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Is a combined XM-Sirius good for consumers?

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The initial fanfare of Sirius Satellite Radio's (NASDAQ:SIRI) purchase of larger rival XM Satellite Radio Holdings(NASDAQ:XMSR) has died down for now. But I am sure it will heat back up in a huge way once Sirius CEO Mel Karmazin brandishes his tongue at federal regulators, who will want to know how combining the two companies into the nation's sole satellite radio provider will benefit consumers.

For one, consumers do have a range of choices for audio entertainment in the car these days. Standard analog terrestrial radio, the newer HD Radio, and portable music players like the iPod can all be seen as competition to satellite radio. This is a very valid argument, and it's hard to refute when the majority of new passenger vehicles and SUVs include an "auxiliary input" on their factory radios to make it easy to listen to that entire music collection on the road from your iPod or other MP3 digital music player.

If we remember history, though, federal regulators blocked a similar proposal from satellite TV operators DirecTV Group (NYSE:DTV) and EchoStar Communications (NASDAQ:DISH) back in 2002. At that time -- and still today -- there was ample competition. Analog (and free) TV, pay TV in for the form of cable television and DVD players were all thought to be the competitors to satellite TV. Federal regulators didn't buy it, and the proposed merger did not happen. What is different here?

Technically, not a whole lot -- except this argument talks about entertainment while mobile, not stationary. Would a combined Sirius/XM be considered a "monopoly" when so many other consumer choices for in-vehicle entertainment exist? In one sense, no. But, if we are talking about a monopoly just in the arena of satellite radio, then yes -- a monopoly would exist in that market after a merger, almost by definition. If programming doesn't fit the needs of consumers and prices go up, a satellite radio consumer would not be able to turn to another satellite radio competitor -- as there wouldn't be one.

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Last updated: July 04, 2009: 07:27 AM

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