XM-Sirius Questioned on Pricing; Discounts Promised
House Democrats closely questioned Sirius CEO Mel Karmazin about pricing, market competition and promised consumer benefits that could emerge from a merger with XM, during a Hill hearing Wed. afternoon. NAB and consumer groups joined in protesting that the proposed deal would be anti-competitive, while House Commerce Committee minority leaders said the furor could be solved by more-liberal media ownership rules.
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A la carte pricing wouldn’t be available under the proposed deal, Karmazin said in response to questions from Telecom Subcommittee Chmn. Markey (D-Mass.). Sirius’ business model wouldn’t permit a la carte pricing, Karmazin said, but he repeated previous promises that the company wouldn’t raise prices post-merger. “For how long?” Markey asked. Karmazin said he'd be “willing to have discussions” about pricing plans, adding that consumers would get “substantial discounts” if they subscribed to both services: “I'm not prepared to come up with specifics, but I'd say it would be closer” to $10 than $2.
“The FCC has been far too laggard in overseeing public interest responsibilities of digital and satellite radio providers, House Commerce Committee Chmn. Dingell (D-Mich.) said, urging a close look at the proposed merger. “I know Judiciary [Committee] will take a long look at this issue,” said Rep. Harman (D-Cal.): “Careful focus is needed.” Harman said she’s concerned that content providers are protected, but she didn’t offer specifics.
Rep. Ferguson (R-N.J.) offered guarded support for the merger, contingent upon Congress’ consideration of an audio flag to protect digital content. Ferguson introduced a bill last year that urged satellite companies and broadcasters to work with content creators to work out “fair royalties” in the private marketplace, he said. “The goal of this legislation was not only to ensure that intellectual property rights are respected and that content creators are treated fairly, but that consumers’ continue to have access to content.”
Changes in “legacy regulation” may need to be considered, said House Commerce Committee Ranking Member Barton (R-Tex.): “We need look no further than the FCC’s inability to justify either of its last two rounds of media ownership restrictions to the satisfaction of the courts.” Barton said “no one could show how either set of rules actually promoted content diversity and localism in the real world.”
The current ownership rules are “destructive,” said Telecom Subcommittee Ranking Member Upton (R-Mich.). The public would benefit from the healthy competition that could come from lessened regulations. Terrestrial radio stations engage in an “extremely competitive marketplace,” Upton said. “It would be worthwhile to lighten regulations on ownership.”
NAB opposes the proposed merger, saying it isn’t needed since neither company is failing. “If this government- sanctioned monopoly is approved, consumers will be the losers,” said Peter Smyth, pres.-Greater Media, testifying for NAB. Smyth said subscription prices would rise due to lack of competition: “Neither listeners nor advertisers will benefit.” Smyth also said XM and Sirius have track records of “misrepresenting their intentions, not following the rules that have been established, and failing to correct their past transgressions.”
Consumer groups said Congress should tell FCC and antitrust authorities to halt the proposed merger until questions are answered about competition and consumer impact. Calling it a “wrong-minded radio merger,” Consumers Union Vp Gene Kimmelman said the companies are creating the impression that consumers won’t pay more for a combined new service. “They haven’t really said what the new prices will be,” Kimmelman said. -- Anne Veigle
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XM and Sirius face a high bar for FCC approval of their merger, Chmn. Martin told investors Tues. at a Bear Stearns media conference in Palm Beach. Asked about prospects for the controversial deal, Martin repeated written comments issued the day the merger was announced, said someone on hand at his presentation. It wasn’t webcast by Bear Stearns, which declined to provide a recording or transcript. Noting that the lack of documentation was the bank’s decision, an FCC spokesman said the agency usually doesn’t send crews to record Commissioner comments at such events. At the meeting, we're told, Martin restated his support for cable operator proposals to use downloadable security to comply with the July 2007 FCC ban on integrating navigation and security functions. To have a chance of getting CableCARD waivers, cable operators must show the FCC they can offer downloadable security, Martin said. The comments harken back to his remarks at CES (CD Jan 11 p1). Neither broadcasters nor cable operators may be happy with a proposal he backs for small programmers to get must-carry status by leasing capacity on TV stations’ multicast streams, Martin suggested. Such a plan may be needed to increase programming diversity, he said. - JM