By now, everyone knows that XM and Sirius have announced plans to merge into a single nationwide satellite radio service provider. This plan is, of course, subject to approval of the FCC. The NAB has announced plans to oppose the merger, and Congress today scheduled hearings on the matter, to be held next week. The obvious issues to be considered by the Department of Justice and the FCC will be whether the merger will be anti-competitive and whether it will serve the public interest. But there are numerous other legal issues, possibly affecting other FCC proceedings, that may well come out of the consideration of this merger.
For instance, the merger raises the question of whether satellite radio is a unique market that should not be allowed to consolidate into a monopoly, or whether there is a broader "market" for audio programming encompassing not only satellite radio, but also traditional over-the-air radio, iPods, Internet radio, and other forms of audio entertainment. While the opponents of the merger may argue that satellite radio is a unique market, such a finding may affect the broadcast multiple ownership proceeding, where some broadcasters are advancing arguments similar to the satellite companies in hopes that the FCC will loosen multiple ownership restrictions.
Another issue that seemingly will be raised by the merger is how important a la carte programming is to FCC Chairman Martin. The Chairman has been pushing both satellite and cable television companies to allow consumers to purchase only the channels that they want rather than whole packages of channels. He has argued that consumers could save money by buying only the channels that they want, and consumers could also avoid programing that they don’t want (like adult oriented content). Service providers have countered that forcing the unbundling of program tiers will make it economically unfeasible to offer many of the more niche program channels. Published reports indicate that part of the merger proposal to be advanced by the satellite companies may include a proposal for a la carte pricing. Thus, this case may show how important the Chairman really believes such offerings are – and whether that offering may help tilt the public interest considerations in the proceeding.
The question of competition may also focus attention on HD Radio. For instance, it may finally force the FCC to face the issues that have been delaying final rules on HD Radio. As we’ve written before, there are no final rules for HD Radio – all new multicast HD channels are operating on experimental authorizations, and the FCC has yet to allow AM HD operation at night. If HD is to be considered in the competitive analysis with satellite radio, shouldn’t it be permanently authorized? Some broadcasters have even suggested that the FCC condition approval on car companies installing HD receivers in cars along with satellite radio receivers – though the FCC’s authority to force such a plan may be questionable.
Finally, music royalty issues may become important considerations. Internet radio is being advanced as a competitor to satellite radio. Yet, as we’ve written before, music royalties on Internet radio for 2006-2010 are to be decided by the Copyright Royalty Board in the next 10 days. If the royalties are significantly raised, as proposed by the copyright holders (principally the record companies), many stations now streaming on the Internet may think twice about continuing their operations. In which case, will Internet Radio provide real competition? Or, if the rates are set too high, will Congress step into the battle to help insure more competition in music programming? And satellite radio itself is just beginning a proceeding before the CRB to set its music royalty rates for the next 5 years. Will the record companies prefer one strong company to pay royalties, or two competitive ones? And what role will that preference cause the recording industry to take in any comments that it may have on the consideration of the merger?
As the merger proceeding plays out, there no doubt will be other issues that will become part of the mix. No matter what the decision, it’s clear that the decision will have an impact far beyond this single proceeding.