**Before the**

Federal Communications Commission

Washington, D.C. 20554

+----------------------------------+---+------------------------------+
| In the Matter of                 | * | MB Docket No. 07-57          |
|                                  | * |                              |
| Applications for Consent to the  | ) |                              |
|                                  | * |                              |
| Transfer of Control of Licenses  | * |                              |
|                                  |   |                              |
| XM Satellite Radio Holdings      | * |                              |
| Inc.,                            | * |                              |
|                                  | ) |                              |
| Transferor                       | * |                              |
|                                  | * |                              |
| To                               |   |                              |
|                                  | * |                              |
| Sirius Satellite Radio Inc.,     | * |                              |
|                                  | ) |                              |
| Transferee                       | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  |   |                              |
|                                  | * |                              |
|                                  | * |                              |
|                                  | ) |                              |
|                                  | * |                              |
|                                  | * |                              |
+----------------------------------+---+------------------------------+

**MEMORANDUM OPINION AND ORDER AND REPORT AND ORDER**

**Adopted: July 25, 2008 Released: August 5, 2008**

By the Commission: Chairman Martin and Commissioners Tate and
McDowell issuing separate statements; Commissioners Copps and Adelstein
dissenting and issuing separate statements.

Table of Contents

Heading Paragraph \#

I. Introduction 1

II\. Description of APPLICANTS 8

A. XM Satellite Radio Holdings Inc. 8

B. Sirius Satellite Radio Inc. 14

C. The Proposed Transaction 20

D. Post-Merger Operations 23

E. Applications and Review Process 26

1\. Commission Review 26

2\. Department of Justice Review 29

III\. STANDARD OF REVIEW AND PUBLIC INTEREST FRAMEWORK 30

IV\. potential public interest harms 35

A. Introduction 35

B. Potential Competitive Harms 36

1\. Potential Horizontal Effects 37

a\. Record Evidence on Defining the Relevant Markets 37

b\. Competitive Analysis Under Worst-Case Assumptions 48

2\. Potential Vertical Effects 59

C. Other Potential Public Interest Harms 69

1\. Impact of the Transaction on Diversity 70

2\. Impact of the Transaction on Broadcasters' Advertising Revenues 73

V. potential public interest benefits 75

A. Analytical Framework 75

B. Claimed Benefits 77

1\. Increased Programming Options/Lower Prices 78

a\. New Programming Packages 79

b\. A la Carte Programming 85

2\. Accelerated Deployment of Advanced Technology 94

3\. Commercial Availability of Interoperable Satellite Radio Receivers
96

4\. Operational Efficiencies 99

VI\. Balancing public interest harms and benefits 104

A. General Introduction and Summary 104

B. Applicants' Voluntary Commitments and Other Conditions 105

1\. Price Cap 105

2\. New Programming Packages and A La Carte Options 111

3\. Interoperable Radio Receivers 113

4\. Open Access 126

5\. Third-Party Access to SDARS Capacity 131

6\. Reservation of Channels for Noncommercial Educational Use 136

7\. Service to Alaska, Hawaii, and Puerto Rico 147

C. Other Issues 151

1\. Spectrum Givebacks 151

2\. No Local Programming or Local Advertising 154

VII\. compliance with communications act and commission's rules

and policies 156

A. 1997 SDARS Report & Order 156

B. Enforcement Matters 164

VIII\. procedural matters 175

IX\. ordering clauses 180

APPENDIX A: Licenses to be Transferred

APPENDIX B: Voluntary Commitments

APPENDIX C: Timeline of Commitments

# Introduction

1.  In this Memorandum Opinion and Order and Report and Order ("Order"),
    we consider the consolidated application of Sirius Satellite Radio
    Inc. ("Sirius") and XM Satellite Radio Holdings Inc. ("XM," or
    jointly, the "Applicants") for consent to the transfer of control of
    the licenses and authorizations held by Sirius and XM, and their
    subsidiaries, for the provision of satellite digital audio radio
    service (or "SDARS") in the United States.[^1] The Application is
    filed pursuant to section 310(d) of the Communications Act of 1934,
    as amended ("Communications Act" or "Act"), and Sections 1.948 and
    25.119 of the Commission's rules.[^2] Applicants assert that grant
    of the Application will generate substantial, merger-specific public
    interest benefits and will not harm competition in any market
    because a combined satellite radio provider will have no market
    power.[^3] Based on the review of the record as set forth in the
    discussion below, we find that grant of the Application, with
    Applicants' voluntary commitments[^4] and other conditions discussed
    herein, is in the public interest.

2.  Applicants operate satellite digital audio radio services in the
    2320 to 2345 MHz spectrum band as authorized by the Commission after
    auction in 1997.[^5] XM commenced service in September 2001, and
    Sirius began service in February 2002.[^6] In order to establish
    fully a nationwide radio service, both SDARS licensees operate
    terrestrial repeaters in areas where satellite signal reception is
    blocked by trees, buildings, or tunnels.[^7] Together, Sirius and XM
    offer hundreds of channels of music, entertainment, news, and sports
    programming, as well as weather and data information services for
    maritime, aeronautical and other purposes. In addition, Sirius
    offers video service in select vehicles equipped with a Sirius
    Backseat TV receiver.[^8] As of December 31, 2007, Applicants,
    collectively, had approximately 17.3 million subscribers in the
    United States.[^9] SDARS radio receivers are used in cars, trucks,
    boats, aircraft, and homes, and are available for portable use.
    Applicants also provide content to subscribers using streaming audio
    over the Internet as well as direct broadcast satellite ("DBS") and
    wireless networks.[^10] The current fee charged by each of
    Applicants for its basic SDARS service is \$12.95 per month.[^11]

3.  As a result of the merger, Applicants maintain that consumers will
    be able to customize their programming options by selecting among
    several new and smaller programming packages, as well as two a la
    carte packages.[^12] Applicants assert that these new programming
    features will provide greater discretion to parents to control the
    programming their children receive because parents may individually
    select which programs to receive or may select programming packages
    that do not include any adult or other objectionable content.[^13]
    Applicants indicate that, post-merger, subscribers will not pay more
    for the content they currently receive.[^14] Thus, subscribers who
    choose to do so may continue to receive the same content for \$12.95
    per month and will not be harmed by the introduction of the a la
    carte and smaller programming packages proposed by Applicants.
    Applicants claim that permitting consumers to individually select
    channels will allow the combined company to make choices about
    content based on the choices made by subscribers, thus leading to
    the creation of more programming that consumers actually want.[^15]
    Applicants further voluntarily commit to not raising the rates for
    either their current packages or these new packages for three
    years.[^16] In addition, we are prohibiting Applicants from reducing
    the number of channels in either their current packages or these new
    packages for three years.

4.  To obtain Commission approval, Applicants must demonstrate that the
    proposed transaction will serve the public interest, convenience,
    and necessity pursuant to Section 310(d) of the Act.[^17] The
    Commission weighs any potential public interest harms of proposed
    transactions against any potential public interest benefits.[^18]
    Applicants have the burden of proving that the proposed transaction,
    on balance, serves the public interest by a preponderance of the
    evidence.[^19]

5.  We note that the Commission had been investigating Applicants'
    compliance with certain Commission regulations.  On July 25, 2008,
    the Commission adopted Orders which adopted the Consent Decrees
    entered into between the Commission and XM, and the Commission and
    Sirius.  These Consent Decrees terminated our investigations into
    Applicants' compliance with the Commission's regulations governing
    FM modulators and terrestrial repeaters. These issues are discussed
    in Section VII, below.

6.  Based on the record before us, we conclude that the proposed
    transfer of control would violate our rule against one licensee
    controlling both SDARS licenses. We also conclude that, absent
    Applicants' voluntary commitments and other conditions discussed
    below, the proposed transaction would increase the likelihood of
    harms to competition and diversity. As discussed below, assuming a
    satellite radio product market, Applicants would have the incentive
    and ability to raise prices for an extended period of time. This is
    more likely given the spectrum and cost barriers which prevent entry
    by new SDARS providers that could offer consumers an alternative
    outlet for satellite radio service. In particular, additional
    spectrum is not available at this time without spectrum divestiture,
    which we have determined is inappropriate in light of the
    considerable financial investment needed to successfully operate an
    SDARS service, as well as the technical complications that might
    result from such divestiture.[^20] Additionally, the regulatory and
    other business aspects involved in the start-up of such a
    cost-intensive operation make effective competitive entry unlikely
    within any relevant time horizon.

7.  Applicants, however, have proposed significant voluntary commitments
    regarding steps the merged company would take to mitigate harms and
    achieve public interest benefits.  We find that absent those
    voluntary commitments and other conditions, the harms of the
    transaction would outweigh the potential public interest benefits. 
    On balance, however, we find that with Applicants' voluntary
    commitments and other conditions, the potential public interest
    benefits outweigh the harms.  Accordingly, we conclude that repeal
    of the 1997 rule barring common ownership of SDARS licensees will
    serve the public interest.  We also conclude that the transaction,
    with all of Applicants' voluntary commitments and other conditions,
    will serve the public interest, and we condition grant of the
    Applications on the merged firm's fulfillment of Applicants'
    voluntary commitments and other conditions.[^21]  Although we
    find it unnecessary to impose a condition requiring the inclusion of
    chips for digital audio broadcast ("DAB") or HD Radio™ in SDARS
    receivers,[^22] we believe that important questions have been raised
    about DAB that warrant further examination in a separate proceeding.
     As discussed in Section VI.B.4, the Commission commits to
    initiating a notice of inquiry within 30 days after adoption of this
    Order to gather additional information on the issue.

# Description of APPLICANTS

## XM Satellite Radio Holdings Inc.

8.  XM is a publicly traded Delaware corporation[^23] headquartered in
    Washington, D.C. XM stock is traded on the NASDAQ Global Select
    Market under the symbol "XMSR."[^24] XM operates using 12.5 MHz of
    spectrum in the 2332.5-2345 MHz frequency band.[^25] This represents
    half of the available 25 MHz of SDARS spectrum.[^26] XM obtained a
    license to use this half of the available 25 MHz of SDARS spectrum
    through Commission auction conducted in April 1997.[^27]

9.  XM commenced operations in September 2001 and currently offers over
    170 channels of music (including some commercial-free music
    channels), sports, news, talk and entertainment to its
    subscribers.[^28] As of December 31, 2007, XM reported having over
    9.03 million subscribers in the United States.[^29] XM's programming
    includes channels devoted to broadcasts of Major League Baseball
    (MLB), National Hockey League (NHL), Indy Racing League and college
    sports.[^30] XM also carries ESPN Radio, ESPN News, Fox Sports, and
    XM Sports Nation (XMSN).[^31] Some of XM's programming is available
    in languages other than English and targets niche audiences. XM
    provides 21 dedicated traffic and weather channels for several large
    U.S. metropolitan areas,[^32] and offers a "free-to-air" channel for
    which no subscription is required that broadcasts emergency alerts,
    safety information, and Amber alerts on a 24-hour/7-days-a-week
    basis.[^33] XM also offers content to subscribers using streaming
    audio over the Internet. XM original music, news and sports series
    are available as free podcasts for download through xmradio.com and
    Apple Inc.'s iTunes Store.[^34] XM is available at participating
    Avis, National, and Alamo car rental locations, and on certain
    AirTran, JetBlue, and United airplanes.[^35]

10. XM has agreements to include an SDARS receiver as a
    factory-installed feature or a dealer-installed option in over 140
    different vehicle models for model year 2008 with General Motors,
    Honda/Acura, Toyota/Lexus/Scion, Hyundai and Nissan/Infiniti, among
    others.[^36] XM's receivers are also available aftermarket at
    retailers nationwide and through XM's website.[^37]

11. XM reports that it transmits content throughout the contiguous
    United States to vehicles, portable receivers, home and
    plug-and-play radios, some of which are capable of receiving both XM
    content and traditional AM/FM terrestrial radio stations.[^38] XM's
    portable, handheld products include the Inno,® which allows
    consumers to "bookmark" songs heard on XM, connect the Inno® to a
    personal computer, and purchase the songs from the XM + Napster®
    online service.[^39] XM plug-and-play radios include the "Xpress,®"
    which features split screen display and 30-minute pause and
    replay.[^40] XM-ready and Mini-Tuner technologies integrate into a
    broad range of home devices such as stereo receivers and DVD players
    by allowing consumers to connect an XM Mini-Tuner into an XM-ready
    receiver.[^41] XM's advanced technology applications include XM
    NavTraffic® which provides continuously updated real-time traffic
    information for 80 major metropolitan areas across the United States
    for a monthly fee.[^42] XM aviation and marine applications include
    the XM WX® weather service, which provides real-time graphical
    weather data.[^43]

12. XM primarily provides its service directly to subscribers via
    satellite. XM, through its 100 percent owned subsidiary, XM Radio
    Inc. ("XM Radio"),[^44] is licensed to operate four satellites in
    geostationary orbit at or near the 85° W.L. and 115° W.L. orbital
    locations.[^45] From these orbital locations, XM is able to provide
    service to the contiguous United States, or "CONUS," as well as
    parts of Alaska.[^46] XM operates a network of terrestrial
    repeaters, pursuant to grants of special temporary authority, in
    order to improve the quality of its signal in areas in which the
    signal may be obstructed, such as by tall buildings and
    tunnels.[^47]

13. XM Radio holds three authorizations for transmit/receive earth
    stations that are licensed to communicate with XM's satellites in
    the S- (2320-2345 MHz), C- (4/6 GHz), and X- (7025-7075 GHz)
    bands.[^48] XM Radio also holds an experimental license under Part 5
    of the Commission's rules.[^49]

## Sirius Satellite Radio Inc.

14. Sirius is a publicly traded Delaware corporation and is
    headquartered in New York City, New York.[^50] Sirius stock is
    traded on the NASDAQ Global Select Market under the symbol
    "SIRI."[^51] Sirius operates using 12.5 MHz of spectrum in the
    2320-2332.5 MHz frequency band. Sirius obtained a license to use its
    half of this spectrum through an auction conducted in April
    1997.[^52]

15. Sirius commenced service in February 2002, and currently offers over
    130 channels, including 69 channels of commercial-free music, 54
    channels of sports, news, talk, and entertainment, and 11 channels
    of traffic, weather, and informational data services.[^53] As of
    December 31, 2007, Sirius reported 8,321,785 subscribers in the
    United States.[^54] Sirius's musical offerings consist of channels
    dedicated to genres such as pop, rock, electronic, hip hop, rhythm
    and blues, country, Christian, blues, jazz, classical, Latin, big
    band, and show tunes.[^55] Sports programming includes coverage of
    the National Football League (NFL), National Basketball Association
    (NBA), National Association of Stock Car Auto Racing (NASCAR), and
    college sports and other sports programming, such as ESPN Radio,
    ESPN News and ESPN Deportes, which is ESPN's Spanish language
    programming.[^56]

16. Several of Sirius's music, news, and talk channels are available in
    languages other than English or target niche audiences, and include,
    among other programs, Howard Stern, Martha Stewart, and Barbara
    Walters.[^57] Sirius news and information channels include BBC World
    Service News, Bloomberg Radio and CNBC.[^58] Sirius reports that its
    11 channels of traffic and weather cover 20 metropolitan markets
    throughout the United States, and include one channel dedicated to
    emergency information and the transmission of emergency messages as
    part of the Emergency Alert System (EAS). [^59]

17. In 2007, Sirius introduced Sirius Backseat TV, a television service
    offering content designed primarily for children from Nickelodeon,
    Disney Channel and Cartoon Network in the backseat of vehicles.[^60]
    Sirius also provides streaming audio content to subscribers via the
    Internet, and music channels to DISH satellite television and Sprint
    mobile telephone subscribers.[^61]

18. Sirius has agreements with automobile manufacturers to include an
    SDARS receiver in vehicles as a factory or dealer-installed option
    in 116 vehicle models, and as a dealer only installed option in 37
    vehicle models.[^62] Sirius receivers are also available for
    installation in homes, automobiles, boats, and aircraft, and may be
    purchased through its website, as well as through retailers
    nationwide.[^63] Sirius radios are also offered to renters of Hertz
    vehicles at airport locations nationwide.[^64]

19. Sirius primarily provides its service directly to subscribers via
    satellite. Sirius, through its 100 percent owned subsidiary,
    Satellite CD Radio, Inc. ("Satellite CD Radio"),[^65] holds a
    license from the Commission to operate a fleet of three satellites
    in highly-elliptical orbits ("HEO").[^66] Sirius also holds an
    authorization to launch and operate a satellite in geostationary
    satellite orbit ("GSO") at the 96° West Longitude (W.L.) orbital
    location in conjunction with Sirius's three HEO satellites, but has
    not yet launched this satellite.[^67] Sirius serves subscribers
    throughout the 48 contiguous United States via its satellite system.
    Sirius operates a network of terrestrial repeaters in urban areas,
    pursuant to grants of special temporary authority, in order to
    improve the quality of reception in areas where there is
    interference to the satellite signal from tall buildings, tunnels,
    heavy foliage or other obstructions.[^68] In addition to its
    satellite licenses, Sirius holds four authorizations for
    transmit/receive earth stations that are licensed to communicate
    with Sirius's satellites in the S- (2320-2345 MHz), C- (4/6 GHz), X-
    (7025-7075 GHz), and Ku- (12/14 GHz) bands.[^69] Sirius also holds a
    Commission wireless license.[^70]

## The Proposed Transaction

20. On February 19, 2007, Applicants, the only entities authorized by
    the Commission to provide satellite digital audio radio service in
    the United States, entered into an Agreement and Plan of
    Merger.[^71] The surviving corporation after all the transactional
    steps are completed will be Sirius Satellite Radio, Inc. It will
    hold, through its subsidiaries Satellite CD Radio, Inc. and XM
    Satellite Radio Holdings Inc., all of the Commission licenses and
    authorizations Sirius and XM respectively hold prior to the
    merger.[^72] The merged corporation will be controlled by a new
    Board of Directors, selected by both Sirius and XM, and its equity
    ownership will be represented equally by former shareholders of
    Sirius and XM.[^73]

21. Applicants propose that the merged company will offer a range of
    programming packages at lower prices than are currently available
    from the individual companies.[^74] In their Joint Opposition,
    Applicants state that some packages will be offered beginning within
    six months of the consummation of the merger, including "best of
    both" packages, discounted "family friendly" packages, and a "best
    of both" package that excludes adult-themed content.[^75] Beginning
    one year following the merger, Applicants state they will offer a la
    carte packages of 50 or 100 channels to those subscribers who
    purchase next-generation radios.[^76] Applicants state that no
    satellite radio subscriber will have to pay more for monthly
    services as a result of the merger.[^77]

