By Brendan McGarry

WASHINGTON, June 1, 2007 – A handful of lawmakers from both political parties have come out against the proposed merger between XM Satellite Radio and Sirius Satellite Radio, saying the deal would stifle competition and harm consumers.

Opponents of the merger include at least three Democrats and two Republicans: Representatives Mike Doyle, D-Penn., James Walsh and John McHugh, both Republicans from New York, and Kirsten Gillibrand, D-N.Y.; as well as Sen. Herb Kohl, D-Wis., chairman of the Senate's Subcommittee on Antitrust, Competition Policy and Consumer Rights. The subcommittee recently held a hearing on the matter.

"I have concluded this merger, if permitted to proceed, would cause substantial harm to competition and consumers, would be contrary to antitrust law and not in the public interest, and therefore should be blocked by your agencies," Kohl wrote in a letter to the Federal Communications Commission and the Justice Department's antitrust division. Both agencies would have to approve the merger before it could take place.

The letter and the other lawmakers' comments were filed recently with the FCC.

One of the bigger legal questions surrounding the transaction is the definition of the satellite radio market. Kohl concludes satellite radio is a separate market because it is the only medium offering hundreds of radio channels on a nationwide basis. "No other audio service existing currently is a viable substitute for satellite radio," and there is no possibility of such a substitute entering the market anytime soon, he wrote.

XM and Sirius, meanwhile, have argued the merger wouldn't result in a monopoly because the companies compete with numerous audio entertainment services and devices, including terrestrial radio, Internet radio and MP3 players such as Apple's popular iPod. Audio programs distributed online, often called podcasts, are another potential competitor to radio talk programs.

Some have additional proposed binding conditions on the merger, including a price cap on satellite radio services, alternative pricing options such as tiered programming, and a requirement to set aside a portion of spectrum for educational, information or independent programming.

During the March 20 Senate Judiciary subcommittee hearing, Sirius CEO Mel Karmazin said the companies will not raise the $12.95 basic monthly cost of service following the merger. He said they also intend to roll out a lower-cost service under $10.

But Kohl expressed reservations about government enforcement of any kind of antitrust consent decree.

If successful, the merger would create a satellite radio giant, with 14 million subscribers and a market value of roughly $13 billion. Terrestrial broadcasters, including the National Association of Broadcasters (NAB), a trade association representing local radio and televisions stations, oppose the deal, arguing it would create an unfair monopoly of satellite radio spectrum.

In his letter to the FCC, Rep. Doyle noted the commission's 1997 order prohibiting the two companies from merging, the inability of the companies to build an interoperable radio so consumers could switch between the two services without having to buy new hardware, and the possibility of a merger leading to higher prices and a lack of artist diversity on satellite radio.

"These are just a few of the many reasons I believe this merger should be denied," Doyle wrote.

Of the five lawmakers, just two – Doyle and McHugh – received political contributions from NAB during a nearly ten-year period ending June 2006, according to the Center for Public Integrity's Well Connected project, which tracks the lobbying influence of telecommunications, media and technology companies and organizations.

The NAB, mostly through its political action committee, was among Doyle's largest contributors in the industry, giving him a total of $16,238 from 2001 through mid-June 2006. Doyle received nearly $10,000 of that money during his last election cycle, during which he faced no Republican opponent and won with 90 percent of the vote.

McHugh, meanwhile, received just $145 in the 2000 election cycle from the association. None of the lawmakers received any contributions from the satellite radio companies during the same decade.

In a jointly signed letter, Reps. Walsh and McHugh said the companies' claim that the merger wouldn't result in a monopoly "is not supported by the facts."

"In the largest radio markets in the country, a local broadcaster can own no more than eight radio stations; the reach of their signals is limited to the local market," the congressmen wrote. However, "Sirius and XM each program almost well over 100 channels and all of their channels cover the entire nation…. Permitting them to combine would unquestionably create a monopoly."

Walsh and McHugh also questioned the companies' track record with regulatory compliance and said they believed that, "If the companies desired they could reduce prices and unbundled channel packages now."

Rep. Gillibrand said such a merger "also has the potential to undermine our local radio stations, which are an important source for public service announcements, community news, and health and safety information."

They haven't issued formal statements, but other lawmakers, including Rep. Anthony Weiner and Rep. Eliot Engel, both Democrats from New York, seemed receptive to the idea of a merger.

During a Feb. 28 hearing of the House Judiciary Committee's Antitrust Task Force, Weiner said the notion that the merged companies would achieve monopoly status was "wildly exaggerated."

"Sometimes mergers serve to help an industry and help move choice forward," he said. Similarly, Engel, during a March 7 House Energy and Commerce subcommittee hearing, urged that the proposed merger not be rejected outright.

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