Saturday, July 26, 2008

XM-Sirius satellite radio gets the green light to merge from the FCC

Sirius Satellite Radio Inc. bought rival XM Satellite Radio Holdings Inc. for $3.3 billion. This means that subscribers will be able to have access to both stations, it was also said to create huge cost savings for the industry. FCC Chairman Kevin Marin told the Associated Press, “Consumers will enjoy a variety of programming at reduced prices and more diversified programming choices.” The two rivals kept each other on their toes, the one fear that Democratic Commissioner Jonathan Adelstein has is that they will turn into a monopoly. Republican commissioner Taylor Tate insisted that the companies settle charges that they violated FCC rules before she would approve of the deal. Both companies agreed this week to pay $19.7 million to the U.S. Treasury for violations related to radio receivers and ground-based signal repeaters. The merging companies said that their merging would create hundreds of millions of dollars in cost savings and lead to greater choice in programming for subscribers and flexible pricing options. The FCC approval faced a steeper climb because the companies were prohibited from combining under terms of their licenses. The agency struggled to come up with a way to show that allowing a satellite radio monopoly was in the public interest. Sirius and XM also have promised to include a limited “a la carte” offering that would be available within three months of the close of the deal and allow listeners to pay only for the channels they want to receive.


Greg Delemeester said...

If the merger creates a monopoly, what would you predict will happen to the price of satellite radio programming? Are there any significant entry barriers preventing other companies from entering the business and competing against the newly merged company?

katiedickson said...

If a monopoly is created, the price of the satellite radio programming will most likely increase. Without the competition, there is no need to maintain their current fairly low prices. As for another company trying to enter the business. At this point it would be hard since XM and Sirius are currently the dominant forces in the business. With the two combined, they will provide a high standard. However, the perfect time to enter a new product would be through the two companies transition phases. Remember when Alltel got big again in Southeastern Ohio, just as Cingular and AT&T merged. As XM and Sirius get their kinks worked out, there is opportunity for new entry.