22. On June 13, 2008 and July 25, 2008, Applicants provided letters
    detailing and further modifying a number of voluntary commitments
    they were willing to implement to "further demonstrate" that the
    approval of their transaction would serve the public interest.[^78]
    With regard to programming, the Applicants state that within three
    months of consummation of the merger, the combined company will
    offer (1) two a la carte options and introduce a la carte capable
    radios, (2) a "Best of Both" programming package, (3) a "mostly
    music" package and a "mostly news, sports and talk" package, and (4)
    a discounted "family-friendly" package. Applicants also state that
    the merged entity will set aside 4 percent of its full-time audio
    channels for noncommercial educational and informational
    programming, and will lease another 4 percent of its channels to
    "qualified entities."[^79] With regard to rates, Applicants state
    that they will not raise their current rates nor the rates for their
    new services for at least 36 months after the consummation of the
    merger (except that after one year, Applicants may pass on cost
    increases to their subscribers).[^80] Six months prior to the
    expiration of the commitment period, the Commission will seek public
    comment on whether the cap continues to be necessary in the public
    interest. The Commission will then determine whether it should be
    modified, removed, or extended. With regard to equipment, within
    nine months after consummation of the merger, Applicants state that
    the merged entity will offer for sale at retail an interoperable
    satellite radio receiver (i.e., one that is capable of receiving
    both the full Sirius and the full XM programming).[^81] They state
    that the merged entity also will (1) permit any manufacturer to
    develop equipment that can deliver their satellite radio service
    and (2) permit manufacturers to incorporate in any satellite radio
    receivers other technology (so long as it does not result in harmful
    interference), including HD Radio technology.[^82] To this end,
    immediately after consummation of the merger, Applicants will offer
    for license to bona fide third parties the intellectual property
    they own and control of the basic functionality of satellite radios
    (not including chip set and encryption technology). Applicants also
    voluntarily commit that the merged entity would not enter into any
    agreements that would bar others from including other
    (non-interfering) audio technology in any device or vehicle.[^83]
    Finally, Applicants voluntarily commit to providing Sirius satellite
    radio service to Puerto Rico using terrestrial repeaters.[^84]

## Post-Merger Operations

23. Applicants state that, post merger, they will continue to operate
    the XM and Sirius infrastructures as separate, legacy systems in the
    near term, and that neither system currently has sufficient capacity
    to offer both companies' full programming line-ups.[^85] Although
    Applicants state that some aspects of the two legacy infrastructures
    could be integrated into a common platform in a relatively short
    time frame, combining all aspects of the two infrastructures will
    take much longer.[^86] Consequently, Applicants state that
    subscribers of the merged entity would have to own two legacy
    receivers (one XM receiver and one Sirius receiver) in order to
    receive the complete offerings of the combined entity.[^87] The need
    for two separate receivers results from the significant engineering
    differences between the XM and Sirius systems and the lack of an
    interoperable receiver capable of accessing all licensed SDARS
    systems.[^88] As discussed below, the need to operate two separate
    legacy systems post-merger delays realization of some of the
    spectrum efficiency benefits claimed by Applicants.[^89]

24. Applicants identify significant engineering differences in their
    existing platforms that would make integration difficult in the
    short term.[^90] Both Applicants use satellites and terrestrial
    repeaters to deliver programming to subscribers, but each has taken
    a different approach in implementing its system. For example, XM
    operates its system using two active satellites in geostationary
    orbit,[^91] whereas Sirius uses three satellites in a highly
    inclined, elliptical non-geostationary orbit.[^92] The difference in
    orbital constellations affects the design of the antennas used to
    receive the satellite signal,[^93] the terrestrial repeater network
    used to augment the satellite service,[^94] and the uplink antennas
    used to communicate with the satellites.[^95] Each Applicant has
    invested significantly in its existing infrastructure with the
    expectation of operating its infrastructure for years to come.[^96]

25. Besides differences in satellite infrastructure, Applicants
    currently use different technology for transmission and reception of
    their programming to subscribers that makes integration to a common
    platform difficult in the short term. XM and Sirius are assigned
    12.5 MHz of spectrum each, but Sirius divides its spectrum into
    three identical carriers of approximately 4 MHz each, whereas XM
    divides its spectrum into six carriers.[^97] As a result, current XM
    receivers are not designed to receive Sirius's programming, and vice
    versa. Furthermore, although XM and Sirius have used a common
    manufacturer for some of the chipsets used in their receivers, they
    also use a number of different chipset manufacturers, and the
    chipsets are highly tuned to address only the transmissions of
    Sirius or XM, respectively.[^98] Applicants state that any migration
    to a common platform will likely require the development of new
    chipsets.[^99] Applicants state that if the combined company were to
    migrate to a common platform while a significant number of
    single-platform devices were still in use, then the combined company
    would either risk losing millions of customers by forcing the
    purchase of new radios, or face prohibitive costs to replace
    millions of single-platform radios, most of which will be hard-wired
    into cars.[^100] Thus, Applicants indicate that it is unlikely that
    the merged company would convert to a common platform until nearly
    all subscribers have migrated to receivers with new chipsets capable
    of operating under a common platform.[^101]

## Applications and Review Process

### Commission Review

26. On March 20, 2007, Applicants submitted the Consolidated Application
    to the Commission seeking consent to transfer control of Commission
    licenses and authorizations held by Sirius, XM and their
    subsidiaries pursuant to Section 310(d) of the Communications Act of
    1934, as amended.[^102] On June 8, 2007, the Media Bureau accepted
    the Consolidated Application for filing and released a Public Notice
    establishing the pleading cycle for parties to file comments with
    respect to the transfer of control.[^103]

27. On June 25, 2007, the Commission adopted the *2007 SDARS NPRM*,
    seeking public comment as to whether language included in the *1997
    SDARS Service Rules Order* establishing SDARS service, which
    prohibits the transfer of control of one SDARS licensee to the
    other,[^104] constitutes a binding rule.[^105] In the event the
    Commission was to determine that the language in the *1997 SDARS
    Service Rules Order* is a binding rule, the *2007 SDARS NPRM* sought
    comment on whether the Commission should waive, modify, or repeal
    the transfer prohibition if the Commission subsequently determined
    that the proposed merger of XM and Sirius, on balance, serves the
    public interest.[^106]

28. Many entities filed comments in support of the transfer of control
    application, including Competitive Enterprise Institute ("CEI"); The
    Heritage Foundation ("Heritage"); Progress and Freedom Foundation
    ("PFF"); National Association for the Advancement of Colored People
    ("NAACP"); Hispanic Federation; General Motors Corp. ("GM"); Circuit
    City; Sen. John Ensign; Rep. Rick Boucher; and Former Sen. Bill
    Bradley. In addition, nine parties filed petitions to deny the
    application: Mt. Wilson FM Broadcasters, Inc. ("Mt. Wilson"); the
    National Association of Broadcasters ("NAB"); Common Cause, Consumer
    Federation of America, Consumers Union and Free Press ("Common
    Cause"); American Women in Radio and Television, Inc. ("AWRT"); the
    Consumer Coalition for Competition in Satellite Radio ("C3SR"); The
    Telecommunications Advocacy Project ("TAP"); The National
    Association of Black Owned Broadcasters ("NABOB"); National Public
    Radio ("NPR"); and Forty-Six Broadcasting Organizations.[^107] An
    "informal objection" was filed by Prometheus Radio Project, U.S.
    Public Interest Research Group, and Media Access Project
    ("Prometheus Radio").[^108] The Commission also received almost
    17,000 formal and informal comments on the proposed transfer of
    control. In addition, comments and reply comments were filed with
    regard to issues raised in the *2007 SDARS NPRM* by 18 parties. The
    Commission also requested additional information from
    Applicants.[^109] Applicants' separately-filed responses to those
    requests are included in the record.[^110]

### Department of Justice Review

29. In addition to Commission review, the proposed transaction is
    subject to review by federal antitrust authorities, in this instance
    by the U.S. Department of Justice ("DOJ"). The DOJ reviews
    communications mergers and transactions pursuant to section 7 of the
    Clayton Act, which prohibits mergers that may substantially lessen
    competition in any line of commerce.[^111] On March 24, 2008, the
    DOJ announced that it had "close\[d\] its investigation of the
    transaction" without taking any enforcement action against the
    proposed merger.[^112]

# STANDARD OF REVIEW AND PUBLIC INTEREST FRAMEWORK

30. Pursuant to section 310(d) of the Communications Act, we must
    determine whether Applicants have demonstrated that the proposed
    transfers of control of the licenses and authorizations held by XM
    and Sirius will serve the public interest, convenience, and
    necessity.[^113] In making this assessment, we evaluate whether the
    proposed transaction complies with the specific provisions of the

31. Act,[^114] other applicable statutes, and the Commission's
    rules.[^115] We also consider whether it could result in public
    interest harms by substantially frustrating or impairing the
    objectives or implementation of the Act or related statutes.[^116]
    We employ a balancing process, weighing any potential public
    interest harms of the proposed transaction against any potential
    public interest benefits.[^117] Applicants bear the burden of
    proving, by a preponderance of the evidence, that the proposed
    transaction, on balance, will serve the public interest.[^118] If we
    are unable to find that the proposed transaction serves the public
    interest, or if the record presents a substantial and material
    question of fact, we must designate the application for hearing
    under section 309(e) of the Act.[^119]

32. The Commission's public interest evaluation necessarily encompasses
    the "broad aims of the Communications Act,"[^120] which include,
    among other things, a deeply rooted preference for preserving and
    enhancing competition in relevant markets,[^121] accelerating
    private sector deployment of advanced services,[^122] ensuring a
    diversity of information sources and services to the public,[^123]
    and generally managing the spectrum in the public interest. This
    public interest analysis may also entail assessing whether a
    transaction will affect the quality of communications services or
    will result in the provision of new or additional services to
    consumers.[^124] In conducting this analysis, we may consider
    technological and market changes, and the nature, complexity, and
    speed of change of, as well as trends within, the communications
    industry.[^125]

33. Our competitive analysis, which forms an important part of the
    public interest evaluation, is informed by, but not limited to,
    traditional antitrust principles.[^126] The Commission and the DOJ
    each have independent authority to examine the competitive impacts
    of proposed communications mergers involving transfers of FCC
    licenses, but the standards governing the Commission's competitive
    review differ somewhat from those applied by the DOJ.[^127] Like the
    DOJ, the Commission considers how a transaction will affect
    competition by defining a relevant market, looking at the market
    power of incumbent competitors, and analyzing barriers to entry,
    potential competition and the efficiencies, if any, that may result
    from the transaction. The Antitrust Division of the DOJ, however,
    reviews telecommunications mergers pursuant to section 7 of the
    Clayton Act, which prohibits mergers that may substantially lessen
    competition.[^128] The Commission's competitive analysis under the
    public interest standard is somewhat broader, for example,
    considering whether a transaction will enhance, rather than merely
    preserve, existing competition, and takes a more expansive view of
    potential and future competition and its impact on the relevant
    market. [^129] The DOJ's review is also limited solely to an
    examination of the competitive effects of the acquisition, without
    reference to diversity, localism, or other public interest
    considerations.

34. Our analysis recognizes that a proposed transaction may lead to both
    beneficial and harmful consequences. For instance, combining assets
    may allow a firm to reduce transaction costs and offer new products,
    but it may also create market power, create or enhance barriers to
    entry by potential competitors, or create opportunities to
    disadvantage rivals in anticompetitive ways.[^130] The Commission's
    public interest authority enables us, where appropriate, to impose
    and enforce narrowly tailored, transaction-specific conditions that
    ensure that the public interest is served by the transaction.[^131]
    Section 303(r) of the Communications Act authorizes the Commission
    to prescribe restrictions or conditions, not inconsistent with law,
    which may be necessary to carry out the provisions of the Act.[^132]
    Indeed, our public interest authority enables us to rely upon our
    extensive regulatory and enforcement experience to impose and
    enforce conditions to ensure that a transaction will yield overall
    public interest benefits.[^133]

35. The Order is set forth, as follows, in four principal components.
    First, we assess the potential horizontal and vertical harms
    presented by the transaction, including the impact on diversity.
    Second, we evaluate the public interest benefits that Applicants
    claim will result from the transaction. Next, we balance the public
    interest harms posed by, and the benefits to be gained from, the
    merger. We conclude by examining whether the proposed transaction
    complies with the Communications Act, other applicable statutes and
    the Commission's rules and policies, as modified herein.

# potential public interest harms

## Introduction

36. In this section, we gauge the potential public interest harms that
    are likely to result from this transaction. We conclude that there
    is insufficient evidence in the record to predict the likelihood of
    anticompetitive harms. Thus, we will evaluate the potential harms to
    competition, diversity, and localism under assumptions that maximize
    the likelihood of harm. This approach is necessary to protect
    consumers from any potential adverse effects of the transaction
    while simultaneously allowing us to balance potential harms against
    potential public interest benefits. As a result of our competitive
    analysis under "worst-case" assumptions, we conclude that the
    merger, absent Applicants' voluntary commitments and other
    conditions, would result in potential harms. However, Applicants
    have committed voluntarily to take steps that will mitigate these
    harms.

## Potential Competitive Harms

37. Transactions involving the acquisition of a full or partial interest
    in another company may give rise to concerns regarding "horizontal"
    concentration and/or "vertical" integration, depending on the lines
    of business in which the two firms are engaged. A transaction is
    said to be horizontal when the firms in the transaction sell or buy
    products that are in the same relevant product and geographic
    markets and are viewed as reasonable substitutes.[^134] Horizontal
    transactions can eliminate competition between the firms and
    increase concentration in the relevant markets. The reduction in
    overall competition in the relevant markets may lead to substantial
    increases in prices paid by purchasers of products in the
    markets.[^135] Vertical transactions raise slightly different
    competitive concerns. Vertical relationships exist when upstream
    firms produce inputs that downstream firms use to create finished
    goods. Transactions are said to be vertical when upstream firms and
    downstream firms are combined.[^136] In this section, we analyze the
    potential horizontal and vertical effects of the proposed
    transaction.

### Potential Horizontal Effects

#### Record Evidence on Defining the Relevant Markets

38. Consistent with the *DOJ/FTC Guidelines,* the Commission typically
    begins its analysis of horizontal effects by defining the relevant
    product and geographic markets. The *DOJ/FTC Guidelines* define the
    relevant product market as the smallest group of competing products
    for which a hypothetical monopoly provider of the products would
    profitably impose at least a "small but significant and
    non-transitory increase in price," presuming no change in the terms
    of sale of other products.[^137] (This procedure is often called the
    "SSNIP Test" for market definition.[^138]) Thus, when one product is
    a reasonable substitute for the other in the eyes of a sufficiently
    large number of consumers, it is included in the relevant product
    market even though the products themselves are not identical.

39. *Product Market.* The commenters in this proceeding disagree as to
    the exact boundaries of the relevant product market. Applicants
    contend that the relevant product market is the relatively broad
    product market for "audio entertainment services," which includes
    terrestrial radio, HD Radio, wireless phones, iPods and other MP3
    players.[^139] They emphasize that substantial demand substitution
    exists "particularly between satellite radio and terrestrial
    radio."[^140] Commenters opposing the transaction contend that SDARS
    constitutes a distinct relevant product market, separate from other
    audio entertainment services.[^141]

40. In order to quantitatively determine the market, we must have
    certain statistical data, in particular the "elasticity" of demand
    for SDARS and other potentially competing products.[^142] No
    commenter in this proceeding has provided detailed quantitative
    estimates of the own-price and cross-price elasticities of demand
    for the services that might be included within the relevant product
    market. We note that in its announcement of its intent not to block
    the transaction, the Antitrust Division of the Department of Justice
    did not discuss any such evidence from its investigation, nor did
    the Antitrust Division define a relevant product market.[^143]
    Moreover, we are unable to perform our own analysis. This is chiefly
    because there has been little or no variation in prices for the
    various services at issue. Since SDARS services were launched in
    2002, XM has changed its monthly recurring price only once, from
    \$9.99 to \$12.95 in April, 2005, and Sirius has not changed its
    corresponding price at all.[^144] Terrestrial (broadcast) radio has
    a zero (and thus unchanging) price. Without price variation, it is
    not possible for us to develop our own estimates of the elasticities
    of demand required for a quantitative definition of the
    market.[^145]

41. While there is other evidence and data in the record that shed some
    light on the relative substitutability of various audio
    entertainment services, as well as evidence concerning the product
    characteristics and prices of the various services that might be
    included in the relevant product market, this evidence is
    insufficient in this case for us to delineate the boundaries of the
    relevant product market with any precision or confidence. Most
    significantly, it is insufficient for us to quantitatively estimate
    whether and by how much prices might rise or fall if we were to
    approve this transaction without a voluntary commitment by
    Applicants not to raise prices.

42. The only systematic empirical analysis of substitutability between
    SDARS and any of its potential substitutes was provided in a study
    conducted by Charles River Associates ("CRA") on behalf of
    Applicants (the "CRA Study"). Applicants commissioned BIA Research,
    Inc. to provide data on the number of AM/FM radio stations reaching
    each census block in the lower 48 U.S. states. CRA used these data
    to estimate the average number of AM/FM stations received in each
    ZCTA (a Census Bureau area approximating a ZIP code). The CRA study
    examined the relationship between the total subscriptions to
    satellite radio and the number of available terrestrial broadcast
    stations. After controlling for a number of factors, such as income,
    gender mix, and the percentage of population commuting by car, the
    study finds a statistically significant inverse relationship between
    SDARS penetration and the number of terrestrial radio signals. In
    other words, as the number of terrestrial radio stations increases,
    SDARS penetration decreases. CRA uses this result to argue that
    SDARS and terrestrial radio are substitutes.[^146]

43. We find that this study does not provide the evidence required to
    determine whether SDARS should be considered to be in the same
    product market as terrestrial radio. This indirect means of
    measuring substitutability of SDARS and terrestrial radio (as
    opposed to directly measuring cross-price elasticities)[^147] leaves
    open the possibility that other unidentified (and possibly
    unobservable) factors could be the cause of this inverse
    relationship. The problem of unobserved confounding factors (i.e.,
    omitted variables) is a well-known problem in the econometrics
    literature.[^148] The most obvious potential factor is the density
    of the population of the area, since the number of radio stations
    will likely depend on the number of potential listeners. Density may
    be related in some direct or indirect way to factors affecting SDARS
    subscribership, such as the length of the driving commute (as
    opposed to the number of people who drive to work, which was
    included in CRA's analysis), or the number of professional truckers,
    deliverymen and other people in the area who spend the day driving,
    or demographic variation by race or age. In other words, we might
    expect that areas of the country where people spend less time in
    their vehicles have lower subscription rates to SDARS. Thus the
    inverse relationship between SDARS penetration and terrestrial radio
    station availability might not be because they are substitutes, as
    CRA contends, but because of other factors that are affected by
    population density and size.[^149]

44. In addition to these theoretical problems with CRA's analysis, there
    is survey data available from Arbitron that indicates SDARS
    listeners are also heavy listeners of AM/FM radio. This suggests
    that AM/FM radio might be a complement rather than a substitute to
    SDARS.[^150] Also, an analysis performed by C3SR finds that the
    results of the CRA study are not "robust" (the results do not hold)
    when the data are analyzed by Arbitron market instead of by ZCTA,
    with the analysis limited to just subscribers in Arbitron markets.
    Indeed, in this analysis a positive relationship was found between
    terrestrial radio station availability and SDARS penetration.[^151]
    Finally, and perhaps most importantly, even if we accept that the
    CRA study's results indicate that there is some substitutability
    between SDARS and terrestrial radio,[^152] they do not demonstrate
    that SDARS and terrestrial radio are sufficiently close substitutes
    to be included in the same relevant product market. Just showing
    that there is some substitution is not enough for antitrust analysis
    -- it is necessary to show that the degree of substitutability is
    high enough that a small but significant nontransitory price
    increase for SDARS service alone will cause sufficient numbers of
    consumers to drop SDARS service to make the price increase
    unprofitable. CRA's analysis provides us with insufficient evidence
    to make this determination.

