F.C.C. Chief Questioning Radio Deal
By STEPHEN LABATON
New York Times
Published: March 7, 2007
WASHINGTON, March 6 — Kevin J. Martin, the chairman of the Federal Communications Commission, has privately questioned recent Congressional testimony by the architect of a proposed merger of the nation’s two satellite radio companies that subscribers would both pay the same monthly rate and receive significantly more programming.
As he sought to sell the proposed merger of Sirius Satellite Radio and XM Satellite Radio to Congress, and by extension to regulators like Mr. Martin, Mel Karmazin, the chief executive of Sirius, vowed last Wednesday that prices would not be raised and that listeners would benefit enormously by getting the best programming from both companies.
But in separate conversations with two people after Mr. Karmazin’s testimony to a House committee, Mr. Martin said that subscribers may be surprised to learn they may actually have to pay more than the current monthly rate of $12.95 if, for example, they want to receive all the games of Major League Baseball (now available only on XM) as well as all the professional football games (now only on Sirius).
Mr. Karmazin, reached on Tuesday, said his testimony was not misleading and that he meant to say two things: subscribers wanting to keep their existing service would not face a price increase, and listeners who wanted the best of both services would pay less than the combined rate of $25.90.
Mr. Martin, in an interview on Tuesday, suggested that the details had not been clear from the testimony. He emphasized that he was not questioning the motives or candor of Mr. Karmazin but that there was “a need for greater clarity” over what was being proposed for fees and programming.
“The commission will need to determine the benefits to consumers of this deal, and in doing that, we will need to carefully look at what price will be frozen and what consumers will be getting for that price,” Mr. Martin said, adding that the hearing left those issues unclear. “When they talk about freezing rates and lowering rates, are they talking about it in terms of the current rate of $12.95 for each service, or are they referring to the combined rate of $25.90?”
The two people who talked to Mr. Martin — one working to get the deal done and the other a critic — said they understood his comments to reflect his skepticism about both the deal and the way it was being sold in Washington as more beneficial to consumers than it might actually be. The two did not want to be identified because they said these were private conversations.
Mr. Martin said that the proposed deal had “not even been filed with the commission yet,” and that he would carefully consider the arguments of both the supporters and the opponents before reaching a decision.
The $13 billion proposed deal cannot be completed without the permission of antitrust lawyers at the Justice Department and a majority of the five commissioners at the F.C.C.
The commission gave the two companies spectrum licenses for the satellite radio services in the 1990s on the condition that they not merge, and it would have to waive that condition for the deal to go forward.
Mr. Martin has said that the companies have a high hurdle to conquer in persuading the commission that the deal would be in the public interest.
At last week’s hearing before the antitrust task force of the House Judiciary Committee, Mr. Karmazin insisted that subscribers could count on a significantly greater offering of programs and no increase in prices. That juxtaposition led some lawmakers to conclude that consumers who pay the same monthly fee for one service would be getting the benefits of the other.
“This merger will give people more choice than they have before and lower prices and, very importantly, less confusion,” Mr. Karmazin testified. “Our vision of the way it works is that if you are an XM subscriber, you have the Major League Baseball, you have whatever number of channels available to you now. But what we contemplate is that we would take some other content, and again we have to work with our content partners. But the hope would be that we would get Nascar to agree to be on XM as well. We’ll get the N.F.L. to agree to be on XM as well.”
At another point in the hearing, he said, “We are saying we are not going to raise our price, and we’re going to offer the consumer something that they have not had before.”
Critics said that the companies had not been candid about their intentions to offer more services for more than $12.95.
“It’s a sleight of hand going on here,” said Gene Kimmelman, vice president for federal affairs at Consumers Union, which opposes the merger. “They highlight the price freeze for the old package. They’re leaving the consumer with the impression of a price freeze. They say you will get the best of both services. But they never tell you what the rate will be for that.
“Regardless of what Mr. Karmazin intended,” Mr. Kimmelman went on, “he has left many consumers with the impression they will receive a combined package of Sirius and XM channels for $12.95, when in reality the price will probably be much higher.”
Mr. Karmazin is scheduled to appear before a second Congressional panel on Wednesday.
In the interview on Tuesday afternoon, he said he thought he had been clear that to get the best of both XM and Sirius, consumers would have to pay more than the monthly rate of $12.95, but less than the combined rate of $25.90. Consumers who just want to stay with their existing lineup would be guaranteed the same price, he said.
“If the merger is approved there will be lower prices and more choice,” Mr. Karmazin said. “If the merger is not approved, there is no discussion on price and there is no discussion about more choices.”
