The FCC has issued a Notice of Proposed Rule Making, which invites comments about whether the "rule" that prohibits XM and Sirius from merging should be waived, modified, or repealed.

In the Commission's 1997 Order, there is language that specifically prohibits one SDARS license holder from owning the other. Sirius and XM have said that the prohibition is a policy statement - and not an actual rule - because it was not codified in the Code of Federal Regulations.

The Notice of Proposed Rule Making opens this issue up for debate. Comments are due 30 days after publication in the Federal Register, with reply comments due 45 days after.

In a joint statement, Sirius and XM said:

"The companies are pleased that the FCC has outlined the full process for reviewing the SIRIUS-XM merger. This action puts all of the FCC decisions regarding approval of the merger on track. We remain confident that the merger is in the public interest, and continue to look forward to completing the regulatory approvals by year end."

Read the full Notice of Proposed Rule Making (PDF).

House Judiciary Antitrust Task Force chairman John Conyers Jr. (D-MI) and ranking member Steve Chabot (R-OH) sent a letter to US Attorney General Alberto Gonzales and FCC Chairman Kevin Martin asking for guidance on the Sirius-XM merger.

In the letter to the FCC and DOJ, Conyers and Chabot asked about the Service Order in the DARS licenses issued a decade ago that prevented the two satcasters from merging. They asked if "circumstances today are similar or different" from the original ruling.

Conyers and Chabot also inquired about the definition of the relevant market, which is the key question when it comes to the antitrust analysis.

"Some witnesses said the market should include local broadcasters, and some claimed the markets for local radio and satellite radio were different because local broadcasters are licensed for specific geographic areas while satellite radio providers have a national service footprint. Please explain what evidence the agency looks for when defining a 'relevant' market as part of its antitrust scrutiny," they wrote in the June 13th letter.

Referencing the failed 2002 DirecTV/EchoStar merger, the letter points to the FCC's finding "that the proposed EchoStar/DirecTV merger was inconsistent with the commission's long-standing policy of not permitting one entity to control all of the spectrum for a particular service." Conyers and Chabot then ask Gonzales and Martin, "Please explain how approval of this merger would be consistent or inconsistent with the finding in the EchoStar/DirecTV order."

While the FCC and DOJ will ultimately decide on the success or failure of the merger, the Congressmen said they would "appreciate" the "consideration" of the many questions presented in the letter.

Read the full letter (PDF)

In a recent Op-Ed piece to the New York Times, FCC Commissioner Michael Copps questioned the public service interests of free broadcasters, and called for the FCC to reform its license renewal process.

"Our policies should reward broadcasters that honor their pledge to serve that interest and penalize those that don’t," wrote Copps.

He continued to call for a shortening of the license renewal process, currently set at every eight years (commonly rubber stamped), to a more frequent three-year renewal period. Copps also called into question broadcaster's intentions for providing children's educational programming, election coverage, and "improve the generally shoddy coverage of minority and other underserved communities."

"If you need convincing that something needs to be done, consider that only about 8 percent of local TV newscasts in the month before the last presidential election contained any coverage whatsoever of local races, including those for the House of Representatives," Copps wrote. "This low number is just one example of how poorly stations are serving their viewers."

XM recently announced POTUS '08 - a 24/7 channel providing election coverage - as well as covered, and is a lead participant, in the Children's Miracle Network $10 Million fundraiser. Both Sirius and XM broadcast CNN en Espanol, ESPN Deportes, a wide variety of Latin music channels, and many public radio channels nationwide. In 2005, Red Cross Radio was established during the Hurricane Katrina aftermath to provide free satellite radio based services to workers on the field during a time when local radio towers were simply not functioning.

Of course, NAB President/CEO David Rehr doesn't agree with Commissioner Copps. He fired back a letter to the New York Times editor disputing Copps' statements. Rehr feels that broadcasters go through "enormous lengths" to fulfill their public interest rolls. He specifically cited Amber alerts, disaster coverage and polls that say broadcasters "do a good job" of covering elections.

Yet, earlier this year, the NAB backed the "Local Emergency Radio Service Preservation Act of 2007" legislature that would prevent Sirius or XM from broadcasting Amber Alerts, as well as transmit local traffic, weather, and other public safety/emergency information. Funny, that seems to go against the public interest, and only serve the broadcaster's own monopoly of localism.

So, exactly who's interests is the NAB serving?

