Washington — Before a skeptical and at times contentious House task force, Sirius Satellite Radio topper Mel Karmazin defended his company’s proposed merger with XM Radio, amid allegations ranging from charges that he is seeking a “government-sanctioned monopoly” to charges that he’ll “say anything to get his merger approved” and “hire all sorts of weird talent.”
Arguing that the merger would benefit consumers, Karmazin said current subscription rates would not rise and quite possibly would drop, and he personally guaranteed that subscribers’ existing radio receivers would not be made obsolete, thus forcing them to buy new ones.
Karmazin promised he would be open to discussing any conditions that regulators might want to impose for approving the merger and repeatedly acknowledged that Sirius and XM have a large obligation to persuade both government officials and consumers that the merger would not violate anti-trust laws.
He also expressed enormous confidence that Sirius and XM would succeed in doing that. He may already have begun the process, if the affable and sympathetic tone of some lawmakers by the end of the hearing are any indication.
Three other witnesses challenged the consumer benefits Karmazin promised the merger would bring.
David Rehr, CEO and president of the National Assn. of Broadcasters, which has been vigorously fighting the merger since its announcement last week, said Karmazin was trying to change an existing “duopoly” into a “government-sanctioned monopoly.” He added that the two satcasters were not to be trusted on promises, since they had “violated” FCC rules in the past and “broken promises” before, such as failing to deliver a radio receiver capable of receiving both Sirius and XM’s signal.
Rep. John Conyers (D-Mich.), chairman of the task force, picked up on this line, asking, “How do we enforce promises? Just saying ‘Trust me’ isn’t going to work here.”
Gigi Sohn, president of the watchdog group Public Knowledge, said her org could endorse the merger “if it’s subject to conditions,” such as the availability of a la carte and tier subs and a sub rate fixed for three years. But she also accused Karmazin of “saying anything to get his merger approved.”
Mark Cooper, research director for Consumer Federation of America, acknowledged that Karmazin’s willingness to fix sub rates and be open to local programming lessened some of his concerns about the merger, but not enough to support it. He accused Karmazin of “parsing his words” and later said “he’ll hire all sorts of weird talent and pay a lot of money for it.”
Among Cooper’s main concerns was the fact that, as he put it, satcasters can compete with local radio because satcasters can aggregate small markets, but local radio cannot compete with satcasters’ ability to reach national markets.
Also, witnesses and lawmakers alike noted that when the FCC originally granted licenses to XM and Sirius, the agency stipulated that one company could not control the other.
Karmazin, largely unflappable, maintained that the merger would not constitute a monopoly since XM and Sirius together only have 3.4% of the total radio market. One lawmaker who agreed even chastised Rehr for repeatedly using the term “monopoly” when terrestrial radio offers almost identical programming.
Karmazin welcomed the task force’s desire for assurances, saying he was ready to help provide regulators with all they would need to approve the merger. He disputed the charges that both satcasters had violated FCC rules and explained that while a receiver capable of receiving both signals existed, it was still too expensive — about $700, he said — to sell.
He would not be pinned on how long a fixed sub rate would last, but said he was open to negotiation on the point.
Regarding the FCC’s prohibition against one satcaster owning the other, Karmazin noted that ban was enacted over 10 years ago, “before HD radio, before Internet radio, before iPods,” and a number of other “competing” media that have developed since.
Rehr, Cooper and some task force members debated whether satcasters really compete with other media.
By the end, Conyers hailed Karmazin for his testimony and seemed upbeat about the idea of the merger. Both the Dept. of Justice and the FCC will be reviewing it, most likely over the course of this year.