Satellite Radio Deal May Go Through, But Hampered by Price Controls

On Friday, I said that the XM-Sirius merger deal had “no end in sight.” But now, the Wall Street Journal reports,

The staff of the Federal Communications Commission has proposed that the agency approve the merger of XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc., setting the stage for a final vote on the multibillion-dollar deal in as little as three weeks if the companies meet several conditions.

Apparently, the conditions include “price caps on the combined company’s service fees and additional service options for three years to give consumers leeway to choose the channels to which they want to subscribe.” In other words, Chairman Martin is trying to turn the new satellite radio service into a regulated monopoly, much like public utilities. But unlike municipal water or electricity, satellite radio is not a natural monopoly. Competitors just need to send a satellite up (or lease space on some other company’s satellite) and start broadcasting. A theoretically infinite number of companies could join the market.

Further, “the FCC would also require the combined XM-Sirius to set aside 8% of its channels equally for noncommercial and minority-owned stations that wanted to lease them.” As Cord Blomquist earlier reported here, there are major problems with such media access requirements. Most notably, Cord finds that often the FCC’s own regulations are the biggest barrier to entry for noncommercial and minority-owned stations. By driving up startup costs with draconian regulatory requirements, the FCC effectively shuts the little guy out of the broadcast market. An ill-conceived mandate to lease a certain percentage of its channels (What if there is little customer demand for such channels? Does XM-Sirius have to give them a discount if they’re not willing to pay the standard leasing fees?) will not solve the underlying problem of media ownership.

The FCC should approve the XM-Sirius deal now, without conditions. Let’s not generate regulatory uncertainty and coerce companies into accepting efficiency-crushing restrictions while the economy is already slowing.