Deciding vote in XM-Sirius deal makes offer

July 17, 2008 5:29:40 PM PDT
The potential deciding vote in the government's review of the $3.1 billion merger between satellite radio companies XM and Sirius told The Associated Press he will vote in favor of the deal if the companies agree to tougher conditions. So far, two of the five members of the Federal Communications Commission have voted to approve Sirius Satellite Radio Inc.'s buyout of rival XM Satellite Radio Holdings Inc. That is one vote shy of a majority.

FCC commissioner Jonathan Adelstein, a Democrat, wants the companies to cap prices for six years and make one-quarter of their satellite capacity available for public interest and minority programming, among other conditions.

If the companies agree, Adelstein told the AP that he will support the deal.

Adelstein circulated his recommended conditions among the other four commissioners Thursday. His proposal seeks more concessions than the companies offered voluntarily one month ago. That offer led to FCC Chairman Kevin Martin's recommendation that the deal be approved.

Robert McDowell, a Republican, has since joined Martin in recommending approval. Deborah Taylor Tate, also a Republican, is undecided and had been considered the possible swing vote.

Commissioners are able to vote on items "on circulation," meaning by way of computer, rather than at a public meeting. Those votes are generally not made public until all have been cast.

Adelstein has been a vocal opponent of big media mergers, so his offer is somewhat surprising. But with strong odds that Tate eventually would vote yes, his move would make the deal more palatable for critics.

"It's critical that if we're going to allow a monopoly, that we put in adequate consumer protections and make sure they're enforced," Adelstein said.

The two companies first announced their intent to merge last year. The Justice Department cleared the combination in March. Martin made his recommendation for approval last month. Since then, the agency has been subjected to intense pressure from those with a stake in the high-profile deal.

The companies have faced a tough challenge in gaining approval because the FCC, in creating the satellite radio industry in 1997, prohibited the only two licensees from merging. In an effort to prove the combination is in the public interest, lawyers for the companies volunteered to submit to a number of conditions, including a three-year price cap, a time frame Adelstein would like to see doubled.

They also agreed to turn over 24 channels to noncommercial and minority programming.

Adelstein is seeking 25 percent of the companies' satellite capacity for public interest programming - 10 percent for noncommercial programming and 15 percent for minority programming. That potentially would work out to about 75 channels.

The companies also offered to adopt an "open radio" standard, meant to create competition among manufacturers of satellite radios. The condition was met with skepticism because the companies subsidize the price of radios, making it unlikely competitors would get into the business.

Adelstein is proposing that the companies be required to include a digital radio tuner in any radios they subsidize that also include regular, non-digital AM-FM service.

Digital radio is a small but growing market that is expected to become more popular in years to come.

Adelstein also wants to set up an enforcement regime to make sure the companies adhere to the conditions, something that was not outlined in the previous voluntary offer.

Sirius and XM also have promised to include an "a la carte" offering that would be available within three months of the close of the deal. In addition, they have pledged to offer radios that are capable of receiving both XM and Sirius service within one year.

Public Knowledge, a public interest group that specializes in technology issues, has been pushing for more concessions from the companies. Gigi Sohn, president of the organization, said the previous offer fell short, but the new one is more promising.

"If we get what Adelstein's pushing, then we will have gotten 110 percent," she said.

XM and Sirius did not respond to requests for comment Thursday.


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