[QUOTE]Clear Channel to FCC: XM/Sirius is illegal, but let's deal

By Matthew Lasar | Published: February 11, 2008 - 10:12AM CT

As the proposed merger of XM and Sirius satellite radio approaches its first anniversary, Clear Channel Communications has filed its seventeenth statement with the Federal Communications Commission on the matter. The comment is similar to some of its previous filings: the merger would constitute an unfair and illegal monopoly, but Clear Channel might accept it if the FCC does something good for the broadcast giant as well.

Clear Channel's latest statement, posted with the FCC on February 5, takes the same stand against the merger as does the National Association of Broadcasters: a combined XM/Sirius would constitute a satellite radio monopoly, prohibited by the FCC's original 1997 Order establishing the Satellite Digital Audio Radio Service (SDARS). In addition, Clear Channel claims that a merged XM/Sirius would constitute unfair competition to terrestrial radio, able to cut exclusive relationships with content providers.

"Such a strategy would seriously jeopardize terrestrial broadcasters," the company warns. "By strategically denying key programming sources to terrestrial operators, the merged satellite firm is likely to reduce terrestrial broadcasters' ability to sell to advertisers, thus creating a spiral in which terrestrial broadcast content quality declines, while satellite content increases, without any cost reducing efficiencies or any increase in listener/advertiser satisfaction."

But Clear Channel adds that if the FCC accepts the merger, it should at least cut the amount of satellite spectrum XM/Sirius controls, bar the merged entity getting into local broadcasting, and require it "to embed HD radio reception capability into all satellite radio receivers."

That last proposal comes from HD Radio developer iBiquity, which lists Clear Channel as an investor and is endorsed by the HD Radio Alliance, to which Clear Channel belongs. And Clear Channel says it supports the positions of both parties.

In mid-January, Robert Struble, CEO of iBiquity Digital, met with FCC Commissioner Robert McDowell and his top staff to outline iBiquity's fear "that a combined XM/Sirius could be in a better position to hamper iBiquity's ability to introduce HD Radio(TM) technology into the marketplace," according to the company's filing.

Struble charged that XM and Sirius may have discouraged further HD expansion through deals with various car makers. Some auto manufacturers, such as Ford, have begun offering HD Radio receivers in their newest models.

"As the sole provider of satellite services, the merged entity will have greater leverage over retailers, car manufacturers and supplies," Struble warned. "This combined satellite monopoly would be in a better position to act anticompetitively to exclude HD Radio products."

Their statement asked the FCC to require a merged XM/Sirius to integrate HD Radio technology into their satellite receivers and to abstain from setting up exclusive arrangements with the auto industry. Clear Channel's filing in support of HD Radio's position represents a shift in the broadcasting company's tactics regarding the XM/Sirius merger. Previous statements tried to leverage Clear Channel's guarded acceptance of the satellite deal in exchange for the company's Holy Grail: changes in the FCC's media ownership rules.

In July of last year, Clear Channel submitted one of a series of FCC filings that literally called the proposed XM/Sirius deal a "peril" to terrestrial radio, a cartel that could "lock up high-value content," denying free radio broadcasters access to it. But the firm said that the proposal might be acceptable "if the Commission were to contemporaneously eliminate all local radio ownership regulations, thus freeing local radio broadcasters to be in a position to match the competition between XM and Sirius that would be lost."

Clear Channel currently owns over 1,100 radio stations in the United States and about 9 percent of all frequencies. It has repeatedly lobbied the FCC to eliminate the eight-station cap on the number of radio frequencies an entity can own in big Arbitron-designated markets. But the company has also floated a more modest proposal: lift the limit to 10 stations in regions with 60 to 74 stations, and 12 in bigger areas. This would permit Clear Channel to own 12 radio stations in markets like New York City or Los Angeles.

Why has Clear Channel switched to the HD Radio proposal in its XM/Sirius filings? Chances are that the firm has tabled its former goal—at least for now—in light of the FCC's unpopular move in December to allow cross ownership of a newspaper and TV station in the same market.

Congress requires the FCC to review its media ownership rules every four years. Given the public opposition that FCC Chair Kevin Martin faced just getting the newspaper/TV rule enacted, it is unlikely that the agency will jump into another broadcast ownership rules proceeding any time soon. So while various media companies may ask for waivers of the ownership rules, most will probably take a break on trying to change them, at least for now.

XM and Sirius announced their plan to merge just short of a year ago. The union would require FCC and Department of Justice approval, neither of which has been forthcoming, troubling investors. Many observers expected a decision from both agencies late last year.
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[url]http://arstechnica.com/news.ars/post/20080211-clear-channel-to-fcc-xmsirius-is-illegal-but-lets-deal.html[/url]
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