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XM-Sirius merger is anti-competitive: "The Emperor has No Clothes"

As a fervent and principled advocate of free markets and competition, I have also been a long-time proponent of principle/precedent-driven anti-trust enforcement under the law. I truly believe that real competition is good and that real, legally-determined monopolization is bad.

  • The Washington Post article today: "XM-Sirius Debate Comes down to Competition" goaded me to write.
  • When Gigi Sohn, of Public Knowledge, one of the biggest supporters of net neutrality, becomes a strong advocate for this merger, as in the public interest if they price and content regulate it to the hilt, we are in la la land and not in the land of competition ad antitrust.

Any principled antitrust analysis of the XM-Sirius merger will find this merger quite quickly to be a "no-brainer" decision -- that it is anti-competitive and illegal under long time anti-trust precedent and competition policy.

  • I believe the DOJ and the FCC will do a principle and precedent driven review of the XM-Sirius merger and will block it with great conviction.
  • The Washington Post article and Gigi Sohn have fallen into the trap that everything is politics and everything is just spin and negotiations.
    • NO! There are such things as law, as legal precedent, as sound policy, as the public interest -- that often get pressured and abused, but generally not trashed.
    • This may be the simplest, most straight-forward antitrust violation the DOJ and FCC have ever been confronted with. It's obvious!
      • Just as the childrens fable had lots of the emperor's people oohing and ahing at the beauty of his new "non-existent" clothes, it took the boy in the background to speak up and say the "Emperor has no clothes!"

The XM-Sirius merger is so over-the-line that it is actually a monumental waste of valuable and scarce Federal resources. XM and Sirius can't be serious. They must be hoping that the Federal Government is comatose.

  • If the DOJ and FCC endorse and enable an obvious government -created duopoly to become a monopoly, they would move the goal posts so far from existing precedent that they could not legally justify blocking almost any merger in the future.
  • If the DOJ or FCC approved this obvious attempt of monopolization, it would be open season on Federal antitrust and competition policy.

Let me explain why the XM merger is such an obvious no-brainer that it will be and should be blocked.

First, cut through all the slick spin and attempted re-framing of competition and how XM and Sirius want it to be defined and not as decades of Federal anti-trust enforcement have defined competition. This not about what a poll thinks or a press article says. It is about hundred-year law that has decades of precedent determining what is legal and what is not based on LEGAL PRINCIPLE.

Second, this is a clear government-created market. XM and Sirius could not be in business without the a government license of spectrum to create a national subscription based satelite service market. The FCC at the time granted the licenses contingent on them not being combined. The FCC was implementing competition policy not monopoly price regulation.

  • Spectrum is scarce and needs to be licensed to prevent chaos. Spectrum licensing is like traffic laws, without them there would be mayhem and no market.
  • The FCC was created in the 1920's period of time to bring order to the chaos of everyones' transmissions interfering with each others. I am not a big fan of the FCC, but clearly believe they have an extremely valid governmental purpose in managing spectrum so that it can be a commercially viable resource.

Without spectrum, XM and Sirius are nothing. Nada. That spectrum grant alone makes satellite radio a separate and distinct market for antitrust purposes. It just isn't that complicated.

  • Does Apple need spectrum to offer iPods?
  • Who programs an iPod? It's user does.
    • Who programs XM and Sirius? Multi-billion dollar corporations with hundreds of millions of dollars to spend on "exclusive" programming.
    • Are they trying to say that an average consumer "programmer" is in the same league and market as XM and Sirius? That's a joke.

Third, well what about over the air radio broadcast?

  • They are also licensed by the FCC and could not exist or do business without a government license to do so.
  • The government organized the over the air radio market in another era under a completely different business model.
    • They got free local spectrum licenses, for an advertising model, and had public obligations of carrying public interest messages and not transmitting indecent programming.
    • Satellite radio licenses enable a national radio market, for a subscription-based model and they do not have the obligation to not transmit indecent programming.
  • The government organized very different radio markets.
    • If organizing markets differently does not make them distinct markets from each other what would?

Let's cut to the chase here.

  • XM-Sirius want the Government to approve a duopoly to a monopoly.
  • While the Chicago school of antitrust, of which I subscribe to, believes it is still competitive to allow a market to go from 3 to 2 players in some very exceptional circumstances, I know of no serious antitrust expert that thinks allowing a duopoly become a monopoly is not substantially lessening competition. It would be oxymoronic and more simply moronic.

I am amazed that the press have not cut through the chatter and spin better on this.

  • This is a slam dunk. A no-brainer to block.
  • The DOJ and FCC can not and will not say this until they have collected and evaluated all the evidence.
  • But when they do, it is a really easy decision. They will say NO.