House Panel Hears Karmazin, Smyth Testimony On Satellite Radio Merger
March 7, 2007 at 5:05 PM (PT)
A House telecommunications subcommittee panel held another hearing on the XM-SIRIUS merger today, with SIRIUS SATELLITE RADIO CEO MEL KARMAZIN attempting to clarify his remarks at a previous panel about the pricing projected for the merged services.
KARMAZIN told the panel members that subscribers presently paying $12.95 per month would continue to pay that figure for the same service, but that receiving content from the other service would cost more (but not more than $25.90). He also suggested that subscribers could take a lesser number of channels for a lower price, although he said selling channels a la carte would not be financially viable.
Put simply, private corporate interests will benefit, but the public will suffer.
GREATER MEDIA CEO PETER SMYTH's prepared testimony scored XM and SIRIUS for having a "track record of misrepresenting their intentions, not following the rules that have been established, and failing to correct their past transgressions." SMYTH raised the issue of the companies' construction and operation of terrestrial repeaters at variance with what they told the FCC, "including one in MICHIGAN built 67 miles from its authorized location." He also brought up the failure of XM and SIRIUS to develop the promised interoperable receiver and noted the controversy over satellite receivers exceeding RF limits for their FM transmitters. "Breaking rules just seems to be part of the DNA of XM and SIRIUS," said SMYTH. "Viewed against this type of behavior, why would government trust these two companies as a monopoly?"
SMYTH also asserted that "consumers will be the losers" if the merger is approved, claiming that "subscription prices will rise, because there will be no competition to restrain monopoly rates. Jobs will be eliminated. Innovation will suffer. Neither listeners nor advertisers will benefit. Put simply, private corporate interests will benefit, but the public will suffer." He also challenged the claim that the companies are presently failing, chalking up their money woes to "extraordinary fees paid for marketing and on-air talent, including the $83 million in stock that SIRIUS awarded to HOWARD STERN last month, on top of his initial bonus of $220 million. But even with these costs, XM and SIRIUS have made clear they can succeed without a merger."
CONSUMER UNION's GENE KIMMELMAN likewise opposed the merger in prepared testimony, telling the panel that the DEPARTMENT OF JUSTICE and the FCC "should reject this merger unless and until XM and SIRIUS present clear-cut facts demonstrating how consumers will benefit from less satellite radio competition." KIMMELMAN rejected the idea that the services are subject to external competition, saying, "The product and geographic market characteristics of satellite radio are easily identifiable and quite distinct from other mobile and stationary audio products. It is national, mobile, programmed radio entertainment.... While AM/FM radio, iPODs and other music recording and listening devices can offer similar prepackaged music or local signals similar to what satellite radio offers, none of them can offer immediate national programming, including live professional sports games from across the country to listeners across the nation. The track record of intermodal competition disciplining anticompetitive abuse is poor at best."
KIMMELMAN warned that the merged company plans to raise prices for consumers despite promises not to disturb the two companies' "basic packages," noting that the promise "does not apply to new packages that include the combined services of the two companies -- like channel packages that could include MAJOR LEAGUE BASEBALL with live NBA basketball and NFL football games. In fact, it is very likely that the 'merger benefits' of combining these offerings will require consumers to pay much more than $12.95 per month." He also criticized the companies for failing to come up with the interoperable receiver and suggested that if policymakers decide only one satellite radio company is needed, they should auction off half the XM/SIRIUS spectrum for other commercial uses.