45. Turning to the submissions of commenters opposing the transaction,
    we find that the evidence from other surveys C3SR provided or
    referenced, specifically the NRG Research Group survey and the
    Wilson Research Strategies survey, provide insufficient evidence
    that SDARS constitutes a distinct relevant product market. Between
    January 24 and January 30, 2008, NRG Research Group identified and
    interviewed 407 individuals who subscribe to satellite radio. The
    NRG survey provides evidence that if one competitor increases
    advertising content on its channels, large numbers of subscribers
    would choose the other service. The NRG survey supports the
    hypothesis that one reason for subscribing to satellite radio is to
    avoid commercials.[^153] The survey, however, has several problems
    that make it difficult to use its results for the purpose of market
    definition. First, NRG report consumers' stated intentions and not
    their actual choices. Consumer behavior often differs from stated
    intentions. Second, the survey reports on consumer sensitivity to
    changes in advertising, but not on their sensitivity to changes in
    pricing. Consumers may differ in their sensitivity to each, with
    important implications for the analysis.

46. The Wilson survey, discussed by Sidak and NAB, is flawed and
    therefore cannot be relied upon for purposes of this transaction. In
    June 2007, Wilson Research Strategies conducted a survey of current
    satellite radio subscribers at the request of the NAB. According to
    the publicly available executive summary, the survey polled 501
    current SDARS subscribers on a range of questions to determine their
    reasons for subscribing and their demographic characteristics. The
    survey results suggest that a significant number of satellite radio
    subscribers: (1) are less likely to have a sufficient amount of
    terrestrial radio service by virtue of their geographic
    location, (2) value certain attributes of satellite radio that are
    not available on terrestrial radio, (3) do not perceive MP3 players
    to be substitutes for satellite radio, and (4) are sensitive to the
    price, and would not pay more to receive the programming offered by
    both XM and Sirius.[^154] We find the survey flawed for several
    reasons. First, again, this survey relies on consumers' stated
    intentions and not their actual choices. Second, this survey
    provides mixed evidence concerning the definition of the market and
    the likely impact of the merger, suggesting that many subscribers
    value SDARS service and its unique characteristics over alternative
    sources of audio entertainment, but are sensitive to the price and
    would not be willing to pay a higher price for combined programming
    from Applicants. In any event, the details of the survey were never
    made public or put into our record. Rather, just an executive
    summary was made available, such that, for example, we were unable
    to examine the methodology, the questions asked, or the underlying
    data, and therefore were unable to determine the survey's
    reliability.[^155] We are thus unable to rely on any of this
    survey's results.

47. *Geographic Market*. Although Applicants do not explicitly address
    the relevant geographic market, their market share calculations
    suggest that they are assuming a national geographic market.[^156]
    Opponents apparently disagree on the appropriate relevant geographic
    market: some appear to argue for a national market,[^157] while
    others appear to advocate a more localized relevant geographic
    market.[^158] However, without knowing the contours of the relevant
    product market, it is impossible to define precisely the relevant
    geographic market. For example, if the relevant product market were
    limited to SDARS, we could define the relevant geographic market as
    a national market. In contrast, if the relevant product market were
    to include terrestrial radio, we would need to adopt a more
    localized relevant geographic market to reflect the fact that
    terrestrial radio stations have a limited reach.

48. We find that the record evidence is insufficient to define precisely
    the relevant product or geographic markets. Without defining the
    relevant product and geographic markets, we cannot perform a
    structural analysis to predict the likelihood of anticompetitive
    harms. Thus, as explained below, we must make certain assumptions
    about the relevant product and geographic markets in order to
    perform our competitive analysis.

#### Competitive Analysis Under Worst-Case Assumptions

49. As stated in Section III above, Applicants bear the burden of
    proving that the proposed transaction, on balance, serves the public
    interest. If we are unable to find that the proposed transaction
    serves the public interest, or if the record presents a substantial
    and material question of fact, we would designate the application
    for hearing under section 309(e) of the Act.[^159] However, not
    every question of fact is material. Specifically, even if we are
    unable to precisely determine the extent of the alleged harms, if we
    are able to determine that the conditions we are imposing would
    ameliorate any anticompetitive harm and that the transaction, as
    conditioned, would serve the public interest, then we may grant the
    application.[^160] Because Applicants bear the burden of proof, we
    will evaluate potential horizontal competitive harms under
    assumptions that maximize the likelihood of harm. We note that the
    assumptions we adopt below provide a worst-case scenario for
    Applicants, but we find this approach is necessary in order to
    protect consumers from any potential adverse effects of the
    transaction while simultaneously allowing us to balance the
    potential harms against the potential public interest benefits of
    the transaction. After conducting the analysis under the worst-case
    assumptions, we find that with Applicants' voluntary commitments and
    other conditions, the transaction will be in the public interest.

50. Consistent with the foregoing principles, we will assume that SDARS
    constitutes a separate relevant product market. Furthermore, because
    Applicants are the only current participants in this relevant
    product market and because both provide nationwide service, we
    assume that the relevant geographic market is national. These
    assumptions will tend to *overestimate* any anticompetitive effects.
    Again, we believe it necessary to employ such worst-case assumptions
    to ensure that, when we balance the potential costs and benefits of
    the proposed transaction, we do not inadvertently approve a merger
    that is not in the public interest.

51. Given these assumptions about the relevant product and geographic
    markets, it is clear that Applicants are the only current providers
    of SDARS service. We find that entry by a new SDARS provider is
    unlikely to be sufficiently timely to defeat any attempted price
    increase.[^161] First, we are unaware of any appropriate,
    unencumbered spectrum that is likely to become available in the near
    future that would allow another company to provide SDARS service.
    Second, even if such spectrum were available immediately, we believe
    that it would take years for the new entrant to build the necessary
    infrastructure and to develop the necessary programming and
    marketing resources to become a viable competitor.[^162]
    Furthermore, we find no "uncommitted entrants" that should be
    counted as market participants.[^163]

52. Under these worst-case assumptions, therefore, the proposed merger
    is a merger to monopoly. The post-merger Herfindahl Hirschman Index
    ("HHI") [^164] is 10,000, and the change in the HHI is 4,992.[^165]
    These estimates exceed the threshold specified in the *DOJ/FTC
    Guidelines* above which mergers are "presumed . . . to create or
    enhance market power or facilitate its exercise."[^166] It is widely
    accepted that, absent offsetting economies, a monopolist will charge
    a higher price than firms in a competitive market, including a
    duopoly.[^167] Thus, we would expect that, other things being equal,
    the merged firm would charge prices that are higher than those
    charged by Applicants pre-merger.

53. Unfortunately, we lack sufficient data to estimate the size of the
    likely price increase, if any. While it is true that economists, in
    recent years, have developed econometric techniques to simulate
    likely unilateral effects arising from horizontal mergers,[^168]
    these merger simulation models require data or assumptions about
    demand, marginal cost, and firm behavior to estimate the likely
    unilateral effects of horizontal mergers. Because we lack sufficient
    data concerning demand elasticities, among other things, we cannot
    employ such a merger simulation to quantify the likely price
    increase. Nevertheless, given that we are assuming a merger to
    monopoly, it is reasonable to predict that, absent exceptional
    countervailing efficiencies,[^169] prices are likely to be higher
    after the merger than before.

54. Applicants argue that, due to the dynamic nature of demand for
    satellite radio services, the merged entity would actually have an
    incentive to lower, not raise, prices.[^170] In particular, CRA
    asserts that SDARS is subject to "dynamic demand effects."[^171]
    According to CRA, firms like XM and Sirius must take into account
    the impact of price changes on not only their current subscribers,
    but also on prospective new subscribers. Such dynamic considerations
    lead to "penetration pricing," which involves setting prices below
    the price that would maximize short-run profits in order to maximize
    subscriber growth and long-run profits. Applicants further argue
    that there are "dynamic demand *spillovers*," i.e., that the
    incentive of one SDARS provider to lower prices is diminished in the
    current market because some of the benefits of early adopters (e.g.,
    word-of-mouth, product demonstrations, etc.) accrue to its
    competitor. The merger, according to CRA, could actually lower
    prices by internalizing these spillover effects and strengthening
    the incentive to price low, in order to "grow the market."

55. While we acknowledge the theoretical possibility of such a dynamic
    demand spillover externality, we note that Applicants have not
    attempted to quantify the effect of internalizing this externality.
    They have also failed to show convincingly the location of SDARS on
    the product adoption curve or the likely ultimate penetration rate
    for SDARS. Finally, they have not demonstrated that this
    internalization effect will outweigh the incentive of the merged
    firm to raise price once their main competitor is eliminated.

56. Furthermore, assuming, *arguendo,* that there are important dynamic
    demand spillovers and that immediately upon consummation of the
    merger the merged entity would have an overall incentive to lower
    price, the concern remains that the merged firm will have the
    incentive and ability to raise price at a later point in the product
    life cycle. In particular, when selling a product with dynamic
    demand effects, firms have an incentive early in the product's
    life-cycle to expand sales and enhance long-run profitability by
    pricing below the short-run profit maximizing price; but the
    incentive to engage in penetration pricing diminishes as the product
    matures, and prices can be expected eventually to rise to the
    short-run profit maximizing level.[^172] Under our assumption of a
    separate SDARS product market and significant entry barriers, the
    merged firm would appear to have the incentive and ability to raise
    prices to the monopoly level later in the product cycle.[^173]

57. Under the assumption that SDARS is the relevant product market, we
    therefore conclude that the merged firm may have an increased
    incentive and ability to raise the price of SDARS over a
    non-transitory period of time. As described in further detail in
    Section VI below, however, we find that the voluntary commitments
    and other conditions will adequately address this competitive
    concern. In particular, the price cap condition ameliorates possible
    harm to consumers, and the new programming packages offer consumers
    more pricing choices.[^174] We therefore conclude, even assuming the
    worst-case scenario, that grant of the application is in the public
    interest.

58. Some commenters argue that the current transaction is similar to the
    proposed transaction in *EchoStar-DIRECTV*, and thus we must, as we
    did there, designate the application for hearing.[^175] As we have
    stated, if we are unable to find that a proposed transaction serves
    the public interest or if the record presents a substantial and
    material question of fact, we must designate the application for
    hearing.[^176] In *EchoStar-DIRECTV*, there was significant evidence
    in the record to demonstrate that the applicants competed against
    one another and that, without such competition, prices were likely
    to increase, especially in markets that did not have access to
    cable. The Commission was unable to conclude, therefore, that the
    *EchoStar-DIRECTV* transaction served the public interest, and the
    transaction was designated for hearing.

59. Although there may be surface similarities between the two
    transactions, there are significant differences. As we have
    explained above,[^177] because there has been little or no price
    variation it is not possible to use the normal tools of econometrics
    to define the relevant market or determine likely impacts on price,
    and conducting a hearing would not change this basic fact. In
    addition, as discussed below, Applicants have offered voluntary
    commitments to ensure that the transaction serves the public
    interest. For example, Applicants voluntarily commit to not raising
    their rates for three years after the consummation of their
    merger.[^178] They voluntarily commit to allowing any manufacturer
    to develop SDARS receivers and to permit manufacturers to
    incorporate in satellite radio receivers any other technologies that
    would not result in harmful interference, including HD Radio
    technology, iPod ports, or Internet connectivity.[^179] Applicants
    also voluntarily commit to setting aside some of their channels for
    noncommercial educational and informational programming and for
    lease to certain "qualified entities."[^180] And, they voluntarily
    commit to offer a la carte and other programming packages, thereby
    increasing consumer choice and allowing parents, for example, to
    better control the types of programs to which their children are
    exposed. Applicants in *EchoStar/DIRECTV* made no such commitments
    to mitigate potential harms or to create benefits that would
    outweigh the potential harms. Thus, unlike in *EchoStar/DIRECTV,* in
    this transaction there is no need for a hearing. On the basis of the
    record before us, we are able to conclude that Applicants'
    significant voluntary commitments and the other conditions we are
    imposing to our approval of the transaction are sufficient to
    ameliorate any public interest harms that otherwise might have
    resulted from the transaction and that the transaction will, as a
    result, create consumer benefits and advance other aspects of the
    public interest. Moreover, to ensure that no longer-term harms will
    result from the transaction, six months prior to the expiration of
    the commitment period, the Commission will seek public comment on
    whether the price cap continues to be necessary in the public
    interest. The Commission will then determine whether it should be
    modified, removed, or extended.

### Potential Vertical Effects

60. Some commenters express concern about the vertical effects the
    merger may have in the market for SDARS and SDARS-related equipment.
    Two commenters raise the possibility of monopsony power in the
    content market, and seek conditions to mitigate such harms. In
    addition, U.S. Electronics, Inc. ("USE") alleges that because there
    will be only one SDARS provider, the merged company will effectively
    have a monopoly in the market for SDARS receivers. Garmin expresses
    concern that its equipment for weather information in the aviation
    market will become obsolete if the merged company chooses to use the
    Sirius system rather than the XM/Garmin system. We address these
    issues in turn.

61. *Monopsony Power.* Two commenters, McGannon and King, raise the
    concern that the transaction creates the potential for monopsony
    power. Both argue that the upstream market for national satellite
    radio content is a separate market, and thus the merger will produce
    a single purchaser for content in this market.[^181] With respect to
    monopsony power in the market for programming, the economic
    literature does not identify a single point at which monopsony power
    becomes likely.[^182] A necessary condition is that an entity or
    entities must possess sufficient size in the relevant market to
    dictate pricing. In general, large purchasing power delivers both
    benefits and potential costs to consumers. The benefits come from
    the fact that a large purchaser that receives programming discounts
    will pass on some of these reduced costs to subscribers (for
    example, in the form of lower prices). The potential harm to
    consumers comes from the fact that these discounts may discourage or
    preclude competitive entry,[^183] and thereby result in higher
    prices or reduced service quality, or that the monopsony purchaser
    may negotiate such terms from content providers that the quality of
    programming is lowered.[^184]

62. Neither commenter presents quantitative evidence that the upstream
    market for content in which Applicants purchase content is a
    separate market. Indeed, King refers to the fact that Sirius was
    able to "steal" Howard Stern away from terrestrial radio.[^185] It
    would seem straightforward that, at least in that case, terrestrial
    radio and SDARS were bidding against each other for content.
    Additionally, neither commenter identifies specific harms that will
    result. Indeed, the merged firm's ability to negotiate better terms
    for expensive talent could benefit consumers via lower rates, and it
    would not be in the combined company's interests to negotiate deals
    that harm the quality of content, especially while seeking to
    increase subscriber penetration and so move to profitability. We
    thus find that the merger is not likely to harm the public interest
    as a result of the exercise of monopsony power over content
    providers. As a result, we decline to take action with regard to
    potential monopsony power.

63. *SDARS Receivers.* USE claims that the transaction would create a
    vertical monopoly in the manufacturing and distribution of satellite
    radio receivers and that this would harm consumers.[^186] USE
    argues, for example, that even if the combined company does not
    raise its monthly subscription fee, it could raise equipment prices
    to optimize overall revenues. This is a potential harm, USE states,
    that will be difficult to detect because "prices at retail points of
    sale are diverse and hard to supervise."[^187] To prevent this harm,
    USE asks that we require the combined company to open and make
    available the technical specifications of its devices and network so
    that receiver manufacturers can develop receivers for consumers to
    use as they choose.[^188] USE states that its proposed condition is
    consistent with well-established open access polices and precedent
    of the Commission, including the *Carterfone*[^189] decision and the
    Commission's recent "reaffirm\[ation\] \[of\] the historical
    rationale for open access policies in its service rules for the
    Upper 700 MHz spectrum block."[^190] MAP supports USE's request,
    asserting that the post-transaction "vertical monopoly would, by
    design and in effect, eradicate consumer choice and price
    competition across manufacturers."[^191]

64. Applicants initially opposed USE's request, arguing that USE is
    attempting to resolve a private contractual matter currently subject
    to arbitration in the guise of seeking a merger condition,[^192] and
    that the proposed condition would inure to USE's benefit alone
    without regard to concerns about the quality of equipment made by
    Applicants' suppliers.[^193] Applicants also contend that the
    combined company would not have an economic incentive to slow
    innovation, increase receiver prices, or cause any other potential
    harm of which USE complains.[^194] Rather, Applicants maintain, the
    combined company would have the incentive to ensure the availability
    of low-cost, innovative, high-quality receivers.[^195] Moreover,
    Applicants state that USE's argument is based on an erroneous
    factual predicate because neither XM nor Sirius relies on a single
    source for radios.[^196]

65. USE replies that its current arbitration relates to past issues with
    Sirius and is unrelated to the potential anticompetitive effects
    posed by a vertical monopoly in the satellite radio market.[^197]
    Further, USE maintains that Applicants are the only parties
    responsible for the design and development of hardware compatible
    with their networks, and therefore would be able to control the
    manufacture of receivers.[^198] Finally, USE argues that the power
    of the combined firm would hurt not only it but also small retailers
    because small retailers would not have sufficient negotiating power
    to receive favorable terms for such things as promotions and return
    policies.[^199]

66. Currently, Applicants each are intimately involved with the design,
    manufacture, and sale of SDARS receivers. As is the case in other
    telecommunications industries (e.g., wireless telecommunications,
    satellite television), SDARS receivers are sold branded or
    co-branded with the XM or Sirius name and can receive only one of
    the two SDARS services. In addition, Applicants own the intellectual
    property that is necessary for the receivers' manufacture.
    Consistent with the practices of providers in other sectors of the
    telecommunications marketplace, the two Applicants subsidize the
    retail price of SDARS receivers paid by the consumer. Partially
    because of that subsidy, the only current manufacturers of SDARS
    receivers are in direct contractual agreements with Applicants, and
    we see no basis in the record for concluding that additional
    manufacturers would enter the market. The record also indicates that
    Applicants are **\[REDACTED\]**.[^200]

67. We find that the proposed merger is likely to harm the public
    interest by allowing one company to gain increased leverage over the
    terms and conditions of the contracts for the manufacture of SDARS
    radios. We agree with USE's concern that the loss of head-to-head
    competition between Applicants has the potential of harming
    consumers by dampening innovation in the manufacture of SDARS
    receivers. In addition, we note that there could be other risks. For
    instance, because of their involvement in the manufacture of SDARS
    receivers, Applicants could also prevent the development of SDARS
    receivers that are compatible with other forms of audio
    entertainment, such as MP3 players and HD Radio. However, Applicants
    have addressed this concern by voluntarily committing to an open,
    non-exclusive architecture. Accordingly, we accept Applicants'
    voluntary commitment to permit any device manufacturer to develop
    SDARS receivers and to incorporate other technology, such as HD
    Radio, iPod ports, and Internet connectivity so long as it will not
    result in harmful interference with the merged company's network. We
    conclude that this, and the additional voluntary commitments on open
    access, adequately mitigate the potential harm presented by this
    transaction, as discussed in Section VI.B.4, below.

