XM, Sirius Start FCC Merger Paperwork, Licensing Questions Remain

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Prospective newlyweds Sirius Satellite Radio and XM Satellite Radio have now filed initial licensing paperwork with the Federal Communications Commission (FCC), another early chapter in a drawn-out process.

The two satellite radio companies have been in talks for years about a possible merger, and the filing of the licensing paperwork is a significant step in that direction. The proposed merger would combine Sirius’ 23 million subscribers with XM’s 17 million, creating a single satellite radio company with 40 million subscribers.

The paperwork requests the transition of current, individual broadcasting licenses into a jointly-held entity. That is currently not allowed by the FCC, though the companies are hoping to modify existing statutes. In the joint filing, the companies stressed that the combination would advance the public interest, a critical litmus test for FCC officials.

“The proposed merger of Sirius and XM will generate substantial, merger-specific benefits,” the filing asserted. Post-merger pricing specifics have been the source of heavy scrutiny from Congressional lawmakers, many of whom are concerned that that satellite monopoly will unfairly elevate current subscription pricing.

“We must view these claims with a healthy degree of skepticism,” Senator Herb Kohl (D-Wis) said during Congressional testimony this week.

The filing only partially allays those concerns by outlining a broader range of pricing possibilities. “The efficiencies resulting from the merger will allow the combined company to provide consumers programming choices on a more a-la-carte basis at lower prices,” the filing states. That includes cheaper subscription costs for more scaled-down offerings, but more expensive costs for packages that include premium content.

“After the merger, customers may elect to receive fewer channels at a monthly price lower than $12.95; substantially similar programming at the existing $12.95 price; or more channels, including some of the “best of both” networks, at a modest premium to the cost of one service, and considerably less than the cost of subscribing to both services.”

Meanwhile, the pair attempted to broaden the market definition beyond satellite radio by pointing to heavy entertainment competition from terrestrial and internet formats.

The proposed merger has been met with mixed reactions from industry analysts and consumers. Some believe that the combination of the two companies would create a stronger, more competitive player in the satellite radio market, while others worry about the potential for increased subscription prices and reduced programming choices.

The merger has also faced opposition from traditional radio broadcasters, who fear that a combined Sirius-XM would dominate the satellite radio market and put them at a disadvantage.

Despite the challenges, Sirius and XM remain optimistic about the possibilities of a merger. “We are confident that the FCC will recognize the significant benefits that this merger will bring to consumers, the satellite radio industry, and the public interest,” said Mel Karmazin, CEO of Sirius.

The FCC is expected to take several months to review the licensing paperwork and determine whether to approve the merger. In the meantime, Sirius and XM will continue to operate as separate companies, but with the knowledge that a potential merger is on the horizon.

The satellite radio industry has seen significant growth in recent years as consumers seek out alternatives to traditional terrestrial radio. However, the industry faces increasing competition from internet radio services such as Pandora and Spotify, as well as from mobile devices that allow users to stream music and podcasts on the go.

A merger between Sirius and XM could help the companies stay competitive in this changing landscape, but it remains to be seen whether the FCC will approve the proposal and whether consumers will embrace the resulting changes.