XM and Sirius Satellite Radio Want to Merge

Satellite radio is a new technology that has two main operators in the US, XM Radio and Sirius Satellite Radio. Neither is making any money, but they are spending right, left and center for talent and content to generate subscribers. They have decided that they will better be able to succeed as a single entity and have announced merger plans. The result would be a private monopoly. The US government should OK this only if there are strict regulations to prevent, or at least ameliorate, the usual abuses of monopolists.

In a nation that extends thousands of highway miles, being able to pay a few dollars a month for a radio system that won’t fade out 100 miles away is good value to many. In a nation that often has language police and naughty-thought cops, paying for content allows the words George Carlin couldn’t say on TV as done by Howard Stern, and Opie & Anthony. Sports fans can get baseball broadcasts that don’t fade out as one drives and the final out approaches, others can get more stuff from Oprah Winfrey and Martha Stewart than could possibly be healthy, and music from DJ Bob Dylan (yeah, the same one).

XM chairman Gary Parsons and his counterpart Sirius Satellite Radio CEO Mel Karmazin will argue that their merger doesn’t create a monopoly. They contend that they are in competition with regular, free radio and with other technologies. “Cell phones are morphing by the moment. Car manufacturers are installing jacks for MP3 players,” Mr. Parsons said in a Reuters interview. “There also has been rapid growth of HD radio and Internet radio.”

This is inaccurate at best, deceitful at worst. HD radio and Internet radio aren’t competing in the long-distance driving market. Anyone playing an MP3 file in any form either owns the rights to do so or has stolen them (at least that’s what the record companies say), which can hardly be said to be competition as it’s a different form of entertainment and a completely different business model.

Satellite radio is an infant technology, and as such, has special needs. There is nothing wrong with allowing a monopoly for a set number of years to build up a subscriber base, to allow greater investment in technology, and to experiment with the medium. In exchange, it must be done in such a way that the consumer is the ultimate beneficiary of the monopoly. That means, regulation on fees, a set time before the monopoly is liquidated (or at least definite milestones), and a guarantee that future competitors aren’t hamstrung with high market entry costs. The model is Bell Telephone back in the days before phone competition. Otherwise, the merger shouldn’t happen.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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