68. *Aeronautical Services.* Garmin International, Inc. ("Garmin")
    raises the concern that the equipment it developed for use with XM's
    real-time weather information services will become obsolete after
    the merger because Applicants' satellite-based weather systems are
    not compatible, and Garmin is concerned that the merged company will
    choose Sirius's system and abandon that of XM. [^201]  Garmin states
    that abandoning the XM/Garmin system is contrary to the public
    interest because the Sirius system is not fully developed, and
    because commercial aviators will each face \$5,000 to \$6,000 in
    costs to switch.[^202] Garmin therefore urges the Commission to
    condition approval of the merger on the continued use by XM of
    Garmin's devices for a period of 20 years, which it says are their
    normal life expectancy.[^203]

69. We reject Garmin's proposed condition. First, Garmin's claims are
    speculative; it is not clear whether the merged company will choose
    to use only one weather information service or, if so, which one
    that will be.[^204] Moreover, we find it unlikely in the near term
    that the merged company would strand its current customers. Indeed,
    their submissions indicate exactly the opposite.[^205] Finally, as
    for the longer term, the question of which weather information
    service the merged company should choose (or whether it should
    provide both services) is one best answered by the company and the
    marketplace.[^206]

## Other Potential Public Interest Harms

70. In this section we examine the impact of the merger on the
    Commission's goals of diversity and localism. We find that
    Applicants' voluntary commitments address concerns about the
    potential loss of diversity. We find that the merger is not likely
    to frustrate the Commission's localism goal.

### Impact of the Transaction on Diversity

71. Some commenters contend that the merger would result in reduced
    programming diversity because the reduction in competition would
    diminish the incentive to innovate and provide diverse
    programming[^207] and because channel capacity available for other
    channels will be reduced when the combined entity allocates some of
    its capacity to "best of both" channels.[^208] Additionally, some
    commenters allege that the merger will harm independent content
    producers, DJs, artists, and on-air personalities that now enjoy the
    potential of having two companies compete for their services; the
    merger, by eliminating this competition, therefore would lead to
    fewer choices and less program diversity for consumers.[^209]
    Commenters also argue that the elimination of one of the SDARS
    providers would cause a reduction in viewpoint diversity.[^210]
    Other commenters allege that the transaction would reduce diversity
    in minority- and women-oriented and owned programming[^211] and
    adversely affect the hiring of minorities and women for management
    positions.[^212]

72. Applicants and other commenters argue that the merger would likely
    lead to no significant reduction in programming diversity, and may
    enhance the incentives of Applicants to provide more diverse
    programming.[^213] Applicants state that the merger will allow them
    to eliminate overlapping and redundant programming, giving them more
    channel capacity to use for more diverse offerings serving smaller
    audiences, including minority and children's programming.[^214]
    Applicants note that they currently offer 12 identical program
    channels and 75 substantially similar channels,[^215] and aver that
    eliminating their redundant programming would free capacity for more
    diverse offerings not currently offered on either system.[^216]
    Further, Applicants argue that a combined company would be better
    positioned financially to take a chance on niche programming.[^217]
    In this regard, Public Knowledge observes that low revenues and a
    small audience base have forced Applicants to abandon alternative
    and niche programming in favor of mainstream programming that
    attracts the largest audiences. It argues that the higher revenues
    and elimination of duplicate programming will provide the merged
    entity with the means to carry alternative programming and
    programming for underserved communities.[^218]

73. To address this potential harm, as discussed in more detail in
    Sections VI.B.5 and VI.B.6., below, Applicants voluntarily commit to
    lease capacity to qualified entities and to set aside capacity for
    noncommercial educational and informational programming.[^219] We
    believe this voluntary commitment mitigates the potential harm from
    a decrease in diversity.

### Impact of the Transaction on Broadcasters' Advertising Revenues

74. Commenters claim that the merger would cause terrestrial
    broadcasters to lose advertising revenue to the merged SDARS
    provider, which would ultimately result in the reduction of their
    production and airing of local programming and thereby disserve
    listeners and the Commission's localism policy goals.[^220] NAB
    claims that the merged entity "would be expected to use revenues
    from its higher-priced premium service offerings to cross-subsidize
    its national advertising rates with revenues from its premium
    service offerings, which would allow the merged entity to drive down
    advertising rates, to the detriment -- in the first instance -- of
    broadcasters."[^221] 46 Broadcasters similarly argue that the merged
    entity will use "monopoly rents" to cross-subsidize its "aggressive
    entry into the advertising markets" to the competitive detriment of
    local broadcasters.[^222] NAB also claims that broadcasters will
    lose advertising revenue and thereby be forced to reduce the amount
    of locally produced programming as a result of the merger because
    the combined entity will increase the amount of commercials in its
    programming.[^223] NAB asserts that as a result of a significant
    increase in commercial time post-merger, "\[t\]he amount radio
    stations can charge advertisers to reach SDARS subscribers in their
    audiences will fall as the satellite services sell more commercial
    time to advertisers, and radio stations' revenues will decline as a
    consequence."[^224] Applicants have not responded to this issue.

75. The Commission finds that the commenters have failed to provide
    sufficient evidence that the proposed merger would substantially
    impact the revenues from the sale of advertising by broadcasters, to
    the detriment of their ability to air locally oriented programming.
    We find that these claims of harm are speculative. The commenters do
    not offer sufficient economic analysis to show that it would be
    economically beneficial to the merged entity. Commenters' only
    evidence that the merged entity plans to increase commercial time
    during programming, post-merger, is the mention of increased
    "advertising synergies" post-merger during a conference call with
    investors and in financial analyst reports.[^225] Such evidence
    fails to show with any certainty that the merged entity intends to
    increase the use of commercials in its programming. Indeed, as NAB
    notes, programmers always run the risk of losing audience when they
    increase the amount of commercials during programming.[^226] The
    loss of revenue from the loss of subscribers needs to be weighed
    against the incremental increase in revenue obtained from the
    additional commercial time, to determine whether it would be
    economically feasible.[^227] Moreover, we note that Applicants cite
    to two studies from 2006 and 2007, which find satellite radio
    accounts for only about 4 percent of all radio listeners.[^228]
    Thus, there is insufficient evidence that the merger would decrease
    the advertising prices that broadcasters could charge, thereby
    reducing their revenue and negatively affecting the amount of
    locally produced programming.[^229]

# potential public interest benefits

## Analytical Framework

76. As part of our public interest evaluation, we consider whether the
    transaction is likely to produce public interest benefits.[^230] We
    apply several criteria in deciding whether a claimed benefit should
    be considered and weighed against potential harms. First, the
    claimed benefit must be transaction specific. This means that the
    claimed benefit must be likely to be accomplished as a result of the
    transaction but be unlikely to be realized by other means that
    entail fewer anticompetitive effects. Second, the claimed benefit
    must be verifiable.[^231] Applicants are required to provide
    sufficient supporting evidence so that the Commission can verify the
    likelihood and magnitude of each claimed benefit.[^232] We will
    discount or dismiss speculative benefits that cannot be
    verified.[^233] In this regard, benefits that are expected to occur
    only in the distant future are inherently more speculative than
    benefits that are expected to occur more immediately. Moreover, we
    calculate the magnitude of benefits net of the cost of achieving
    them.[^234] Third, the benefits must flow through to consumers, and
    not inure solely to the benefit of the company.[^235]

77. Finally, we apply a "sliding scale approach" to our ultimate
    evaluation of benefit claims. Under this approach, where potential
    harms appear both substantial and likely, Applicants' demonstration
    of claimed benefits also must reveal a higher degree of magnitude
    and likelihood than the Commission would otherwise demand.[^236] On
    the other hand, where potential harms appear less likely and less
    substantial, we will accept a lesser showing.[^237]

## Claimed Benefits

78. Applicants claim that the transaction will increase competition and
    benefit consumers. They maintain that the synergies and resulting
    cost savings from the merger will allow the combined entity to offer
    greater programming choices and lower prices, as well as preserve
    the future viability of satellite radio.[^238] Specifically, the
    claimed benefits include: (1) more programming choice at lower
    prices,[^239] (2) more diverse programming,[^240] (3) accelerated
    deployment of advanced technology,[^241] (4) commercialization of
    interoperable radio receivers,[^242] and (5) operational
    efficiencies to safeguard the future of satellite radio.[^243]
    Moreover, Applicants claim that the combined company will be able to
    eliminate redundant programming, which will eventually free capacity
    for more diverse offerings that are not currently available on
    either company's system, including expanded non-English language
    programming, children's programming, and additional programming
    aimed at minority and other underserved populations.[^244]
    Applicants explain that without the merger, an increase in
    programming diversity is unlikely, as both companies will be
    required to maintain overlapping, mainstream content in order to
    retain and attract customers.[^245] We find that these programming
    options offer consumers enhanced choices and are merger-specific
    benefits. Based on the evidence before us, however, we do not find
    the other claimed benefits to be merger specific. We discuss each of
    Applicants' claimed benefits below.

###  Increased Programming Options/Lower Prices

79. Applicants advance two types of additional programming options and
    pricing structures for consumers that, they argue, are benefits
    specific to the proposed merger. First, Applicants pledge to offer
    consumers new packaged channel options designed to take advantage of
    the addition of each Applicant's unique programming to the other's
    service in the short term. Second, to serve the interests of
    consumers who prefer greater control over their programming options,
    Applicants propose to offer an a la carte channel selection system
    that will give subscribers the power to tailor their channel
    selections to their own tastes and interests.

#### New Programming Packages

80. Applicants propose to offer a number of new programming packages at
    lower prices to subscribers.[^246] Specifically, Applicants claim
    that they will offer consumers a range of new programming packages
    at prices lower than currently available, including: (1) a "Mostly
    Music" package, which includes commercial-free music as well as
    several family-oriented and religious channels and emergency alerts,
    for \$9.99 per month; (2) a "News, Sports & Talk" package, which
    includes various sports, talk and entertainment, family, news,
    traffic and weather, and emergency channels, for \$9.99 per
    month; (3) two "Family Friendly" packages, which exclude
    adult-themed content, at a cost of \$11.95 per month or \$14.99 per
    month, respectively; and (4) a "best of both" package, which will
    enable customers to receive selected programming from both companies
    at a cost of \$16.99 per month.[^247] Applicants assert that these
    new programming packages will result in public interest benefits in
    the form of lower prices and greater consumer choice.[^248]

81. Commenters disagree about the potential benefits of Applicants'
    proposal to offer new programming packages to subscribers. WIPP
    agrees with Applicants that the merger will create public interest
    benefits, because operational efficiencies created by the merger
    will result in lower prices for consumers.[^249] Others criticize
    the proposal, particularly the proposed "best of both" package. C3SR
    criticizes Applicants' proposed tiered programming packages on the
    grounds that (1) the proposed packages will cost more than the
    current service packages offered by Applicants, (2) the premium
    channels cost more per channel, (3) the base rates are not
    guaranteed, (4) consumers are unlikely to have the two satellite
    receivers necessary to receive such programming, and (5) providing
    crossover programming would increase costs due to exclusive
    agreements and limiting technology in existing receivers and that
    costs per channel would increase.[^250] NATOA expresses concerns
    about potential exclusivity clauses in Applicants' programming
    agreements, arguing that such clauses may place some of the
    exclusive content that might otherwise be offered in Applicants'
    "best of both" package out of consumers' reach.[^251]

82. Applicants respond that the "best of both" package represents a
    significant discount -- 34 percent -- over the only way to obtain
    all of the programming included in this package today -- buying a
    Sirius satellite radio, an XM satellite radio, and paying monthly
    subscription fees totaling \$25.90 (two times \$12.95) to Sirius and
    XM.[^252] Applicants note that a number of subscribers expressed
    interest in receiving through a single receiver exclusive content
    not available on their current service.[^253] Applicants also cite
    to a CRA analysis that found that introducing new programming
    packages, without taking away current options, necessarily raises
    consumer welfare.[^254] The study concluded that no packages that
    combine content from the two providers would be available absent the
    merger.[^255]

83. Knowledge Ecology International ("KEI") states that the proposed
    pricing plans are temporary and are not guaranteed over the longer
    term.[^256] We find that KEI's argument is sufficiently addressed by
    Applicants' voluntary commitment, which will ensure that these
    benefits materialize. As discussed below, Applicants have
    voluntarily committed to offer for sale an interoperable receiver in
    the retail after-market within nine months of the consummation of
    the merger,[^257] as well as capping the price for all proposed (as
    well as current) programming packages for at least 36 months after
    consummation of the merger.[^258] This voluntary commitment ensures
    that these programming packages will be available at the rates
    proposed by Applicants for at least three years after the merger
    occurs.

84. We conclude that Applicants' proposed new programming packages will
    increase consumer choice and offer consumers lower-cost options.
    These are well-recognized public interest benefits.[^259] While some
    commenters criticize specific aspects of Applicants' proposal, no
    one disputes that these new packages would offer consumers
    additional choice, or that a number of the packages are priced lower
    than Applicants' current offerings. Although the proposed "best of
    both" package (which combines some of the most favored content from
    both XM and Sirius) is priced higher than Applicants' current
    offerings, the content included in this proposed package can be
    accessed today only by subscribing to both XM and Sirius, obtaining
    receivers for each Applicant's service, and paying monthly fees
    totaling \$29.50.[^260] Finally, with respect to comments addressing
    the impact of exclusivity provisions in Applicants' programming
    agreements, we find that only a small fraction of the agreements
    contain provisions of this type. In addition, Applicants have
    promised to "conduct a thorough analysis of the existing contracts
    and negotiate any new terms that may be necessary to implement the
    proposed programming options."[^261] This pledge, in combination
    with the relatively small number of agreements containing
    exclusivity provisions, gives us confidence that the vast majority
    of Applicants' programming will be available post-merger.

85. Moreover, despite some commenters' claims to the contrary, we find
    these benefits to be merger specific.[^262] We note that "the
    Commission does not have to find that a proposed transaction or
    merger is the only means to achieve a claimed benefit,"[^263] merely
    that the benefit is unlikely to be achieved by another means that
    would entail fewer anticompetitive effects. After reviewing the
    record, we conclude that this is the case with regard to each of the
    new programming packages. The record indicates that prior to the
    merger, **\[REDACTED\]**.[^264] Accordingly, we accept Applicants'
    assertion that the proposed programming packages would not be
    offered by Applicants absent a merger and find the benefits that
    will accrue from the offering of such packages in the future to be
    merger specific.

#### A la Carte Programming 

86. In addition to the new packaged programming options proposed by
    Applicants, Applicants voluntarily commit to offer two a la carte
    offerings to subscribers.[^265] "A La Carte I" would allow a
    subscriber to individually select 50 channels for \$6.99 per month.
    Subscribers to A La Carte I will be able to purchase additional
    individual channels for 25 cents per month each as well as "premium"
    packages of certain Sirius channels for \$5 or \$6 per month each
    and of certain XM channels for \$3 or \$6 per month each. "A La
    Carte II" would allow a subscriber to select 100 channels, including
    access to "best of both" programming offered by the other satellite
    provider, for \$14.99 per month. Subscribers would have the ability
    to craft an individualized line-up that includes some of the most
    popular and appealing programming currently offered by the other
    provider. Subscribers would select the channels they wish to receive
    via Applicants' websites. Applicants assert that the proposed a la
    carte plans would create public interest benefits in the form of
    lower prices and greater choice.

87. A number of commenters respond that subscribers will receive fewer
    channels and will pay the same or slightly more for them.[^266] C3SR
    asserts that Applicants' a la carte plan is in reality a tiered
    bundling of reduced total programming that costs more on a
    channel-by-channel basis than Applicants' current packages.[^267]
    C3SR states that Applicants fail to explain how less content for
    less money is the same or better than the current competition
    between two providers.[^268]

88. Applicants dispute these assertions. According to Applicants, "\[a\]
    subscriber choosing the A La Carte I plan would save more than 70
    dollars a year."[^269] Applicants contend that opponents' assertions
    regarding the per-channel price of the a la carte options are
    fundamentally flawed because they assume that all subscribers value
    all channels equally, which, Applicants assert, is not the case.
    [^270] Rather, Applicants claim that a subscriber who only listens
    to 20 channels on Sirius' service would pay more than 64 cents per
    month per valued channel under the current Sirius plan, but would
    pay approximately 35 cents per month for those channels under the A
    La Carte I plan. Applicants add that consumers who value having more
    channels will not be harmed because such individuals will continue
    to be able to purchase the full set of channels offered by Sirius or
    XM at the current price or choose a new option that includes
    additional programming.[^271]

89. We conclude that Applicants' voluntary a la carte commitment
    represents a clear public interest benefit. First, consumers will
    benefit from their ability to tailor the programming they receive to
    match their individual tastes and interests. The proposed a la carte
    system will allow consumers to, in effect, "block" unwanted or
    objectionable content that would otherwise be delivered to
    consumers' SDARS devices. Second, the proposed a la carte system
    will ensure that customers of the merged company have greater
    control over the programming they receive and pay for than
    subscribers to XM or Sirius currently enjoy. Third, consumers will
    benefit from their ability to obtain more programming that they
    desire for lower prices. In order to ensure that consumers have
    ready access to relevant information concerning their programming
    options, we also require that the combined company make the content
    and price details concerning its a la carte options and channel
    lineups clearly available on its websites.

90. Our conclusion that the voluntary a la carte commitment proposed by
    Applicants is by nature a public interest benefit is consistent with
    the conclusion in the *Further Report on the Packaging and Sale of
    Video Programming Services to the Public* that "\[a\] la carte could
    be preferable to bundling in providing diverse programming response
    to consumer demand."[^272] In that Report, the Media Bureau also
    noted that consumer choice over content is an important consumer
    benefit, stating that "\[t\]he marketplace will thus be able more
    quickly to shed unpopular networks in favor of popular networks
    under a la carte than under bundling and in the process become more
    responsive to consumer demand for better programming. Programmers
    may also have an increased incentive to improve their programming
    under a la carte."[^273]

91. We find unpersuasive the argument that Applicants' proposal falls
    short of a "true" a la carte option.[^274] The Commission's goal is
    to ensure that the public receives the greatest benefit from
    services that require use of public spectrum. Applicants' promised a
    la carte options plainly will enhance consumer choice and will
    provide subscribers with an opportunity to lower their bills.

