Despite a report from Bear Stearns analyst Robert Peck, who predicts that a DOJ decision could arrive as soon as today or Monday, Bank of America analyst Jonathan Jacoby advises clients to remain "cautious" - deal or no deal.

Jacoby has remained as the devil's advocate throughout the merger proceedings, which is a good thing because it helps keep some of the more irrationally exuberant investors grounded (to a degree). Historically he's been very skeptical of the merger prospects (putting chances of approval roughly around ~30%). The interesting thing in his most recent research note, though, is that Jacoby does not dispute what Peck is reporting.

Much of the Bank of America analyst's conclusions have been based on information from DC contacts, but we don't hear about them in this note. Instead, Jacoby brings to light the high hurdles that XM-Sirius need to overcome to get approval (and there's no denying that this isn't your rubber-stamp kind of merger). If the deal is not approved, he points to significant downside. And even if the deal is approved, he feels there's not much upside.

"However, we are not ‘naïve.’ We think investors will most likely run these stocks post-merger approval," Jacoby notes.

To me, it's a significant development when the naysayers stop saying "nay."

Peck and Jacoby have been on two sides of the coin for this merger. With no significant information coming from BofA's sources disputing the information of Bear Stearns, well, I'd say that's pretty telling.

A decision by the Department of Justice on the merger between Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. could come as early as today or Monday, according to an analyst note issued this morning.

Bear Stearns analyst Robert Peck issued a research note this morning stating that a decision by the DOJ is imminent. According to Peck, conversations with their contacts in DC suggest that a DOJ decision could come as early as today or Monday.

Further, the Bear Stearns analyst believes that junior staffers at the DOJ are recommending blocking the merger, but that higher officer deputy officials likely disagree with the junior staff recommendation. The analyst expects Tom Barnett likely will rule along with the higher officials and announce that the DOJ will not be blocking the deal.

This is consistent with a Cowen & Co. note issued earlier this month, which also said that Antitrust Chief Tom Barnett is likely to approve the deal, "despite a staff recommendation against the deal."

Bear Stearns' Bob Peck also feels that the FCC has been coordinating its actions with the DOJ, and that an FCC decision will likely come near this year's end.

Just in case the Federal Communications Commission wasn't already aware of it, the Sirius-XM camp has filed an ex parte filing highlighting the NAB's dubious tactics for garnering "support" for their cause.

The counsel for Sirius Satellite Radio Inc. says little else in the filing beyond simply linking to the Washington Post article, but that's really more than enough for them to do. It's better to put the issue on record and let it speak for itself.

It still boggles me that the NAB needed to resort to these "inspirational" tactics so as to generate 8,500 form-letters, when they advocate on behalf of 8,300+ radio/TV stations and networks.

John Gorman said it perfectly in a recent blogpost:

"Is this how your NAB members want their money spent? Is this the image the radio industry wants or needs right about now?"

I would wager to say the answer is a resounding "no" and the NAB will have a lot of explaining to do once this is all over.

[Ex Parte filing (PDF) via SiriusBuzz]

Representative Rick Boucher (D-VA) wrote a piece that ran in both the Washington Times (yesterday) and a similar piece that ran in BusinessWeek (a week or so ago).

In both, Boucher dismisses antitrust concerns by building a case as to why satellite radio is part of a greater "audio entertainment" market, and argues that the Sirius-XM merger would benefit listeners.

"At first blush, one might conclude that a combination of the only two providers of this satellite-based service would be an obvious antitrust abridgement. In fact, the 'bumper sticker-like' campaign of merger opponents stresses the harm of a 2-to-1 combination.

The reality of the relevant market, however, is both more subtle and more compelling."

I think that's the basis of this entire argument. Whether you consider satellite radio to be within its own silo, or whether you feel that satellite radio directly competes with other audio mediums.

Rep. Boucher addresses this debate in his piece, talking about his view of the competitive landscape:

"[Regulators] often ask, 'How far would a person have to drive in order to find a substitute?' In the case of XM and Sirius, consumers don't have to drive anywhere to find a competitive alternative: They just have to hit a different button on their car stereo."

It's that ease of switching between audio mediums that, in my opinion, is the biggest case for the merger. And ultimately, it's what protects the consumer from a combined company abusing "monopolistic" powers.

Aside from the argument about whether or not a merger would create a monopoly (which has been discussed here ad nauseum), I think it's great to see Sirius-XM getting this level of public political support. The NAB is quick to point out that they got X number of Congressmen to sign a document, but there's little in public support coming from those in Capitol Hill for their cause.

[BusinessWeek, Washington Times]

Consumer advocacy groups today urged the Federal Communications Commission to reject the proposed merger of satellite radio providers XM and Sirius, saying the deal would eliminate competition and negatively impact consumers.

