Satellite (Radio) of Love
The FCC is currently presiding over the proposed merger of satellite radio companies XM and Sirius. And, to no one’s surprise, a host of groups are clamoring for the feds to stick their regulatory snout into the proceedings and stop the merger from going forward. The haters in the crowd would have you believe satellite radio is a unique market that needs to have multiple competing companies, even if both of them are suffering massive operating losses:
…simply put, the two companies have been competing so fiercely with one another that costs at both have skyrocketed to unsustainable levels. In 2006 alone, Sirius and XM had combined losses of just over $1.8 billion
The huge losses can be traced to Sirius and XM spending billions to compete with each other for talent, distribution and subscribers, not to mention the ongoing costs that both must incur for the highly capital-intensive, infrastructural build-out and upkeep of their respective systems. At the rate they’ve been spending and losing money, there has been a fear among some industry followers that one or both companies could be on the verge of going under.
In other words, critics of the merger would rather see both companies go permanently out of business that allow them to form one efficient, profitable company.
This brouhaha also illustrates one of the classic problems with antitrust law: all you have to do is designate a market narrowly enough, and, by definition, you’ll end up with the troubling charge of monopoly. You can see this in the opposition of the National Association of Broadcasters to the merger. They charge that satellite radio is a unique market that has no meaningful competition from other news and entertainment sources like broadcast radio (them) or cable and satellite TV. Then why are they so concerned about the emergence of an invigorated XM-Sirius hybrid? If, by definition, satellite doesn’t compete with broadcast, then they should have nothing to worry about, right? I guess they’re just covering their bases.
Naturally Wayne has something to say about all of this, and you can read up to your heart’s content by pulling up his comments to the FCC (in PDF here). The quick take:
Satellite company mergers are one element of an evolving marketplace that increasingly magnifies consumer choice and ability to customize information; not merely information received, but also that which individuals themselves create or assemble for distribution to others. That personalization coexists with media enterprises that exist on a gigantic scale. Bureaucrats cause untold damage when they undermine network industries’ efforts to orient themselves, to attain the scale appropriate to fostering customization, and to achieve such feats as moving global information to the exosphere as satellite operations do. Liberalizing spectrum for future satellite and communications operations—not restraining the private operations of those that now exist—should be FCC’s focus.