Information and Document Request for XM Satellite Radio Holdings Inc.
INFORMATION AND DOCUMENT REQUEST FOR XM SATELLITE RADIO HOLDINGS INC.
November 2, 2007
Corporate Documents and Other Agreements:
A. Provide any and all agreements and like documents relating to the Transaction, including, but not limited to, the Merger Agreement and any and all attachments, appendices, side or separate letter agreements and like documents by and between the Applicants.
B. Provide any documents relating to:
(1) agreements with major retailers, including, but not limited to, Wal-Mart, Best Buy and Circuit City, relating to the marketing and sale of XM radio receivers and related equipment (including FM wireless transmitter modulators), including commissions, advertising credits, subsidies, co-share advertising arrangements and the provision of complimentary XM service subscriptions to equipment purchasers;
(2) agreements with aftermarket equipment manufacturers or distributors, including, but not limited to, Audiovox, Delphi, Pioneer, AGT, Alpine, Sony, Polk and eton/Grundig, relating to the manufacture, distribution and/or marketing of XM radio receivers and/or related equipment (including FM wireless transmitter modulators), including commissions, advertising credits, subsidies, co-share advertising arrangements and the provision of complimentary XM service subscriptions to equipment purchasers;
(3) programming agreements relating to specialized channels, including sports and entertainment programming, including, but not limited to, Major League Baseball, MLB Home Plate, National Hockey League, the PGA Tour, Andretti Green Racing, Indy Racing League, ESPN Radio, ESPN Sports, Fox News, Fox Sports, CNN and the Food Network;
(4) agreements relating to programming with celebrity talent, including, but not limited to, Oprah Winfrey, Bob Dylan, Snoop Dog, Ludacris, Ellen DeGeneres, Tyra Banks, Bill O’ Reilly, Larry King, Opie and Anthony, and Graham Nash;
(5) agreements with car, truck, boat, recreational vehicle and motorcycle manufacturers relating to the marketing, sale and/or installation of XM equipment and service contracts, including revenue sharing, training for vehicle sales staff, service activation, subsidies, provision of complimentary XM subscriber service to vehicle purchasers and lessees, and other services;
(6) licensing agreements with, including provisions regarding subsidies to, chipset manufacturers relating to chip and other equipment component sales to consumer electronic manufacturers for use with licensed XM radio receivers; Information and Document Request for XM Satellite Radio Holdings Inc.
(7) agreements relating to joint operations with Internet Service Providers (e.g., AOL), mobile phone companies, satellite video distributors (e.g., DIRECTV), or other entities regarding the use or distribution of XM-branded programming, including music, talk or sports channels, or other non-XM branded channels (e.g., National Public Radio);
(8) agreements with car, truck, recreational vehicle and motorcycle rental companies, such as Avis, National, Alamo and Zipcar, relating to the provision of XM radios and XM service in rental vehicles, including revenue sharing, training for vehicle rental staff; commissions, advertising credits, subsidies, co-share advertising arrangements and the provision of complementary XM service to vehicle renters;
(9) agreements between XM and Sirius relating to the joint engineering operation for the research and development of interoperable radio receivers; and
(10) agreements between XM and Sirius between 1997 and the present relating to sales, programming, service or equipment.
Data, Studies and Analyses
A. Provide all company-sponsored surveys and studies cited in the Joint Opposition to Petitions to Deny and Reply Comments or otherwise submitted to the Commission by or on behalf of XM, or XM and Sirius, in this proceeding, and any underlying data and analyses.1
B. Provide the following materials, as well as any underlying data or analyses, used in the CRA Economic Analysis of the Competitive Effects of the Sirius-XM Merger:
(1) the number of FM and AM stations reaching each census block in the lower- 48 United States states (“lower-48 states”);
(2) the average number of FM and AM stations reaching each Zip Code Tabulation Area (“ZCTA”) in the lower-48 states;
(3) the number of XM subscribers in each ZCTA in the lower-48 states; and
(4) the cited demographic information for each ZCTA in the lower-48 states.
C. Provide any underlying data and analyses used in the Furchtgott-Roth Economic Enterprises’ study of the Sirius-XM Merger that are not already in the public record.
D. Provide all studies, analyses, evaluations, and strategic discussion materials prepared by or for XM, or XM and Sirius, after January 1, 2005, that are intended to offer guidance on the economic advisability of the proposed merger.
E. Provide all studies, analyses, and evaluations prepared by or for XM of subscriber churn from the automobile and retail sales sectors, respectively, for the period January 2001, to the present.
1 See XM Satellite Radio Holdings Inc., Transferor, and Sirius Satellite Radio, Inc., Transferee, Joint Opposition to Petitions to Deny and Reply Comments of Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc., MB Docket No. 07-57, filed July 24, 2007. Information and Document Request for XM Satellite Radio Holdings Inc.
F. Provide all surveys, analyses, and evaluations of listener behavior prepared by or on behalf of XM, including, but not limited to, audience studies (i.e., ratings data, usage, audience demographics, and geographic distribution of audience) for the period January 2001, to the present.
