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Sirius-XM: 'We're Not a Monopoly'

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WASHINGTON By the time the two-hour, 20-minute congressional hearing into the proposed $13 billion Sirius-XM merger ended late Wednesday afternoon, Mel Karmazin was getting a little hot under the collar trying to drive home the message to legislators that the company left standing after Sirius and XM merge will not be a monopoly.

He said it many ways and many times, including at least once where some frustration finally began to show, "We are absolutely not a monopoly," the Sirius CEO said.

The word had been used by almost every one of the panelists on the newly formed Antitrust Task Force chaired by Rep. John Conyers (D-Mich.). And each time Karmazin, who abandoned his prepared statement and flew by the seat of his well-trained salesman's pants, counted down the many benefits that a unified company would be able to offer to consumers.

Perhaps the most surprising argument from Karmazin was that not only would the new company not raise its monthly price from $12.95, it could lower it, he said.

With XM chairman Gary Parsons sitting nearby, Karmazin described the competition: "200 million cars that have free AM/FM radios in them and there are homes that have four free radios in them. I guarantee no price increase and we will lower the price."

In subsequent explanations, he noted that the new company would be competing with an entire digital landscape—Internet radio and with terrestrial broadcasters' HD movement about to explode and radio agreements with cell carriers, there is a vast new world of free, over-the-air radio not to mention millions of iPods.

At one point, Rep. Steve Cohen (R-Tenn.) asked Karmazin if paying morning personality Howard Stern millions of dollars a year in salary wasn't "obscene," which drew laughter from most everyone in the room including Karmazin. But Karmazin assured Cohen that had Clear Channel or CBS Radio agreed to pay Stern more than what Sirius did, Stern would be working for either of those companies. It's all about competition, Karmazin stressed.

"The reason we are not going to raise prices is that terrestrial radio is free," Karmazin said. "We are trying to build a paying audience." He said that could be done by offering more choices in programming, better technology and more consumer services than competitors.

That message was not lost on those who would be most affected. At one point in the harangue, a Midwest broadcaster in town for the NAB's 2007 State Leadership Conference and seated in the gallery, whispered to the person next to him, "He's still really sharp, isn't he?"

The thrust of NAB CEO David Rehr's testimony was that a merger would create a monopoly and the new company "could also use cross-subsidies to engage in anti-competitive actions against local broadcasters." A number of NAB folks sat in the gallery wearing red round stickers with white writing that read "No Satellite Radio Monopoly."

But that argument may have gone down in a red ball of flames when Rep. Anthony Weiner (D-N.Y.) asked Rehr, "Do your broadcasters offer talk programming?" "Yes," answered Rehr. Karmazin was asked the same question and he also answered "yes." What about sports programming? Weiner asked Rehr. "Yes," to that to. Karmazin also answered in the affirmative. The answers were the same from both men about other formats, too.

"This monopoly argument has been wildly exaggerated," said Weiner. "No one needs to have radio. No one needs to have this product. One hundred percent of computers have the ability to download content, to download podcasts," added Weiner. "Sometimes mergers serve to help an industry."

Karmazin also made it clear his wasn't looking to produce local content.