Are XM Satellite Radio
Congressman Gene Green, D-Texas, is a vocal critic in the proposed merger between XM and Sirius. Earlier this week in an interview by 24/7 Wall St., he suggested the possibility of a third player entering the mix.
The article adds: "Green also thinks that one of the most interesting proposals being debated to move the merger along would be for the two companies to give up half of their spectrum once a business competition [sic] is complete. That would allow the FCC to conduct another auction, and, presumably, create yet another satellite radio company in the market."
The attribution isn't a direct quote, so I can't fault the congressman for being ignorant about the implications of such a proposal. Still, the suggestion itself is flat-out ridiculous.
Starting with the obvious roadblock
The next generation of receivers might offer interoperability, but nearly all the 17.3 million current subscribers have radios that are hog-tied to their designated spectrums. There is no central switch that can flip XM users to Sirius channels, or vice versa. It's baked into the internal chipsets of the receivers.
XM and Sirius will offer cross-programming content and lower-priced tiers with fewer channels, but -- for now -- that will mean beaming Howard Stern out of available XM channels and Oprah out of available Sirius channels.
So how can the FCC or the Department of Justice justify shutting down half of the channels? It would render older XM or Sirius receivers obsolete, or halve the number available channels across both systems. That certainly would go against the stipulation in the deal that the product would become more consumer-friendly.
Reselling the spectrum
The next problem is the suggestion that the FCC would somehow resell the spectrum. XM and Sirius paid roughly $80 million apiece in 1992 -- yes, 16 years ago -- to secure the licenses. It proved to be a great investment. Have you seen how Google
Is the implication here that the FCC could be bought off with a side of spectrum? No. Just as broadcasters have sold certain assets to grease a merger's approval, the new Sirius XM would reap the profits of a sale.
Throw in the costly launched satellites and receivers, and the move would be enough to wipe the combined company clean of all debt, leaving spending money to spare.
It won't happen, of course, because even that idyllic scenario doesn't lick the interoperability quandary. Someone would still have to update older receivers, and that won't come cheap to the provider, nor without inconvenience to the owner.
Making it work
The combination of XM and Sirius appears inevitable, even if it was announced a whopping 381 days ago. The public concessions -- which include lower-priced tiers and broader content choices -- should be enough.
Anyone who believes that a single satellite radio operator constitutes a monopoly may as well check on how WorldSpace
However, if Sirius XM ever does find a way to achieve universal interoperability, it might be a good idea to see what half of the spectrum would be worth to a hungry third provider like Clear Channel
It's not the perfect long-term solution. Spectrum is a precious commodity. The XM and Sirius dials may appear to go forever, but they don't. There are real constraints. Why do you think that the Sirius backseat video offering is limited to three children's cartoon channels of dubious video quality? Adding channels to a limited spectrum typically means higher compression and lower quality.
The proposed talk of bringing in a new satellite radio provider is just that: talk. But it's not something that XM or Sirius should fear; they already have the established carmaker relationships and the growing subscriber base. In line to collect billions from the possibility, bears better watch where they aim.
Critics of the deal will have to try harder than that. It's one thing to shoot fish in a barrel, but it's another thing entirely to toss around red herrings.
Here are some other recent XM stories on its long courtship with Sirius: