Karmazin: Merger price is right

Sirius CEO tells Congress deal won't mean higher fees

Sirius Satellite Radio CEO Mel Karmazin on Wednesday attempted to clear up confusion over the price customers would have to pay if his company and XM Satellite Radio are allowed to combine.

Karmazin told lawmakers on the House Commerce Committee's telecommunications panel that the most customers would have to pay is $25.95 if they choose to receive all of the programming available on both services.

"Prices will not go up," Karmazin told Rep. Ed Markey, D-Mass. "The only increase in pricing would be if you take content from both companies and their price comparison is $25.95, and the price will drop significantly from that."

Karmazin left the House Judiciary Committee with the impression that the combined service would cost consumers no more than the current $12.95 customers pay for one service.

While Karmazin said $25.95 would be the maximum for the immediate future, he said some customers could pay less than subscription for a single service package that didn't include all the programming. A music fan who didn't want sports programming could opt for a package that would cost less than $12.95, he told lawmakers.

"There will be a significant discount, and it looks closer to $10 than $2," he said.

He told lawmakers that they did not have to take him on his word alone, and that there were methods to enforce the price controls.

"You can come up with a way of holding our feet to the fire," he said.

Karmazin is attempting to convince lawmakers, the Justice Department, the FCC and consumers that allowing the two satellite services to combine is a good deal.

There was no firm consensus among lawmakers about the $13 billion deal as some said it looked good and some said it was a bad idea.

Broadcasters and some consumer groups are fighting the deal. They contend that the services are a discrete market and shouldn't be allowed to combine.

A single satellite service would give that company undue monopoly power.

"You can say a bike and a train and a plane and a car all compete on some level, but for what's important in defining a relevant market for competition that keeps prices down for the consumers and options open, that would not make sense," said Consumers Union vp Gene Kimmelman.

Karmazin contends the two services compete with everything from terrestrial radio to MP3 players.

While Karmazin was attempting to sell House Commerce Committee members, antitrust officials were answering questions about their efficacy in the Senate.

Sen. Herbert Kohl, D-Wis., said there is "an alarming decline" in the Justice Department's "antitrust enforcement efforts across the board, particularly with respect to mergers," according to the Associated Press.

Congressional Democrats have vowed in recent weeks to step up their scrutiny of antitrust enforcement. Kohl charged that the administration's "hands-off approach" has encouraged consolidation in a range of industries and hurt consumers by reducing competition.

The Senate Judiciary Committee's antitrust panel also said Wednesday that it will hold a hearing on the proposed Sirius-XM combination at a hearing March 20.

While the Sirius-XM deal dominated the Commerce Committee's hearing, it was not the only topic of concern to lawmakers. They also wondered about the effect new copyright royalty rates would have on webcasts.

Under a recent decision by the Copyright Royalty Board, commercial webcasters will have to pay 8 cents per song for each song played last year, increasing to 11 cents per song this year and rising to 19 cents in 2010.

The rates can still be appealed, either to another hearing of the copyright board or to federal court. Webcasters contend that the rate increase approaches 30% per year for four years.

Rep. Mike Doyle, D-Pa., called the new rate a "body blow" that makes "little sense" because it forces the newest and arguably most vulnerable music service to pay the highest royalty.

The CRB's decision can be appealed.
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