In re Applications for Consent to Transfer of Control of Licenses, MB 07-57

• Decision Date: 05 August 2008
• Docket Number: MB 07-57
• Parties: In the Matter of Applications for Consent to the Transfer of Control of Licenses XM Satellite Radio Holdings Inc., Transferor To Sirius Satellite Radio Inc., Transferee
• Court: Federal Communications Commission Decisions

In the Matter of Applications for Consent to the Transfer of Control of Licenses XM Satellite Radio Holdings Inc., Transferor To Sirius Satellite Radio Inc., Transferee

MB No. 07-57

Federal Communications Commission

August 5, 2008

Adopted: July 25, 2008

MEMORANDUM OPINION AND ORDER AND REPORT AND ORDER

Marlene H. Dortch Secretary

By the Commission: Chairman Martin and Commissioners Tate and McDowell issuing separate statements; Commissioners Copps and Adelstein dissenting and issuing separate statements.

TABLE OF CONTENTS

Heading Paragraph #

I. INTRODUCTION .................................................................................................................................. 1

II. DESCRIPTION OF APPLICANTS ....................................................................................................... 8

A. XM Satellite Radio Holdings Inc 8

B. Sirius Satellite Radio Inc 14

C. The Proposed Transaction 20

D. Post-Merger Operations 23

E. Applications and Review Process .................................................................................................. 26

1. Commission Review ................................................................................................................ 26

2. Department of Justice Review ................................................................................................. 29

III. STANDARD OF REVIEW AND PUBLIC INTEREST FRAMEWORK .......................................... 30

IV.POTENTIAL PUBLIC INTEREST HARMS ...................................................................................... 35

A. Introduction .................................................................................................................................... 35

B. Potential Competitive Harms ......................................................................................................... 36

1. Potential Horizontal Effects ..................................................................................................... 37

a. Record Evidence on Defining the Relevant Markets ........................................................ 37

b. Competitive Analysis Under Worst-Case Assumptions ................................................... 48

2. Potential Vertical Effects ......................................................................................................... 59

C. Other Potential Public Interest Harms ............................................................................................ 69

1. Impact of the Transaction on Diversity ................................................................................... 70

2. Impact of the Transaction on Broadcasters' Advertising Revenues ........................................ 73

V. POTENTIAL PUBLIC INTEREST BENEFITS .................................................................................. 75

A. Analytical Framework .................................................................................................................... 75

B. Claimed Benefits ............................................................................................................................ 77

1. Increased Programming Options/Lower Prices ....................................................................... 78

a. New Programming Packages ............................................................................................ 79

b. A la Carte Programming ................................................................................................... 85

2. Accelerated Deployment of Advanced Technology ................................................................ 94

3. Commercial Availability of Interoperable Satellite Radio Receivers ..................................... 96

4. Operational Efficiencies .......................................................................................................... 99

VI. BALANCING PUBLIC INTEREST HARMS AND BENEFITS ..................................................... 104

A. General Introduction and Summary ............................................................................................. 104

B. Applicants' Voluntary Commitments and Other Conditions ....................................................... 105

1. Price Cap ............................................................................................................................... 105

2. New Programming Packages and A La Carte Options .......................................................... 111

3. Interoperable Radio Receivers ............................................................................................... 113

4. Open Access .......................................................................................................................... 126

5. Third-Party Access to SDARS Capacity ............................................................................... 131

6. Reservation of Channels for Noncommercial Educational Use ............................................ 136

7. Service to Alaska, Hawaii, and Puerto Rico .......................................................................... 147

C. Other Issues .................................................................................................................................. 151

1. Spectrum Givebacks .............................................................................................................. 151

2. No Local Programming or Local Advertising ....................................................................... 154

VII.COMPLIANCE WITH COMMUNICATIONS ACT AND COMMISSION'S RULES AND POLICIES ....................................................................................................................................... 156

A. 1997 SDARS Report & Order ..................................................................................................... 156

B. Enforcement Matters .................................................................................................................... 164

VIII.PROCEDURAL MATTERS ........................................................................................................... 175

IX.ORDERING CLAUSES ..................................................................................................................... 180

APPENDIX A: Licenses to be Transferred

APPENDIX B: Voluntary Commitments

APPENDIX C: Timeline of Commitments

I. INTRODUCTION

1. In this Memorandum Opinion and Order and Report and Order ("Order"), we consider the consolidated application of Sirius Satellite Radio Inc. ("Sirius") and XM Satellite Radio Holdings Inc. ("XM, " or jointly, the "Applicants") for consent to the transfer of control of the licenses and authorizations held by Sirius and XM, and their subsidiaries, for the provision of satellite digital audio radio service (or "SDARS") in the United States.^[1] The Application is filed pursuant to section 310(d) of the Communications Act of 1934, as amended ("Communications Act" or "Act"), and Sections 1.948 and 25.119 of the Commission's rules.^[2] Applicants assert that grant of the Application will generate substantial, merger-specific public interest benefits and will not harm competition in any market because a combined satellite radio provider will have no market power.^[3] Based on the review of the record as set forth in the discussion below, we find that grant of the Application, with Applicants' voluntary commitments^[4] and other conditions discussed herein, is in the public interest.

2. Applicants operate satellite digital audio radio services in the 2320 to 2345 MHz spectrum band as authorized by the Commission after auction in 1997.^[5] XM commenced service in September 2001, and Sirius began service in February 2002.^[6] In order to establish fully a nationwide radio service, both SDARS licensees operate terrestrial repeaters in areas where satellite signal reception is blocked by trees, buildings, or tunnels.^[7] Together, Sirius and XM offer hundreds of channels of music, entertainment, news, and sports programming, as well as weather and data information services for maritime, aeronautical and other purposes. In addition, Sirius offers video service in select vehicles equipped with a Sirius Backseat TV receiver.^[8] As of December 31, 2007, Applicants, collectively, had approximately 17.3 million subscribers in the United States.^[9] SDARS radio receivers are used in cars, trucks, boats, aircraft, and homes, and are available for portable use. Applicants also provide content to subscribers using streaming audio over the Internet as well as direct broadcast satellite ("DBS") and wireless networks.^[10] The current fee charged by each of Applicants for its basic SDARS service is $12.95 per month.^[11]

3. As a result of the merger, Applicants maintain that consumers will be able to customize their programming options by selecting among several new and smaller programming packages, as well as two a la carte packages.^[12] Applicants assert that these new programming features will provide greater discretion to parents to control the programming their children receive because parents may individually select which programs to...