G. Provide all studies, analyses, and evaluations prepared by or on behalf of XM, or XM and Sirius, performed after January 1, 2005, regarding price projections for proposed new programming options and a la carte packages, including information relating to price stability, channels per programming package, and pricing comparisons between the current basic $12.95 package and new programming options on a per-channel basis.
H. Provide the following information on all promotions conducted by XM involving pricing, rebates, coupons, and all other forms of discounts offered to new or existing subscribers (including, but not limited to, discounts on equipment, service activation fees, installation charges, and service fees, such as free or discounted service trial periods), for the period January 1, 2005, to the present:
the name of the promotion;
the beginning date of the promotion;
the ending date of the promotion;
(4) the nature of the promotion (coupons, rebates, promotional pricing, etc.);
the effect of the promotion on prices (e.g., reduced monthly price by $5 per month for three months, two free months of service, $50 rebate on a radio, no activation fee, etc.);
(6) the eligibility and other requirements (e.g., new customers only, minimum subscription periods, purchases from specific retailers or original equipment manufacturers (“OEMs”), or of specific equipment, geographical limitations, etc.); and
(7) the number of subscribers that took advantage of the promotion.
I. For each such promotion described in the response to Question H above, provide copies of all documents supporting the response or otherwise relating to the promotion. Technical Information
A. Provide a list of the XM terrestrial repeaters deployed in each market since January 2001, and, for each such terrestrial repeater, provide the following information:
(1) latitude, longitude, and community;
(2) antenna type;
(3) antenna orientation;
(4) antenna downtilt;
(5) antenna height;
(6) Equivalent Isotropically Radiated Power (“EIRP”);
(7) dates that operation of the facility with those parameters commenced and ended;
(8) description of any technical modification to the facility; and
(9) dates that operation of the modified facility commenced and ended. Information and Document Request for XM Satellite Radio Holdings Inc.
B. Provide the methods or technologies of coding, compression, encryption, modulation, signal bandwidth and bit rate for both satellite and terrestrial repeater networks used since January 2001.
C. List all receiver models sold since January 2001 and include all chipsets data including the manufacturer of the chipset used in them. Provide any statistics showing whether these receivers could become interoperable with minor changes in the chipset design or in the software program of these receiver chips.
D. Provide the data sheet of technical characteristics for each chipset used in all receiver models sold since January 2001.
. Provide a description of all efforts to develop and commercialize interoperable satellite radio receivers and any difficulties in such development and commercialization. F. Describe all steps necessary to migrate all of XM’s subscribers to a common technology platform and the cost the company and its customers will incur to implement such a migration.
G. Provide maps, in .gxt format where possible, of the actual or expected geographic coverage area(s) for each of the XM satellites already in orbit or under development, including associated power flux density contours. Describe what factors went into the selection of the geographic coverage areas for the XM satellite networks, as well as any technical, economic, or other considerations that limit the ability of the XM satellite network to serve U.S. states and territories outside the contiguous United States.
IV. Claimed Public Interest Benefits
A. Provide a detailed description of each of the cost savings expected to be realized as a result of the proposed transaction. For each of these anticipated cost savings:
(1) provide a full explanation as to why those cost savings would not be achieved absent the proposed transaction;
(2) provide a quantification of the cost savings and an explanation of how the quantification was calculated, including all assumptions and their sources;
(3) state separately the one-time fixed cost savings, recurring fixed cost savings, and variable cost savings (in dollars per unit and dollars per year); and
(4) provide sufficient supporting evidence to demonstrate that these cost savings will result in cognizable public interest benefits under our merger review standard.
B. Describe any other efficiencies that are expected to occur as a result of the proposed transaction. For each of these other anticipated efficiencies:
(1) provide a full explanation as to why those efficiencies would not be achieved absent the proposed transaction; Information and Document Request for XM Satellite Radio Holdings Inc. Page 5 of 12
(2) provide a quantification of the efficiencies and an explanation of how the quantification was calculated, including all assumptions and their sources; and
(3) provide sufficient supporting evidence to demonstrate that these efficiencies will result in cognizable public interest benefits under our merger review standard.
C. With respect to the synergies Applicants expect will materialize and result in more programming choices at lower prices, including claimed benefits from a la carte programming and programming efficiencies: (see Consolidated Application at 9-11, 13, 172; Joint Opposition at 10-14, 19-21):
(1) list each audio and video channel distributed in the United States currently by XM and for each such channel state: (a) whether the content is exclusive to XM; and (b) whether the content is also available on Sirius or over other media, including but not limited to terrestrial broadcast radio, cable television, Internet stream or download/podcast, or HD radio;
(2) for each channel identified in question (1)(a), indicate whether the company has obtained the rights necessary, if any, to distribute the programming by the combined company on an a la carte basis or as part of the “best of” or other proposed programming packages.
(3) with respect to the claim that the “combined company will be able to consolidate redundant programming,” provide a list of channels which are duplicative on XM and Sirius and expected to be consolidated.
(4) explain why the proposed billing credit for subscribers who do not elect adult programming is a merger-specific benefit. In addition, address whether the Company would offer such a credit in the absence of merger approval.
