- About CEI
- Support CEI
Corporate Welfare for XM/Sirius Competitors?
Corporate Welfare for XM/Sirius Competitors?
Crews and Young article at RealClearPolitics.com
July 22, 2008
After a year's delay, Federal Communications Commission (FCC)Chairman Kevin Martin blessed Sirius Satellite Radio’s buyout of itscompetitor, XM. Martin is just one of five FCC Commissioners, though.The other commissioners have yet to weigh in. The Justice Department(DoJ) has already given conditional permission.
Now the U.S. Senate is getting in on the act. In a letter toChairman Martin, Sens. John Kerry (D-Mass.), Claire McCaskill (D-Mo.),and Ben Cardin (D-Md.) say they worry that the merger would “fail toprovide meaningful competition.” Really it is their smokestack-eraantitrust concerns that are a threat to open competition.
Yes, the merger would create a “monopoly” in satellite radio, but amerged Sirius-XM will still face fierce competition. AM and FM radio,podcasts, mp3 players, and cell phone programming all compete againstsatellite radio for listeners. In the future, mobile Internet radiowith programmable stations could easily threaten satellite radio, whichis not programmable.
“Regulation” by competition, not by the FCC and DoJ, is what is needed.
A big reason Sirius and XM want to merge is that they stand to savehundreds of million dollars in costs (Oprah and Howard Stern areexpensive). Those savings will make satellite radio more competitive.
That competitive challenge is precisely why traditional over-the-airbroadcasters launched a fierce lobbying and advertising campaignopposing the merger.
Why complain if a rival's merger will result in that competitorcharging higher prices and degrading its services? A harmful mergerwould be cheered. Competitors’ opposition reliably signifies that amerger will benefit consumers.
The great irony of antitrust regulation is that, in the name offostering competition, the laws themselves actually hobble competition,undermining consumer choice.
Antitrust authorities’ ritual holdup of ordinary business deals isbad enough. But whenever two companies of sufficient size merge, theymust satisfy conditions so that the FCC and Justice Department cancreate pretended relevance for themselves.
One condition of appeasement for the Sirius-XM merger is that theyhand over 8 percent of their channels to noncommercial and “publicservice” programming. Internet radio does not face this requirement.
Another condition is that they freeze their prices for three years.Meanwhile, their competitors are still free to set their own prices toreflect changing market conditions.
A third condition is that XM-Sirius must introduce á-la-cartesubscription models. If this were economical, they would have done thisalready.
This is pure protectionism under another name. Restricting satelliteradio unfairly benefits its competitors--yet another instance ofantitrust regulations reducing competition.
Post-merger business strategies and decisions lie with people noteven involved with either firm. Those calls should belong to managersand shareholders. They answer to consumers. If the merger does not givetheir customers a good product, they stand to lose everything. Theyhave every incentive to make the deal work.
Regulators, by contrast, do not answer to consumers. If they makethe wrong decision, they lose nothing. If they make the right decision,they gain nothing. The incentives to make the right call are simply notthere.
FCC commissioners and DOJ appointees are political actors. Theirdecisions are thoroughly politicized. They have no real incentives toensure an open, competitive market. Their goals are to keep bad pressto a minimum, and to increase their budgets by appearing to be “doingsomething.” The FCC’s indecency rulings, for example, are notorious forshifting with the political winds.
This is hardly conducive to ensuring an open, competitive market.
Antitrust regulations did not work in the smokestack era, and theydo not work now. Today, the temptation is great for competitors to goto Washington and cry foul instead of, well, competing.
The media market is more competitive than ever. Not too long ago,broadcast radio was the only game in town. That has changed with theadvent of satellite radio and the Internet. Old radio does not likethis, but broadcasters can still buckle down and compete. What a shamethat instead of bettering their product they try to kneecap theircompetitors.