XM-Sirius Merger Banal-ysis

FCC

As has been well documented, Public Knowledge did not take a position on the merits of the antitrust law issues arising out of the XM-Sirius merger. But one need not be an antitrust expert to be a bit shocked at last week's perfunctory three-page decision by the Department of Justice approving the merger. After over a year of deliberation, the Department concluded that the merger would not lessen competition and that the parties could not profitably increase prices because 1) the parties did not compete with each other in important market segments; 2) there are alternative services available to consumers and technological change is expected to make those alternatives increasingly attractive; and 3) efficiencies are likely to flow from the merger that could benefit consumers.

Now these might be very reasonable conclusions supported by the evidence presented to the Department. But we will never know, because the decision is nothing more than a string of conclusions couched as "analysis." The Department states on a number of occasions that "the evidence demonstrates...," or "[d]ata analyzed by the Department shows...." without the slightest mention of what that evidence or data might be. We are just supposed to take their word for it. Given the intense opposition to this merger by broadcasters, consumer groups and others, wasn't the public owed more than this?

In particular, one conclusion the Department reached had me shaking my head. It found that there is no competition between the companies for existing subscribers because

satellite radio equipment sold by each company is customized to each network and will not function with the other service. XM and Sirius made some efforts to develop an interoperable radio capable of receiving both sets of satellite signals. Depending on how such a radio could be configured, it could enable consumers to switch between providers without incurring the costs of new equipment. The [DoJ's] investigation revealed, however, that no such interoperable radio is on the market and that such a radio likely would not be introduced in the near term.

Recall that one of the arguments made against this merger was that the companies had promised to develop and market an interoperable radio, but to this day have not done so. So in essence, the Justice Department has rewarded the companies for failing to keep their promise. This is perverse.

Given that the FCC is unlikely to reject the merger in the face of the DoJ's approval, the merger conditions that PK proposed become all the more critical to ensure that consumers are protected. Specifically, the condition that

the new company should make the technical specifications of its devices and network open and available to allow device manufacturers to develop, and consumers to use, any device they choose without interference. Pursuant to the Commission rules, these devices must be certified by the FCC for receiving signals on the frequencies licensed to the merged entity and be subject to a minimum “do-no-harm” requirement

would ensure greater competition in satellite radios by eliminating the exclusive deals that the companies now have with device manufacturers, and would likely also lead to the development of that long-promised but elusive interoperable radio.

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