92. We find other criticisms of the proposal likewise unpersuasive. For
    example, NAB, NPR, and the Consumer Federation of America, Consumers
    Union, and Free Press ("CFA") assert that Applicants' claims of
    benefits arising from their proposed new programming packages are
    speculative and non-verifiable.[^275] As stated above, both NAB and
    C3SR question when Applicants will make available the interoperable
    receiver necessary to initiate the proposed a la carte
    offering.[^276] Commenters also contend that subscribers have no
    guarantees as to the quality or duration of any benefits from the
    pricing and programming offerings.[^277] As discussed further below,
    we find that Applicants' voluntary commitments address these
    criticisms by ensuring that the claimed benefits are likely to
    materialize in the near term. We note that in addition to the
    voluntary commitments regarding programming, Applicants also have
    voluntarily committed to offer for sale an interoperable receiver in
    the retail after-market within nine months of the consummation of
    the merger,[^278] and cap for at least 36 months the price of all
    proposed (as well as current) programming packages.[^279] These
    voluntary commitments ensure that consumers will receive Applicants'
    proposed a la carte offerings and that these offerings will be
    available for at least three years at the proposed price.

93. Finally, a number of commenters assert that Applicants' promised a
    la carte offering is not a merger-specific benefit because each
    company could offer a la carte today.[^280] Applicants disagree,
    asserting that both Sirius and XM have experienced billions of
    dollars in losses and that neither company has ever turned a
    profit.[^281] They assert that, without the synergies and economies
    of scale created by this merger, neither company could afford to
    introduce a la carte offerings.[^282] We find that Applicants are
    not likely to offer a la carte options absent the merger. Thus, the
    public interest benefits associated with these a la carte offerings
    are merger specific.

94. As we note in Section IV.B.1., above, under our "worst-case
    scenario" approach, we assume, *arguendo,* that the merged firm
    would have an incentive to charge prices that are higher than those
    charged by Applicants as independent competitors. The voluntary a la
    carte commitments will provide an additional "safety valve" against
    price increases in the future. The a la carte system provides
    individual consumers with increased choice as to the cost of the
    services they will receive from the merged entity, allowing
    consumers to tailor their SDARS service not only to fit their
    programming tastes, but individual budgets as well. Should the
    merged entity choose to raise prices for its services in the future,
    consumers electing the a la carte plan will be able to reduce the
    number of channels selected to compensate for the price increase.
    This option for consumers places an additional check on the merged
    entity's ability to raise prices that does not exist under
    Applicants' current "take-it-or-leave-it" single service offerings.
    Accordingly, in addition to the general increase in consumer welfare
    that results from giving subscribers increased control over the type
    of programming they receive, the increased bargaining power held by
    consumers post-merger will help alleviate the potential competitive
    harms resulting from the merger.

### Accelerated Deployment of Advanced Technology

95. Applicants claim that the merged entity will realize efficiencies
    that will allow the offering of advanced technologies and new
    services sooner than would occur absent the transaction. They state
    that subscribers will have access to a wider range of easy-to-use,
    multi-functional devices such as real-time traffic and rear-seat
    video devices, as well as new services such as advanced data and
    telematics services, including traffic, weather, and "infotainment"
    services.[^283] The claimed efficiencies are based on combining
    Applicants' engineering resources, as well as accelerated
    involvement of third-party manufacturers and technology partners in
    developing and offering new devices and services based on common
    engineering standards and protocols for the combined company.[^284]

96. We agree with commenters that these claimed public interest benefits
    are not cognizable.[^285] Some advanced services data and telematics
    services already are being introduced by Applicants.[^286] Moreover,
    the analysis submitted by Applicants relies **\[REDACTED\]**. Given
    that the additional capacity will not be available until after
    interoperable receivers are widespread, we find that, to the extent
    that this claimed benefit might be based on the availability of
    additional capacity (and thus be merger specific), it is
    speculative.[^287]

### Commercial Availability of Interoperable Satellite Radio Receivers

97. Applicants claim that the proposed transaction will foster the
    commercial introduction of interoperable satellite radios.[^288]
    Applicants state that, absent the merger, they would have little
    incentive to subsidize the cost of interoperable receivers, and
    that, without a subsidy, manufacturers have not expressed interest
    in producing or distributing interoperable radios.[^289]

98. Regardless of whether the proposed merger facilitates the commercial
    introduction of an interoperable satellite radio, it cannot be
    considered as a merger-specific benefit because existing Commission
    rules already require Applicants to introduce such a radio
    regardless of the merger.[^290] Eleven years ago, when the
    Commission required that SDARS operators certify that their system
    includes a receiver design that permits all users to access all
    SDARS systems, it noted that the mandate would encourage consumer
    investment in equipment, create economies of scale, and "promote
    competition by reducing transaction costs and enhancing consumers'
    ability to switch between competing DARS providers."[^291] To the
    extent that increased competition between SDARS providers was viewed
    as one of the benefits from promoting receiver interoperability, the
    commercial availability of interoperable satellite receivers, in the
    context of the proposed transaction, will not provide that benefit.

99. Furthermore, to the extent that timely, widespread penetration of
    interoperable receivers will be necessary for the realization of any
    of the other potential public interest benefits, such as increased
    program diversity, spectrum efficiencies, or other operational
    efficiencies, the timely commercial availability of an interoperable
    receiver does not provide a separate public interest benefit, but is
    necessary if the other potential public interest benefits are to be
    considered cognizable. Thus, we cannot consider the commercial
    availability of interoperable receivers to be a merger-specific
    benefit. Instead, we review this issue in Section VI.B., below. We
    note, however, that Applicants' voluntary commitment to offer for
    sale an interoperable receiver in the retail aftermarket within nine
    months of consummation of the merger will facilitate the realization
    of other claimed public interest benefits in a timely manner.[^292]

### Operational Efficiencies

100. Applicants claim that the proposed transaction will allow the
     merged firm to achieve operational efficiencies that will reduce
     costs, and that those cost savings can be passed on to subscribers
     in the form of lower subscription rates. The claimed efficiencies
     include the ability to reduce programming expenses by eliminating
     duplicative staffing needed for the creation of self-produced music
     programming; to reduce operational expenses for the infrastructure
     used to broadcast and transmit satellite radio programming; to
     reduce marketing and subscriber acquisition costs, including
     efficiencies due to economies of scale in equipment; to reduce
     duplicative research and development efforts and accelerate
     innovation in products and services in the retail and automotive
     distribution channels; and to achieve operating efficiencies by
     reducing duplicative general and administrative expenses. [^293]
     Applicants also maintain that, with their proposed merger, they
     will be able to operate more effectively by adopting the best and
     most efficient practices of the two companies based on their core
     competencies.[^294]

101. We find that some of the claimed efficiencies, such as some of the
     reduced operational expenses and claimed scale economies for some
     equipment design, are not merger specific.[^295] However, others of
     the claimed savings relate to the elimination of duplicate expenses
     and scale economies which can only be achieved by the combined
     company.[^296] To the extent that any of the claimed efficiencies
     might be obtainable by other means that would entail fewer
     anticompetitive effects, the Commission would discount that portion
     of the claimed benefits.[^297]

102. In addition, Applicants have not provided sufficient evidentiary
     support to estimate the magnitude of many of the claimed
     efficiencies.[^298] Of those efficiencies that might be considered
     to be merger specific, some are not expected to be realized within
     several years of closing.[^299] For example, Applicants claim that
     there will be merger-specific savings in satellite operations,
     broadcast operations, terrestrial networks, programming and
     content, customer service and billing, sales and marketing,
     subscriber acquisition costs, general and administrative costs,
     product development, and interest expense.[^300] Some efficiencies,
     such as savings from elimination of duplication in non-unique,
     self-produced music channels, can be realized relatively
     quickly,[^301] but other efficiencies, such as the more efficient
     use of spectrum through the elimination of the need to broadcast
     largely duplicative content, can only be realized once
     interoperable receivers are widespread.[^302] Some of the
     efficiencies related to the satellite fleet and satellite
     operations would be implemented over a long period of time.[^303]
     These savings are discounted in our analysis to the extent that
     some of the savings cannot be verified and some of the efficiencies
     would only be expected to be realized in the distant future.[^304]

103. With respect to programming costs, NAB notes that the merged firm
     would not be able to eliminate some of the most expensive
     programming due to existing long-term contracts.[^305] However,
     Applicants' claimed savings with respect to programming costs are
     based largely on eliminating duplication in the overhead and
     production of similarly formatted channels and improving scale
     economies in content acquisition.[^306] Potential cost savings on
     content covered by long-term contracts would only be realized as
     the contracts covering the content come up for renewal.[^307]

104. We agree with commenters who express concern that consumers will
     not benefit from some of the claimed efficiencies, inasmuch as some
     of the savings relate to a reduction in fixed costs, not variable
     costs.[^308] Applicants engaged an outside consulting firm to
     evaluate the claimed efficiencies arising from the merger, and the
     firm concluded that such efficiencies will likely lead to
     reductions in both marginal and fixed costs, with **\[REDACTED\]**
     percent of the claimed annual savings attributed to a reduction in
     variable costs.[^309] We find that, to the extent that
     **\[REDACTED\]** percent of these efficiencies lead to a reduction
     in variable costs, consumers will benefit from those claimed
     savings. However, only **\[REDACTED\]** percent of the efficiencies
     that lead to a reduction in variable costs would likely be realized
     within the next several years.[^310] Thus, the remainder of those
     efficiencies are speculative. As a result we find that only
     **\[REDACTED\]** percent of the claimed efficiencies are likely to
     be realized within several years of the transaction and could lead
     to a reduction in variable costs. Accordingly, we find that
     consumers might benefit from, a small percentage, at most,
     **\[REDACTED\]** percent, of the claimed efficiencies.

# Balancing public interest harms and benefits

## General Introduction and Summary

105. As previously noted, under the Communications Act, we must
     determine whether the "public interest, convenience and necessity
     will be served" by the granting of the Application.[^311] We now
     employ a balancing process, weighing the potential public interest
     harms of the proposed transaction that we have found against the
     potential public interest benefits.[^312] Applicants bear the
     burden of proving, by a preponderance of the evidence, that the
     proposed transaction, on balance, will serve the public
     interest.[^313] Absent Applicants' voluntary commitments and other
     conditions, the harms outweigh the potential benefits; the presence
     of these voluntary commitments mitigates the harms and ensures that
     benefits are realized. The Application and the record before us
     make clear that, on balance, the public interest will be served by
     approval of the Application subject to the voluntary commitments
     and other conditions that we discuss below. Accordingly, we accept
     the Applicant's voluntary offer of these commitments with the
     expectation that Applicants will adhere to each according to its
     specified terms and within the specified timeframes.[^314]  These
     voluntary commitments are fully enforceable by the Commission.

## Applicants' Voluntary Commitments and Other Conditions

### Price Cap

106. For the reasons given above, we assume that the relevant product
     market may be limited to SDARS, and therefore that it is likely
     that the merged entity will have an increased incentive and ability
     to raise prices above pre-merger levels and that this incentive and
     ability will grow stronger over time.[^315]

107. As discussed above, Applicants have argued, however, that due to
     the particular nature of demand for satellite radio services, the
     merged entity will have an incentive instead to lower prices.[^316]
     Several commenters dispute this argument, and instead predict that
     the merged entity will raise prices. For example, NAB states that
     SDARS is the relevant market, that the merger will lead to a
     monopoly, and that demand is relatively inelastic, so that the
     merged entity will be able to raise prices profitably.[^317] C3SR
     agrees with a narrow product definition, and raises concerns
     regarding higher prices, foregone benefits from price competition,
     increased advertising, and lower value overall.[^318] Similar
     concerns are raised by Common Cause,[^319] KEI,[^320] and
     AAI.[^321]

108. To address concerns about such potential price increases,
     Applicants have voluntarily committed to cap the retail prices on
     their basic subscription package and on the new programming
     packages that they voluntarily commit to offer.[^322] Specifically,
     Applicants voluntarily commit to not raise the retail prices on
     their basic \$12.95 per month subscription package, their a la
     carte programming package, their "best of both" programming
     packages, their "mostly music" and their "news, sports, and talk"
     programming packages, and their discounted family-friendly
     programming package.[^323] Applicants voluntarily commit to these
     price caps for at least 36 months after consummation of the
     merger.[^324] Notwithstanding the voluntary commitment, after the
     first anniversary of the consummation of the merger, the combined
     company may pass through cost increases incurred since the filing
     of the merger application as a result of statutorily or
     contractually required payments to the music, recording and
     publishing industries for the performance of musical works and
     sound recordings or for device recording fees.[^325] The combined
     company will provide customers, either on individual bills or on
     the combined company's website, details about the specific costs
     passed through to consumers pursuant to the preceding
     sentence.[^326]

109. We accept this voluntary commitment and conclude that it will
     mitigate the harm from any post-merger price increases. In
     addition, Applicants may not reduce the number of channels in
     either their current packages or their new packages for three
     years. Some commenters submit that the price cap should be longer
     than three years, arguing that the potential harms will still
     remain at the end of the period.[^327]  We do not know what the
     competitive landscape will be like in three years.  Accordingly,
     six months prior to the expiration of the commitment period, the
     Commission will seek public comment on whether the cap continues to
     be necessary in the public interest. The Commission will then
     determine whether it should be modified, removed, or
     extended.[^328]  We also note that Applicants voluntarily commit to
     a price cap, not a price freeze, and therefore retain sufficient
     flexibility to flow through to consumers any cost savings or other
     efficiencies resulting from the merger.[^329]

110. Some commenters argue that a price cap cannot ameliorate the harms
     that are likely to flow from the merger. CEI, for example, states
     that price increases are sometimes beneficial for consumers if the
     resultant overall package is a better deal for consumers, and that
     fear can prevent companies from instituting price decreases if
     there is concern that subsequent necessary future increases will
     cause antitrust action.[^330] CEI further argues that intermodal
     competition (i.e., between SDARS and other technologies) can
     suffice to discipline the merged company.[^331] Common Cause
     contends that only intramodal competition (i.e., between the
     existing two SDARS providers) can constrain prices, and thus also
     concludes that merger conditions cannot ameliorate the harms from
     the merger. Common Cause therefore opposes merger approval.[^332]
     AAI, referring to the *EchoStar-DIRECTV HDO*, indicates that a
     price freeze condition would not account for other dimensions of
     competition, such as quality and innovation, and that it would not
     allow possible price reductions resulting from SDARS
     competition.[^333] NAB argues that the merged companies cannot be
     counted on to comply with any conditions, that pricing conditions
     are of dubious legality, and that approving the merger would
     contravene the Commission's preference for intramodal
     competition.[^334]

111. We reject these arguments. As stated elsewhere in this document, on
     balance we find that with the voluntary commitments by Applicants
     and the other conditions we impose, the benefits of the merger
     outweigh the potential harms. Because SDARS is in a mode of growing
     penetration so as to reach profitability, the merged entity will
     have sufficient incentive to improve quality and innovate for the
     foreseeable future. Despite this incentive, **\[REDACTED\]**.[^335]
     Because we do not have sufficient record evidence to conclude that
     the relevant market includes any other entities than Applicants
     themselves, we cannot rely upon intermodal competition post-merger
     to discipline prices. However, Applicants' voluntary commitment
     will prevent any harm that might result from a possible price
     increase, if it were intramodal competition that prevented the
     price increase before the merger.[^336] As far as non-compliance is
     concerned, if NAB or any party has evidence of such behavior, it
     may file a complaint with the Enforcement Bureau.

### New Programming Packages and A La Carte Options

112. As discussed in Section VI.B.2., several commenters express
     concerns about whether the potential competitive harms of the
     merger can be mitigated by a condition requiring Applicants to
     offer new programming and a la carte packages.[^337] NAB and others
     state that the effectiveness of such a condition would depend on
     the array of channels to be included in the package, the
     attractiveness of the structure to customers, the pricing of the
     packages, the duration of the offering, the likelihood of changes
     after the expiration of any short-term conditions, whether
     equipment prices will increase to offset lost revenue, and whether
     there will be more advertising-supported programming to offset lost
     revenues.[^338] NAB also raises concerns about the types of
     programs that will be available in each type of package; whether
     customers will have to "buy through" a larger basic package before
     getting combined premium programs at a higher price; what channels
     will be dropped (reducing consumer choice); and, if no channels are
     dropped, what kind of audio degradation consumers will face.[^339]
     CFA asserts that the merged entity will likely cite "exclusive
     programming agreements" as a reason for not including their best
     programming in particular packages.[^340] C3SR questions whether
     customers will be able to migrate between packages and channel
     selections.[^341]

113. In order to address these concerns, Applicants have voluntarily
     committed to cap current prices and offer a la carte and new
     programming packages. The merged firm will maintain the current or
     proposed prices for each their existing and proposed product
     offerings (including regular, as well as premium channels), for a
     term of at least thirty-six (36) months after consummation of the
     merger. In addition, six months prior to the expiration of the
     commitment period, the Commission will seek public comment on
     whether the cap continues to be necessary in the public interest.
     The Commission will then determine whether it should be modified,
     removed, or extended. This cap on prices will protect consumers
     while they enjoy the immediate benefits of a la carte pricing
     options.[^342] Applicants have voluntarily committed to introduce
     the first a la carte-capable receivers in the retail after-market
     and to begin offering a la carte programming within three months of
     the consummation of the merger.[^343] We find that Applicants'
     voluntary commitments will mitigate the potential harms identified
     by NAB and others and will provide a merger-specific benefit to
     consumers.

### Interoperable Radio Receivers

114. Section 25.144 of the Commission's rules sets forth the licensing
     provisions for SDARS systems.[^344] As part of these provisions,
     each applicant for an SDARS license must certify that its system
     "includes a receiver that will permit end users to access all
     licensed satellite DARS systems that are operational or under
     construction."[^345] As the Commission stated when it adopted this
     rule, such receiver interoperability would "at the very least"
     permit consumers "to access the services from all licensed
     satellite DARS systems."[^346] The Commission stated that a
     receiver interoperability requirement was an alternative to
     mandating a specific receiver standard, concluding that a more
     flexible certification approach would promote innovative system
     design.[^347] In October 1997, the International Bureau granted
     each Applicant's application to provide SDARS, "subject to
     certification ... that its final user receiver design is
     interoperable with respect to \[the other SDARS provider's\] system
     final design."[^348]

115. Since authorization in 1997, Applicants have twice filed letters
     with the Commission regarding their compliance with the
     Commission's receiver interoperability rule. By letter dated
     October 6, 2000, Applicants stated their "continued compliance"
     with the receiver interoperability rule and described their efforts
     towards making available interoperable receivers to the
     public.[^349] Applicants noted that they "do not control the actual
     manufacture, distribution and sale of receivers," but instead
     license their receiver technology to radio manufacturers.[^350] As
     a result, they stated that they rely on such manufactures to
     produce SDARS receivers, as well as on automakers to install
     receivers and on retailers to market receivers for installation in
     existing vehicles.[^351]

116. By letter dated March 14, 2005,[^352] Applicants reiterated that
     they had complied with the Commission's interoperability rule "by
     including interoperable radios in their respective system
     designs."[^353] They claimed that they had designed and licensed
     receiver systems with common components capable of receiving Sirius
     or XM programming, although not both simultaneously, and that they
     had invested nearly \$5,000,000 in a joint venture aimed at
     "combining XM's and Sirius's proprietary chipsets into a compact
     and efficient device capable of receiving both services."[^354]
     They emphasized, however, that "the availability of interoperable
     radios ... will depend in large part on factors outside of the
     control of either XM or Sirius, including consumer demand for
     interoperability and the willingness of manufacturers to
     manufacture, distribute, market and sell interoperable radios after
     carefully weighing the integration, qualification, costs and
     efficiency considerations."[^355]

117. We note that each of Applicants subsidizes the manufacture and sale
     of receivers in various ways. Applicants state, however, that there
     is little incentive for each to subsidize the cost of interoperable
     receivers -- as is done with single-system receivers -- because of
     uncertainty whether the subsidy would be recouped since the
     purchaser might not subscribe to that particular Applicant's
     service.[^356] Applicants state that the absence of subsidization
     has limited the interest of manufacturers in producing and
     distributing such interoperable receivers.[^357] As a result, no
     interoperable radio is currently on the market.

