Satellite radio saga takes unexpected turn

[July 18, 2008]  WASHINGTON (AP) -- During his tenure at the Federal Communications Commission, Jonathan Adelstein has been a fierce critic of government policies that allow big media companies to get bigger. So it came as a surprise when the Democratic commissioner put forth a proposal that would allow the nation's only two satellite radio companies to merge.

Adelstein, the potential deciding vote, told The Associated Press on Thursday that he would support Sirius Satellite Radio Inc.'s $3.1 billion buyout of XM Satellite Radio Holdings Inc. if the companies agree to a six-year price cap and make one-quarter of their satellite capacity available for public interest and minority programming, plus other conditions.

It may be that the commissioner, a seasoned political operator who spent 15 years as a Senate staffer, recognized a limited window of opportunity.

Thus far, two of the five members of the commission have voted to approve the satellite radio deal, one vote shy of a majority. All eyes have been on Republican Deborah Taylor Tate, who is expected ultimately to vote in favor of the deal, but as a friend to the broadcast industry that opposes it, has been under intense pressure to reject it.

Her reluctance to cast the deciding vote created an opportunity for Adelstein to extract further conditions from the companies.

"It's critical that if we're going to allow a monopoly, that we put in adequate consumer protections and make sure they're enforced," Adelstein told the AP on Thursday.

Adelstein is seeking stronger concessions than the companies offered voluntarily one month ago. That offer led to FCC Chairman Kevin Martin's recommendation that the deal be approved. Robert McDowell, also a Republican, has voted in favor, too. Democrat Michael Copps is expected to be a "no" vote.

Commissioners are able to vote on items "on circulation," meaning by way of computer, rather than at a public meeting. Those votes are generally not made public until all have been cast.

Following Adelstein's offer, Martin, Tate and both companies all declined to respond to requests for comment.

XM and Sirius first announced their intent to merge in last year. The Justice Department cleared the combination in March. Martin made his recommendation for approval last month.

The companies have faced a tough challenge in gaining approval because the FCC, in creating the satellite radio industry in 1997, prohibited the only two licensees from merging. In an effort to prove the combination is in the public interest, lawyers for the companies volunteered to submit to a number of conditions, including a three-year price cap, a time frame Adelstein would like to see doubled.

They also agreed to turn over 24 channels to noncommercial and minority programming.

Adelstein is seeking 25 percent of the companies' satellite capacity for public interest programming -- 10 percent for noncommercial programming and 15 percent for minority programming. That potentially would work out to about 75 channels.

XM broadcasts more than 170 channels, Sirius over 130 channels.

The companies also offered to adopt an "open radio" standard, meant to create competition among manufacturers of satellite radios. The condition was met with skepticism because the companies subsidize the price of radios, making it unlikely that competitors will get into the business.

Adelstein is proposing that the companies be required to include a digital radio tuner in any radios they subsidize that also include regular, non-digital AM-FM service.

Adelstein also wants to set up an enforcement regime to make sure the companies adhere to the conditions, something that was not outlined in the previous voluntary offer.

Sirius and XM have promised to include an "a la carte" offering that would be available within three months of the close of the deal. In addition, they have pledged to offer radios that are capable of receiving both XM and Sirius service within one year.

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On the Net:

Federal Communications Commission: http://www.fcc.gov/

Sirius: http://www.sirius.com/

XM: http://www.xmradio.com/

[Associated Press; By JOHN DUNBAR]

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.