Mel Karmazin, gave some more light on the possible "A La Carte" packages and pricing at today's House Judiciary Committee Antirust Task Force hearing on the proposed satellite radio merger.

First, Karmazin clarified that at this time "per-channel" A La Carte packages is not possible in the current infrastructure. In other words, the ability to pick and choose a completely customized subscription (labeled a "consumer advocate's dream") won't be a reality right now.

But what is possible is the choice of tiers based on different consumer interests.

Karmazin also stated that the $12.95 per month pricing is currently the ceiling that is possible for a subscriber. There's "no scenario where we're raising that price," said Karmazin in his testimony.

"What we're also saying is that we'll provide the consumer with a choice to be able to get satellite radio for less than [the current price]," he added.

For instance, in the scenario of a "music only" a la carte package, the consumer could likely pay less than a current satellite radio subscriber does today. I can imagine a "family package" with children/family-friendly programming, a "sports package" with live play-by-play sports, and a "news/talk package" with only (wait for it) news and talk.

More choice, and lower prices. It's rare that you see a merger scenario with those possibilities becoming a reality. 

Mel Karmazin just told the House Judiciary Committee antitrust task force that if terrestrial radio is not competing with satellite radio, then "they are lying" to the SEC.

Just as a reminder to those who didn't catch it - several terrestrial radio companies have stated in their own SEC filings that satellite radio (as well as Internet radio, and MP3 players) directly competes with terrestrial radio. These statements constitute admissions by law.

I'm really happy that Mel has driven home this point. 

When questioned about the XM/Sirius merger in front of the House Judiciary Committee antitrust task force, Mel Karmazin was asked whether he would agree to pricing restrictions for the newly merged company.

"Yes," Karmazin flat out said.

When asked whether he would be able to agree to this for a four year period of time, Karmazin stated that he would be happy to discuss it with the necessary people. There was some joking back and fourth whether the timeframe would span within 2 weeks to 4 years, but in the end no timeframe was actually specified.

Karmazin was also asked whether he would agree to not transmit local content (local news/weather) and he clearly stated that they have no intentions of entering into the local market.

Gigi B. Sohn, co-founder and President of Public Knowledge, testified in front of the U.S. House Judiciary Committee antitrust task force hearing on the proposed XM/Sirius merger. Interestingly enough, Gigi was actually in favor of the merger.

...but on a few conditions:

1. The new company makes available pricing choices such as a la carte or tiered programming.

2. The new company makes 5% of its capacity available to non-commercial educational and informational programming over which it has no editorial control.

3. The new company agrees not to raise prices for three years after the merger is approved.
   

...and I really can't say those are unreasonable expectations. In fact, I fully support them.

David Rehr, president of the NAB, testified in front of the House Judiciary Committee antitrust task force. He had five main points as to why this merger should not go through.

1. The national satellite radio industry is a duopoly that is looking to become a monopoly
2. It would violate FCC rules, precident, and anti-trust principles. "Ironically" Sirius was the one who asked for competition in the 1997 FCC SDARS license.
   
3. It would undermine audio content competition. In contract negotiations, the new entity could unfairly leverage their monopoly to maintain exclusivity or to reduce prices unfairly.
   
4. Two entities that have had a pattern of violating FCC rules cannot be trusted with monopoly power. The FCC mandated that an interoperable radio be developed - 10 years later, nothing has been developed. Both companies violated Part 15 rules. Both companies have violated repeater rules.
   
5. XM and Sirius are, by their own admission, not failing companies. And should not receive a government bail out.
   

At the joy of the audience, Mr. Rehr was the first witness to go over his allotted time at the hearing.

The House subcommittee on telecommunications will hold a hearing next Wednesday, March 7th that will include a look at the proposed Sirius-XM merger.

Mel Karmazin will appear before the subcommittee to review the merger and the future of radio.

US Representative Edward J. Markey, a 16-term Massachusetts Democrat who heads the subcommittee (and who was chairman of it 12 years ago), said that over the next two years he will focus on fostering competition that will benefit consumers.

"We're going to go back to the beginning, to begin to talk about the whole nature of these" issues, Markey said. "Now, for the first time I have the gavel back again, and I plan to highlight competition."

Markey also said that under a Republican-controlled Congress and FCC, consumers have suffered with the slow spread of broadband and a lack of competition to telephone and cable companies.

Looks like there may be trouble coming next week.

[Reuters and The Boston Globe]

Mel Karmazin will testify today in front of a new House Judiciary Committee antitrust task force today at 3pm ET. The hearing will discuss the proposed XM-Sirius merger.