118. Commenters in this proceeding disagree whether Applicants' efforts
     to date comply with the Commission's provisions regarding radio
     receiver interoperability. Applicants argue that the
     interoperability requirement mandates that an interoperable
     receiver be designed, but does not require the production,
     distribution, marketing, or sale of such a receiver, which
     Applicants claim is outside of their control.[^358] Relying on
     their October 6, 2000 and March 14, 2005 letters, Applicants
     maintain that they have complied with the receiver interoperability
     requirement by designing an interoperable receiver.[^359] Other
     commenters contend that Applicants have not satisfied the receiver
     interoperability requirement contained in the Commission's
     rules.[^360] For example, NAB asserts that the receiver
     interoperability provision requires both the development and the
     public availability of an interoperable receiver and that, in any
     event, the design process for an interoperable receiver is not
     complete.[^361] Another commenter claims that existing receivers
     made available to the public are already capable of
     interoperability, despite claims by Applicants to the
     contrary.[^362]

119. In addition, C3SR filed a letter on May 27, 2008, alleging that
     Applicants have not been truthful or candid in their
     representations regarding compliance with the Commission's receiver
     interoperability requirement.[^363] C3SR states that documents
     submitted by Applicants demonstrate that instead of complying with
     the interoperability requirement, Applicants
     **\[REDACTED\]**.[^364] In particular, C3SR claims that the
     documents show that Applicants concealed the
     **\[REDACTED\]**.[^365] C3SR states that the documents also
     demonstrate **\[REDACTED\]**.[^366] C3SR urges the Commission to
     designate the merger applications for hearing and to commence an
     investigation into whether Applicants lacked candor in their
     representations to the Commission in the Merger Applications and
     whether the merger is contrary to the public interest because it
     furthers a conspiracy to restrain trade.[^367] In the alternative,
     if the Commission does not designate the applications for hearing
     or investigate further, C3SR requests that the Commission impose
     certain remedies in response to the alleged misconduct, including
     disgorging profits resulting from the alleged FCC rule
     violations,[^368] restitution to the public,[^369] an order
     requiring the adoption of a corporate compliance plan,[^370] and
     divestiture of one of the existing satellite systems.[^371]

120. Applicants respond that they have fully complied with the
     Commission's interoperability requirement and that the documents
     cited by C3SR simply reflect the substantial efforts that
     Applicants have taken in developing an interoperable
     receiver.[^372] They acknowledge building and developing a
     prototype of an interoperable receiver through a Joint Development
     Agreement, but have not taken the ultimate step of bringing such an
     interoperable radio to market.[^373] Applicants deny that
     interoperable receivers designed under the Joint Development
     Agreement could be sold at **\[REDACTED\]** since the cost cited in
     the documents cited by C3SR included **\[REDACTED\]**.[^374]
     Applicants state that the cost did not include **\[REDACTED\]**,
     and that existing receivers sold by Applicants are available at
     prices significantly less than **\[REDACTED\]**.[^375] Applicants
     also state that the documents cited by C3SR reflect only the
     aspirations of one person who was directed to develop interoperable
     technology -- not to evaluate the distribution or sale of
     interoperable radios -- and that the views did not represent the
     views of Applicants.[^376] Furthermore, Applicants claim that
     C3SR's pleading is procedurally and substantively deficient and
     should be dismissed.[^377]

121. We conclude that Section 25.144(a)(3)(ii) requires Applicants to
     make an interoperable receiver commercially available. As stated
     above, the rule requires each applicant to "\[c\]ertify that its
     satellite DARS system includes a receiver that will permit end
     users to access all licensed satellite DARS systems that are
     operational or under construction."[^378] The rule's reference to
     "a receiver that will permit end users to access all licensed
     satellite DARS systems" also indicates that consumer availability
     is required,[^379] as end users cannot use a receiver that is not
     commercially available. The Bureau's references in 1997 to Sirius's
     expressed "commitment to work with all interested parties to insure
     that the SDARS receivers will permit customers to access both
     systems,"[^380] and in 2005 to the need for Sirius and XM to
     identify "a clear timeframe for making such an interoperable
     receiver available to the public,"[^381] also support this
     interpretation. The 1997 condition that "final user receiver
     design" be interoperable[^382] merely reflects the recognition that
     Sirius and XM still were designing receivers at the time: the
     Bureau did not intend (nor did it have authority) to modify the
     rule to require only the design of an interoperable receiver.[^383]

122. Notwithstanding the rule's express language requiring that end
     users have access to receivers that can access all licensed
     satellite DARS systems, we do not believe that Applicants'
     interpretation of the receiver interoperability mandate as a design
     requirement was unreasonable, under the circumstances. As indicated
     above, Applicants do not manufacture or distribute SDARS receivers,
     and the 1997 condition requires that "final user receiver design"
     be interoperable. Further, the Commission did not explicitly
     require them to assure consumer availability of an interoperable
     receiver or require that all SDARS receivers sold in interstate
     commerce be interoperable. Moreover, the Commission never specified
     a deadline for compliance.

123. Based on our examination of the record, we are also not persuaded
     that C3SR's filing raises a substantial and material question of
     fact that requires a hearing before the Commission can make the
     required public interest determination in this proceeding.[^384]
     First, neither the references to **\[REDACTED\]** nor the
     information that the documents reveal as to the joint venture
     company's activities reflect a lack of candor.[^385] Contrary to
     C3SR's argument, the requirement that Applicants make an
     interoperable receiver commercially available was not
     "unambiguous," as the above analysis indicates, and the general
     language of the joint venture agreement does not cast significant
     doubt on Applicants' contention as to how they interpreted that
     requirement.[^386] In addition, we perceive no discrepancy between
     the representations in Applicants' March 14, 2005 letter to the
     Commission concerning the status of their joint venture activities
     and later documents cited by C3SR, a presentation to the joint
     venture board and several "white papers" discussing potential means
     of distributing interoperable receivers.[^387] As C3SR
     acknowledges, there is a time lag between the documents, and in any
     event we are not persuaded that Applicants had a duty under Section
     1.65 of the Commission's rules to disclose an internal presentation
     or "white papers" prepared by the joint venture that did not
     reflect the companies' actual business plans or conclusions.[^388]

124. C3SR urges the Commission to bring the documents in question to the
     attention the Department of Justice, the antitrust enforcement
     authority, arguing that they warrant antitrust investigation under
     Section 1 of the Sherman Act.[^389] **\[REDACTED\]** Further, we
     are not persuaded that the documents cited by C3SR otherwise
     provide sufficient support for their allegations. The documents
     reflect **\[REDACTED\]**.[^390] These estimates do not reflect that
     Applicants could have made an interoperable receiver available to
     the mass market, without any subsidy, at a cost comparable to that
     of commercially available Sirius and XM receivers. As Applicants
     point out, **\[REDACTED\]**.[^391] C3SR also maintains that the
     documents reflect **\[REDACTED\]** does not contradict Applicants'
     representations that the mass market availability of interoperable
     radios depends in large part on factors outside of their
     control.[^392] Finally, although C3SR characterizes Applicants'
     decisions not to make an interoperable receiver commercially
     available in 2006 and 2007 as improper, the documents are
     consistent with Applicants' rationale in the Merger Application
     that making an interoperable receiver commercially available would
     not make economic sense for them.[^393] **\[REDACTED\]**; there is
     no evidence that

     Applicants ever had a business plan for mass market
     deployment.[^394] **\[REDACTED\]**[^395] Under the circumstances,
     there is not a substantial question of fact as to whether the
     companies' decisions not to go forward, in order to avoid creating
     the perception of such a change, were improper.

125. Applicants have voluntarily committed that the combined entity will
     offer for sale an interoperable receiver in the retail aftermarket
     within nine months of the consummation of the merger.[^396] As a
     result, subscribers who already have purchased non-interoperable
     receivers will be able to transition to a receiver that has the
     ability to receive either of the complete programming offerings
     that the merged entity will offer without having to purchase two
     separate receivers. In light of this voluntary commitment, we
     dismiss a complaint filed by Michael Hartleib that seeks
     enforcement of the interoperability mandate.[^397] We conclude that
     Applicants' voluntary commitment to establish a deadline to ensure
     the commercial availability of an interoperable receiver will
     enable and expedite realization of the full benefits of the merger,
     such as more efficient use of the SDARS spectrum.[^398] We also
     find this commitment satisfies the request of commenters that
     commercial deployment of interoperable receivers by the merged
     entity be prompt and subject to a stringent timeline.[^399]

126. We believe that the merged entity will adhere to this voluntary
     interoperability commitment and bring its system into compliance
     with the Commission's interoperability rule, despite commenters'
     views to the contrary.[^400] Applicants' voluntary interoperability
     commitment is clear in its scope and deadline for implementation,
     which should remove any uncertainty as to what is necessary for
     compliance.[^401] We decline to impose the additional receiver
     filtering requirements advocated by NextWave Wireless
     ("NextWave").[^402] We observe that the Commission previously has
     declined to adopt SDARS receiver standards.[^403] Furthermore, the
     issue underlying NextWave's proposal (that is, the potential for
     interference between SDARS licensees and adjacent terrestrial
     wireless services) is the subject of a pending rulemaking
     proceeding, and any filtering obligations are best addressed in the
     context of that proceeding.[^404]

### Open Access

127. As discussed in more detail in Section IV.B.2., USE proposes, as a
     condition to the merger, that the merged entity provide open access
     of the technical specifications of its devices and network so that
     receiver manufacturers may choose the receivers they develop for
     consumers.[^405] USE claims that this condition will prevent a
     potential vertical monopoly in the manufacturing and distribution
     of satellite receivers and the merged entity from increasing the
     cost of equipment paid by consumers.[^406] MAP and other commenters
     support USE's request. [^407] Senator Christopher S. Bond and U.S.
     Representatives John Dingell and Edward Markey also support a
     condition that would allow any device manufacturer to develop SDARS
     equipment.[^408] They support a condition that would allow device
     manufacturers to incorporate additional technology in receivers
     such as HD Radio technology, iPod ports, and Internet connectivity,
     so long as the technology would not harm the merged entity's
     network.[^409] Finally, Reps. Dingell and Markey propose that the
     Commission bar the merged entity from entering into exclusive
     contracts that would, for example, prohibit the inclusion of HD
     Radio chips or iPod compatibility in satellite radio
     receivers.[^410]

128. iBiquity Digital Corp. ("iBiquity")[^411] requests that we
     condition the merger on mandating that the merged entity require
     manufacturers to include HD Radio™ technology for digital AM and FM
     radio in all satellite receivers containing analog AM or FM radio
     technology.[^412] Other commenters support the HD Radio
     condition.[^413] iBiquity argues that HD Radio compatibility is
     necessary because post merger, the merged entity will be in a
     stronger position to restrict iBiquity's sale of HD Radio receivers
     and because it will have more cash to fund subsidies and incentives
     that could prevent the growth of the HD Radio technology.[^414] For
     original equipment manufacture ("OEM") receivers, iBiquity proposes
     that the condition become effective within three years, and for all
     other satellite receivers, within one year.[^415] Applicants object
     to iBiquity's proposed condition as an unnecessary intrusion on
     their business plans. In addition, Applicants argue that it will
     harm satellite radio's ability to compete in the audio
     entertainment market.[^416] Pioneer also opposes iBiquity's
     proposal, explaining that it would "limit the breadth of radio
     product offerings to consumers, limit which radio component
     suppliers' products be designed into radios, have the effect of
     decreasing AM/FM tuning performance, unnecessarily increase costs
     to consumers uninterested in HD Radio and interfere with the useful
     and healthy free market mechanisms extant in radio electronics
     purchases."[^417] Pioneer also argues that iBiquity's proposed
     phase-in periods do not provide sufficient time for typical design
     cycles for either retail or OEM receivers. Pioneer states that
     design cycles for retail equipment last from 18 to 24 months and
     OEM design cycles last significantly longer than the three years
     suggested by iBiquity.[^418]

129. In response to the concerns raised by commenters, Applicants have
     voluntarily committed to comply with certain open access
     conditions.[^419] First, the merged entity, immediately after
     consummation of the merger, will permit any device manufacturer to
     develop equipment that can deliver the combined entity's satellite
     radio service. Device manufacturers also must be permitted to
     incorporate in satellite radio receivers any other technology that
     would not result in harmful interference with the merged entity's
     network, including HD Radio technology, iPod ports, Internet
     connectivity, or other technology. This principle of openness would
     serve to promote competition, protect consumers, and spur
     technological innovation. In addition, we believe that it is not
     enough simply to require the open development of satellite radio
     devices. To ensure that consumers have unfettered access to these
     devices, we will prohibit the merged entity from preventing such
     devices, and any features such devices might contain, from reaching
     consumers, through exclusive contracts or otherwise. We find that
     it would be contrary to the public interest, for example, to permit
     the merged entity to bar HD Radio chips or iPod compatibility from
     inclusion in a manufacturer's satellite radio device, whether that
     device is freestanding or installed in an automobile. Applicants
     shall provide, on commercially reasonable terms, the intellectual
     property to permit any device manufacturer to develop equipment
     that can deliver the merged entity's satellite radio service. The
     encryption, conditional access, and security technology is embedded
     in chip sets that can be purchased from third party manufacturers.

130. We conclude that Applicants' voluntary commitments and other
     conditions address many of the commenters' concerns. [^420] As we
     discussed in Section IV.B.2., the merger may provide the merged
     entity with the ability and incentive to contract with fewer
     manufacturers to save on subsidies or other development and
     distribution costs. Such action would potentially reduce consumer
     choice for SDARS receivers and diminish current features or future
     innovations. Pursuant to Applicants' voluntary commitment, the
     merged entity will offer additional entities the option to license
     the intellectual property rights necessary to design and develop
     SDARS equipment. In addition to bringing more choices of receivers
     directly to consumers, this voluntary commitment may allow
     additional parties to directly negotiate with automobile makers,
     ultimately to the benefit of consumers. Given Applicants' open
     access voluntary commitment to allow additional parties to develop
     and design SDARS equipment and not to bar the inclusion of audio
     technology, including HD Radio technology, we conclude that
     discrimination by the merged entity is not likely to cause a public
     interest harm that warrants the imposition of additional
     conditions. 

131. Though we are unpersuaded a case has been presented on this record
     of a merger-specific harm to HD Radio not remedied by the voluntary
     commitments and other conditions, we do believe important questions
     have been raised that warrant further examination in a separate
     proceeding. To this end, the Commission commits to initiating a
     notice of inquiry within 30 days from the adoption date of this
     Order to gather more information on issues including, but not
     limited to:   

-   Whether HD Radio chips or any other audio technology should be
    included in all satellite radio receivers;

-   Whether satellite radio capability or any other audio technology
    should be included in all HD Radio receivers;

-   The cost to auto manufacturers of including HD Radio chips;

-   The cost to radio manufacturers of including HD Radio chips;

-   Consumer demand for HD radio;

-   The amount and type of programming available on HD Radio today, and
    that projected to be available over the next 3 years; and

-   Whether the FCC has jurisdiction to mandate inclusion of HD Radio,
    satellite radio, or other audio technology.

    While we do not adopt iBiquity's proposed condition in this Order,
    we note that our actions today do not diminish our commitment to the
    HD Radio technology. We continue to believe that HD Radio is an
    important technological development that enables terrestrial radio
    stations to deliver better audio fidelity, more robust transmission
    systems, and the possibility of new auxiliary services.[^421]

### Third-Party Access to SDARS Capacity 

132. *Overview*. Several commenters propose that the merger be
     conditioned on Applicants leasing a certain amount of their channel
     capacity to non-affiliated programmers.[^422] The proposals
     advanced by the commenters include two related, but functionally
     distinct, mechanisms for permitting third parties to access to the
     SDARS system. Some commenters recommend adopting a mechanism
     similar to the Commission's cable leased access regulations,[^423]
     while others propose a system akin to the Open Video System ("OVS")
     whereby a certain percentage of the total system capacity would be
     leased on a long-term basis to a third party. Although Applicants
     have asserted that such conditions are unnecessary,[^424] they have
     voluntarily committed to enter into long-term leases with one or
     more third parties for use of a percentage of the combined entity's
     capacity.[^425] We find that Applicants' voluntary commitment to
     provide such leases directly serves the public interest and will
     further the Commission's goals of fostering competition and
     diversity on the SDARS platform.

133. *Leased Capacity to Single Entity*. Georgetown Partners, LLC
     ("Georgetown") proposes a long-term capacity leasing mechanism
     somewhat similar in function to the Commission's rules governing
     Open Video Systems in the multichannel video programming
     distribution ("MVPD") context.[^426] Georgetown proposes that the
     Commission condition the grant of the merger on Applicants leasing
     "at least 20 percent of the merged entities' total licensed
     bandwidth capacity, as measured in megahertz, ... on an exclusive
     basis to an entity that is totally independent of and unaffiliated
     with Sirius or XM."[^427] Such a condition, Georgetown argues,
     would provide alternative access to satellite radio and counteract
     the merged entity's monopoly over the SDARS service.[^428]
     Georgetown would require that the lease be consummated before the
     merger closes, would require the lease term to be coterminous with
     Applicants' FCC licenses, and would require certain other
     conditions to ensure the quality of the lessee's service on
     Applicants' system.[^429] The proposed service would compete with
     that of Applicants by offering advertising-supported programming
     available to any consumer with a satellite radio receiver at no
     cost, regardless of whether the listener is a subscriber to
     Applicants' service.[^430] The terms of the lease, under
     Georgetown's plan, would be privately negotiated between Applicants
     and the lessee and would be submitted to the DOJ and the Commission
     for approval.[^431] Finally, should it be the lessee, Georgetown
     commits to complying with the "Commission's indecency provisions as
     applied to broadcasters."[^432] Other commenters filed in support
     of a third-party leased access condition.[^433]

134. *Leased Access Model*. Prometheus and Entravision each propose that
     the Commission apply a leased access regime patterned after the
     system used in cable television. Prometheus does not provide
     specific mechanisms for implementing leased access, but rather
     advocates generally that Applicants be required to "provide a
     reasonable amount of capacity at true market rates for commercial
     programming, over which \[Applicants\] would not exercise any
     editorial control."[^434] Such a system would "offer to those who
     feel that satellite service is the preferred programming platform
     an opportunity to make use of it."[^435] Applicants originally
     opposed the third-party leased access proposals advanced by
     Prometheus and Entravision and argued that they are counter to the
     public interest.[^436]

135. *Discussion*. Though Applicants originally opposed the third-party
     access proposals described above, Applicants submitted a voluntary
     commitment to enter into long-term leases or other agreements to
     provide a Qualified Entity[^437] or Entities rights to 4 percent of
     the full-time audio channels on the Sirius platform and on the XM
     platform, respectively (which currently represents six channels on
     the Sirius platform and six channels on the XM platform), and to
     enter into such leases within four months of the consummation of
     the merger.[^438] Applicants further voluntarily commit that, as
     digital compression technology enables the combined company to
     broadcast additional full-time audio channels, the combined company
     will ensure that 4 percent of full-time audio channels on the
     Sirius platform and the XM platform are reserved for a Qualified
     Entity or Entities, provided that in no event will the combined
     company reserve fewer than six channels on the Sirius platform and
     six channels on the XM platform.[^439] The Qualified Entity or
     Entities will not be required to make any lease payments for such
     channels, and the combined company will not be involved in the
     selection of the Qualified Entity or Entities.[^440] The combined
     company will have no editorial control over these channels.[^441]

136. We find that Applicants' voluntary commitment to provide leased
     channel capacity to other programmers addresses the concerns voiced
     by Media Access Project, Public Knowledge, and others who contend
     that the consolidation of the SDARS service to a single provider
     will harm programming diversity.[^442] We further find that
     Applicants' voluntary commitment is consistent with the
     Commission's stated goals to promote diversity as described in the
     recently adopted Diversity Order, which took steps to promote
     diversity in the broadcasting context and solicited comment on
     additional ways to increase minority involvement in the
     communications industry.[^443] Commenters have raised concerns,
     however, about the mechanics of the channel lease administration
     and allocation.[^444] We will determine the implementation details
     for use of these channels at a later date.