The groups - which include the Consumer Federation of America, Consumers Union and Free Press - filed a report Monday stating that the estimated $5 billion deal would reduce the number of channels and formats available and result in little cost savings.

"The proposed XM-Sirius merger is not in the interest of American consumers," said Dr. Mark Cooper, director of research for the Consumer Federation of America and lead author of the report.

"Leaving one company to monopolize the satellite radio industry would result in higher prices and fewer choices -- with no foreseeable public benefit."

The report - which claims to not "restate the case against the merger" but rather "focus on new data introduced into the record" - says the Sirius-XM merger would have negative side effects for both consumers and for the satellite radio industry. They feel that the deal would reduce the number of channels and formats available, result in fewer cost-saving incentives, and cause a dramatic drop in spending on talent and retail.

The groups say the companies have not made a sufficient case that the FCC should end its explicit prohibition on mergers between satellite licensees.

[Read the FCC Filing (PDF) via The Hollywood Reporter]

Yesterday, the Thanksgiving Day post lightly touched upon what the Washington Post uncovered recently: that many of the "comments" submitted to the fcc against the Sirius-XM merger were simply generated through a dubious pop-up ad campaign.

This issue goes far beyond the use of form letters. I'm no lawyer, but this appears to border on all out fraud.

Form letters can be a "useful" tool for large groups to assemble their thoughts en masse. I don't necessarily like them (I would much prefer the public submit in their own words), but at least the submitter is voicing their opinion and is aware of it.

But what the NAB has done here is not at all a case of "form letters."

The Washington Post discovered that out of the 60 people they contacted - many of the phones were actually disconnected, or went unanswered. Out of the 10 people they were actually able to talk to (which - in itself - is a ridiculous rate of failure), only 1 person - ONE PERSON - even remembered filling out something remotely related to satellite radio (and not even being merger related).

So how did those comments get submitted to the FCC?

According to the Washington Post article, the NAB bought pop-up ads on websites like CarMax.com, Staples.com and PriceGrabber.com in August and September. The ad ran the headline, "The XM Radio/Sirius Merger will create higher prices. Stop the Monopoly!" - and users could click either, "Yes, I'd like to help stop the monopoly" or "No, thank you."

Those who clicked "yes" were asked to type in their contact information and later received a confirmation e-mail "detailing their action and providing a copy of the letter to be sent to the FCC," according an NAB spokesperson. Respondents were given the "opportunity to opt out of the process" and cancel submission of their letter.

If I'm reading that correctly... it means that any inaction to the email was considered confirmation. So if these emails were sent to the Spam folder, or were inadvertently deleted, the submission was still considered confirmed.

And there's another question...

So far only a little over 5,000 computer generated emails have hit the FCC and, as the article points out, many with the names and addresses of people who said they never filed any comments regarding the merger. But the NAB states in the article that 8,500 comments were "inspired" by this campaign.

That means some 3,500 more "comments" with dubious provenance are waiting to appear. Where are they? When will they show up? Why have they been withheld?

I don't care if you're pro- or anti-merger. If you have an opinion on the merger - whatever it may be - you should have submitted your comments to the FCC. That is your right as a citizen, and it's the whole purpose as to why the FCC has a public comment submission process.

These phony letters corrupt this entire process and are in sharp contrast to the thousands of Americans who took time to write genuine, thoughtful letters to the FCC.

The fact that the NAB - which advocates on behalf of over 8,300 radio and television stations and networks, and has an annual NAB Radio Show which reportedly is attended by over 110,000 industry professionals - simply cannot garner enough genuine public support for their agenda is telling. Very very telling.

But just because the public isn't agreeing with a lobbyist's position doesn't mean they should resort to these tactics. It is the public who should decide how to voice their opinion, not a special interest group.

A Call To Action:

The more I think about this, the more angry I get. Again, we're not talking about form letters (which, sadly, is a standard lobbying practice) - I'm talking about people participating as part of a legal process without knowing they are. In the Washington Post article, it was pointed out that a poll of 350 congressional staffers conducted by the Congressional Management Institute in 2005 indicated that half of them did not believe that form-letter messages were sent with the knowledge or approval of constituents.

How long has this been going on? How many other comments from "the public" aren't genuine? How exactly are all these comments being extracted, especially considering WaPo's astonishing rate of failure in contacting submitters? Are these in fact even real people?

We need to ask Congress and the FCC for an inquiry. There needs to be some accountability here.

Regardless of whether you support or oppose the merger, we need to know the extent of these practices. How exactly were these comments were "inspired" by the NAB? If you feel the same way as I do, then please voice your opinion and contact Congress/FCC to demand an inquiry.

