Hurry Up and Wait, FCC Style

Not surprisingly, the FCC continues to hold up Sirius’ purchase of rival XM. Three of the five commissioners whose decisions will ultimately bless or kill the deal have cast their votes, all along party lines. As it stands, two Republican commissioners have voted for the merger and one Democrat has voted against the deal, leaving one commissioner from each party who has yet to cast his or her vote. The remaining Democrat, Jonathan Adelstein, has laid out concessions that the merged satellite radio provider would need to make to gain his support. Deborah Taylor Tate, the remaining Republican on the commission, hasn’t given any indication of how she might vote or what concessions may accompany her vote.

As it stands, the FCC is the only federal body standing in the way of the merger. Sirius and XM shareholders approved the deal last year, with the Justice Department signing off earlier this year. Now, two people stand in the way of a multimillion dollar deal which both companies had expected to complete by the end of last year.

Commissioner Adelstein will likely be the one who kills the deal with his list of concessions, including:

  • Six-year price cap for existing subscribers
  • Interoperable radios capable of receiving (terrestrial) HD Radio
  • Reservation of 25% of channel capacity for non-commercial and minority programming

While most of these requests are inconsequential, one will likely hold the deal up for some time. By requiring interoperable radios to receive HD Radio (a digitally-enhanced version of terrestrial radio), Mr. Adelstein forces the combined company to take on additional expense with little benefit to the subscriber or company. This additional expense comes in the form of royalties to iBiquity, the company which developed HD Radio technology. Such a move will also impact advertising revenue by forcing the satellite radio provider to compete with terrestrial radio within its own system (no, HD Radio will not be broadcast via satellite; presumably the new radio antenna would be capable of receiving satellite and terrestrial radio broadcasts).

What does Commissioner Adelstein hope to accomplish with such a ridiculous requirement? I don’t know. As a Sirius subscriber, I have no interest in listening to terrestrial radio, regardless of whether it’s HD or not. That’s precisely why I subscribe to satellite radio. Regardless of delivery method, the majority of terrestrial radio is still commercial-supported. Broadcasting in HD won’t change the sad fact that commercial broadcasters devote nearly as much time to programming as they do to advertisements.

Commissioner Adelstein’s remaining demands are inconsequential. Both providers have said that the combined company won’t raise subscriber prices. In fact, both companies regularly discuss how the combination may allow them to lower their monthly fees. As for requiring capacity to be set aside for non-commercial and minority programming, this will have little impact on the merged company. Already, both providers feature non-commercial programming from National Public Radio, Public Radio International, and the BBC. XM has its own version of public radio, which would also help meet the 25% quota. As for minority programming, Sirius offers a lineup of Spanish-language programming, as does XM. Both providers carry channels catering to African American tastes, and Sirius even has a channel devoted to the gay and lesbian community. To meet Mr. Adelstein’s final requirement, the combined company may have to set aside a few additional channels, a move unlikely to have a noticeable effect on the majority of listeners.

In the interest of full disclosure, I am both a Sirius shareholder and subscriber.