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Sat Radio Merger Update
Washington - Jun 15, 2007 - The main news items of the week in the ongoing satellite radio merger debate include a study of the proposal commissioned by XM and Sirius, and a letter from Congressmen Conyers and Chabot of the House Judiciary Committee to FCC Chairman Martin and U.S. Attorney General Gonzales.
XM and Sirius retained the services of Thomas Hazlett, the former chief economist of the Federal Communications Commission, a professor of law and economics at George Mason University, and a principal in Arlington Economics, to prepare a study regarding the merger. The paper, titled The Economics of the Satellite Radio Merger, was filed with the FCC on June 14.
The 49-page report explores the financial and strategic rationale behind the merger and concludes that the merger offers the potential to yield substantial efficiencies, benefit consumers and enhance the dynamics of competition within the audio entertainment marketplace. In a press statement about the study, Hazlett said, "After a thorough analysis, it is my opinion that the merger of XM and Sirius will predictably enhance consumer welfare. The National Association of Broadcasters' staunch opposition to the merger illustrates [its] similar expectation. The improved economic vitality of a combined satellite radio company would drive industry innovation, promote competition and enhance programming and pricing options for customers."
As expected by a study commissioned by the merging companies, the key findings favor the merger. The main arguments state:
Hazlett concludes that it is for these reasons that Wall Street analysts have argued in favor of this transaction since long before the satcasters negotiated a merger agreement. Likewise, these same reasons serve as the basis for incumbent broadcasters' opposition.
Not surprisingly, the National Association of Broadcasters issued a statement that opposes the conclusions of the study, saying that the report "defies logic" and that stating that consumers would benefit from the merger is "laughable."
The June 13 letter from Congressmen Conyers and Chabot of the House Judiciary Committee to FCC Chairman Martin and U.S. Attorney General Gonzales poses several questions to the two leaders who are being charged with allowing or rejecting the merger.
The letter is available through the NAB's website at this link.
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