Tech Daily Dose

XM/Sirius: All Eyes On FCC

The FCC is expected to consider the pending merger between Sirius Satellite Radio and rival XM -- and approve it with conditions by May 1 or soon thereafter, Medley Global Advisors said in an e-mail update Tuesday. The Justice Department OK'd the pairing on Monday after more than a year-long review.

While FCC Chairman Kevin Martin may try to circulate an order seeking approval of the transaction in the weeks ahead, analysts said Congress and all five FCC commissioners maintain drastically different views on merger approval orders and the broader issue of media consolidation.

Martin's two Republican colleagues -- Deborah Taylor Tate and Robert McDowell -- are "likely to insist that no conditions be placed" on the deal but one exception may involve a condition supported by one or both to extend the FCC's indecency rules to the merged entity to ensure that edgy content is kept in check, Medley said.

The FCC's two Democrats -- Jonathan Adelstein and Michael Copps -- "may be inclined to support meaningful behavioral safeguards to reduce the potential for anticompetitive harms to occur given concerns raised by some ratepayer groups," analysts added. "It will be no easy task to strike this balancing act."

Possible conditions, according to the analysts, include:
- The a la carte/tiered programming package option
- Price caps (for three to five years)
- Spectrum spin-offs to noncommercial and minority programmers
- Mandatory device interoperability
- Prohibition on sole-source contracts on devices

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Big Media Foes Team With Harry Potter Fans

StopBigMedia.com, a coalition aimed at fighting media consolidation, has teamed up with the Harry Potter Alliance to mobilize thousands of fans of the fictional boy wizard. The two groups launched Potterwatch on Wednesday -- an effort that uses the character to illustrate the dangers of allowing big business to swallow up local media outlets.

In the book series, wizarding newspapers like the Daily Prophet put the magical community in jeopardy "by denying Voldemort's return … and ultimately becoming a mouthpiece for Voldemort," alliance creator Andrew Slack said in a press release.

[Disclaimer: I've never read a Potter book or seen a Potter movie so I have no idea what this guy is talking about but I'm sure those of you who are in the know either agree or disagree with his thesis.]

The Potterwatch movement brought together opponents of the sinister Voldemort, Slack said. StopBigMedia.com and the alliance "have come together to create a Potterwatch movement in the real world to fight back against 'Voldemedia' -- the handful of companies that control most of what we see, hear and read every day."

The groups are urging fans to speak out against FCC Chairman Kevin Martin's plan to loosen media ownership rules later this month. Ironically, some policy watchers have whispered that Martin looks a little like the spellbinding whippersnapper. Go figure.

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Kevin Martin & Eddie Fritts: Kings Of Comedy?

Highlights from Wednesday night’s annual FCC Chairman’s Dinner at the Washington Hilton, sponsored by the Federal Communications Bar Association. FCC Chief Kevin Martin, weary from a long day before Congress, poked fun at his recent battles with lawmakers and the cable industry:

“I have to admit that I usually dread delivering this speech. I’m not nearly as good at comedy as – oh, I don’t know – say charming my fellow FCC commissioners.”

“This year I can say I'm actually thrilled to be here. In fact, if I weren't at this dinner, I'd still be testifying before Congress.”

“Now I recognize that I’ve brought some of my recent problems on myself. For example, my cable choice proposal. You know the one, where cable gets to choose to do whatever I say.”

“But seriously, I’ve heard your complaints about how late the meetings have been starting. So I’d thought I’d start my next one early. So I’d like to welcome everyone to the December . . . [laughter]”

“Honestly, though, enough is enough with these late-night meetings. I just can’t keep delaying the meetings so you can run up your billable hours anymore. I think the clients are catching on.”

“I recognize that as rough as things are right now, they could be a lot worse. Some of you might remember a recent headline from the Washington Post” (The headline “Chinese Regulator is Sentenced to Death” was displayed on video screens throughout the ballroom)

“I should wrap it up here. I have another Senate hearing next week. Hopefully I’ve accomplished my real goal for the evening – doing enough bad jokes that they’ll criticize me for the jokes rather than my policies.”

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Consumer Groups Rally Against Sirius-XM Merger

The Consumer Federation of America, Consumers Union and Free Press on Monday urged the FCC to reject the proposed merger between Sirius Satellite Radio and XM. The groups argued in a report that the pairing would eliminate competition and negatively impact American consumers.

"Leaving one company to monopolize the satellite radio industry would result in higher prices and fewer choices," CFA Research Director Mark Cooper said. CU Vice President Gene Kimmelman added that the companies have failed to make the case for ending the explicit prohibition on mergers between satellite licensees.

Using the FCC's own data on radio stations, the organizations attempted to show that satellite radio and terrestrial radio are not close substitutes and argued that Sirius and XM's offerings do not compete with iTunes or Internet radio.

Sirius and XM responded with this joint statement: "Examining this merger on its merits shows that the lower prices and greater choices that will result, including for the first time two a la carte programming options, are clearly in the public interest and will help strengthen competition in the vast audio entertainment market."