Also in attendance will be the NAB's President David Rehr, Gigi B. Sohn (co-founder and President of Public Knowledge), and Mark Cooper (Consumer Federation of America).

John Conyers Jr (D-MI) became chairman of the House Judiciary Committee after Democrats took control of Congress in the last election. He said he created the bipartisan antitrust task force within the committee to focus on antitrust and competition policy issues. It will have a limited term and operate only through the end of August.

A live feed of the hearing will be available here, or on CSPAN-3.
Thanks MB!

USA Today has a very nice feature with Sirius CEO Mel Karmazin on the XM/Sirius merger.

From questions about the merged company raising prices, to the sharing of XM-Sirius content, to dual receivers and what exactly the cost-savings are - the Q&A is quick and concise. And hopefully it will answer some of the questions that you all may have.

Obviously there's more questions, and probably not enough answers at this time. That's sort of the way it goes when you have a merger (anyone who's been through one can attest to that). But just remember that we're barely over a week through this... so give it some time.

[USA Today] 

As I'm reading coverage on the XM/Sirius merger, there's a common point of reference being brought up when the media looks to find prior parallels, and that obviously is the EchoStar/DirecTV deal.

Understandably because the two seem very similar (I used it myself in the past). Echostar/DirecTV is afterall probably the only precedent to work with. Both involve two companies, broadcasting via satellite, and the only difference is that one does video, while the other does audio. Sounds simple right?

Except that in 2002, the definition of the "relevant market" involved only satellite and cable (also known as the MVPD or "Multichannel Video Programming Distribution" market). Even "free" television is delivered through satellite or cable because receiving television via the ol' rabbit-ears just isn't a viable alternative (so much so that in 2008 the FCC is selling off the VHF side of the spectrum).

EchoStar and DirecTV used the argument of spectrum, and the fact that both companies use the same spectrum for "overlapping programming services," as their main case for why they need to do their merger. They felt that by combining their spectrum, there would be a more efficient use of the available spectrum, and thus they would be able to provide better services to the customer. In terms of pricing, EchoStar/DirecTV would promise to keep their pricing inline with the overall national price of MVPD services. In short: the merger would give them more bandwidth and they promise to stay competitive.

So with only satellite and cable occupying the same space, what is the alternative to consumers who cannot receive one of the two? Cable is fragmented among multiple companies so there's no monopoly there (an arguable point, but I won't get into that), whereas with satellite TV there would be only one player. It would create a monopoly in areas where there is no cable service - and so it wouldn't be "in the best interests" for the public.

There was no YouTube (which even to this day is no where near 'competition' to TV) or Slingbox (which still requires a subscription to cable/satellite) or MediaFLO or video via mobile phones, etc. The Internet and other high-speed services did not provide any reasonable level of a service to be considered as part of the relevant market. EchoStar/DirecTV were without question part of the MVPD market, and even with the advance in technologies it's a pretty hard case to try to redefine their competitors. But the main problem with the EchoStar/DirecTV merger attempt the argument of spectrum efficiencies just wasn't compelling enough for the FCC.

With satellite radio, there's plenty of coverage from terrestrial radio, not to mention all the other mediums vying for your "earshare" (I really like that term by the way). And the competition for satellite radio is largely free competition, not other pay-services. So prices are theoretically kept in check by the laws of good ol' capitalism (rather than mandated, though I'm sure XM/Sirius are open to government mandated pricing restrictions). XM/Sirius have two main hurdles they need to overcome to get this to pass: Redefining their market (DoJ) and ensuring that they're serving the public's best interests (FCC).

So when Michael Powell says, "It’s going to be incumbent on the companies to demonstrate that the analysis in EchoStar-DirecTV is different." Then that case is pretty much a slam dunk.

BusinessWeek has published an article about what the XM, Sirius merger "won't fix" in terms of the basic business model. Essentially they're saying that the model is flawed.

It's an unfortunate conclusion that many people seem to be taking as a result of this merger, and concern I voiced in the height of all the merger rumor hub-bub. The feeling is that the merger isn't in the pursuit of "synergies" but rather as a result of the business model being screwed up.

The notion, as stated in the article, that satellites are a "soon-to-be obsolete method of delivery" is absolutely ridiculous, but it does lead to a thought that I hope XM and Sirius realize. That they're both not in the "satellite" business, but rather in the "content" business. Who cares how it's delivered, just that it's delivered.

But... maybe that's the whole point of the merger.

[BusinessWeek]
Thanks to everyone who sent this in!