E8-20735. Applications for Consent to the Transfer of Control of Licenses, XM Satellite Radio Holdings Inc., Transferor, to Sirius Satellite Radio Inc., Transferee

AGENCY:

Federal Communications Commission.

ACTION:

Notice; approval of merger.

SUMMARY:

This document approves the consolidated application of Sirius Satellite Radio Inc. (“Sirius”) and XM Satellite Radio Holdings Inc. (“XM”; 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 SDARS in the United States and eliminates the prohibition on one licensee of satellite digital audio radio service (or “SDARS”) acquiring control of the other SDARS licensee.

DATES:

The Commission's action became effective July 25, 2008.

FOR FURTHER INFORMATION CONTACT:

Marcia Glauberman, Industry Analysis Division, Media Bureau, at [phone], or Rebekah Goodheart, Industry Analysis Division, Media Bureau, at [phone].

SUPPLEMENTARY INFORMATION:

This is a summary of the Federal Communications Commission's Memorandum Opinion and Order and Report and Order (the “Order”) in MB Docket No. 07-57; FCC 08-178, adopted July 25, 2008, and released August 5, 2008. The full text of this document is available for public inspection and copying during regular business hours in the FCC Reference Center, Federal Communications Commission, 445 12th Street, SW., CY-A257, Washington, DC 20554. These documents will also be available via ECFS (http://www.fcc.gov/​cgb/​ecfs). The complete text may be purchased from the Commission's copy contractor, 445 12th Street, SW., Room CY-B402, Washington, DC 20554. To request this document in accessible formats (computer diskettes, large print, audio recording and Braille), send an e-mail to [e-mail] or call the FCC's Consumer and Governmental Affairs Bureau at [phone] (voice), [phone] (TTY).

Summary of the Order

1. In 1997, the Commission established the SDARS service and determined that there would be two initial SDARS licenses, sold at auction to different parties. The 1997 SDARS Service Rules Order, 62 FR 11083, 11102, March 11, 1997 (“1997 Order”), contained the following language:

Even after DARS licenses are granted, one licensee will not be permitted to acquire control of the other remaining satellite DARS license. This prohibition on transfer of control will help assure sufficient continuing competition in the provision of satellite DARS service.

2. In this Order, the Commission found that the merger would be prohibited by the language in the 1997 Order. For the reasons summarized below, however, the Commission found that approval of the merger, subject to the Applicants' voluntary commitments and other conditions, would benefit consumers by making available to them a wider array of programming choices at various price points and affording them greater choice and control over the programming to which they subscribe, and that those benefits would exceed the harms. For the same reasons, the Commission concluded that elimination of the prohibition on one licensee of SDARS acquiring control of the other SDARS licensee, on balance, would serve the public interest.

3. The Commission's decision was based on consideration of the consolidated application of Sirius and XM for consent to the transfer of control of the licenses and authorizations held by Sirius and XM and their subsidiaries for the provision of SDARS in the United States. After reviewing the empirical data available as part of its competitive analysis, the Commission determined there was insufficient evidence in the record to predict the likelihood of anticompetitive harms. It therefore evaluated the Application under “worst-case” assumptions, i.e., that the relevant market is limited to SDARS. This approach permitted the Commission to protect consumers from potential adverse effects of the transaction while also allowing the Commission to balance potential harms against potential public interest benefits. The Commission concluded that the merger, absent the Applicants' voluntary commitments and other conditions, would result in potential harms. The Commission found that, with the Applicants' voluntary commitments and other conditions, the potential public interest benefits of the transaction, on balance, outweigh the potential harms, and approval of the transaction is in the public interest.

4. The Commission conditioned grant of the application on the merged firm's fulfillment of the Applicants' voluntary commitments and other conditions. The Commission accepted the Applicants' voluntary commitments and imposed conditions to:

a. Cap prices for at least 36 months after consummation of the transaction, subject to certain cost pass-throughs after one year. In addition, six months prior to the end of commitment period, the Commission will seek public comment on whether the cap continues to be necessary in the public interest and will determine whether it should be extended, removed, or modified. The merger approval is conditioned on the Commission's ability to modify or extend the price cap beyond the three-year commitment period.

b. Offer to consumers, within three months of consummation of the transaction, the ability to receive a number of new programming packages, including the ability to select programming on an a la carte basis.

c. Make available four percent of its capacity for use by certain Qualified Entities, and an additional four percent of capacity for the delivery of noncommercial educational or informational programming, which will enhance the diversity of programming available to consumers.

d. Offer interoperable receivers in the “retail after-market,” i.e., receivers available at retail outlets for installation in consumers' automobiles or homes, within nine months of consummation of the merger.

e. Refrain from entering into any agreement that would grant an equipment manufacturer an exclusive right to manufacture, market, and sell SDARS receivers. Applicants also commit to refrain from barring any manufacturer from including in any receiver non-interfering digital audio broadcast (or, “HD Radio”) functionality, iPod compatibility, or other audio technology.^[1] In addition, Applicants will make available the intellectual property needed to allow any device manufacturer to develop equipment that can deliver SDARS.

f. File the applications needed to provide Sirius satellite service to Puerto Rico via terrestrial repeaters within three months of the consummation of the merger.

5. The Commission reiterated that SDARS licensees are already prohibited, independent of the merger, from using terrestrial repeaters to distribute local content—including both programming and advertising—that is distinct from that provided to subscribers nationwide via satellite. The Commission also prohibited the merged entity from entering into agreements that would bar any terrestrial radio station from broadcasting live local sporting events.

6. The Commission clarified that the merged entity must comply with the Commission's equal employment opportunity rules and policies for broadcasters, including periodic submissions to the Commission consistent with the broadcast reporting schedule.

Federal Communications Commission.

Marlene H. Dortch,

Secretary.

Footnotes

1.  Although the Commission found it unnecessary to impose a condition requiring the inclusion of HD Radio technology in SDARS receivers, it recognized that important questions were raised about HD Radio that warrant further examination in a separate proceeding. The Commission will initiate a notice of inquiry within 30 days after adoption of the merger order to gather additional information on the issues.