I've never thought that there is only one “public interest” position in communications policy, although it is relatively rare that the most prominent groups disagree. The proposed XM-Sirius merger is one of those rare occasions. First three and now six public interest groups have called for flat-out rejection of the merger. PK, on the other hand, reserves judgment on whether the deal passes antitrust scrutiny, saying that if the antitrust authorities allow the merger, then the FCC should permit it as well, but only subject to the following three conditions:
the new company makes available pricing choices such tiered programming.
the new company makes 5% of its capacity available to non-commercial educational and informational programming over which it has no editorial control.
the new company agrees not to raise prices for its combined programming package (as opposed to each individual company's current programming package) for three years after the merger is approved.
If you haven't seen them, PK's House testimony is here, and our Senate testimony is here.
So why is Public Knowledge differing from its public interest kin in this case? Here are the two main reasons why:
No Slam Dunk on Antitrust Analysis. Of course it is true that XM and Sirius are the only two satellite-delivered, mobile, multi-channel audio services. But that fact is not sufficient to determine whether the combination violates the antitrust law. What is relevant is whether the existence of other competitive services (like cellphone music services, Internet radio, broadcast and new digital “HD radio”) in the market are “substitutes” that would constrain the combined entity from raising its prices more than 5%. Again, those competitive services do not have to be identical. Without knowing more about why consumers buy or do not buy satellite radio, this is impossible to determine. Remember, only 3.4% of Americans choose to get XM and Sirius, so one would think that there are some market forces that are dissuading them from doing so. What is also not immediately known is whether new technologies, such as mobile Internet radio services like Slacker, will be available within the 2-year time frame that is relevant for antitrust analysis.
There is Far More to Fear from a Broadcast Monopoly than a Satellite Radio Monopoly. It is no accident that the National Association of Broadcasters is vigorously opposing this merger — despite their protestations to the contrary, they view satellite radio as a major competitor. As a result, they have done everything possible to hobble the satellite radio industry ever since the FCC set-aside spectrum for what was to be 4 services in the mid-90's. I recall being approached by the NAB at that time (when I was at the Media Access Project) to advocate imposing public interest obligations on what was then called DARS (Digital Audio Radio Service) or S-DARS. For the past two Congress' the broadcasters have tried to legislatively prohibit satellite radio services from providing any local service, including emergency information. They filed a similar petition at the FCC. At least two broadcast groups refuse to carry satellite radio advertisements, and another forced XM to carry advertisements on the channels it programmed.
Nothing would please the broadcast industry more than this merger being denied – leaving two weak companies to compete with the 80 year-old broadcasting behemoth. Don't believe the nonsense that broadcasters do not compete nationally with XM because they cannot/do not aggregate demand. Ever hear of syndicated programming like the Tom Joyner Morning Show? Rush Limbaugh? Or Opie and Anthony? (who, by the way, are on both XM and terrestrial radio). Large station groups use their national reach to aggregate demand, just like satellite radio. Nor should anyone be fooled by merger opponents' talk about the “unique characteristics” of satellite radio. There is nothing inherently subscription-based or non-commercial about satellite radio. Indeed, one of the early applicants for an S-DARS license proposed being free and advertiser supported. And both XM and Sirius originally had commercials on their music channels before competitive pressures caused them to change. Finally, digital HD-radio makes it possible for radio broadcasters to charge subscription fees, and indeed, some are considering that alternative.
Consumer advocates and policymakers opposing this merger might take heed from the failure of the 2002 proposed Echostar-DirecTV DBS merger. That merger was premised on the notion that one strong satellite TV company would be better competition to incumbent cable than two weak companies. We did not take a position on the merger at the time, but interestingly, several of the organizations opposing the merger here supported that merger with fewer conditions than PK is seeking for XM and Sirius. The merger was denied at the behest of Fox, which ended up buying DirecTV (which Murdoch is now selling, having called DirecTV a “turd bird.” ) The result? Cable prices continue to go up, DBS cannot provide competitive broadband, and the DBS industry did not have enough resources to successfully bid for new Advanced Wireless Services spectrum, which was largely gobbled up by the incumbent telcos (so much for a competitive third broadband “pipe”).
I see parallels to the DBS merger here – one strong satellite radio company will be able to push radio broadcasters to provide better, more diverse programming and fewer commercials, particularly as broadcasters provide multiple HD radio streams. This competition could be even stronger if satellite radio providers are permitted to do more local programming, which, ironically, is the one type of programming most public interest groups want more of. But two weak companies are unlikely to provide any competitive or political pressure on broadcasters – hence their vehement opposition to the merger. James Surowiecki of the New Yorker, no lover of media consolidation, agrees with us on this point..
So I caution my public interest colleagues to be careful about giving aid and comfort to the broadcasters. They haven't earned your support, and you should expect nothing for giving it. Strict opposition to the merger may preserve some public interest principles, but it certainly will not help the public.