### Reservation of Channels for Noncommercial Educational Use 

137. Public Knowledge and Prometheus argue that if the Commission
     determines that the merger is in the public interest, the merged
     entity should be required to reserve a percentage of channel
     capacity for noncommercial educational or informational
     programming.[^445] The commenters suggest that the Commission use
     the Direct Broadcast Satellite ("DBS") public interest
     obligations[^446] as a model for implementation of the same
     obligations for SDARS. Applicants have committed to voluntarily
     make capacity available for this purpose.[^447] We find that
     Applicants' voluntary commitment will help maintain a platform for
     diverse voices post-merger and, as a result, we find that it serves
     the public interest.

138. *Proposals by Commenters.* Prometheus and Public Knowledge each
     propose that the merger, if approved, be subject to a condition
     that a certain percentage of the merged entity's channel capacity
     be reserved for noncommercial educational programming.[^448] Public
     Knowledge proposes the following four requirements to implement an
     SDARS noncommercial channel reservation requirement. First, similar
     to the DBS rule, Public Knowledge asserts that the merged company
     should allocate only one channel per qualified programmer unless
     all other requests for access have been granted in order to
     increase program diversity.[^449] It also argues that any
     noncommercial channels already carried by SDARS should not count
     toward the reservation requirement and that "qualifying programmers
     currently on either service should not be eligible" for reserved
     channels.[^450] Second, Public Knowledge proposes that all
     subscribers of the merged company should get access to all of the
     noncommercial programming on the reserved channels at no additional
     charge. Public Knowledge clarifies its proposal to mean that the 5
     percent reservation should be based on the entire service offering
     and not on a reduced package that might be offered on an a la carte
     basis.[^451] Third, as in the DBS context, the merged entity should
     not exercise any editorial control over the noncommercial
     programming, although it may select from among qualified applicants
     when demand exceeds capacity. Fourth, only national and local
     educational programming suppliers would be eligible for carriage on
     the reserved channels. Although in the DBS rules only national
     programmers are eligible, Public Knowledge urges the Commission to
     expand eligibility to local noncommercial entities. It states that
     this would permit low power radio stations and other local entities
     to have access to satellite radio audiences which Public Knowledge
     claims would in turn further the Commission's goal of promoting
     localism.

139. Applicants initially opposed the imposition of public interest
     obligations, asserting that their services "provide\[\] a
     tremendous range of public interest and educational content . . .
     because such programming is attractive to consumers."[^452]

140. *Background: Public Interest Obligations in The SDARS and DBS
     Contexts.* When the Commission adopted licensing and service rules
     for SDARS in 1997, it considered imposing public interest
     obligations on the licensees.[^453] Commenters in the proceeding
     cautioned against impeding the introduction of a new service with
     rapidly changing technology.[^454] The Commission concluded that
     SDARS licensees should be subject to Equal Employment Opportunity
     requirements as well as certain political broadcasting rules.[^455]
     The Commission declined, however, to impose additional public
     interest programming obligations on SDARS, but reserved the right
     to do so at a later date, "\[i\]f additional public interest
     obligations are found to be warranted."[^456] This included a
     specific reservation of a future right to "adopt rules similar to
     those Congress enacted for DBS providers, including a 4-7 percent
     set-aside of capacity for noncommercial educational and
     informational programming."[^457]

141. Applicants' voluntary commitment to make capacity available for
     noncommercial educational and informational programming is similar
     to the DBS public interest rules.[^458] These rules were mandated
     by the Cable Television Consumer Protection and Competition Act of
     1992 ("*1992 Cable Act*"),[^459] which directed the Commission to
     impose public interest obligations on DBS providers, including a
     requirement to reserve a percentage, between 4 and 7 percent, of
     channel capacity for noncommercial educational or informational
     programming.[^460] In implementing this statutory mandate, the
     Commission adopted a 4 percent reservation requirement[^461] and
     elaborated on the definition of entities qualified to be carried on
     the reserved channels.[^462] We concluded that in order to qualify
     for carriage, an entity must be noncommercial with an educational
     mission.[^463]

142. *Discussion.* We find that Applicants' voluntary commitment to set
     aside 4 percent of their capacity for NCE programming mitigates the
     potential harm to program diversity and is consistent with the
     Commission's expectation, first stated in 1997, that diverse public
     interest programming would be available on the SDARS platform.
     Eleven years ago, when the Commission considered whether to impose
     such conditions on the nascent SDARS service, the Commission was
     persuaded by the parties' argument that "public interest
     programming obligations \[were\] not necessary to ensure diverse
     public oriented programming" because "the economic and distribution
     structure of satellite DARS makes it good business to offer
     programming that regular broadcasters would not offer absent
     incentives."[^464] At that time, the Commission agreed that market
     forces produced by the robust competition between two SDARS
     competitors would ensure that listeners would receive noncommercial
     educational and public interest programming on the SDARS service.
     In the absence of such competitive forces post-merger, we find the
     potential harm to programming diversity greater than was the case
     in 1997.

143. Applicants have voluntarily committed to set aside 4 percent of the
     full-time audio channels for noncommercial educational and
     informational programming on both Sirius's and XM's current
     systems, a figure that currently represents six channels on each
     platform.[^465] We accept Applicants' voluntary commitment. We find
     that this commitment addresses commenters' concerns and will
     promote diversity. To ensure that the commitment is implemented in
     a fair and efficient manner, we adopt additional requirements based
     on regulations implementing the DBS public interest
     requirement.[^466] We are aware that "attractive" programming is
     not necessarily the same as "profitable" programming, particularly
     where it concerns programming of an educational and informational
     nature. While we acknowledge and expect that the merged company
     must behave in a profit-maximizing manner in order to operate as a
     successful commercial enterprise, we have a counterbalancing
     obligation to protect the public's interest in diverse programming
     choices. Accordingly, we find that the proposed set-asides are
     justified in order to balance the risk of harm to programming
     diversity and the amount and quality of noncommercial educational
     and informative public programming available via SDARS
     post-merger.[^467] In addition, we find that the burden on the
     merged company as a result of this voluntary commitment will not
     prohibit the merged entity from realizing the benefits of the
     merger. Moreover, Applicants state in their pleadings that the
     merged company will eliminate a number of channels that offer
     substantially duplicative programming in order to free up channel
     capacity for other formats and services.[^468] We expect that the
     consolidation of Applicants' merged channel offerings in this way
     will free a significant amount of capacity, a small portion of
     which can be reallocated for noncommercial services pursuant to
     Applicants' voluntary commitment.

144. As the Commission did in the context of imposing public interest
     obligations on DBS providers, we limit the number of channels that
     can be initially allocated to a single noncommercial
     programmer.[^469] In adopting the DBS rules, the Commission was
     concerned that access to noncommercial channels not be dominated by
     a few national educational program suppliers and concluded that
     limiting the capacity for any one programmer will increase the
     development of quality educational and informational programming
     for carriage on the set aside channels.[^470] The Commission also
     found that the limitation would provide an opportunity for carriage
     of programming that might not otherwise be available, including
     programming targeting traditionally underserved audiences.[^471] We
     believe that these same concerns hold true for the merged entity.
     Accordingly, the merged entity will not be permitted to initially
     select a qualified programmer to be carried on more than one of its
     reserved channels. After all qualified entities seeking access to
     the reserved channels have been offered carriage, the merged entity
     may allocate an additional channel to a programmer without having
     to make further efforts to find other qualified programmers to fill
     the NCE set-aside channels.

145. In determining how many channels must be made available at any
     point in time in fulfillment of Applicants' commitment to set aside
     4 percent of their full-time audio channels for this purpose, the
     merged entity shall use the method specified in section
     25.701(f)(1) of the Commission's rules.[^472] Specifically, the
     number of full-time audio channels shall be determined annually by
     calculating, based on measurements taken on a quarterly basis, the
     average number of channels available for audio programming on all
     satellites licensed to the provider during the previous year.[^473]
     In addition, as provided in the regulations implementing the DBS
     set-aside, Applicants may use this reserved capacity for any
     purpose until such time as it is used for NCE programming.[^474] We
     agree with Public Knowledge that the number of reserved channels
     must be based on total system capacity and not on the number of
     channels in any particular service package. Public interest
     channels must be made available to all subscribers at no additional
     charge.[^475] With respect to noncommercial programming already
     carried by one or both of the SDARS licensees, we disagree with
     Public Knowledge that this programming never be counted as
     qualified for carriage on the reserved channels. The merged entity
     has the discretion to choose among programmers, and those
     noncommercial entities already carried should not be penalized for
     prior successful relationships with SDARS licensees.

146. As in the DBS context, the merged entity may not exercise editorial
     control over the programming on the reserved channels but may chose
     between qualified programmers when demand for capacity exceeds
     channel supply. With respect to Public Knowledge's suggestion that
     local as well as national programmers are qualified for carriage,
     the merged entity could choose a local programmer but must not use
     its terrestrial repeater network to originate local programming or
     local advertising that is not carried on its satellites.[^476] In
     other words, any noncommercial programming on the reserved
     channels, like all other SDARS programming, must be carried by
     satellites that reach customers nationwide. The merged company may
     charge noncommercial programmers no more than 50 percent of the
     direct costs of making the channel available for access, although
     they may charge such programmers less than 50 percent.[^477] As in
     the DBS context, direct costs may not include those related to the
     construction, launch, or general operation of the satellite, nor
     can they include marketing costs, general administrative costs, or
     similar overhead costs of the SDARS provider or the revenue it
     might have lost if it could have offered the channels to a
     commercial programmer.[^478]

147. The merged entity shall reserve discrete channels and offer these
     to qualified programmers at consistent times to fulfill this
     reservation requirement.[^479] In addition, the merged company must
     comply with the public file requirements of section 25.701(f)(6) of
     the Commission's Rules, 47 C.F.R. § 25.701(f)(6). Finally, the
     merged entity shall make NCE channel capacity available upon
     consummation of the transaction, and programming provided pursuant
     to this set-aside requirement must be available to the public no
     later than six months after the transaction's consummation.[^480]

### Service to Alaska, Hawaii, and Puerto Rico

148. Applicants have committed voluntarily to file applications with the
     Commission, within three months of the consummation of the merger,
     to provide the Sirius satellite radio service to the Commonwealth
     of Puerto Rico using terrestrial repeaters and to promptly
     introduce such service upon grants of permanent authority by the
     Commission to operate these repeaters.[^481] We find that the
     public interest would be served by Applicants' voluntary commitment
     to provide service to Puerto Rico. We also strongly encourage the
     merged entity to expand service to Alaska, Hawaii, the U.S. Virgin
     Islands, and other territories of the United States, where
     technically feasible and economically reasonable to do so.

149. In this proceeding, we have received comments urging the Commission
     to expand the SDARS geographic coverage requirements as a condition
     on approving the merger.[^482] In particular, commenters noted that
     although there was an expectation that access to SDARS would grow
     alongside technological advances, this has not been the case for
     consumers in Alaska, Hawaii, U.S. Virgin Islands, Puerto Rico, and
     the outlying territories of the United States.[^483] Thus,
     commenters have requested that access by all consumers in the
     United States be a central tenet of the Commission's merger
     review.[^484]

150. Our rules governing the provision of SDARS requires that each
     applicant for an SDARS license demonstrate that its system will, at
     a minimum, provide service throughout the 48 contiguous United
     States ("full CONUS").[^485] Under existing rules, there is no
     obligation that SDARS licensees provide service beyond full
     CONUS.[^486] Thus, Applicants' voluntary commitment to provide the
     Sirius satellite radio service to Puerto Rico will expand SDARS
     service beyond existing coverage requirements.[^487]

151. We decline to require expansion of the SDARS licensees' geographic
     service area beyond this voluntary commitment. Based on the record
     in this proceeding, we conclude that service outside full CONUS by
     the existing SDARS satellite networks is not technically feasible
     or economically reasonable at this time. Although Applicants state
     that the Sirius satellite network is capable of serving Puerto Rico
     and southeastern portions of Alaska using its current
     three-satellite NGSO orbital configuration and satellite
     design,[^488] satellite coverage does not extend to the rest of
     Alaska or Hawaii due to technical limitations, such as low
     elevation angles[^489] and requirements for high power over CONUS.
     [^490] Applicants also state that **\[REDACTED\]**.[^491] We
     nevertheless strongly encourage the merged entity to include
     service to Alaska, Hawaii, the U.S. Virgin Islands, and other
     territories of the United States as part of future applications to
     launch and operate SDARS satellites, where such service is
     technically feasible and economically reasonable.

## Other Issues

### Spectrum Givebacks

152. We decline to impose a condition requiring Applicants to divest a
     portion of their spectrum. Some commenters argue that, for the
     merger to serve the public interest, the merged entity must
     surrender up to half of its assigned spectrum in order to allow a
     new competitor to enter the market for SDARS.[^492] Applicants,
     however, assert that the Commission should reject any proposals
     that involve divestiture of a portion of the combined entity's
     spectrum post-merger because such divestiture is unnecessary and
     would undermine the public benefit of the merger.[^493] Other
     commenters join Applicants in opposing spectrum divestiture as a
     condition to the merger.[^494] For the reasons set forth below, we
     agree with Applicants that the public interest would not be served
     by requiring the merged entity to divest completely a portion of
     SDARS spectrum.

153. Applicants each use 12.5 MHz to deliver content to receivers, and
     transmit data streams by three separate data paths: two
     time-diverse satellite paths and a terrestrial repeater path.[^495]
     Although these data streams are redundant, the redundancy of the
     signals, along with onboard digital signal processing, ensures that
     the listener experiences minimal outages.[^496] Any divestiture of
     spectrum by Sirius would require an overhaul of the network and
     would require Sirius to replace all of its current user
     receivers.[^497] A partial divestiture of spectrum by XM would also
     require an overhaul of the network, although XM could divest
     approximately 6.25 MHz without requiring XM to replace all customer
     radios.[^498] The reduced bandwidth, however, would significantly
     reduce the number of channels and the quality of service for
     existing XM customers. Furthermore, in addition to the harm to
     existing SDARS customers from a partial divestiture, it is not
     clear to us that a new competitor would have sufficient spectrum to
     emerge as a significant competitor to the newly merged entity, nor
     is it clear that a new SDARS operator could overcome the regulatory
     and business hurdles required to offer service.

154. We also considered alternative methods that would permit a new
     SDARS operator in the spectrum.[^499] We have determined, however,
     that each method has drawbacks that would make it infeasible for a
     new SDARS operator to offer service. Requiring the merged entity to
     transfer the space and ground infrastructure of either Sirius or XM
     to a new SDARS operator might allow the new operator to begin
     service without the delays of building a new satellite network from
     scratch.[^500] However, we believe that the cost of purchasing
     these assets would be prohibitively expensive for a new operator to
     enter the market in the near term.[^501] For these reasons, we
     reject Primosphere's request for a condition to require the merged
     entity to enter into an agreement whereby Primosphere could deliver
     programming by means of the existing SDARS satellite systems.[^502]

### No Local Programming or Local Advertising

155. Terrestrial broadcasters contend that the merger will harm their
     ability to provide free over-the-air local programming. For
     example, NAB contends that Applicants will increase the amount of
     advertisements via their services after the merger is
     consummated,[^503] and that the loss of even a small amount of
     advertising revenue to the merged entity would be "devastating" to
     local radio stations and would force them to reduce local
     programming.[^504] Clear Channel requests that the Commission
     prohibit the merged entity from carrying local programming and
     local advertising.[^505]

156. As stated above, we find that record before us now does not show
     that the merger will necessarily harm the ability of local
     broadcasters to air locally oriented programming.[^506] In
     addition, we note that Applicants operate terrestrial repeaters
     pursuant to grants of special temporary authority that restrict the
     use of repeaters to the simultaneous retransmission of the complete
     programming, and only that programming, transmitted by the
     satellite directly to SDARS receivers.[^507] Thus, SDARS licensees
     are already prohibited, independent of the merger, from using
     terrestrial repeaters to distribute localized content that is
     distinct from that provided to subscribers nationwide via
     satellite. We note that the prohibition on local content remains in
     effect and prohibits Applicants from distributing local programming
     as well as local advertising.[^508] In light of the importance of
     local sports programming to terrestrial radio stations, we prohibit
     the merged entity from entering into any agreements that would
     preclude any terrestrial radio station from broadcasting live local
     sporting events. Entities concerned about Applicants' compliance
     with these mandates may file complaints with the Commission, which
     will act promptly to enforce the prohibitions.