The companies pointed out that other public interest and consumer-oriented outfits have expressed support for the merger, including the Competitive Enterprise Institute, League of Rural Voters, League of United Latin American Citizens and the NAACP.

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Boucher Backs Sirius-XM Merger In Op-Ed

The Washington Times on Monday published a column by Rep. Rick Boucher, a Virginia Democrat and co-chair of the Congressional Internet Caucus, backing the pending merger of satellite radio giants Sirius and XM.

By year-end, the Justice Department and the FCC should have completed their review of the proposed pairing, and "because the merger will promote competition and benefit consumers, it should be approved," he wrote.

"At first blush, one might conclude that a combination of the only two providers of this satellite-based service would be an obvious antitrust abridgement," but "the reality of the relevant market, however, is both more subtle and more compelling," he stated. Read the full column here.

The estimated $14 billion deal also has its critics on Capitol Hill. The National Association of Broadcasters is keeping count, with a list of more than 80 lawmakers who reportedly have expressed opposition. Among them is Sen. Herb Kohl, a Democrat from Wisconsin and chairman of the Senate Judiciary Antitrust Subcommittee.

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Former FCC Chief Backs XM-Sirius Merger

Former FCC Chairman Reed Hundt voiced support for the merger of satellite radio giants Sirius and XM in a Tuesday filing with the agency. During his four year tenure as chief, which ended in 1997, the commission formulated rules for the industry and granted the companies their licenses.

"I think that if XM and Sirius combined, it will be pro-competitive in all likelihood," Hundt said in transcripts from an interview. "It seems to me that what has happened over time is that these two firms have proved when kept apart to be incapable of mounting the really serious competition against … terrestrial radio that I had always hoped for."

He also clarified for the record the intention behind the FCC’s 1997 order creating satellite radio: "My thought was this: Let's start out with these two licenses, since it is not clear exactly what is the optimal business model, and then let's let the two firms go at it for a while and see what happens."

Read more of Hundt's thoughts on the merger here.

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Tech Daily's Best Lede Of The Week

Technology Daily's best article lede of the week award goes to my colleague David Hatch for his coverage of Wednesday's FCC meeting. Here's how he started off his story:

Media consolidation opponents turned out in force at a high-profile Halloween Day FCC meeting featuring a protest outside the agency, activists in cheerleader uniforms, and a self-described "corporate media whore" in a French maid outfit who briefly upstaged the agency's chairman while being momentarily detained in the hearing room.

Read the entire article here.

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Sirius, XM Execs Visit FCC

Top brass from Sirius Satellite Radio and XM Satellite Radio paid visits to the FCC last week, according to agency filings (via the Orbitcast blog). The companies are trying to persuade commissioners to approve a pending merger estimated to be worth $13 billion.

Sirius honchos Mel Karmazin, Scott Greenstein, David Frear, Patrick Donnelly and Terry Smith took part in a Thursday meeting. A day earlier, XM's Gary Parsons, Eric Logan, Mark Vendetti and Jeff Blattner made an appearance.

During the meetings, executives discussed various aspects of the satellite radio business, "including the topics of subscribers and service, content and advertising, technical issues, and business relationships with automobile manufacturers and retail outlets."

Meanwhile, the National Association of Broadcasters' opposition to the deal continued. NAB spokesman Dennis Wharton issued a statement last week noting that XM and Sirius are spending millions "trying to bamboozle the Beltway into believing that a monopoly is good for consumers. Never in history has a monopoly served consumers better than competition."

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Making Sense Of Spectrum

The FCC voted Tuesday to adopt ambitious new rules designed to impose "open access" conditions on a slice of the wireless airwaves' spectrum. The conditions, a compromise championed by Chairman Kevin Martin, a Republican, divided the communications sector and Capitol Hill recently.

Technology Daily's David Hatch has a thorough article on the topic here and our very own Theresa Poulson worked up a handy chart that breaks down the spectrum of opinions on the auction rules.

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Think Tanks Speak Out About Sirius-XM Merger

As the fight over the proposed merger of satellite radio rivals Sirius and XM heated up with new filings from supporters and opponents this week [read Technology Daily's coverage], think tanks also got in on the action.

The Competitive Enterprise Institute, the Progress and Freedom Foundation and The Free State Foundation all weighed in by sending comments to the FCC about the estimated $13 billion pairing.

CEI said stakeholders "ought not petition the FCC to tighten its regulatory grip, but rather phase out that agency’s involvement in price, entry and ownership regulation in frontier technologies altogether."

According to the group, antitrust activism will "hobble tomorrow's technology and communications sectors, painting a bulls-eye on the back of competitors that rise above the fray or engage in large-scale transactions."

"Competition, properly understood, has little to do with the number of competitors and industry concentration ratios that bewitch government commissions," CEI said. It is better understood as "an extension of the same 'voluntarism' that characterizes a free society that enshrines property and the right of contract."

Continue reading "Think Tanks Speak Out About Sirius-XM Merger" »

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