XM-Sirius: Congressional Hearings

Congress will be holding hearings on the XM-Sirius merger:

The hearing will enable lawmakers "to probe whether this merger will enhance or diminish competition in the digital music distribution industry" and whether the "merger will lead to increased choices and lower prices for consumers," Conyers said in the statement.

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The hearing will consider "whether satellite radio competes against terrestrial radio, the Internet or other emerging technologies," Smith said.

I like that last bit. Clearly, satellite radio competes against the listed items. Hopefully this will be a mostly positive hearing, laying the groundwork for approval. Even aside from my financial stake, I do worry that the existing duopoly industry structure is not financially viable.

The Proposed XM-Sirius Merger

I love the proposed XM-Sirius merger. But then, I'm biased: I own a little stock in both companies!

I think the antitrust issues can be overcome and the FCC/DOJ will sign off on the merger. Here are some reasons why.

First, satellite radio has a great deal of competition. There is traditional radio, which has increased its offerings through high-definition broadcasting. There are various internet radio and related offerings. And there is the iPod and similar devices, which allow consumers to carry with them huge quantities of music and thus making radio less important.

Second, both XM and Sirius are pretty fragile financially. If one were to go under, the industry would be down to one company anyway; and if both were to go under, there would be nothing. Might as well let them merge so as to ensure there is at least one healthy company.

Third, it will reduce costs tremendously, which should lower prices and improve quality.

And fourth, with this type of regulated industry, there is no real danger of the merged company raising prices too much even if it had the power to do so. If it did, the FCC could just step in. (And the FCC might very well make price increase limits a condition of approving the deal).