XM-Sirius Success Hinges on Concessions
05/27/08 - 05:31 AM EDT
Robert Holmes
Of course, the National Association of Broadcasters has been the most outspoken critic of the merger, claiming the satellite industry is distinct from terrestrial radio and that a joined XM-Sirius would create a monopoly. The NAB has consistently called the potential XM-Sirius merger analogous to the failed EchoStar (SATS Quote - Cramer on SATS - Stock Picks) and DirecTV (DTV Quote - Cramer on DTV - Stock Picks) deal.
"When the FCC first licensed a satellite radio service, it made clear that satellite radio was to remain a national service and should not provide localized content," the NAB states on its Web site. "However, since then, the satellite radio industry has largely disregarded the terms of its charter by attempting to move into localized content." The NAB has asked the FCC to bar satellite from local content and to examine the legality of satellite's more recent move to distribute local content on national channels. The NAB defines local content to be weather, traffic and sports. Additionally, the NAB wants the FCC to clarify that satellite radio companies could not use GPS technology to trigger local content on satellite radio receivers. If XM and Sirius are forced to make many of these concessions, the new company may have 20% fewer stations. Satellite radio equipment will have been unlocked to other potential satellite radio providers as well as HD Radio. As the devices and technology will no longer be proprietary, other new competitors can use it without licensing the technology or paying royalties. Shareholders probably won't be very happy with this outcome. Moreover, subscribers might not be able to get local weather, traffic, or sports content through satellite radio, either. If that happens, so much for looking out for the public's best interests.
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