Sunday, August 12, 2007

US Electronics Weighs in on the Merger

Last Friday, August 10, 2007, US Electronics (USE) had its latest comments on the merger published. USE has had numerous exparte meetings with the Commission and has commented before, but this is by far the most extensive comment, totaling 93 pages, including exhibits. USE never comes out against the merger; however, it suggests that conditions be placed on the merger, notably that there should be "open network access". It doesn't want to be shut out of the market. Clearly, USE is looking after its self interest, but it also brings up several valid consumer concerns. USE makes some very important points and is at the same time very fair-minded. Although USE does not come out against the merger, they shoot down most of XM's and Sirius' arguments for the merger.

USE comments appear to be well researched and bring the unique perspective of a designer, developer, and distributor of satellite radio. USE makes a number of assertions that we have no way of verifying, such as Sirius giving sole distributor rights to Directed Electronics (DCI) and XM giving sole distributor rights to AudioVox. The conclusion is that if there is a merger, then there will be a sole distributor of satellite radios. A sole distributor, according to USE, would stifle innovation, which would harm the public interest. USE references a recent DEI presentation where DEI 'referred to itself as Sirius' "[e]xclusive retail hardware partner"' as proof of its assertion that Sirius has selected DEI as its sole distributor.

USE cites Hush-a-Phone and Carterfone as precedents for an "open access network".

USE makes the points that once merged, subsidies can be used to prevent others from entering the manufacturing business. Or, there may be no subsidies, raising the cost to consumers. Also, there will be no incentive to give subsidies to retailers in order to make the selling of satellite radios profitable, again raising the cost of hardware to consumers.

USE also notes its lawsuit against Sirius, stating that the "performance of its agreement with Sirius was interdicted by Sirius' determination to use a single supplier for its network's satellite receivers, Directed Electronics, Inc."

The meat of USE's comments is here:

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