(5) explain what short-term and long-term plans currently exist to “provide increased opportunities for a wider variety of content providers,” to distribute niche programming to a wider audience via the merged entity. Explain why this benefit will only be achieved through the Transaction.
(6) with respect to radio receivers and other equipment needed to access the proposed, new program packages: (a) provide all documents regarding the claim that “subscribers will be able to continue to use their existing radios.” Explain in detail what equipment, including any enhancements or additional devices, will be needed by subscribers to access these packages. Identify Applicants’ plans regarding target dates and the projected costs to subscribers for any enhancements or additional devices;
2 See XM Satellite Radio Holdings Inc., Transferor, and Sirius Satellite Radio Inc., Transferee, Consolidated Application for Authority to Transfer Control, filed Mar. 20, 2007. Information and Document Request for XM Satellite Radio Holdings Inc. Page 6 of 12 (b) if certain equipment or enhancements will be needed to access certain of these programming packages, but not others, specify the exact equipment and/or enhancements (e.g., chipsets, compression techniques) that will be required to make each of these programming packages available; and
(c) provide all documents regarding the claim that “subscribers will eventually purchase new radios capable of receiving all of the content of both services.” Explain whether all Sirius and XM subscribers – not just subscribers that select a la carte programming – will be required to purchase new radios capable of receiving all of the content of both services.
(7) provide any and all documents that discuss, identify, quantify, or otherwise relate to the anticipated synergies.
D. With respect to Applicants’ claim that the merger will “foster the commercial introduction of interoperable satellite radios” thereby providing greater customer choice and convenience (see Consolidated Application at 15-16):
(1) explain whether Applicants will make commercially available the “radio that is interoperable with each other’s networks” as developed by the jointly funded engineering team and described in the Consolidated Application. If so, explain when this interoperable radio prototype will be commercially available.
(2) if not, explain whether Applicants will make commercially available a different radio prototype capable of receiving Applicants’ combined signals, and when it will be available for commercial distribution.
(3) provide all documents that detail the intermediate steps, internally and with regard to equipment manufacturers, that will occur prior to the commercial availability of radios capable of receiving all of the content of both services.
(4) identify Applicants’ plans and target dates for the commercial distribution of interoperable radios at retail distribution centers and via automobile manufacturers. As part of this response, explain Applicants’ plans for making new receiver equipment or enhancements available to consumers who have existing automobile SDARS receivers.
(5) identify electronics manufacturers who have committed to, or have expressed an interest in, producing Applicants’ interoperable radio;
(6) identify anticipated prices for such equipment;
(7) identify and describe Applicants’ plans to subsidize interoperable radios;
(8) identify OEMs that have committed to installing interoperable radios. (9) provide any and all documents that discuss, identify, quantify, or otherwise relate to the anticipated synergies; and
(10) explain why these claimed benefits will be achieved only through the Transaction.
E. With respect to Applicants’ claim that the merger will accelerate deployment of advanced technology (see Consolidated Application at 14):
(1) identify the “wider range of low cost, easy-to-use, multi-functional devices” that will result from the merger; Information and Document Request for XM Satellite Radio Holdings Inc. Page 7 of 12
(2) identify the planned new services, such as advanced data and telematics services, including enhanced traffic, weather and infotainment offerings that will result from the merger;
(3) identify any plans to make available to XM subscribers a service similar to SIRIUS Backseat TV, and when this service will be available to XM subscribers (see Joint Opposition at 22);
(4) explain how the merger will enhance the delivery of emergency services programming and information (see Joint Opposition at 24);
(5) with regard to XM’s services to business/commercial customers: (a) identify services offered by XM and the subscription fees; and (b) identify which services will be available post-merger, their subscription fees, and any distinctions between services currently available; and 6. explain why these claimed benefits will be achieved only through the Transaction;
(7) provide any and all documents that discuss, identify, quantify, or otherwise relate to the anticipated synergies and claims.
F. With respect to Applicants’ claim that the merger will safeguard the future of satellite radio and produce a stronger, more stable competitor in the audio entertainment market (see Consolidated Application at 17-20):
(1) identify whether the merged entity will eliminate any of the satellites currently deployed by Applicants, respectively;
(2) identify whether the merged entity will eliminate any of the repeater networks currently deployed by Applicants, respectively;
(3) identify whether Applicants, absent the merger, will have access to capital markets to sustain continued research, development and technological innovation; and
(4) provide any and all documents that discuss, identify, or otherwise relate to forecasts projecting ahead for periods beyond three years regarding the financial performance of the firm, including but not limited to subscribers, revenues, costs, profits, cash flow, and overall viability of the firm.
G. Describe any other public interest benefits that are expected to occur as a result of the proposed transaction, and provide a full explanation as to why those benefits would not be achieved absent the proposed transaction. Provide documents that serve to provide sufficient support for these benefit claims so that the Commission can verify the likelihood and magnitude of each claimed benefit. Information and Document Request for XM Satellite Radio Holdings Inc.
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