Hundt Backs XM-Sirius Merger

Former FCC Chairman Thinks Two Satellite-Radio Cos. Should Be Allowed to Merge

By John Eggerton -- Broadcasting & Cable, 11/13/2007 11:53:00 AM

Former Federal Communications Commission chairman Reed Hundt, who presided over the commission that established the satellite-radio licenses held by XM Satellite Radio and Sirius Satellite Radio, said he thinks the two companies should be allowed to merge and that the combination would be pro-competitive.

In an interview with lawyers for both companies that was then submitted to the FCC in support of the merger, Hundt, currently a telecommunications entrepreneur, said the caveats were: "I’m not in any way trying to say what I think the current chairman should do. Nor do I have access to the information that the Department of Justice has, and I’m not trying to say what I think the antitrust division should do."

But as for him, Hundt said his goal behind approving satellite radio was to spur competition to terrestrial broadcasting, and XM and Sirius had not been able to do that as separate companies.

“[T]here was not a shadow of doubt in my mind that the competitive force of satellite radio was one of the very few arrows we had to shoot at this elephantlike industry that was going to be created in terrestrial radio," he told the lawyers. "And it seems to me that there’s no indication of any anticompetitive outcome if they do combine, so let’s give them a chance to have a sharper point on the arrow and see if they can do better in terms of penetrating the listener audience.”

When the Hundt-headed commission established the licenses, it said they should not be held by the same company. Just what the FCC meant by that has become a point of contention between the satellite companies and terrestrial broadcasters, the latter of which have argued that the commission meant just what it said. Hundt instead said that it was at least his intention that the prohibition not be written in concrete.

Hundt added that he had not been paid for the interview and was not a consultant to the companies.

XM and Sirius argued that they would be stronger competitors to terrestrial radio in a crowded audio market that includes the Internet and cable radio. Terrestrial broadcasters said the companies are looking for a government bailout after overpaying for programming and the result would be a monopoly with which local radio does not compete on a national platform.

The FCC has until the middle of next month to decide on the deal -- the DOJ has to weigh in, as well -- if it is to meet its informal 180-day shot clock on merger reviews, although it is under no obligation to do so.

In other XM-Sirius news, the stockholders of both companies voted to approve the merger, subject to FCC and DOJ approval.

That came in a special meeting Tuesday in New York, where preliminary results showed that 96% voted to approve. XM stockholders will get 4.6 shares of Sirius common stock for each of their XM shares.