The proposed merger of Sirius Satellite Radio and XM Satellite Radio may make perfect business sense to the two companies, but if they hope to convince federal regulators that the combination should be allowed to take place, XM and Sirius may first have to remind them which year it is.
A February hearing before the House Judiciary Committee Antitrust Task Force to examine the proposed merger was at the same time entertaining and frustrating, at least if you were trying to convince government officials that there are multiple ways to listen to music.

Sirius CEO Mel Karmazin tried to make the case that competition for listeners is not limited to Sirius versus XM, but extends to terrestrial radio, Internet radio, portable music players and other emerging content providers. Arbitron’s Fall 2006 ratings survey supports his statement, finding that satellite radio accounted for just 3.4 percent of all radio listening. Even satellite radio subscribers who answered the survey said they listened to more terrestrial radio than satellite.

If those figures are to be believed, it seems obvious that a single satellite radio operator would be far from a monopoly.
But the idea that satellite is just another platform for delivering content rather than a business unto itself remains a foreign concept to many in the upper reaches of government.

During the hearing, Rep. Lamar Smith (R-Texas) spoke wistfully about 1960s rock-n-roll music and Rep. F. James Sensenbrenner Jr. (R-Wis.) compared the proposed merger to an “old regulated gas company.”

The National Association of Broadcasters (NAB), the trade association that promotes and protects the interests of free radio and television broadcasters, also is doing its best to confuse officials about whether satellite radio has any competition.

David Rehr, president and CEO of the NAB, told the panel that a “government-sanctioned monopoly” would “undermine audio competition, not enhance it.” But the NAB’s near-constant attacks on the satellite radio operators and Rehr’s very presence at the hearing suggest that a single satellite radio company would have plenty of competition for listeners.

Certainly XM and Sirius would have a monopoly on some programming alternatives, but it is hard to see why the satellite radio operators should be penalized for the programming shortcomings of terrestrial radio.

Rep. Anthony Weiner (D-N.Y.) demonstrated himself to be one of the more up-to-date members of the committee, imploring other representatives “to stop with the ’70s version of this discussion” and drawing a direct line of competition between the offerings on satellite radio and terrestrial radio. Old lines of competition are “anachronistic,” Weiner said, noting the trend of automobiles coming standard with terrestrial radios, MP3 jacks and podcast capabilities along with satellite radio.

Weiner cited the previous government debate over the proposed merger of EchoStar and DirecTV, which was denied. “We made a mistake. … Content has suffered. Sometimes mergers help to move the industry forward.”

The merger must be approved by the U.S. Federal Communications Conference (FCC) and the Department of Justice, and there will be some need to convince those officials of potential benefits as well. When the FCC first licensed the services it prohibited them from merging, and FCC Chairman Kevin Martin has reiterated that stance in recent comments.

If this deal is to go through, XM and Sirius must hope that officials who will make the final decision develop more modern views on what constitutes competition.