A la carte on the sat radio menu

Choice plan aims to boost XM-Sirius merger chances

Sirius Satellite Radio CEO Mel Karmazin outlined his plans Monday to allow customers to choose which channels they want if his company is allowed to merge with its competitor.

During a speech at the National Press Club, Karmazin touted the so-called a la carte option as one of the benefits that the proposed merger with XM Satellite Radio would bring to customers.

"We need to build the subscription business base of satellite radio to strengthen our business and better leverage our high fixed costs," he said in a speech in Washington. "We are confident that a lower price point (and) more programming choices will help us do just that."

In addition to allowing customers of the combined company to decide what they want, Karmazin said costs for the service would go down for customers who choose to have only 50 channels.

According to the plans announced Monday, customers could pay as low as $6.99 per month for 50 channels from one company, up to $16.99 per month where customers could keep their existing service, plus choose from a "best of" from both companies. Current monthly subscription for both companies is $12.95, and there is no channel choice.

While Karmazin has pledged that no current device will be rendered obsolete by the merger, the pricing plans would require customers to buy new devices.

Karmazin is trying to convince the FCC and the Justice Department to approve the deal. XM and Sirius agreed to the deal in February. Many consumer groups, nearly 100 lawmakers and the National Association of Broadcasters oppose the merger.

The a la carte option is a favorite of FCC chairman Kevin Martin, who has pushed such subscription services as cable and satellite TV to offer the option to allow consumers to control what comes into their homes.

In his speech, Karmazin said broadcasters want it both ways. Companies like Clear Channel portray satellite and Internet radio services as formidable competitors in one government filing, then say they don't like them when it comes to the merger.

The combined company would have 14 million customers but account for only 3.4% of radio listeners, he said.

"Some argue that a merged company would have incentives to raise prices, but that argument also falls flat, given that our largest and most potent competitor is terrestrial radio, and that's for free," Karmazin said.

NAB pooh-poohed Karmazin's announcement, saying there is nothing that could stop Sirius or XM from giving customers the a la carte deal today.

"Policymakers should not be hoodwinked by today's announcement, since nothing is stopping either XM or Sirius from individually offering consumers a more affordable choice in limited program packages," NAB spokesman Dennis Wharton said. "The history of antitrust law demonstrates that two hotly competitive companies will promise anything to become a monopoly."

New opposition to the deal also emerged Monday, with National Public Radio telling the FCC that the merger would give the combined company too much leverage over programmers like themselves.

"A monopoly (of satellite radio) providers would certainly be able to demand less favorable licensing terms, thereby forcing NPR and others to decide between program quality and carriage," NPR wrote in its filing.

Reuters contributed to this report.
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