FCC: Commission Approves Transaction Between Sirius Satellite Radio Holdings Inc. and XM Satellite Radio Holdings, Inc. Subject to Conditions

July 29, 2008 at 9:06 am | Posted in Space Law | Leave a comment

by P.J. Blount with the blog faculty

The FCC has published its Public Notice of its approval of the XM – Sirius Satellite Merger: Commission Approves Transaction Between Sirius Satellite Radio Holdings Inc. and XM Satellite Radio Holdings, Inc. Subject to Conditions. The notice states:

On July 25, 2008, the Commission voted to approve the application of Sirius Satellite Radio Inc. (“Sirius”) and XM Satellite Radio Holdings Inc. (“XM”; jointly, the “Applicants”) to transfer control of the licenses and authorizations held by Sirius and XM and their subsidiaries for the provision of satellite digital audio radio service (or “SDARS”) in the United States. The Commission found that grant of the application, with the voluntary commitments made by the applicants and other conditions, is in the public interest. The transaction will benefit consumers by making available to them a wider array of programming choices at various price points and by affording them greater choice and control over the programming to which they subscribe.

Highlights of the Commission’s action are noted below, followed by details concerning the grant of the application and the separate resolution of certain enforcement matters.

· After reviewing the empirical data available as part of its competitive analysis, the Commission determined there was insufficient evidence in the record to predict the likelihood of anticompetitive harms. It therefore evaluated the application under “worstcase” assumptions, i.e., that the relevant market is limited to SDARS. This approach permitted the Commission to protect consumers from potential adverse effects of the transaction while also allowing the Commission to balance potential harms against potential public interest benefits. The Commission concluded that the merger, absent the Applicants’ voluntary commitments and other conditions, would result in potential harms. With those commitments and conditions to mitigate the harms, however, the Commission found the transaction to be in the public interest. All of the voluntary commitments must continue in effect at least three years after consummation of the merger.

· The Commission accepted the Applicants’ voluntary commitments to:

o Cap prices for 36 months after consummation of the transaction, subject to certain cost pass-throughs after one year. In addition, six months prior to the end of commitment period, the Commission will seek public comment on whether the cap continues to be necessary in the public interest and will determine whether it should be extended, removed, or modified. The merger approval is conditioned on the Commission’s ability to modify or extend the price cap beyond the three-year commitment period.

o Offer to consumers, within three months of consummation of the transaction, the ability to receive a number of new programming packages, including the ability to select programming on an a la carte basis.

o Make available 4 percent of its capacity for use by certain Qualified Entities, and an additional 4 percent of capacity for the delivery of noncommercial educational or informational (“NCE”) programming, which will enhance the diversity of programming available to consumers.

o Offer interoperable receivers in the “retail after-market,” i.e., receivers available at retail outlets for installation in consumers’ automobiles or homes, within nine months of consummation of the merger.

o Refrain from entering into any agreement that would grant an equipment manufacturer an exclusive right to manufacture, market, and sell SDARS receivers. Applicants also commit to refrain from barring any manufacturer from including in any receiver non-interfering hybrid digital terrestrial radio functionality, iPod compatibility, or other audio technology. In addition, Applicants commit to make available the intellectual property needed to allow any device manufacturer to develop equipment that can deliver SDARS.

o File the applications needed to provide Sirius satellite service to Puerto Rico via terrestrial repeaters within three months of the consummation of the merger.

· Although the Commission found it unnecessary to impose a condition requiring the inclusion of hybrid digital radio technology in SDARS receivers, it recognized that important questions have been raised about hybrid digital radio that warrant further examination in a separate proceeding. The Commission therefore committed to initiating a notice of inquiry within 30 days after adoption of the merger order to gather additional information on the issues.

· The Commission reiterated that SDARS licensees are already prohibited, independent of the merger, from using terrestrial repeaters to distribute local content—including both programming and advertising—that is distinct from that provided to subscribers nationwide via satellite.

· The Commission prohibited the merged entity from entering into agreements that would bar any terrestrial radio station from broadcasting live local sporting events.

· Concurrent with grant of the application, the Commission repealed the prohibition on the merger of the two SDARS service providers as set forth in the 1997 SDARS Report and Order.1 For the same reasons that it approved the merger, the Commission concluded that repeal of the rule prohibiting the merger will, on balance, serve the public interest.

· In separate actions on July 25, 2008, the Commission approved Consent Decrees between it and each of the Applicants. The Consent Decrees terminated the Commission’s investigations into the Applicants’ compliance with the FCC regulations governing FM modulators and terrestrial repeaters. They provide that XM and Sirius will voluntarily contribute approximately $17.4 million and $2.2 million, respectively, to the U.S. Treasury and take additional remedial measures.

The statements made by the individual commissioners are available:

STATEMENT OF CHAIRMAN KEVIN J. MARTIN

STATEMENT OF COMMISSIONER MICHAEL J. COPPS, DISSENTING

STATEMENT OF COMMISSIONER JONATHAN S. ADELSTEIN

STATEMENT OF COMMISSIONER ROBERT M. McDOWELL

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