FCC OK’s Satellite Radio Merger

The FCC has approved the long-gestating satellite radio merger between Sirius and XM...and is getting ready to hit cable giant Comcast with sanctions.

As anticipated, the Federal Communications Commission has voted to approve the long-gestating merger between XM Satellite Radio and Sirius Satellite Radio into a single company with about 18 million subscribers. Although it seems counter-intuitive that an agency supposedly dedicated (in part) to enabling and preserving competition in the marketplace would let the satellite radio arena dwindle from two players to just one, the companies have apparently been able to successfully argue that their primary competition is not each other, but the rapidly growing array of digital Internet and mobile services available to consumers.

The final approval comes almost a year and a half after the companies announced their intentions to merge.

The FCC tied several conditions to the tie-up. The new company must cap prices for three years after the merger and enable consumer to choose the channels they want to receive a la carte style (although customers will pay less for channel packages). XM has also agreed to pay $17.5 million in fines to resolve misrepresentations and violations of FCC technical rules involving the transmission power of transmission towers and aspects of receivers sold to consumers; Sirius will kick in another $2.2 million in similar issues. The companies have also pledges to offer more educational and minority programming.

The merger approval flies in the face of the original rules the FCC set down for the satellite radio industry, in which XM and Sirius were given licenses to operate their businesses on the condition that they would never be permitted to merge, lest the combine company use its total control of the marketplace to jack prices and control content.

The companies will now work to scrap redundant transmission towers and programming selections, and roll out new receivers enabling a la carte programming selection. The companies are expected to focus on in-car radio receivers, since that market segment has seen the steadiest consumer interest during the protracted merger negotiations.

More complete details on the merger arrangement should be released today by the FCC.