Satellite Vs. Local: Karmazin, Broadcasters Square Off

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Former over-the-air broadcaster Mel Karmazin made his case yet again for the merger of the Sirius--he is CEO--and XM satellite radio companies, while a local broadcaster argued that the merger was a government-sanctioned monopoly that would leave listeners the losers.

In a hearing on the "Future of Radio," in the House Telecommunications & Internet Subcommittee, Karmazin said he was glad to clarify a confusion that had arisen over his testimony about pricing, which stemmed from a hearing last week on the merger.

Subscribers who pay $12.95 for Sirius or XM will pay no more than that to receive the same service after the merger, he said, and potentially will pay less under a system where they could receive fewer channels (say the NFL or MLB were broken out into a separate tier). He reiterated that a pure a la carte model was not financially viable one, an argument cable has long made.

He also said that subscribers who want content from both services would pay no more than $25.90--the price of both combined--and would likely pay less.

How much less he was asked? Karmazin said the discount from $25.90 would be "closer to 10 than to 2," though it was not immediately clear whether he meant dollars or percentage points.Karmazin did not say how long prices would stay down, but said the company was willing to work with regulators on a timetable.

Peter Smyth, president of radio station owner Greater Media, wasn't buying the pledge of lower prices, saying "subscription prices will rise because there will be no competition to restrain monopoly rates," then, sounding like an anti-media consolidation activist, he added: "Jobs will be eliminated. Innovation will suffer. Neither listeners nor advertisers will benefit. Put simply - private corporate interests will benefit, but the public will suffer."

Again, media activists came to broadcasters aid. Gene Kimmelman of Consumers Union, a frequent Hill witness on consolidation, said the merger as advertised would not be in consumer's interest. He said that satellite radio was a distinct service, a mobile national offering, that broadcasters do not directly compete with.

One legislator pointed out that Kimmelman had seen some "significant benefits" in the proposed merger of DirecTV and EchoStar in 2002--a merger that was found to be anticompetitive--while he opposed outright the current satellite radio merger, not even proposing conditions on a possible merger.

Kimmelman said the difference was that cable prices were going up three times the rate of inflation and that he was looking to satellite to be a governor on that price. By contrast, he said, "last time I looked, the price of free radio wasn't going up." He also said there had been a proposal of spectrum divestiture.

He then suggested that if the combined companies wanted to divest some spectrum and combine into one service, that would be an interesting proposal.

"We paid for our spectrum," said Karmazin, sounding a bit like Ronald Reagan in front of that campaign microphone. "We're not spectrum hogs," he said.
Republicans Fred Upton (R-Mich.) and Joe Barton (R-Tex.) used the hearing as an opportunity to argue for looser media ownership rules, while Democrats Ed Markey (D-Mass.) and John Dingell (D-Mich.), chairmen of the subcommitte and Energy & Commerce Committee, respectively, called for greater diversity of ownership.
While Kimmelman supported broadcasters on the satellite merger issue, he also warned against consolidation in general.