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FCC To Clear Sirius-XM Merger For Liftoff

With today's news that Federal Communications Commission chairman Kevin Martin will vote to approve the merger of the XM and Sirius satellite-radio companies, it looks like we're officially near the end of competition in this corner of the radio realm.

I thought this combination was a bad idea when it was first announced, and I have yet to find a compelling reason to change my mind.

Even more than the monopoly that this will create, what bothers me here is the fundamental dishonesty of the XM-Sirius proposal. Both companies gave their word to the government not to merge and have been allowed to back out of that pledge. And why? Not because basic market conditions are too hostile to permit the survival of two separate satellite-radio firms, but because they spent too much on signing exclusive deals with the likes of Howard Stern and Major League Baseball.

I thought we already had a mechanism for dealing with that kind of foolish behavior: the bankruptcy code. Poorly managed companies fail, get bought at a discount price by new owners -- forcing investors who underwrote the mismanagement to eat a loss -- and get a fresh start. This worked just fine for the Iridium satellite-phone company; were XM and Sirius somehow too good for this form of market discipline?

The Department of Justice and the FCC thought otherwise, so here we are. The FCC, at least, seems inclined to impose some fairly restrictive conditions on the deal, the most important being a requirement that the combined firm offer "a la carte" pricing, in which listeners could pay for only the channels they like. Martin has been lobbying for this kind of option in cable and satellite-TV pricing for years; perhaps he sees this sat-radio deal as a way to prove that the concept works.

I'd like to hear from the XM and Sirius subscribers who read this: Are you relieved that the merger will proceed, anxious about how your service might change or still uncertain about what you think?

By Rob Pegoraro  |  June 16, 2008; 9:56 AM ET
Categories:  Music  
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