This excerpt taken from the SIRI 8-K filed Mar 21, 2007.
IV. THE TRANSACTION WILL NOT HARM COMPETITION IN THE MARKET
The various public interest benefits that would result from the proposed satellite radio merger will not be undercut by any adverse effects on competition. The Commission has emphasized that competition depends on consumers having choices among products that can be substituted for each other.43 The availability of such choices restrains all market participants,
43 See, e.g., Adelphia Order, 21 FCC Rcd at 8234 (¶ 59); Cingular-AT&T Wireless Order, 19 FCC Rcd at 21,552 (¶ 57).
because it enables consumers to respond to one carriers practices by simply switching to a substitute.44
The Commission already has an extensive record relevant to these issues. As the National Association of Broadcasters (NAB) explained to the Commission just two months ago, there can be no reasonable doubt that the current media marketplace is robustly competitive, and indeed exploding at the seams with consumer choices for both delivery mechanisms and content.45 Similarly, Clear Channel Communications, one of the largest owners of radio stations in the nation, has stated:
Given this indisputably competitive environment, economic forces will be more than sufficient to ensure that the proposed merger will have no anti-competitive effects in the market for audio entertainment services.
The Commissions product market analysis necessarily begins with the product supplied by the merging firms. As of December 31, 2006, XM and Sirius combined had approximately
45 2006 Quadrennial Regulatory ReviewReview of the Commissions Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, Reply Comments of the National Association of Broadcasters, MB Docket No. 06-121, at 34 (filed Jan. 16, 2007).
46 2006 Quadrennial Regulatory ReviewReview of the Commissions Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, Comments of Clear Channel Communications, Inc., MB Docket No. 06-121, at 10 (filed Oct. 23, 2006) (Clear Channel Comments, 2006 Quadrennial Regulatory Review).
14 million subscribers. One study predicts this will grow to 25 million by the beginning of 2010,47 and others have projected similar growth.48 Although satellite radio has proven to be an appealing and popular new product, the current 14 million subscribers pales in comparison to terrestrial radios approximately 230 million weekly listeners49 (and is also dwarfed by Internet radios 72 million monthly listeners50). Both companies offer many channels of music and a range of other programming, including national and international news, sporting events, and talk shows. Both also offer consumers a variety of ways to access this programming, including in their cars, on their computers, at home, and in a portable capacity. Despite strong initial growth, satellite radios market penetration remains quite limited: A recent Arbitron study found that satellite radio accounted for just 3.4 percent of all radio listening, spread out among the approximately 300 channels that XM and Sirius combined currently offer.51
48 See, e.g., Credit Suisse, 2007 Satellite Radio Outlook, Jan. 16 2007, at 7 (projecting 25.5 million subscribers by the end of 2009 and 28.9 million by the end of 2010); Stifel Nicolaus, Satellite Radio Merger Attempt Likely, Based on History & Risk/Reward, Nov. 27, 2006, at 10, 12 (projecting 27.0 million subscribers by the end of 2009 and 31.7 million subscribers by the end of 2010).
49 See infra n.59.
50 See Bridge Ratings, Digital Media Growth Projections, Feb. 19, 2007, at http://www.bridgeratings.com/press_021907-digitalprojectionsupd.htm (last visited Mar. 15, 2007).
51 Phil Rosenthal, Satellite deal foes dont hear message, CHICAGO TRIBUNE, Feb. 28, 2007, at http://www.chicagotribune.com/business/columnists/chi-0702280164feb28,0,1928140.column?coll=chi-navrailbusiness-nav (last visited Mar. 17, 2007) (summarizing the results of the Arbitron study); see also The Katz Radio Group, Satellite Radio Penetration, RADIOWAVES, Dec. 2006, at http://www.katz-media.com/pubs/RadioWaves/121206/RadioWavesDEC2006.pdf (last visited Mar. 17, 2007) (finding that satellite radio constituted 4.1 percent of the market).
This modest market share is not surprising. Todays audio entertainment marketplace includes services that did not even exist when the Commission first authorized satellite radio, many of which provide music as well as news, talk formats, public safety information, and a range of other valuable programming over the Internet and on handheld devices that can be used in a variety of locations, including through car stereo systems. Further, new devices and services emerge every day.52 The Commission has acknowledged this competition before,53 but it has yet to account fully for the many market developments of the past several years.54 Nationwide, the
53 See Flexibility for Delivery of Communications by Mobile Satellite Service Providers in the 2 GHz Band, the L-Band, and the 1.6/2.4 GHz Bands, Report and Order and Notice of Proposed Rulemaking, 18 FCC Rcd 1962, 1988 n.110 (¶ 44 n.110) (2003) (noting that satellite radio appears in many respects to compete directly with segments of the terrestrially based broadcast market) (citing Brian Steinberg, XM Satellite Radios Ads Generate Some Heavy Static, WALL ST. J., Feb. 1, 2002).
54 See 2006 Quadrennial Regulatory ReviewReview of the Commissions Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, Reply Comments of Clear Channel Communications, Inc., MB Docket No. 06-121, at 5 (filed Jan. 16, 2007) (stating that the vast majority of the competitive alternatives now available for audio entertainment did not become real participants in the marketplace until after 2003). In 2003, when the Commission last reviewed its media ownership rules, it identified radio listening as a product market that included only free AM and FM radio. 2003 Media Ownership Order, 18 FCC Rcd at 13,715-16 (¶ 245). At that time, the Commission further observed that the only other audio entertainment services, satellite radio and Internet audio streaming, competed directly with broadcast radio but were not adequate substitutes. See id. Specifically, the Commission found that satellite radio may be a substitute for broadcast radio, but only for the 600,000 people that subscribed to it at the time. Id. It similarly observed that Internet audio may be a substitute for broadcast radio when listening takes place while working on a computer or in a small office environment, but not in the mobile environment. Id.
audio entertainment marketplace today is characterized by a diversity and multiplicity of options that, despite some differentiation, offer consumers similar content and features.55