[NYTimes: Commission Copps' Op-Ed Piece]
[NY Times: Rehr Letter's to the Editor]

Variety reports that Sirius CEO Mel Karmazin has proposed several possible pricing structures for the combined company in his informal talks with the Federal Communications Commission.

 

"We've had a number of meetings since we announced the deal," Karmazin said. "We hope we can draft an offering that will be something the commissioners will see is in the public interest."

Among the proposed packages is a low-cost option, well below the $12.95 both charge, and a "best of" package that would be more expensive but include all of Sirius, including Howard Stern and the NFL, and parts of XM's big-ticket programming, including "Oprah and Friends" and the MLB.

With regards to the NAB and their relentless efforts to shoot down the merger (including a dreaded banner hanging) Karmazin said the organization "has pulled out all their guns" in their lobbying efforts.

"They have paid a lot of people to write letters to the Justice Dept. and the FCC against the merger and are a formidable body to compete with," Karmazin said.

Sirius isn't without its own big guns - having hired former FCC chairman Richard E. Wiley, one of the most influential telecommunications attorneys in Washington - to take up its cause. Incidentally, current FCC chairman Kevin Martin is a former member of Wiley Rein LLP.

"We've been taking a few slings and arrows here and there," Wiley said. "[We're] waiting for our turn at bat."

[Variety]
Thanks Richard!

On Friday, the FCC issued the much anticipated public notice seeking official comment on the Sirius-XM merger. Within the next 30-days, interested parties can submit comments to the FCC - allowing the public to gauge the level of opposition against the merger. Currently it's been over 75 days worth of lobbying, Congressional hearings and of course, rhetoric - but now we get opportunity to assess how strong the opposition to the merger truly is.

"The DOJ process is not as transparent," wrote Bear Stearns analyst Bob Peck in a recent note. So with the FCC official pleading cycle, industry followers will best be able to watch how the sentiment towards the merger unfolds. This will be an important 30 days.

This also kicks off the informal "shot clock" for the FCC, which likes to make a decision like this within an 180-day timeline. This brings the latest the FCC would make a decision to sometime in December.

"The FCC can 'stock the clock' if it determines that it needs additional information," said Bank of America analyst Jonathan Jacoby in a note. "Realistically, we believe that the earliest a decision might come down is in early 2008, assuming there are no clock stoppages."

I'm sure we'll see a heightened level of activity from the NAB, as well as from Sirius and XM, who just recently hired bi-partisan lobbyists Quinn Gillespie & Associates to support their case.

If you support or oppose the merger, now is time to have your voice heard. Go to this url and fill out the form (make sure to include docket number 07-57) and your opinion will be officially submitted.

FCC Chairman Kevin Martin is darn tootin' pissed over a U.S. Court of Appeals ruling yesterday on so called "indecency" on television. The decisions involved incidents where Cher and Nicole Ritchie each used "fleeting expletives" on live broadcasts of music awards shows. Namely the words "fuck" and "shit."

But the decision isn't really the news here. It's Kevin Martin's reaction to the decision, and how obviously pissed he is. The FCC Chair feels that essentially the New York court may have neutered the FCC from enforcing any restrictions on language as a result of this decision. Martin also doesn't hesitate to point to a la carte channel programming as a solution to indecency in the media. Something that cable companies vehemently oppose, but that Sirius-XM have offered up as an option as part of their merger. The satellite radio companies should probably play this card a little harder, clearly outlining their plans for a la carte programming and "family friendly" packages (but suspensions aren't the solution).

Read FCC Chairman Kevin Martin's statement after the jump...

[via The Huffington Post]

The Sirius-XM merger faces a "high hurdle" because a rule bans the combination, FCC Chairman Kevin Martin told reporters yesterday after an FCC meeting.

"I think this is an unusual merger and I think it faces a high hurdle," Martin said.

The agency hasn't started reviewing the deal because it is still debating the substance of the rules with Sirius and XM, Martin also said.

"It's a little gray whether there's a rule or there isn't a rule," said Sirius CEO Mel Karmazin at a Lehman Bros. conference yesterday.

When the FCC granted licenses to the satellite radio companies 10 years ago, the FCC made a "statement," he said.

"If you go to the rule books, I'm not sure you'll find a rule," said Karmazin.

Karmazin also called the NAB "disgraceful" because of its opposition to the merger. He said the NAB paid organizations and individuals to write letters to agencies and Congressmen urging them to block the combination.

In a statement, Sirius and XM stated that they still "expect the transaction to be completed by the end of 2007.''

[Bloomberg]