Martin Backs XM/Sirius Merger

Satellite-Radio Merger Now Head to Other Four FCC Commissioners

Federal Communications Commission chairman Kevin Martin said Sunday that he will support the merger of XM Satellite Radio and Siruis Satellite Radio under a voluntary set of conditions proposed by the two companies.

The move tees up the next round in the process, which is review by the other four commissioners. Martin was hoping to decide on the merger by the end of June, but recently has given no timetable.

"As I have indicated before, this is an unusual situation," Martin said. "I am recommending that with the voluntary commitments they've offered, on balance, this transaction would be in the public interest. They have voluntarily committed to setting forth price constraints, so the prices for consumers do not increase; smaller packages at lower prices; an open standard for radios; the sale of interoperable radios; and additional public-interest programming for noncommercial use and for qualified entities that have not been traditionally represented."

The smaller packages are the companies' effort to approximate the a la carte programming model the chairman favors as a way to lower prices and increase choice for multichannel radio and TV. Those packages would be available within three months of the merger's approval.

According to a source familiar with the proposals, the two companies also pledged not to raise prices for 36 months, to offer interoperable radios within one year of the merger's approval and to set aside 8% of their spectrum -- 4% for noncommercial use, 4% for commercial use by outside entities.

Martin appeared to have a clearer path to approving a merger with conditions after top Hill Democrats outlined similar conditions as what would be required, in their view, if the merger was to be approved.

The Justice Department gave the deal a green light in March without conditions. But Justice only deals with whether a merger would be anticompetitive, while the FCC has other public-interest concerns to weigh.

Martin is expected to circulate a proposal for review by the other four commissioners this week, a source said, and perhaps as early as Monday.

The situation is "unusual" because back when the FCC approved the two satellite licenses, it also said they should not be held by the same company. In an interview for C-SPAN Friday, FCC commissioner Jonathan Adelstein said the decision will have to come in two parts, with the FCC first changing its rules to allow one company to own the two satellite-radio licenses. "Then we have to decide what to do about the merger and whether there are any specific conditions that need to be placed on it,” he added. “I expect that will happen pretty shortly."

The companies have argued that allowing them to merge will make them more competitive in a crowded audio-delivery marketplace that includes terrestrial and cable and Internet radio and MP3 players. Broadcasters countered that it will create a monopoly that competes with them for local listeners while they are unable to compete with satellite radio for a national audience.

"Given their systematic breaking of virtually every rule set forth by the FCC in their 11 years of existence, it would be curious if the Commission now rewards XM and Sirius with a monopoly," said National Association of Broadcasters spokesman Dennis Wharton. XM and Sirius had no comment on the chairman's support.

Public Knowledge, which has pushed for conditions on any merger, was generally pleased.

“From what we have been able to read and to learn this morning, many of the conditions the Federal Communications Commission (FCC) is considering placing on a potential merger of XM Satellite Radio and Sirius Satellite Radio are conditions that we have proposed and supported for more than a year, both in Congressional testimony, as well as in meetings with the Commission," said Public Knowledge President Gigi Sohn. .

“We support what we have heard today about the Commission’s proposals, although we would like to know more about how the set-aside for noncommercial channels would be implemented.