Radio to the People

This week marked the anniversary of the announcement that the satellite radio firms Sirius and XM plan to merge, yet so far the companies have not been allowed to consummate the marriage. That’s because regulators are standing in the way, backed by well-heeled Washington lobbyists out to prove that ridiculous ideas still have an impact if they come with dollar-sign attachments.

For instance, the National Association of Broadcasters (NAB) has spent more than US$4 million lobbying to convince regulators that the XM-Sirius deal would create a radio monopoly. That’s like arguing that the Kindle, Amazon’s (Nasdaq: AMZN) new wireless reading device, is a monopoly because it is the only e-book reading device that can download books using EVDO (evolution-data optimized) technology so the user can read them immediately. Yet neither new way of enjoying books or radio excludes all others.

Leaky Logic
NAB’s claims don’t hold up to scrutiny, especially when they try to have it both ways. As the Pacific Research Institute’s Daniel Ballon has pointed out, “the NAB concocted an absurd notion of competition” with its statement that “Sirius and XM compete directly with us, but we don’t compete directly with them.” George Orwell savaged that kind of logic in his novels, and it does not belong in the debate halls of the most powerful nation in the world.

As anyone can easily verify, there are tons of radio stations, both on the airwaves and on the Internet. When Internet radio becomes available in cars, NAB will probably come up with an equally silly “duopoly” argument. However, the bad news is that if XM and Sirius don’t merge, they will likely both be wiped out, as neither station has ever made a profit and both are bleeding money. Together they lost nearly $2 billion in 2006. That seems to be the NAB’s strategy as a way to avoid innovation in an industry that has a lot of similarities with the horse and carriage before Ford came along.

It’s easy to understand the techno-Luddite urge for older, less innovative groups of companies to use the law to stop competition, but it is much more difficult to understand why the government won’t step up and make a sensible decision. The future of radio choice may be at stake and America’s lawmakers seem completely out to lunch.

Standing on Tradition
In attempting to explain why his agency hasn’t yet acted on the merger, FCC chief Kevin Martin recently said, “Traditionally the commission doesn’t act on those until after the Department of Justice — 99 out of 100 times the Department of Justice goes first and the Department of Justice hasn’t acted yet on that merger.” With explanations like that, no wonder the country is clamoring for change.

Heritage Foundation senior analyst James Gattuso recently expressed frustration with the DoJ saying, “rumors of imminent action at DoJ have frequently made the rounds: the DoJ is going to approve the deal, the DoJ is going to reject the deal, the DoJ is going to attach conditions on the deal. I’m half-expecting to read that the DoJ’s dog ate the files on the deal.”

Well, it is clear that the DoJ is sitting on the deal, and that needs to change immediately. With all the lobbying scandals Americans have weathered, somebody in D.C. should finally start making decisions based on the facts instead of on how much money is in play.

New technologies and innovation have always driven America’s success. By standing in the way of the growth of new technology, government regulators are doing a massive disservice not only to avid radio listeners, but also to those who depend on the sector for their jobs. It’s time to let the market work and lift the heavy government boot that is holding down the radio of the future. Let a merged satellite radio reach the people now.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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