Day 505: The XM-Sirius Circus Is Finally Over

by on August 7, 2008 · 9 comments

It’s over.   The FCC, which voted to approve the merger between satellite radio firms XM and Sirius two weeks ago, finally released its formal report on the case on Tuesday, ending the drama 505 days after the firms submitted their application to the Commission.

The episode was not the FCC’s finest hour.  The agencies once-vaunted “shot clock” — by which the FCC pledged to decide on mergers within 180 was left in shreds, with the counter going around almost three times before the circus finally ended.   Even at that, XM and Sirius managed to claw their way to approval only by making an (ever-longer) series of “voluntary” commitments:  including offering “a la carte” programming, capping prices for 36 months, making 8% of its capacity available to others to non-commercial and other entities, and extending service to Puerto Rico.   Even more was being considered when the music stopped, including a proposal to require all satellite radio receivers to have built-in HD broadcast tuners as well. (Apparently, there was concern that broadcasters would be frozen out of the audio market, in which they hold a market share of about 96 percent).

This regulatory free-for-all contrasts with the approach taken by the Department of Justice, which — after a fact-specific inquiry, approved the merger -  without conditions – five months ago.

This difference is more than a one-off burp, some momentarily loss of focus, over at the FCC.  The difference is a long-standing  one.  The statutory changes, and institutional culture, of the two agencies is vastly different.  The DOJ, is charged with enforcing competition laws, using a fairly well-accepted set of guidelines and economic principles.  And, for all its faults, its considerations  tend to be economic and factual in nature.   The FCC, by contrast, is a political animal, besieged – and often co-opted – by competing industries and interests.   And its statute allows it to go beyond questions of competition and consumer choice to open-ended and undefined inquiries as to what is in the “public interest.”

The problem is not a new one.   Former Commissioner Harold Furchtgott-Roth has long railed against what he has called the FCC’s “policy exploits masquerading as merger reviews.”

Rather than another round of reform of the FCC’s merger processes, the answer is to scrap the FCC’s merger review authority entirely.   The effects of mergers on consumers and competition are sufficiently, and best, weighed by the competition authorities.  Broader public interest factors — if those can ever be defined — are better addressed in a broader policy context, not in the hothouse atmosphere of a merger review.

Don’t expect the FCC to be stripped of its role anytime soon, however.   The sad reality is that, while most everyone who has seen an FCC merger review up close knows the problems, after it’s over no one has an interest in fixing it.   The newly-christened Xm Sirius certainly has no dog in that fight.  CEO Mel Karmazin no doubt hopes he will never go through an FCC merger review again.  Moreover, for most firms, FCC merger authority may be just as likely to be a useful weapon against competitors as a threat to their own plans.

So despite the XM Sirius debacle, expect the circuses to go on.  And on.   And on.

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