The two giants of satellite radio are about to become one. The FCC has approved the merger of XM and Sirius, ending a year-and-a-half struggle to finalize the deal. The move will give the newly combined company unprecedented power in the world of satellite communications; however, it will come with some strict conditions as well.
The merger, approved by a three to two vote Friday night, is designed to offer customers “greater flexibility and choices” at lower prices, FCC Chairman Kevin Martin said.
Deconstructing the Deal
The deal requires XM to pay a whopping US$17 million and Sirius to pay $2 million to the government. The companies are also prohibited from increasing fees for at least 36 months after the merger is finalized. Other guidelines include a requirement of open standards for satellite radios, the release of devices that reach both networks within the first year, the addition of public interest channels, and the availability of “a la carte” programming — wherein subscribers can pick and choose which channels they pay to receive — for each network within the first three months.
The FCC also made sure the joint venture won’t interfere with existing FM radio stations. XM and Sirius are both shutting off some terrestrial repeaters — technology used to strengthen their signals — to keep from overwhelming airwaves and making it impossible for smaller stations to operate.
Consolidating Resources
On the whole, the move is seen as a positive step for the growing medium. Particularly with the conditions created around the deal, consumer options should increase — and programming quality should follow.
“My guess is that had the FCC not approved the merger, we’d have very weak entities trying to compete for a share of the market,” David Irwin, director of the Institute for Communications Law Studies at Catholic University, told the E-Commerce Times.
“[Now] they’ll be able to consolidate resources. New tuners that can tune to frequencies used by each of the satellite carriers will become available. That will mean more incentives for consumers to use satellite radio,” he explained.
That, in turn, could convince more people to try the services — which would be a strong gain for the growing number of content providers that have offered up their programming on satellite.
“The people they paid megabucks to — Howard Stern, the baseball leagues, the football leagues — I think will get more ears to listen to them,” Irwin predicted.
Future Implications
The consolidation could be the first media move of its sort that we’ll see. The fiercely competitive world of television programming, Irwin suspects, may be next.
“I believe the current FCC chairman would like to see [the same thing] happen in the cable industry [and is] using satellite radio as a bit of a laboratory to see how that works out,” he said.
The scope of the success, however, may be limited. The one-time goal of making any medium “mainstream” is quickly turning into a dated concept.
“Even broadcast television is no longer mainstream. It’s hard to define what is,” Irwin noted.
“We live in today’s telecommunications world, in a world with a huge number of niches. I think we’ll have a much healthier niche with the combined XM-Sirius — [but] I don’t know that it ever will become mainstream,” he concluded.
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I see two down sides to what has transpired:
(1) The obvious monopoly created for national subscription radio service.
(2) The misguided attempt by the FCC to mitigate this concern by getting into the realm of content regulation by insisting on "public interest channels". This will inevitably lead to occasional scrutiny of content in order to ensure compliance – a slippery slope for satellite radio. In addition, this mandate will use up valuable limited bandwidth. (As it is whenever the holiday music season arrives, XM has to take other stations off the air or reduce their operating hours in order to free up bandwidth for Jingle Bell Rock.)