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Static may be clearing on merger of XM and Sirius satellite radio

June 16, 2008 | 11:11 am

XM and Sirius signs

UPDATE JUNE 17: Although Chairman Kevin J. Martin recommended the deal, another commissioner says the deal is still "a steep climb" for him.

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Getting shocked by Howard Stern and tuning in to everything else that satellite radio offers could become easier and more affordable, at least in the short term. That's if (and this is still a good-size "if") Federal Communications Commission Chairman Kevin J. Martin can push through his proposed conditions for approving the long-pending merger of Sirius and XM.

Martin said today that he would grant the $3.85-billion merger (an earlier version of this post said the year-old deal was worth $5 billion, but its value has declined with the companies' stock prices), based on commitments the companies have made. Those commitments include:

  • Freezing subscription rates for three years.
  • Offering smaller, cheaper packages of stations that also allow listeners to pick only the stations they want.
  • Selling interoperable radios, within a year of merger approval, that can receive both services.
  • Opening their technological standards so that anyone can make satellite radios.
  • Setting aside a total of 8% of their channels -- 24 in all -- for noncommercial and minority programming.
  • Martin leaked the details of his plan last night to the Washington Post, the Wall Street Journal and the AP as he prepared to jet off to Asia for a two-week business trip. FCC staffers this morning confirmed the proposal and released a statement from Martin indicating that he was ready to push for approval of the deal. He said:

    As I have indicated before, this is an unusual situation. I am recommending that with the voluntary commitments they've offered, on balance, this transaction would be in the public interest. They have voluntarily committed to setting forth price constraints, so the prices for consumers do not increase; smaller packages at lower prices; an open standard for radios; the sale of interoperable radios; and additional public interest programming for noncommercial use and for qualified entities who have not been traditionally represented.

    FCC Chairman Kevin MartinBy "unusual," Martin (pictured) meant that, when the FCC authorized satellite radio in 1997, the agency specifically decided to grant two licenses and to prohibit any merger to ensure "sufficient continuing competition." For that reason, when Sirius and XM said in February 2007 that they planned to wed, Martin said the companies would have a high hurdle to overcome.

    Sirius and XM have been scrambling to clear that hurdle, and others, ever since. The National Assn. of Broadcasters, which represents the old-fashioned land-based radio stations, has unleashed a furious campaign to deny the merger. Lawmakers have raised serious questions. And some public interest groups have complained, pushing for conditions that would make the merger more consumer-friendly.

    The Justice Department approved the merger in March. Antitrust officials there agreed ...

    ... with arguments from Sirius and XM that their merger would not create a monopoly. The reasoning: Devices such as iPods give people growing options for listening to music in their cars and elsewhere. Sirius and XM are desperate for the cost saving of a merger to offset the high expenses of some of their programming, including the aforementioned shock jock, other celebrities such as Oprah Winfrey and professional sports broadcasts.

    But the FCC hurdle still remains. Martin pressured the companies to solidify promises they made earlier to Congress, such as offering some lower rates and so-called a la carte channels. He has pushed cable TV operators to offer the latter, in order to cut the cost of service and allow families to avoid objectionable programming. Martin also has sought to lure the votes of other commissioners by seeking new consumer-friendly commitments from Sirius and XM to open the technology for its radios to any manufacturer and to set aside some channels for noncommercial and minority programming.

    The channel set-asides and open standards for radios are similar to what Public Knowledge, a digital rights group, has advocated and specifically proposed in March.

    "We support what we have heard today about the commission's proposals, although we would like to know more about how the set-aside for noncommercial channels would be implemented," said the group's president, Gigi B. Sohn.

    But Mark Cooper, director of research from the Consumer Federation of America, still isn't pleased. Martin's plan all but admits that Sirius and XM would have a monopoly, and if that's the case, the conditions don't go far enough, Cooper said.

    "It's half-baked, and the consumer loses," he said. His organization continues to oppose the merger.

    It's unclear whether Martin has the votes to push through his plan. The other FCC commissioners could not be reached for their reaction this morning. Martin normally waits until he has at least the support of a majority of the five-member commission to start circulating a written proposal, which he is expected to do this week.

    But Martin was under intense pressure from Sirius and XM to present a plan before he left for Asia. The companies are not commenting today. But the market is -- both stocks are up about 4% this morning on the news of Martin's plan.

    -- Jim Puzzanghera

    Puzzanghera, a Times staff writer, covers tech and media policy from Washington, D.C.

    Photo, top: XM and Sirius signs. Credit: Associated Press

    Photo, bottom: Kevin Martin. Credit: Bloomberg News

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