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Consumer groups object to XM -Sirius radio merger

Wednesday, February 28, 2007

Consumer Groups Object to XM and Sirius Satellite Radio Merger

Washington, DC—Communications regulators and antitrust officials should reject the merger of XM and Sirius Radio unless the companies demonstrate that consumers and competition will not be harmed, according to the testimony of Mark Cooper of Consumer Federation of America (CFA). The testimony before the Intellectual Property Task Force of the U.S. House Judiciary Committee was presented on behalf of CFA, Consumers Union, and Free Press.
“The proposed merger of the only two satellite subscription radio companies — XM and Sirius Radio — should raise a red flag for the Department of Justice and the Federal Communications Commission (FCC) whose job is to promote competition and consumer choice in the marketplace,” said Gene Kimmelman, Vice President of Federal and International Affairs for Consumers Union.
“Not only were XM and Sirius prohibited from merging as a condition of getting their licenses to use the public airwaves, but the enormous growth of satellite radio subscriptions at very substantial monthly charges and consumer equipment costs in just a few short years shows that this service could develop into a vibrant competitive market,” added Kimmelman.
“The merging firms have hired an army of public relations specialists and lobbyists,” said Mark Cooper, Director of Research for the Consumer Federation of America. “But, in the post-Abramoff era, lobbying muscle and political influence can no longer be allowed to short circuit careful analysis of the market or trump clear threats to the public interest.”
“We remain unconvinced by the excuses we have heard offered to justify the merger,” said Cooper. “Traditional broadcast radio, digital Internet distribution and mobile handheld devices, like iPods have not disciplined prices and will not discipline pricing practices after the merger because there are sharp differences in product quality, listener experiences and mode of delivery. They are not national, not mobile or not programmed,” said Cooper. “Experience and careful analysis suggests that the effort to position satellite radio as merely one product option in a broader product market should be rejected.”
Under the scant details released to date, it also remains unclear what additional equipment costs will be imposed on consumers as a result of the merger and whether, if consumers fail to invest in additional equipment, they will enjoy benefits the parties purport to provide to their subscribers.
“If these two competitors are allowed to merge, we fear prices will rise and innovation will suffer and the loose definition of product and geographic competition the antitrust authorities used to allow the merger will unleash an avalanche of merger across the digital product space,” added Cooper.
Click here to view the full testimony
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Mark Cooper, CFA, 301.384.2204
or Jeannine Kenney, CU, 202.462.6262
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Free Press is a national, nonpartisan organization with over 350,000 members working to increase informed public participation in crucial media and communications policy debates.