The Federal Communications Commission tonight approved the merger of the nation’s only two satellite radio companies, ending 18 months of regulatory wrangling over antitrust issues.
Sirius and XM Satellite Radio will now be able to merge into a single entity with 18 million subscribers. I’ve enjoyed trying out both services in the past, but I never thought this $3.3 billion merger was a good idea. It was so clear to me that consumers would suffer if two choices became one.
But the companies had a good point. They were both losing buckets of money. And they argued that they faced competition from a variety of sources. That included iPods, Internet radio, free AM/FM radio, and iPhones. The executives said they would get big cost savings from the merger and that they would be able to offer a la carte offering to consumers that could lower prices paid. Such arguments carried the day.
It was a narrow 3-2 vote late Friday. Republican Commissioner Deborah Taylor Tate voted to approve the deal after the companies agreed to pay $19.7 million in fines to settle FCC rule violations such as locating towers in unapproved locations. The companies also agreed to a three year cap on prices, set aside 8 percent of their channel capacity for minority and noncommercial programs, and agreed to market interoperable radios within a year.
The two Democratic commissioners Michael J. Copps and Jonathan S. Adelstein voted against the merger. Robert M. McDowell, a Republican, and FCC Chairman Kevin Martin voted in favor of it.
“Consumers will get to enjoy the best of the programming on both services,” Martin told the Washington Post. “They’ll also be able to pick and choose channels at a lower price.”
The Justice Department gave its approval in March. I’ve followed this case closely because it signals what antitrust enforcers will do in other technology markets. Companies such as Electronic Arts, which has made a hostile $2 billion offer to buy Take-Two Interactive, will likely make the same arguments as they attempt to merge with other rivals who own the same kind of properties. EA, for instance, would gain a near monopoly in sports video games if it buys Take-Two.
But EA could argue that there are plenty of competitors out there who provide adequate competition, from fantasy sports leagues to casual sports game web sites. We can expect that our choices will dwindle in the future and the government won’t stop that from happening, even if we’re left with a choice of one.