There's several ways to do this (like, contacting the FCC directly or check out the EFF's guidelines for contacting Congress). XM and Sirius also have handy-dandy pages that submit your comment to the FCC and copy your state's representatives (here's XM's version, or Sirius' version - they both do the same thing).

However you do it, just remember this issue is not about the merger itself, rather an inquiry into these deceitful and dubious tactics. Those of us who's actually spent the time to submit a unique and thoughtful comment shouldn't be undermined by a pop-up ad.

Have a Happy Thanksgiving everyone!
...and in between naps after gorging yourself with food today - check out this Washington Post article about the form letters reportedly generated by the NAB and subsequently submitted to the FCC.

The Washington Post has contacted several of the people - who's names are now on record as supporting the NAB's political agenda - and many of them had no idea that they would be submitting comments to the FCC.

"No sir, I never sent any notes to Washington," said William Chadwick, a retired truck driver from Lebanon Junction, Ky., whose name is attached to one of the messages that reached the FCC. "This call is the first time I've heard of this."

"I never sent an e-mail," said Frank Dashields, a Salisbury, Md., building-services manager. "I don't even know about the issue."

"I don't know what the merger is about and I don't care," said Tom Biniecki, a retired steel worker from Winamac, Ind. "I have no idea what you're talking about."

Apparently the form emails (which you can read more about here) were sent to the Commission after people clicked on an ad that read, "The XM Radio/Sirius Merger will create higher prices. Stop the Monopoly!" The ad invited users to choose either, "Yes, I'd like to help stop the monopoly" or "No, thank you."

It's an incredible article, and one that speaks volumes of the NAB's tactics. Well worth the read.

[The Washington Post]
Thanks to everyone who sent this in!

The FCC has issued a second Protective Order to ensure that prying eyes do not see "highly confidential and competitively sensitive documents" coming from Sirius and XM.

In the beginning of this month, the Commission asked for additional information in regards to the merger. Later that week, Sirius and XM stated that there are certain documents and information related to the request which constitute some of their most sensitive business data, releasing them would place the companies at a significant competitive disadvantage.

As a result, the FCC has issued a Second Protective Order. Anyone who wants to gain access to these sensitive documents must sign an Acknowledgement of Confidentiality.

Today is the due date that Sirius-XM needed to have all of their documents submitted to the FCC.

[FCC Protective Order (PDF)]

This is pretty big news. Former FCC Chairman Reed Hundt - who was essentially the "architect" of satellite radio - has voiced support for the merger between Sirius Satellite Radio Inc and XM Satellite Radio Holdings Inc.

Hundt served as Chairman of the FCC from 1993 through 1997. During his tenure, the Commission created the rules for satellite radio and granted Sirius and XM their licenses, a process that Hundt was integrally involved in.

In an interview - of which an unedited transcript was filed with the FCC today - Chairman Hundt discussed the proposed merger, the creation of the satellite radio rules, the rationale behind the establishment of two satellite radio licenses and developments in the audio entertainment market since 1997.

Read excerpts from the interview after the jump...

[Updated to include joint statement from Sirius-XM]

It's difficult to interpret exactly how the FCC's request for additional info weighs in on the Sirius-XM merger prospects.

From one side, it's a request that comes fairly late in the game - which could be an indication that the Commission isn't as far into the process as originally hoped. As Bank of America analyst Jonathan Jacoby puts it, the timing of the request "indicates to our contacts that the FCC isn’t as 'in the bag' as many on the Street believe."

Perhaps the late request means that FCC isn't as near to reaching a decision as previously assumed?

On the other side, it could mean that the FCC is anticipating a decision by the DOJ, and is finalizing their own information collection procedures. The move could also be meant to appease those who've asked for the clock to be stopped (NAB, U.S. Electronics, etc.) based on the need of more information.

The quick two-week turnaround required - while not stopping the clock - might be perceived as a positive, since there's definitely a degree of urgency there. The requests are also very specific, which could be that the FCC is dotting i's and crossing t's as we near the end of this ordeal.

Superstar analyst Robert Peck of Bear Stearns brings another thought that should be even more encouraging to merger-hopefuls. His thought is that the DOJ could be nearing approval, which means the FCC needs to finalize their own process.

"If the DOJ were close to denying the deal, the need for such detailed information would not have arisen in the first place," writes Peck in a recent note.

So the FCC asking for more information could be an indication that the DOJ will be approving the merger, as has been widely rumored, otherwise the Commission would simply deny the merger on the basis of Rule 25.118.

Very interesting.

UPDATE: I asked Sirius-XM about the FCC's request, below is their joint response:

"This is a next step in the regulatory process. It is not a surprise. This is information that has already been collected for the DoJ and is easy to share with the FCC. We continue to work with regulators and expect the merger to close by the end of the year."