity would have half as much spectrum as the aggregate of the separate entities do today. in exchange for allowing the merger the public would get half its spectrum back in return. Sounds like a fair deal all 'round.

    And, of course, my question for kipesq, who seems to know about these things, is:

    would they still do the currently proposed merger if this rule were in effect?

  • Skip Oliva||

    The Justice Department's interest, if history serves as a guide, will be in maintaining existing subscription-price levels. The Antitrust Division generally throws a fit if they expect even a small price increase after a merger, regardless of the reasons or economic principles involved. XM and Sirius may even have to agree to short-term price controls to win the DOJ's approval.

  • ||

    Jesse,
    You surprise me. Not that I find any particular point unexpected. It's just that, that's a lot more musing from you than I would have thought. I was expecting you to say:
    "If we only had more low power FM stations this wouldn't even matter."

  • ||

    At least Mike Nelson's monopoly on satellite-based entertainment has been broken.

  • ||

    AC nice MST3K reference !

    As an XM subscriber I don't care about this merger one way or the other as long as it does not interfere with Ron & Fez.

  • Guy Montag||

    As an XM subscriber I don't care about this merger one way or the other as long as it does not interfere with Ron & Fez.

    I miss the old Ron & Ron days. That was the funniest thing on radio, IMHO.

  • ||

    "AC nice MST3K reference !"

    Uh, only if you think MST3K invented it.

    Listen to the end of any aforementioned "Ron & Fex" show on XM and you'll hear the real deal.

    What a great song....

  • ||

    "Ron & FEZ"!

    Damn typ0s.

  • ||

    Personally, I'm looking forward to the day that getting internet through cell phones becomes more ubiquitous (i.e., higher speed at better prices). When we can reliably get internet radio through cell phone connections, all this regulatory stuff as it pertains to radio will be irrelevant.

  • ||

    Henry I am more than aware of the difference between the Joel Hodgson/Mike Nelson "Satellite of Love" and the Lou Reed version.

    Guy I never got to hear the Ron&Ron days. I only started listening to the show in the .com era on `NEW in NYC.

  • Dave W.||

    Personally, I'm looking forward to the day that getting internet through cell phones becomes more ubiquitous (i.e., higher speed at better prices). When we can reliably get internet radio through cell phone connections, all this regulatory stuff as it pertains to radio will be irrelevant.

    Yup. In that world, the operative body of regulation will be the net neutrality (or non-neutrality) laws. In that case, the releavnt service providers may well decide, a-la the Kipster, that one bigger non-bankrupt Internet radio station is better than two hundred thousand smaller bankrupt Internet radio stations, and set the relevant rates accordingly. If the net neutrality regulations then operative allow this approach, that is.

    Now, as someone who thinks Internet radio is really coming, you may wonder how Mr. Walker's colleague, Mr. Sanchez, feels about this net neutrality thing:

    http://www.reason.com/news/show/117327.html

  • Ken Layne||

    I want the merger because I bought a new car about 18 months ago and got the Sirius, not knowing that the two services were pretty different. Well, Sirius has everything I hate (Nascar, four or five right-winger talk channels, a hundred Howard Stern channels, bunch of Christian rock channels) and very little that I like.

    Meanwhile, XM has all the stuff I might like to hear, like the Bob Dylan radio show.

    Then again, that car is a shoddy Chrysler and I'm sure it's going to completely fall apart before the merger goes through.

  • ||

    Dave: the merger offers no benefit to anybody if the merger doesn't include both halves of the 25 MHz of spectrum in the S-Band (2.3 GHz).

    There's a chance that, since the WCS licensees are nearing the deadline for offering service over their spectrum (IIRC, anybody who got the licenses 10 years ago has to demonstrate that they're delivering a usable signal to most of their service area by the end of this year), that XM/Sirius may be able to convince the FCC to give that spectrum back to digital audio broadcasting (whether satellite or terrestrial).

    The original plan was to have four licenses available for SDARS. Just before the 1996 spectrum auction, the FCC decided to cut that down to 2 licenses and allocate the remainder for wide-area wireless telecom licenses (1-way broadcasting from satellites or ground antennae being a permitted use under these licenses, fwiw). Those licenses were auctioned on a regional basis in 1997 and the licensees have proceeded to not do much of anything since then (except complain about satellite radio).

  • miche||

    Ken,
    There's Nascar and Christian on Sirius? Seriously, I have Sirius and love the programming. There is Stern on two channels; I hated him before he was on Sirius, but I am quite addicted now. I love the 80's, Hip-Hop Nation (I know that I'm a mid-30s white chick), New Wave, 70's, Jazz, and Chill channels. If the merger brings more choices, great. If it blocks others from getting into the game we will end up with pay for service Clear Channel programming.

  • ||

    Dave W-

    Isn't taking half their spectrum back when they merge kind of like if two neighboring farms merged, and the state took away half of their land so that other farms could compete? (OK, let's assume that the land was leased from the govt to make it closer to spectrum)
    I'm assuming part of what went into the merger was the thought that they would have x amount of spectrum. Also, isn't having a certain amount of market share at least partially linked to how much spectrum they have? To say we will take away spectrum as the market share increases is rather John Rawls-esque.

  • Dave W.||

    Isn't taking half their spectrum back when they merge kind of like if two neighboring farms merged, and the state took away half of their land so that other farms could compete?

    I don't think so, but it depends on the technology.

    What I am guessing is that Sirius and XM could put all their combined channels onto half of the aggregate spectrum they currently have, but want to keep all the aggregate spectrum they currently have, not for the purpose of maintaining their channels,* but rather for the purpose of keeping out potential competitors like Ted Turner.

    Kip said that it is purely fear of bankruptcy, but I am not sure I believe. People and corporate people plead poverty all the time. I learned that when I was a wee kid.

    FOOTNOTE

    * assuming they are going to maintain the current aggregate number of channels over the long run which, like the bankrutcy threats, I doubt.

  • Dave W.||

    the merger offers no benefit to anybody if the merger doesn't include both halves of the 25 MHz of spectrum in the S-Band (2.3 GHz).

    Here is how the process flow should work on this issue:

    (1) The DoJ (or more preferably an antitrust court of competent jurisdiction) should formally ask Sirius and XM if they can maintain their aggregate number of channels in half the spectrum.

    (2) Assume Sirius and XM say "no" they need all the currently allotted aggregate spectrum they currently have, just as "Leviramsey" would have us believe.

    (3) DoJ then appoints an independent expert to check that contention.

    (4) If it turns out that Siriu and XM were lying at step (2), then (i) merger permission denied; (ii) current spectrum allocations trimmed back to what is absolutely neccessary to support the current number of aggregate channels; and (iii) the DoJ/court appoints one board member to serve on each of these company's respective boards for 5 years and to report back to it if there is any other monkey business going on.

    That is how it would work if the government had any integrity. being a libertarain I don't hold out much hope for that!

  • ||

    Toshiro said:

    "Henry I am more than aware of the difference between the Joel Hodgson/Mike Nelson "Satellite of Love" and the Lou Reed version."

    Yeah, over 15 years.

  • Custom Nike Dunk||

    thanks

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