XM, Sirius Agree to Conditions for Merger

It has been a year since the idea was proposed to merge satellite radio giants Sirius and XM, but no deal is in sight. Both are suffering from sagging stock prices and competition from technologies like MP3 players and iPods. Analysts say this is proof the merger, if it happens, would not lead to a monopoly.

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Satellite radio companies XM and Sirius have been trying to merge for over a year now. The brave investors holding onto stock certificates through the process went on a wild ride this past week. On Monday prices went up after FCC Chairman Kevin Martin hinted he would support that plan. But then the stock prices plunged after an analyst trashed the merger. He reported that satellite radio would still face stiff competition from other technologies like the Internet and MP3 players.

NPR's Felix Contreras has our report.

FELIX CONTRERAS: Since the merger was first proposed last June, consumer advocates have warned it would create a monopoly that would not benefit consumers. The Justice Department determined last spring that was not the case. But the concessions XM and Sirius agreed to are meant to deflect criticism of the merger.

For example, both companies have agreed not to raise prices for three years. They've also agreed to a la carte programming. That means no more paying for the NASCAR channel if you're more of a smooth jazz kind of person. Or you could create a package of all talk radio all the time. This could potentially lower your subscription price.

The companies also said new radios that get both XM and Sirius programming would be offered within a year of a merger but subscribers would have to pay for them. Another big concession is that other manufacturers would be able to make satellite radios. That could drive down the costs.

But Chris Murray of Consumers Union is skeptical that the prices would stay low for long if the two companies merged.

Mr. CHRIS MURRAY (Consumers Union): What we like about them is they have to compete with each other. They have to struggle to maintain consumers' happiness and as a result people get a better product. Once you take away that competition, once you say, hey, it's okay for two competing firms to merge to one here, then it's much easier for them to get fat, lazy and raise consumers' prices.

CONTRERAS: Some critics say that a merger would narrow the choice of programming that people get on their satellite radio, especially non-commercial content and programming for minorities and women. National Public Radio, it should be noted, as a programming contract with Sirius satellite radio and has opposed the merger.

XM and Sirius have pledged to set aside 24 channels dedicated to non-commercial and minority programming. Representative G.K. Butterfield, a Democrat from North Carolina, has been looking into the buyout for the Congressional Black Caucus. He said the channel concessions address the lack of minority participation that exists in regular broadcasting but they're not enough.

Representative G.K. BUTTERFIELD (Democrat, North Carolina): The fact is that minority ownership of the broadcast telecommunications industry for minorities has substantially decreased over the last 15 years. And so this is an opportunity to correct it, to provide a remedy and we're missing the opportunity.

CONTRERAS: There are certainly more questions than there are answers about the ramifications of the buyout of XM by Sirius. Representatives of both companies have been tentative with financial forecasts and strategies during recent quarterly investor calls. And it is difficult to predict if Chairman Martin will get the two votes he needs among the remaining four FCC commissioners to okay the deal.

But U.S. News tech writer David Leggett says if the merger is approved, consumers will be watched over by old-fashioned supply and demand.

Mr. DAVID LEGGETT (Tech Writer, U.S. News): If you're a loyal customer, I suspect they're going to go voila to their way to try to keep you a customer and they can't stick us with too much costs or they're going to lose too many people.

CONTRERAS: Felix Contreras, NPR News.

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