Does the Lack of Inter-operable Radios Mean Less Competition and Monopoly Power?
The Carmel Group's 4th Study Opposing the Proposed Sirius-Xm Merger
Recently, as it relates to arguments that apparently support the proposed merger of Sirius Satellite Radio (Sirius) and XM Satellite Radio (XM), a strange message has entered the public forum: because Sirius and XM never met their obligation to develop radio receivers that could receive both services (i.e., the so-called inter-operable satellite radios), there is inadequate competition between Sirius and XM to support the government’s antitrust opposition. This non-sequitur attempts to further break the universe of current subscribers and would-be subscribers into two distinct and separate bodies of satellite radio subscribers. Acknowledging that strong competition exists between Sirius and XM for new (i.e. would-be) subscribers, this odd argument instead focuses on current satellite radio subscribers.
Focusing on these current subscribers, this argument maintains that if the barriers in front of changing to a competitive provider are so high that the current subscriber is essentially kept from switching to a competitor, then the two operators do not actually compete for current subscribers. By not timely developing and distributing an inter-operable radio (thus easing those barriers), the argument goes, Sirius and XM showed a lack of competition between them. This perplexing argument finally posits that preventing Sirius and XM from merging would thus not gain anything for consumers (because the two providers already have minimal competition between them, at least as it relates to current subscribers). It is then argued that the U.S. Department of Justice’s (DOJ) and the Federal Communication Commission’s (FCC) opposition to the proposed merger is not warranted, because permitting a merger would have little ill effect on the consumer in the marketplace. Yet, the truth lies clearly elsewhere. Unfortunately for Sirius’ and XM’s ill-advised attempt to become a monopoly – and as each of The Carmel Group’s prior three studies have clearly exhibited – the satellite radio duopolists do compete, vigorously, for both new and current subscribers. As this study shows below, the real truth is that the failure to date of Sirius and XM to develop an inter-operable radio has occurred primarily because of the opposite of what this quirky argument posits. Indeed, the lack of an inter-operable radio occurs at best because of intense existing competition between Sirius and XM, or at worst because of premeditated collusion.