Karmazin Would Consider Government Review Of Prices


Senate Antitrust Subcommittee Chairman Herbert Kohl (D-Wis.) told Sirius CEO Mel Karmazin Tuesday that the committee had real concerns that the proposed merger between Sirius and XM might be a great monopoly for the two satellite radio companies, but a bad deal for consumers.

The subcommittee was taking its crack at the merger Tuesday in a hearing that spelled out the dilemma pretty clearly: "The XM-Sirius Merger: Monopoly or Competition From New Technologies."

Karmazin has already pitched the deal in two Hill hearings over the past few weeks.

For his part Karmazin, who has promised not to raise prices after the merger, said he would at least consider having to submit any future price increases through some government agency, but he said he thought it would be unnecessary.

Karmazin has repeatedly told legislators the companies were willing to work with the FCC, FTC and Congress to be held to its promise of price caps.

Kohl argued that traditional broadcasting did not supply a similar panoply of services to satellite. He pointed out that Ipods and other alternatives are too expensive and too different to be included as competitors in the satellite radio market.

Broadcasters say the merger would create a monopoly in satellite-delivered mobile national audio service. They also have concerns that traditional radio is not a direct competitor in the market.

XM and Sirius, fronted by Sirius CEO Mel Karmazin, argue that a merger would not create a monopoly, but  a stronger competitor to traditional radio and Internet radio. National Association of Broadcasters board member Mary Quaas reiterated that case to legislators.

Karmazin said in filings to the SEC, radio companies say they compete with satellite radio, yet are now arguing the opposite.

Quaas said that broadcasters point is that they do not compete directly with satellite radio in the national, bundled, mobile audio business. Satellite radio does, however, compete with them in their local markets, where they are constrained by government-determined coverage areas and public interest obligations.

Antitrust attorney David Balto fueled Kohl's concerns by saying the merger should be stopped. He argued that Sirius and XM did not have direct national, mobile competition from traditional radio. He cited satellite radios program variety, ubiquitousness, and its unregulated content.

Balto said that Karmazin's promise not to raise rates is not sufficient, and he added  that the courts have "almost never" permitted such mergers based on the promise not to increase prices. "At the end of the day you are left with a monopoly and a monopoly is forever," he said. He said the legislators grandchildren would be paying monopoly prices.

Karmazin conceded he thought it was unlikely that another satellite company would enter the market as a competitor to the combined company, a point Kohl wanted to emphasize. Karmazin said it was possible that someone could launch one, but he continued that the issue was not whether it would be another satellite competitor. The issue, according to Karmazin is, that there is-- and will be --similar competition from wi-fi, cell phones and terrestrial radio.