XM-Sirius Deal Under Fire | Adweek XM-Sirius Deal Under Fire | Adweek
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XM-Sirius Deal Under Fire

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WASHINGTON Consumer groups renewed their attack on the proposed merger of the nation's two satellite radio companies, telling federal regulators the union would eliminate competition and hurt American consumers.

The Consumer Federation of America, the Consumers Union and Free Press argued in a report filed Monday with the Federal Communications Commission that the $5 billion deal would reduce the number of channels and formats available and result in little cost savings.

"The companies fail to make the case for ending the explicit prohibition on mergers between satellite licensees," said Consumers Union vp Gene Kimmelman. "The commission should not abandon the fundamental principles that have guided its policies for the past decade to approve the deal."

Using the FCC's own data on radio stations, the consumer groups claim there is new evidence showing that satellite and terrestrial radio are not close substitutes—a direct contradiction of the data submitted by XM-Sirius. The XM-Sirius filing details claims that satellite radio represents a unique consumer product, that it does not compete with iTunes or Internet radio, and that its national service is not in direct competition with local terrestrial broadcasters.

"Leaving one company to monopolize the satellite radio industry would result in higher prices and fewer choices—with no foreseeable public benefit," said Consumer Federation research director Mark Cooper.

The report details the XM-Sirius merger's negative side effects—both for consumers and for the satellite radio industry, claiming that the deal would reduce the number of channels and formats available, result in fewer cost-saving incentives, and cause a dramatic drop in spending on talent and retail.

"The commission should reject this merger," said Free Press policy director Ben Scott. "A license to use the public airwaves does not come with an entitlement to monopoly profits—it carries with it the obligation of public service."

The satellite services stuck to their argument that the deal will benefit consumers.

"The two a la carte programming options we will introduce as a merged company clearly benefit subscribers and will help strengthen competition in the vast audio entertainment market, of which satellite radio holds a mere 4 percent of all radio listeners," they said in a statement.

Many other consumer-oriented groups support the merger, they said, pointing to expressions of support of the NAACP and the League of Rural Voters.

"We are confident the FCC and DOJ will also recognize these important consumer benefits and allow the merger to proceed by the end of the year," the companies said.

Both the FCC and the Department of Justice have to approve the deal. While the Justice Department examines the deal for anti-competitive effects, the FCC must decide whether the union is in the public interest. Both are expected to decide on the deal before year's end.