XM-Sirius merger approved

FCC voted 3-2 to approve buyout

By WILLIAM TRIPLETT

WASHINGTON -- It took 16 months and a flurry of last-minute negotiating, but federal regulators finally OK'd the proposed merger between XM and Sirius, the only two satellite radio companies in the country.

As expected, the Federal Communications Commission voted along party lines to approve the $3.5 billion deal, but not before opponents and skeptics repeatedly urged the agency to reject it or at least impose strict conditions. The Republican majority agreed to only one major condition -- a $20 million fine for equipment violations -- beyond those which both companies volunteered to meet.

The 3-2 vote occurred late Friday after normal business hours, mainly because the fine arose as a sticking point last week between FCC chairman Kevin J. Martin and fellow GOP commissioner Deborah Taylor Tate, who held the key vote.

Martin and the other Republican, Robert McDowell, had already voted earlier in the week to approve; Democrats Michael Copps and Jonathan Adelstein had already voted against the deal. According to sources, Tate withheld her tie-breaking vote until Martin would agree to the fine, but Martin reportedly refused to commit to the fine without Tate's vote to approve.

The impasse broke late Friday when Tate agreed to approve. Martin then agreed to the fine.

The Justice Dept. cleared the deal in March, saying no conditions were necessary. But the National Assn. of Broadcasters and some consumer groups protested, as did numerous congressional Democrats, who tried to pressure the FCC into imposing conditions more stringent than what XM and Sirius were offering -- a three-year subscription rate cap, a la carte subscriptions, 8% of capacity set aside for public interest and/or independent programming and consent to allow radio manufacturers to make interoperable receivers.

(Existing devices will be able to receive programming from both XM and Sirius. But the a la carte option will require subscribers to buy new radios.)

Martin said more stringent conditions weren't necessary.

"The merger is in the public interest and will provide consumers with greater flexibility and choices," Martin said in a statement. "Consumers will enjoy a variety of programming at reduced prices and more diversified programming choices. It will also spur innovation and advance the development and use of interoperable radios, bringing more flexible programming options to all subscribers."

NAB said the approval was "a disappointment" that will yield "a monopoly," adding that the org was "considering all options," which presumably include a court challenge of the approval.

National Public Radio, which has two channels on Sirius, was also critical. "The FCC's approval of the merger of Sirius and XM undermines public radio and, in turn, the public's access to our services," interim chief exec Dennis Haarsager said. "While NPR, other public radio producers and public radio stations have had long and mutually beneficial relationships with both companies, this new monopoly -- wielding unprecedented control over spectrum and without the mitigating conditions we sought -- will limit the public service mission of public radio and dilute the significant investment our community, our audience and Congress have made in HD radio technology. The public interest is not being served in this decision."

XM and Sirius execs, primarily Sirius topper Mel Karmazin, have argued that the merger will bring more choice and greater value to consumers as well as reduce production costs so that satellite radio can finally start posting a profit. Critics said XM and Sirius weighed themselves down with debt by overpaying for talent and programming, and that the merger is equivalent to a governmental bailout.