Randolph J. May on Satellite Radio Competition
Wednesday, April 11, 2007 at 6:52 AM
Tags: 2, XM
Randolph J. May published a post that I've just read in disbelief. It's really a compelling argument for the Sirius-XM merger, in defining the market, and in explaining how this merger would actually lead to innovation.Now, before those who are against the merger tune out, understand that Mr. May is a former Assistant General Counsel and Associate General Counsel at the FCC, as well as the current President of The Free State Foundation. May has also held numerous leadership positions in bar associations, and is a past Chair of the American Bar Association's Section of Administrative Law and Regulatory Practice. Mr. May also served as Public Member of the Administrative Conference of the United States.
Yeah, he's no slouch.
Now, May points out that the FCC's 2006 report on video competition determined that "the market for the delivery of video programming services is served by a number of operators using a wide range of distribution technologies." The FCC's competitive examination included: cable operators, direct broadcast satellite operators, broadband service providers and other wireline video providers, wireless cable operators, Internet-based video services, and DVDs and videocassettes.
"It would be difficult to understand why, in assessing competition in the audio market, the full range of distribution technologies similarly would not be considered," May writes.
May continues to argue that the mere fact that XM and Sirius are operating on a government-licensed spectrum doesn't make them a separate and distinct market.
"Terrestrial radio and television broadcasters use spectrum too. So do DBS operators and wireless cable operators. Even cable and other multichannel video operators often use spectrum," says May. "The use of different spectrum blocks does not mean that these various forms of media do not compete with each other."
The thought that May is arguing, and one that I've said for years - though, maybe not so eloquently - is that distribution method doesn't matter anymore. The technology behind the media doesn't matter anymore. The methods of delivery are evolving just too quickly to simply "define" them. It's the application of the media, and whether there are alternatives to that application, that defines the competitive market.
I could essentially quote every sentence that Mr. May wrote, but I'm just not sure if I'm doing it any justice. Read it for yourself. Trust me, it's well worth it.
[The Free State Foundation]
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Comments
I am somewhere around 60/40 against the merger but have kept an open mind. Randolph makes valid points and I have to agree with him that the suvival of SatRad depends on growth and the way they are going now it's not happening. There is so much competition out there fighting for consumer attention that companies can be forgotten quickly. I remain mixed on this topic but am starting to see benefits of the merger. Mainly further improved technology.
Posted by: prozac ? | April 11, 2007 7:36 AM
Growth isn't happening Prozac? LOL! Between the 2 of them they had close to 14 million subs by the end of 2006. And together by the end of 2008 they will probably have over 20 million subs and deals with just about every single auto manufacturer. There are 230 million cars on the road in this country. Satellite radio is one of the fastest growing media businesses that ever existed in this country.
Posted by: MUSCLE13 ? | April 11, 2007 8:15 AM
Although the FCC Competitive examination included DVD's, the FCC did not include DVD's and video cassettes when it examined the DirecTV/Echostar deal. Kevin Martin even pointed that out in one of his statements. It is true that distribution doesn't matter to people, but the type of content being distributed does. You cannot receive live broadcasts from an iPod or a DVD or any other storage device. News services like CNBC and CNN only exist to the listener in a live environment, and that's what makes Satellite Radio distinctly different than the iPod.
Posted by: Anonymous Coward | April 11, 2007 8:22 AM
I don't think Prozac is ignoring the amazing growth satellite radio has seen, but it needs to be put into context with the alternatives.
Randolph May doesn't see the merger as benefiting the consumer due to the "more choice, better prices" mantra. He takes a free-market view:
"Consumer welfare ultimately depends on continued long-run investment and innovation in the marketplace, with providers seeking competitive advantage by responding to consumer demands. And continued investment and innovation depend on regulators at DOJ and the FCC not taking such a constrained, static view of marketplace competition that they end up maintaining in place or adopting new regulations, or preventing market-driven mergers, which have such investment and innovation-stifling effects."
Yes, we have 14+ million subscribers. And that's great. But let's put it in context. There are currently:
- 237 million cars on the road
- 230 million PCs
- 223 million AM/FM listeners
- 219 million Wireless subscribers
- and we just reached 100 million iPods sold
It's obvious where those "consumer demands" lie. I'm not saying satellite radio is failing, or can't compete with these other technologies - but what Sirius-XM are seeking is that "competitive advantage" by combining.
Posted by: Ryan Saghir ? | April 11, 2007 8:42 AM
Those 230 million cars on the road represent serious opportunity for satellite radio growth Ryan. Thats where the growth lies. There is competition yes. But there is no denying the growth that lies ahead. Thats why terrestrial is fighting so hard.
Posted by: MUSCLE13 ? | April 11, 2007 8:48 AM
True their is no denying their fast growth as a company whole but recently even though subs are still increasing havent they experienced a slow down? With the car deals that took place this year I tink 2008 will be a great year for increase. Innovation/Merger/Advertising as well.
The key thing I think is for these companys to do some real clever advertising soon and creat some sort of software or niche that can get users more involved with their music listening and downloading.
Posted by: Dave | April 11, 2007 3:50 PM