Two senators are asking the Federal Communications Commission to require XM Satellite Radio Holdings Inc. (XMSR) and Sirius Satellite Radio Inc. (SIRI) to divest up to half of their combined radio spectrum as a condition of their proposed merger.
Sens. Claire McCaskill, D-Mo., and Olympia Snowe, R-Maine, on Wednesday sent a letter to Federal Communications Chairman Kevin Martin saying the merged entity would hold more radio spectrum "than all terrestrial FM and AM spectrum combined."
"The FCC should require the newly formed XM-Sirius to divest a portion (up to half) of its spectrum holding," the letter said.
McCaskill and Snowe are asking for tighter conditions on the pending merger than two senior House Democrats, who sent a similar letter to the FCC earlier in the month.
In that letter, House Energy and Commerce Chairman John Dingell, D-Mich., and Telecommunications Subcommittee Chairman Edward Markey, D-Mass., did not mention spectrum set-asides. The Dingell and Markey letter said the merged entity should adhere to pricing arrangements that the two companies have already agreed to and ensure that the new company's signal can be received on devices from any manufacturer.
Various public interest groups have demanded that the merged company be required to reserve up to 20% its spectrum for diversity or public interest programming. The individual requests for spectrum set-asides, added up, come close to 50%.
Spokesmen for both XM and Sirius weren't immediately available for comment, but industry watchers say they are likely to balk at a 50% divesture requirement.
Consumer advocates oppose the merger outright, but Consumer Federation Research Director Mark Cooper acknowledged that requiring the new entity to give up spectrum is a classic antitrust remedy. "It's a perfectly legitimate and technically feasible thing to do," Cooper said.
But, Cooper added, it makes more sense simply to deny the merger and maintain the current competition between XM and Sirius. "Why allow a merger and then depend upon a whole brand new startup to replace the competition you just lost," he said.
The FCC is widely expected to approve the merger, which leaves interested parties scrambling to lobby the commission about how stringent the conditions will be.
Snowe spokesman Kurt Bardella said the letter was sent with the expectation that the merger would be approved. "Given that it's expected that the FCC is going to approve the merger, but with various conditions, the letter that Senators Snowe and McCaskill sent to the FCC aims to ensure that there is fair competition and open acess so that consumers will always have a choice," Bardella said.
The XM-Sirius deal was approved by the Department of Justice's antitrust unit in March with no conditions attached.
It is still waiting for FCC approval before it can be finalized, now some 15 months after the two companies made public their intention to merge.
In their letter, McCaskill and Snowe also said the FCC should preserve free local radio programming by making it clear that "the merger company is not authorized to employ its terrestrial repeater networks to differentiate or localize content from market to market."
Like Dingell and Markey, the McCaskill and Snowe letter said the FCC should require "open access" to satellite radio manufacturers.
The FCC declined to comment.