Karmazin Faces Senate Panel On Merger
March 20, 2007 at 12:33 PM (PT)
The Antitrust subcommittee of the SENATE JUDICIARY COMMITTEE held another hearing on the XM-SIRIUS merger today (3/20), with SIRIUS CEO MEL KARMAZIN fielding tough questioning on the merger's effect on pricing and the definition of the relevant market for competition purposes.
Panel Chairman HERB KOHL (D-WI) asked KARMAZIN about his promise not to raise prices, asking if it isn't reasonable to assume that the combined company would have the power to raise prices, and KARMAZIN disagreed, noting that SIRIUS has not raised its prices since it launched "because we are competing with free." KARMAZIN said that even combined with all of XM's present subscribers, satellite is "not a successful business" and that his target is the other 300 million listeners who don't subscribe. "If the argument is that we're gonna raise our price," KARMAZIN said, "we're not." He added that he would be willing to work with regulators on pricing and asserted that the merger would result in lower prices (for lesser tiers of programming). KOHL asked if KARMAZIN would accept price regulation as a condition of merger, to which KARMAZIN said that "we would be open to hear exactly what it is" that the government might require, althought he termed the possibility of such regulation "totally unnecessary."
If the argument is we're gonna raise our price, we're not.
Responding to questioning about program content by Sen. ORRIN HATCH (R-UT), KARMAZIN touted the ability to restrict access to programming at the receiver level as well as at the headend, and noted that the company's latest license filing promised that subscribers asking to have channels blocked will see a cost reduction in their bills. And KARMAZIN declined to say that he would agree not to carry "pornography" when challenged by Sen. SAM BROWNBACK (R-KS), noting that he does not know BROWNBACK's definition of the term and asserting First Amendment rights.
'Monopoly Is Forever'
NRG's MARY QUASS gave the terrestrial broadcasting industry's position in her prepared statement, saying, "Consumers will be the losers as there will be no competition to restrain monopoly rates and power. Innovation and program diversity will suffer." QUASS dismissed satellite's claims of competing with terrestrial radio, insisting, "Radio broadcasters do not compete in the national market of the satellite radio companies, but XM and SIRIUS do compete in the local radio markets. I can understand why they would want a monopoly, but that does not mean it is in the best interest of the public."
Antitrust lawyer DAVID BALTO told the panel that "benevolent monopolies" never benefit the public and that "it is only competition that can guarantee consumers the full range of benefits... there is no substitute for competition."
"Monopoly is forever," BALTO warned in response to a question from KOHL, noting that the FCC's record on regulating monopolies is not strong.