XM-Sirius, regulatory blackmail, and diversity

by on June 17, 2008 · 6 comments

XMSirius As James Gattuso noted last week, the XM-Sirius merger review has now entered the realm of the theater of the absurd. It’s not just that the FCC has lapped its 180-day merger review shot clock two-and-half times already (we’re over 450 days into the proposed merger, after all), but it’s the fact that there seems to be no end to the list of conditions that some regulatory advocates or policymakers want to extort out of the firms. After all, according to the latest press reports, the FCC has already managed to extract the following “voluntary” concessions out of them: a price cap on programming for potentially 3 years; a la carte programming requirements; new interoperability standards for satellite radio receivers; capacity set asides of something like 4 percent of their spectrum capacity (apparently about 12 channels) for non-commercial educational programming; and potentially the lease of another 4 percent of capacity to minority or women-owned enterprises.

These are astonishing concessions, and one is forced to wonder if the merger was really worth it and whether the merged firm will really be able to survive the intensely competitive media landscape it finds itself in with such constraints in place. Let’s not forget, although both firms have grown their subscriber rolls, they have NEVER found a way to turn a profit! And new audio options continue to pop up seemingly every week and bombard our ears with evermore news, information and entertainment.

Alas, all those concessions appear not to be enough to satisfy some on Capitol Hill. According to today’s Washington Post:

Senior members of the Congressional Black Caucus yesterday criticized a compromise plan for the proposed merger of the XM and Sirius satellite radio companies, saying the deal does not provide enough opportunities for minority-owned programming.

Federal Communications Commission Chairman Kevin J. Martin said over the weekend that he would support the merger after XM Satellite Radio Holdings and Sirius Satellite Radio voluntarily agreed, among a series of other concessions, to lease 4 percent of their radio spectrums, or 12 channels, for programming run by minorities and women.

Members of the black caucus on Capitol Hill have been arguing for the merged company to lease five times that amount of spectrum to companies owned by racial minorities. Short of that, caucus members have warned in letters to the commission and meetings with Martin, they would oppose the merger.

Five times that amount? Wow, there’s a pound of flesh and then’s a pound of flesh! They’re talking about a massive capacity set-aside that would leave the merged entity scrambling to find a way to add more capacity or, more likely, booting existing channels off the air to make room for politically preferred options.

What makes this all so silly, perhaps even outrageous, is that the satellite radio industry didn’t even exist 10 years ago–wasn’t even launched until late 2001, in fact–and yet here we are already trying to regulate it like the broadcast industry. Set-asides, quotas, capacity requirements, programming mandates, etc… that’s the language of analog-era broadcast regulatory law. You know… the body of law that was built on the theory of media scarcity!! And so as more competition comes along we end up quickly boxing it into the old, unjust regulatory paradigm. Oh, the absurdity of it all!  [And just wait, speech controls come next! If they can mandate set-asides and other programming requirements, then they can wash out Howard Stern's mouth with a bar of regulatory soap as well.]

The rise of satellite radio has given us choices we couldn’t image 10 years ago. That’s what makes the plea for even more set-aside capacity particularly silly. I wonder, have these lawmakers even bothered to take a look at what’s on satellite radio today? It seems to me that the industry is doing a very nice job satisfying unique nitches that were going under-served in the past. Can you name a musical genre that is not represented on satellite radio today? Moreover, in many cases, each genre has multiple sub-genres.

Of course, the central planners in Congress and at the FCC think they can do a better job of programming the radio dial than the people who work in this industry. So, what are we going to get if they get their way? You need do nothing more than turn on cable or satellite TV and look at all those silly channels occupying prime real estate between roughly channels 12-30 on the dial. What’s that you say, you’ve never looked at those channels before? Me neither! Those are the dreadfully awful “public access channels” that roughly 0.0000000000001% of the view public consumes. I doubt that the policymakers who mandate that those channels be there even bother watching them!

Of course, as overall TV channel capacity has grown, it has become somewhat easier for cable and satellite operators to live with those “must carry” public access channels. It doesn’t make it right that those media providers are forced to carry channels that no one demands, however.  Regardless, it would be extremely difficult for satellite radio providers to absorb similar mandates without probably forcing some other, existing channels off the air. You know, those channels that actually have some demand!

But hey, who cares about what the public really wants. The Congress critters and unelected FCC bureaucrats know what’s best for us, right?  Perhaps they should just nationalize the entire satellite radio spectrum and let every member of Congress have their own channel as a soapbox. After all, the people don’t really want 24/7 music of every possible genre, or every sports league and all their games aired live, or every type of news programming imaginable, or Howard Stern or Oprah or Martha Stewart, or …

Oh, forget it.

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