By STEPHEN LABATON
New York Times
Published: March 7, 2007
WASHINGTON, March 6 — Kevin J. Martin, the chairman of the Federal Communications Commission, has privately questioned recent Congressional testimony by the architect of a proposed merger of the nation’s two satellite radio companies that subscribers would both pay the same monthly rate and receive significantly more programming.
As he sought to sell the proposed merger of Sirius Satellite Radio and XM Satellite Radio to Congress, and by extension to regulators like Mr. Martin, Mel Karmazin, the chief executive of Sirius, vowed last Wednesday that prices would not be raised and that listeners would benefit enormously by getting the best programming from both companies.
But in separate conversations with two people after Mr. Karmazin’s testimony to a House committee, Mr. Martin said that subscribers may be surprised to learn they may actually have to pay more than the current monthly rate of $12.95 if, for example, they want to receive all the games of Major League Baseball (now available only on XM) as well as all the professional football games (now only on Sirius).
Mr. Karmazin, reached on Tuesday, said his testimony was not misleading and that he meant to say two things: subscribers wanting to keep their existing service would not face a price increase, and listeners who wanted the best of both services would pay less than the combined rate of $25.90.
Mr. Martin, in an interview on Tuesday, suggested that the details had not been clear from the testimony. He emphasized that he was not questioning the motives or candor of Mr. Karmazin but that there was “a need for greater clarity” over what was being proposed for fees and programming.
“The commission will need to determine the benefits to consumers of this deal, and in doing that, we will need to carefully look at what price will be frozen and what consumers will be getting for that price,” Mr. Martin said, adding that the hearing left those issues unclear. “When they talk about freezing rates and lowering rates, are they talking about it in terms of the current rate of $12.95 for each service, or are they referring to the combined rate of $25.90?”
The two people who talked to Mr. Martin — one working to get the deal done and the other a critic — said they understood his comments to reflect his skepticism about both the deal and the way it was being sold in Washington as more beneficial to consumers than it might actually be. The two did not want to be identified because they said these were private conversations.
Mr. Martin said that the proposed deal had “not even been filed with the commission yet,” and that he would carefully consider the arguments of both the supporters and the opponents before reaching a decision.
The $13 billion proposed deal cannot be completed without the permission of antitrust lawyers at the Justice Department and a majority of the five commissioners at the F.C.C.
The commission gave the two companies spectrum licenses for the satellite radio services in the 1990s on the condition that they not merge, and it would have to waive that condition for the deal to go forward.
Mr. Martin has said that the companies have a high hurdle to conquer in persuading the commission that the deal would be in the public interest.
At last week’s hearing before the antitrust task force of the House Judiciary Committee, Mr. Karmazin insisted that subscribers could count on a significantly greater offering of programs and no increase in prices. That juxtaposition led some lawmakers to conclude that consumers who pay the same monthly fee for one service would be getting the benefits of the other.
“This merger will give people more choice than they have before and lower prices and, very importantly, less confusion,” Mr. Karmazin testified. “Our vision of the way it works is that if you are an XM subscriber, you have the Major League Baseball, you have whatever number of channels available to you now. But what we contemplate is that we would take some other content, and again we have to work with our content partners. But the hope would be that we would get Nascar to agree to be on XM as well. We’ll get the N.F.L. to agree to be on XM as well.”
At another point in the hearing, he said, “We are saying we are not going to raise our price, and we’re going to offer the consumer something that they have not had before.”
Critics said that the companies had not been candid about their intentions to offer more services for more than $12.95.
“It’s a sleight of hand going on here,” said Gene Kimmelman, vice president for federal affairs at Consumers Union, which opposes the merger. “They highlight the price freeze for the old package. They’re leaving the consumer with the impression of a price freeze. They say you will get the best of both services. But they never tell you what the rate will be for that.
“Regardless of what Mr. Karmazin intended,” Mr. Kimmelman went on, “he has left many consumers with the impression they will receive a combined package of Sirius and XM channels for $12.95, when in reality the price will probably be much higher.”
Mr. Karmazin is scheduled to appear before a second Congressional panel on Wednesday.
In the interview on Tuesday afternoon, he said he thought he had been clear that to get the best of both XM and Sirius, consumers would have to pay more than the monthly rate of $12.95, but less than the combined rate of $25.90. Consumers who just want to stay with their existing lineup would be guaranteed the same price, he said.
“If the merger is approved there will be lower prices and more choice,” Mr. Karmazin said. “If the merger is not approved, there is no discussion on price and there is no discussion about more choices.”
