One month after Sirius XM signed Howard Stern to a new, and likely lucrative contract, the subscription satellite radio service is looking to raise its rates. But first, it needs the green light from the Federal Communications Commission, which could choose to extend a three-year rate cap that was a condition of Sirius' July 2008 merger with XM.
As part of the condition, the FCC reserved the right to examine whether to modify, remove or extend the caps six months before the end of the period that ends July 28.
In a letter to the FCC, Sirius XM argued that the cap should not be extended and questioned the FCC's authority to do so.
"The price cap was suggested by the applicants for a defined period of time. Government-set rates are something quite different,” Robert Pettit, counsel for Sirius XM, wrote. “How would the FCC independently justify setting the $12.95, or any other particular rate, as the appropriate rate for basic satellite subscriptions? And for what period of time? Moreover, what process would the commission employ for determining subscription rates or the period of time they would be in effect?"
An FCC spokesperson said the commission was "reviewing the request," declining further comment.
If the FCC decides to extend the cap, it would be a surprise, Rebecca Arbogast and David Kaut of Stifel Nicolaus, stated in a report. "It would still be surprising to us for this FCC to basically give Comcast-NBCU a pass on rate caps and then extend merger-related caps for a company such as Sirius, whose stock dropped as low as a nickel per share two years ago and which continues to struggle and has no new transaction pending," they wrote.