Expiration of FCC Sirius XM Rate Cap Seems Likely, Say Observers
The FCC is expected to let Sirius XM’s merger condition price cap expire, industry executives said. The commission is still reviewing its options, said an agency official. The condition caps the satellite radio company’s price at $12.95 per month, and is set to expire July 28. The FCC is looking at the cap to determine if it should be allowed to expire. The agency approved XM’s purchase by Sirius with conditions including the price cap in 2008.
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If the agency decides to let the cap expire, it isn’t clear how it would do it. An order may come out of the Media Bureau or the full commission, though that hasn’t been decided, an FCC official said. Another option would be to let the condition simply expire, without any agency action, and then the FCC would be able react to any subsequent Sirius XM rate changes, said an industry official. As part of the price-cap deal condition for combining Sirius with XM, the FCC said it would look at the price caps again beginning six months before their expiration to revisit the competitive landscape. While the original condition was voluntary, any extension or modification wouldn’t be, potentially eliciting significant legal concerns, Sirius XM has said.
Another issue is the lack of comments in response to a January public notice. Longtime foes Sirius XM and the WCS Coalition provided what the only comments made by anyone other than individual consumers. Several individuals also filed short comments. The coalition asked the FCC to hold off on lifting the price cap until the agency rules on the group’s petition for reconsideration in a separate proceeding on new rules for use of the wireless communications service band. Otherwise, Sirius XM’s support of lifting the cap are some of the few answers provided to the agency’s questions on public interest benefits and competitive impact. The filings are in docket 07-57.
Whether the FCC will reach a conclusion on questions that didn’t receive much comment “depends on whether the question turns out to be essential to the analysis in the order,” said an agency official. The commission is reviewing the comments received in response to the January public notice as well as the previous record in the proceeding, the official said.
The expiration of the condition is likely an important development for the company, which has spent heavily on recruiting top talent, statements by company CEO Mel Karmazin indicate. As a result of the condition, Sirius XM has been unable to adjust its pricing to balance spending on content, he said during the company’s Q1 conference call (CD May 4 p12). Karmazin indicated a price increase was likely, noting that while there’s no decision yet on “on exactly what or when a price increase will” begin, “it would be something that would be compensating the company for its investment in content.”