Here’s the backstory.
There are two satellite radio providers in the United States, Sirius and XM. I’ve been an XM subscriber for almost two years. Neither company has ever turned a profit, and it’s clearly difficult to remain in business if you’re losing money. So earlier this month, the two companies announced plans to merge.But that partnership may be blocked by the government.
Back in 1995, when the FCC originally assigned radio frequencies for satellite radio, it announced that “one (satellite radio) licensee will not be permitted to acquire control of the other remaining” provider. And while both companies describe their merger as a combination of equals, the bottom line is that, if Sirius and XM merge there will be only one satellite radio provider.
So the hurdle to a merger “would be high,” as FCC Chairman Kevin J. Martin announced. “The companies would need to demonstrate that consumers would clearly be better off, with both more choice and affordable prices.” However, this brings up an important question: Why should the government be in the business of deciding what’s best for consumers? Especially since in this case the consumers are perfectly able to decide for themselves.
The FCC should take note of the fact that when it comes to satellite radio, listeners are truly “consumers.” Regular radio (which has long been regulated by the FCC) is free. Anybody can buy an inexpensive radio receiver and listen for nothing. Most people, in fact, have several radios scattered around the house.
But satellite radio subscribers pay (about $13 every month) to listen. Thus, we’re able to express our displeasure at any time by canceling our subscription. So let’s suppose that the combined Sirius-XM company decided to balance its budget on the backs of its subscribers by doubling its fees. Angry listeners would revolt by canceling their subscriptions, and revenue would decline.
In other words, we don’t need the government to promote competition in this industry, because the pricing power of the market is very much there. Just as when the price of gasoline goes up people drive less, if the price of satellite radio were to go up, there would be fewer subscribers.
So much for the government’s concern about prices.