A Better Ending for Sirius and XM

Fellow Fool Rick Munarriz is right; very few investors appear to believe that the Federal Communications Commission, which years ago blocked a merger between EchoStar (Nasdaq: DISH  ) and DirecTV (NYSE: DTV  ) , will allow Sirius (Nasdaq: SIRI  ) and XM Satellite Radio (Nasdaq: XMSR  ) to combine.

But it doesn't have to be that way. I think Sirius and XM can start offering customers a better, broader service right now without raising the hair of the FCC and, at the same time, entice a homebound cheapskate like me to become a customer.

Whither the Web?
That's the power of the Internet. Both Sirius and XM have Web-enabled services that allow their broadcasts to make their way to my Mac or, really, just about any Internet-connected device.

I've tried both services in the past but haven't bought them. Mostly, that's because I'm too cheap when it comes to entertainment. But I'd strongly consider any service that would allow me to, say, stream broadcasts for the Yankees and the New York Giants. To do so now requires separate subscriptions, to Sirius for the NFL and to XM for baseball. But would it really be so hard to have one sub-site where I'd pay, a la carte, for streaming rights across both services?

Not exactly fighting the law
There is, of course, a chance that the FCC won't appreciate such a move and could thus put the kibosh on a formal merger. But I don't see that happening. Web radio has largely avoided scrutiny from the FCC.

And, like I said, the technology is already available to make it easy to subscribe to a radio stream over the Web. I have one going now, for WETA, a classical station based in Washington, D.C. Adding the stream to iTunes required nothing more than a generic MP3 file download. Sirius and XM must be capable of the same.

Notice, too, that I'm not suggesting that Sirius and XM do anything to combine their satellite networks. They don't have to. Nor should they want to. Not yet, at least. Regulators should be given all the time necessary to be assured that combining the services would benefit consumers.

A shallow moat deepens
But integrating services over the Web, no matter how informal, should begin immediately. The competitive dynamics of the radio industry demand it.

Think about it. Terrestrial radio broadcasters such as Clear Channel Communications (NYSE: CCU  ) and Westwood One (NYSE: WON  ) may be having their problems, but Internet radio now reaches 65 million listeners.

Expect that number to keep growing, especially with the glut of Wi-Fi-enabled devices reaching the market. Meanwhile, potential Baby BreakerClearwire is investing billions to broadcast Internet signals over vast metropolitan distances. Big backers like Intel (Nasdaq: INTC  ) and Motorola (NYSE: MOT  ) virtually guarantee that the technology, known as WiMax, will spread as cellular once did.

In other words: A globally accessible wireless Web isn't just a dream, it's a certainty.

But that could take decades to complete. In the meantime, it's become clear to me that the only place it makes sense to have a satellite radio is in your car. Everyone else can do just fine with the Web. So, if that's true, why shouldn't Sirius and XM -- owners of the world's best radio content -- combine to create the planet's best Web radio station?

They should. In fact, if I may be so bold, it's what this merger ought to be all about.

XM is a former Rule Breakers pick. Intel is an Inside Value selection. Try either market-beating service free for 30 days -- there's no obligation to subscribe.

Fool contributor Tim Beyers, who is ranked 1,096 out of more than 23,000 in our Motley Fool CAPS investor intelligence database, wishes suburban Denver had better radio. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. All of his portfolio holdings can be found at Tim's Fool profile. His thoughts on tech stocks, Foolishness, and investing in general may be found in his blog. The Motley Fool's disclosure policy sends a strong signal to Wall Street.


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