Saturday, March 03, 2007

Urge to Merge Part 8: What Satellite Radio Must Do

In our opinion, this is what satellite radio must do to get this merger passed. Our assumption is that the FCC and DOJ will accept a broad definition of the relevant product market; otherwise, the deal is dead on arrival.

1.Assuage their customers that their investment in satellite radio is protected and they will not lose content and that prices will be held in check. They have already done this, but they need to go further.

2. Demonstrate to the FCC that subscription prices will be held in check by market forces, and not by price guarantees.

3. Demonstrate that they need the entire bandwidth of both companies.

4. Demonstrate that they both have plans to implement hierarchical modulation techniques that will happen regardless of the merger. They need to put forth definitive timelines.

5. Successfully define the relevant product market such that it includes all sources or audio entertainment.

6. Demonstrate the substitutability between the relevant product market participants.

7. Successful define the relevant geographic markets such that the combined company is not a monopoly in any markets. NAB has given them some ammunition with which to work.

8. Demonstrably prove from where the purported cost savings and synergies will come. They will need to show a timeline for these savings. Their arguments will be picked apart, so no pie in the sky arguments.

9. Demonstrate that the cost savings are not at the expense of others. In other words, their market power won’t result in another entity losing; for example, that their combined market power won’t allow them to pay less for content or command higher advertisement rates. If someone loses, it is not a net public good.

10. Demonstrably prove in concrete terms how the cost saving will benefit the consumer.

11. Lip service to the public interest benefit is all important. All arguments must be framed with this in mind.

12. Offer concrete examples of how they intend to enrich the present content offering and how market forces will drive it, not promises.

13. Demonstrate technically how they will eventually integrate the services into a single service and how the consumer will be protected.

14. Demonstrate that the combined company will not be a detriment to terrestrial radio, that the combined company is no more a detriment than the two companies operating separately.

There are many other things that we are sure will come to mind.

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