# compliance with communications act and commission's rules and policies

## 1997 SDARS Report & Order

157. In 1997, the Commission established the SDARS service and
     determined that there would be two initial SDARS licenses, sold at
     auction to different parties. The *1997 SDARS Service Rules Order*
     contained the following paragraph:

     *Transfer.* We note that DARS licensees, like other satellite
     licensees, will be subject to rule 25.118, which prohibits
     transfers or assignments of licenses except upon application to the
     Commission and upon a finding by the Commission that the public
     interest would be served thereby. Even after DARS licenses are
     granted, one licensee will not be permitted to acquire control of
     the other remaining satellite DARS license. This prohibition on
     transfer of control will help assure sufficient continuing
     competition in the provision of satellite DARS service.[^509]

158. The 2007 SDARS NPRM sought comment on whether this language in the
     *1997 SDARS Service Rules Order* constitutes a binding Commission
     rule and, if so, whether the Commission should waive, modify, or
     repeal the prohibition in the event it determines that the proposed
     merger would serve the public interest. [^510] Commenters expressed
     conflicting views on these issues. Applicants maintain that this
     language is a policy statement under the Administrative Procedure
     Act ("APA"), rather than a binding Commission rule because it was
     not codified in the Code of Federal Regulations.[^511]
     Specifically, they claim that it is "merely a policy statement
     reflecting the Commission's view, based on the evidence available
     in 1997, that two satellite radio licensees were needed to have
     enough competition in the audio entertainment market."[^512] Other
     parties argue that the prohibition is a binding rule. They contend
     that the Commission intended to impose a binding legal prohibition
     on merger by the satellite DARS licensees, that it was adopted in a
     notice and comment rulemaking proceeding, and that it was published
     in the Federal Register.[^513]

159. We find that the prohibition is a binding substantive rule, not a
     mere statement of policy. The prohibition is expressed in clear,
     specific, and unequivocal language; was characterized by the
     Commission in the *1997 SDARS Service Rules Order* as a
     "prohibition"; and leaves no room for the exercise of agency
     discretion (unless it is waived, modified or repealed). Recent
     decisions distill the D.C. Circuit's attempts to distinguish
     between rules and policy statements into two related lines of
     analysis:

> One line of analysis focuses on the effects of the agency action. *See
> Cmty. Nutrition Inst. v. Young*, 818 F.2d 943, 946 (D.C. Cir. 1987)
> (stating that the court should consider whether the agency action (1)
> "impose\[s\] any rights and obligations," or (2) "genuinely leaves the
> agency and its decisionmakers free to exercise discretion") (internal
> quotations omitted); *see also, e.g., Troy Corp. v. Browner*, 120 F.3d
> 277, 287 (D.C. Cir. 1997); *Am. Bus. Ass'n v. United States*, 627 F.2d
> 525, 529 (D.C. Cir. 1980). The second line of analysis focuses on the
> agency's expressed intentions. *See Molycorp., Inc. v. EPA*, 197 F.3d
> 543, 545 (D.C. Cir. 1999) (stating that the court should consider "
> (1) the Agency's own characterization of the action; (2) whether the
> action was published in the Federal Register or the Code of Federal
> Regulations; and (3) whether the action has binding effects on private
> parties or on the agency"); *see also, e.g., Am. Portland Cement
> Alliance v. EPA*, 101 F.3d 772, 776 (D.C. Cir. 1996).[^514]

The ultimate focus of both analytic approaches is "whether the agency
action binds private parties or the agency itself with the 'force of
law.'"[^515]

160. The plain language of the relevant paragraph in the *1997 Report
     and Order* binds both private parties and the Commission itself
     with the force of law. First, it removes the Commission's
     discretion to approve one satellite DARS licensee's acquisition of
     control of the other, absent repeal of the prohibition, by stating
     in advance that such an acquisition will not be permitted.[^516]
     Second, the use of the words "will not be permitted" and
     "prohibition" strongly suggests that the Commission intended this
     to be a binding rule.[^517] Indeed, it is difficult to imagine
     words that would have a more mandatory connotation than those used
     here.

161. Applicants assert that "the real dividing point between binding
     regulations and general statements of policy is publication in the
     Code of Federal Regulations, which the \[APA\] authorizes to
     contain only documents which 'having general applicability *and
     legal effect*,' and which the governing regulations provide shall
     contain only 'each Federal *regulation* of general applicability
     and current or future effect.'"[^518] The D.C. Circuit, however,
     has refused to place such weight on the publication factor. As it
     has said, "\[i\]n none of the cases citing the distinction ... has
     the court taken publication in the Code of Federal Regulations, or
     its absence, as anything more than a snippet of evidence of agency
     intent."[^519] In contrast, the D.C. Circuit has given decisive
     weight to mandatory language.[^520] The publication factor is of
     even less significance here than in other cases because the
     prohibition at issue here applies to only two entities and those
     two entities were very familiar with the *1997 SDARS Service Rules
     Order*, making it less necessary to codify the prohibition.

162. For the foregoing reasons, we conclude that the prohibition on
     merger in the *1997 Service Rules Order* is a binding rule.
     Therefore, we must address the question raised in the Notice
     whether we should waive, modify, or repeal the prohibition in order
     to permit the proposed merger.[^521]

163. First, we disagree with Applicants that it is appropriate to waive
     the prohibition in order to permit the merger.[^522] As a number of
     commenters note,[^523] it is well established that "\[t\]he
     function of a waiver is not to change the general standard, a
     matter for which the opportunity for general comment is a
     prerequisite under the Administrative Procedure Act, but to justify
     an ad hoc exception to that standard in a particular case."[^524]
     Here, the prohibition against merger applies only to the two
     Applicants; it has no application beyond this proceeding. Thus,
     grant of a waiver clearly would eviscerate the rule and for that
     reason is not appropriate here.

164. We can, of course, repeal a rule if we decide that doing so would
     serve the public interest and we comply with rulemaking
     procedures.[^525] In this proceeding, we repeal the prohibition on
     merger set forth in paragraph 170 of the *1997 SDARS Service Rules
     Order*. We find above that approval of the merger, subject to
     Applicants' voluntary commitments and the other conditions, will
     benefit consumers by making available to them a wider array of
     programming choices at various price points and affording them
     greater choice and control over the programming to which they
     subscribe, and that those benefits exceed the harms identified
     above. For the same reasons, we conclude that repeal of the rule
     prohibiting the merger will, on balance, serve the public
     interest.[^526]

## Enforcement Matters

165. NAB and other commenters argue that Applicants each have a "history
     of ignoring" the Commission's rules and the Commission therefore
     cannot reasonably rely on a merged XM-Sirius entity to comply with
     any regulatory conditions that might be imposed.[^527] In
     particular, NAB makes two specific allegations concerning
     Applicants' marketing of FM modulators and use of terrestrial
     repeaters, which are discussed below.

166. First, NAB asserts that Applicants violated the Part 15 equipment
     rules intended to ensure that the modulators[^528] in their
     satellite radio receivers do not interfere with broadcast radio
     stations.[^529] Consequently, NAB states, listeners to
     noncommercial[^530] radio stations may not only receive
     interference, but may also receive "signal bleed" that results in
     their hearing on their vehicle radios unwanted satellite radio
     programming.[^531] NAB adds that "\[i\]t is a matter of record that
     these violations were apparently intentional on Sirius's
     part."[^532]

167. Second, NAB alleges that XM violated the Commission's technical
     rules in constructing and operating its network of terrestrial
     repeaters.[^533] XM's repeater violations, NAB states, include
     operation of 19 repeaters without any FCC authorization;
     construction and operation of at least 125 repeaters at
     unauthorized locations; operation of at least 221 repeaters at
     power levels in excess of its authorization; and installation of
     more than 80 of its repeaters at heights that exceeded authorized
     levels.[^534] In addition, NAB asserts that XM continued the
     unauthorized operations even after the violations came to its
     attention.[^535] NAB states that Sirius has engaged in analogous,
     although less extensive, repeater violations.[^536]

168. In response, Applicants assert that they take their obligations and
     responsibilities as FCC licensees seriously.[^537] According to
     Applicants, the allegations raised by NAB and others do not bear on
     their qualifications as Commission licensees or cast doubt on their
     willingness to comply with merger-specific conditions.[^538]
     Regarding the FM modulators, Applicants state that they have
     cooperated fully with the Enforcement Bureau in its investigations
     into whether some of their receivers were non-compliant with
     Commission regulations and that all newly produced receivers are
     fully consistent with applicable regulations.[^539] In addition,
     Applicants indicate that both companies voluntarily disclosed their
     terrestrial repeater variances to the Commission in October 2006
     after taking unilateral actions to bring many of those variances
     into compliance, that no party has experienced interference as a
     result of the repeater variances, and that both companies have been
     working diligently with Commission staff to resolve issues
     concerning their repeaters.[^540]

169. Applicants argue that the Commission has repeatedly rejected the
     notion that outstanding allegations of rule violations that can be
     addressed through the normal enforcement procedures have any
     bearing on a licensee's qualifications.[^541] Rather, Applicants
     state, the Commission has made clear that "'typically it will *not*
     consider in merger proceedings matters that are the subject of
     other proceedings before the Commission.'"[^542] Applicants assert
     that NAB's allegations relate entirely to issues that have been
     brought to the Commission's attention and the agency is addressing
     these matters through its traditional enforcement procedures.[^543]
     Therefore, Applicants conclude that the issues raised by NAB have
     no relevance to the Commission's review of the merger.[^544]

170. We agree that the issues concerning Applicants' apparent misconduct
     in connection with the manufacture, importation, marketing and
     distribution of modulators for their services and the construction
     and operation of various of their terrestrial repeaters are
     troubling. We have, however, fully investigated these matters and,
     after extensive discussions with the parties and careful
     consideration of the record, concluded that settlement of these
     issues by consent decrees was in the public interest. As we noted
     in the Orders adopting the Consent Decrees:

     We do not come to this conclusion easily. The apparently
     intentional nature of some of the violations ... and the apparent
     involvement of certain XM \[and Sirius\] personnel in these
     violations are very troubling. Indeed, the ability and willingness
     to conform one's conduct to the requirements of the Commission's
     rules are central to the qualifications of any Commission licensee.
     We must balance our concern, however, against the public's interest
     in the continued availability and viability of \[the companies'\]
     satellite radio service and the impact on the public and other
     licensees that \[the companies'\] violations precipitated. These
     considerations, taken together with the rigorous oversight and
     reporting obligations and substantial voluntary contribution\[s\]
     prescribed in \[the\] Order\[s\] and the Consent Decree\[s\],
     persuade us that settlement of these matters would best serve the
     public interest.[^545]

171. The Consent Decrees terminated the agency's investigations into
     Applicants' compliance with the Commission's regulations governing
     FM modulators and the terms of their authorizations for their
     terrestrial repeaters. The Consent Decrees also provide that
     Applicants will each make a substantial voluntary contribution to
     the U.S. Treasury, implement certain remedial measures with respect
     to radio receivers with built-in FM modulators in the hands of
     subscribers, and implement comprehensive compliance plans to ensure
     the companies' future compliance with the Commission's regulations.
     In addition, XM agrees, within a period of 60 days from the
     effective date of the Consent Decree, to shut down 50 variant
     terrestrial repeaters and to bring another 50 repeaters into
     compliance with the specifications that they were originally
     authorized or cease operating them. Sirius can return to operation
     two of its repeaters, which varied slightly from what they were
     originally authorized to do, and may return to operation another
     nine repeaters that varied significantly from their original
     authorization, provided they are first brought into compliance with
     what they were originally authorized to do.

172. The compliance plans in the Consent Decrees are extensive and
     involve the appointment of a dedicated FCC Compliance Officer, with
     explicit equipment design and certification authority and
     responsibility, the development and implementation of recurring and
     enduring compliance training programs, and the development and use
     of detailed guidelines governing equipment design and certification
     and the implementation of any changes to the Applicants'
     terrestrial repeater networks. Applicants also are subject to
     continuing reporting obligations that will serve to ensure that the
     Commission is informed on an ongoing basis of all developments
     relevant to the companies' compliance with the Consent Decrees.
     Except with respect to their training obligations, which continue
     indefinitely, the Consent Decrees will continue in effect for a
     period of five years.

173. In light of these and other provisions in the Consent Decrees and
     our consideration of the record as a whole, we concluded that our
     investigations raised no substantial and material questions of fact
     as to whether Applicants possess the basic qualifications,
     including those related to character, to hold or obtain any
     Commission license or authorization. In this connection, we note
     that NAB does not assert that Applicants lack the requisite
     qualifications to hold or obtain FCC licenses or authorizations.
     Moreover, while one commenter, Blue Sky Services, questions whether
     Applicants meet the "citizenship, character ... and other
     qualifications" test set forth in Section 308(b) of the Act,[^546]
     our conclusions in the settlement proceedings, as detailed above,
     directly address and adequately dispose of this contention.

174. Finally, to the extent that NAB and various commenters argue that
     the Commission cannot rely upon a merged XM-Sirius entity to comply
     with any regulatory conditions given Applicants' past history of
     non-compliance with Commission rules, we disagree.[^547] We are
     conditioning our approval of the merger transaction on the merged
     entity's compliance with Applicants' voluntary commitments. We will
     rigorously monitor Applicants' compliance with the conditions of
     the Consent Decrees and the conditions specified herein and believe
     that the mechanisms put in place in those Decrees will fully serve
     to ensure compliance on an ongoing basis. Moreover, we will not
     hesitate to take prompt and effective enforcement action if these
     conditions are not satisfied.[^548]

175. *EEO Obligations.* In the *1997 SDARS Service Rules Order* the
     Commission determined that "satellite DARS licensees must comply
     with the Commission's equal employment opportunity
     requirements."[^549] We reiterate that decision here. When SDARS
     services were initially licensed, the Commission had a pending
     rulemaking proposing revision to its EEO rules; the Commission
     decided that licensees in the SDARS services would be required to
     comply with the then-current rule and any changes adopted when the
     rulemaking is completed.[^550] Thus, we clarify here that the
     merged entity must comply with the Commission's EEO broadcast rules
     and policies, including periodic submissions to the Commission
     consistent with the reporting schedule established for broadcast
     licensees.[^551]

# procedural matters

**A. Petitions and Motions Addressing Various Other Issues**

176. Various entities request the Commission to delay its decision on
     Applicants' proposed merger or to designate the Application for
     hearing. NAB filed a Petition to Defer Action urging the Commission
     to suspend its merger review until the Enforcement Bureau releases
     documents responsive to a Freedom of Information Act request filed
     by NAB.[^552] NAB asserts that the documents, which pertain to
     Applicants' compliance with Commission rules governing the
     operation of FM modulators and terrestrial repeaters, are central
     in determining whether Applicants can be relied upon to adhere to
     promises made in their Application.[^553] In addition, USE asks the
     Commission to suspend its review to allow adequate time for the
     Commission to: (1) address adverse effects of vertical
     integration; (2) disclose its findings on compliance matters,
     including Applicants' failure to provide interoperable radios; (3)
     ensure that its ex parte rules are being followed; and (4)
     condition the merger should it be approved.[^554] USE also
     submitted filings arguing that the Commission should designate the
     Application for hearing because of material issues of fact
     regarding whether the public interest is served by the vertical
     integration that would occur with a merger and whether the
     information furnished in the Application is accurate and
     complete.[^555] The Leadership Conference on Civil Rights argues
     that the Commission should delay its final decision until it has
     had more time to assess the potential impact of a merger on media
     ownership diversity.[^556] We believe we have adequately addressed
     the issues relevant to this merger review and find that no further
     delay is warranted.[^557]

177. Primosphere Limited Partnership ("Primosphere") has a pending
     Application for Review seeking authority to operate two satellites
     in the SDARS spectrum if the Commission approves this merger.
     Primosphere filed a motion to consolidate its proceeding with the
     XM-Sirius review.[^558] We do not believe these two proceedings
     need to be linked, and we therefore deny Primosphere's motion.
     Primosphere filed a petition simultaneously with its motion, in
     which it attempts to preserve its request for SDARS spectrum in the
     event the Commission dismisses its Application for Review. We need
     review Primosphere's issues in only one proceeding. We therefore
     deny Primosphere's petition without prejudice to its Application
     for Review.

> **B. Final Regulatory Flexibility Certification**

178. Pursuant to the Regulatory Flexibility Act,[^559] the Commission
     certifies that the outcome of this rulemaking will not have a
     significant economic impact on a substantial number of small
     entities. This rulemaking affects SDARS providers. SDARS provides
     nationally distributed subscription radio service. Currently, only
     two operators hold licenses to provide SDARS service, XM and
     Sirius, which requires a great investment of capital for operation.
     Because SDARS service requires significant capital, we believe it
     is unlikely that a small entity as defined by the Small Business
     Administration would have the financial wherewithal to become an
     SDARS licensee.

**C. Final Paperwork Reduction Act Analysis**

179. This document does not contain new or modified information
     collections subject to the Paperwork Reduction Act of 1995, Public
     Law 104-13. In addition, therefore, it does not contain any new or
     modified "information collection burden for small business concerns
     with fewer than 25 employees," pursuant to the Small Business
     Paperwork Relief Act of 2002, Public Law 107-198, *see* 44 U.S.C.
     3506(c)(4).

**D. Additional Information**

180. For additional information on this proceeding, please contact
     Marcia Glauberman or Rebekah Goodheart, Industry Analysis Division,
     Media Bureau, at (202) 418-2330.

# ordering clauses

181. Accordingly, having reviewed the applications and the record in
     this matter, IT IS ORDERED, pursuant to sections 1, 4(i), 4(j),
     303(r), and 310(d) of the Communications Act of 1934, as amended,
     47 U.S.C. §§ 151, 154(i), 154(j), 303(r), 310(d), that this
     *Memorandum Opinion and Order and Report and Order* and the rule
     modifications included herein ARE ADOPTED, and that the
     Consolidated Application for Authority to Transfer Control of
     various Commission licenses and authorizations held by Sirius
     Satellite Radio Inc. and XM Satellite Radio Holdings Inc., and the
     associated supplemental application,[^560] ARE GRANTED subject to
     the condition that Applicants fulfill the voluntary commitments as
     set forth in Appendix B, which is incorporated by reference into
     this *Memorandum Opinion and Order and Report and Order*, as well
     as the additional conditions set forth herein.

182. IT IS FURTHER ORDERED that the above grants shall include authority
     for XM and Sirius consistent with the terms of this *Memorandum
     Opinion and Order and Report and Order* to acquire control of any
     license or authorization issued for any station during the
     Commission's consideration of the Application or the period
     required for consummation of the transaction.

183. IT IS FURTHER ORDERED that Applicants are required to comply with
     the Commission's broadcast EEO rules and policies set forth in 47
     C.F.R. § 73.2080.

184. IT IS FURTHER ORDERED that pursuant to sections 4(i), 4(j), and
     310(d) of the Communications Act of 1934, as amended, 47 U.S.C. §§
     154(i), 154(j), 310(d), that the Petitions to Deny filed by
     American Women in Radio and Television; Common Cause, Consumer
     Federation of America, Consumers Union, and Free Press; Consumer
     Coalition for Competition in Satellite Radio; Forty-Six
     Broadcasting Organizations; Mt. Wilson FM Broadcasters, Inc.; The
     National Association of Black Owned Broadcasters, Inc.; National
     Association of Broadcasters; National Public Radio, Inc.; and The
     Telecommunications Advocacy Project ARE DENIED except to the extent
     otherwise indicated in this *Memorandum Opinion and Order and
     Report and Order* .

185. IT IS FURTHER ORDERED that pursuant to Sections 4(i), 4(j), and
     310(d) of the Communications Act of 1934, as amended, 47 U.S.C. §§
     154(i), 154(j), 310(d), that the Petition for Declaratory Ruling
     filed by Michael Hartlieb IS DENIED.

186. IT IS FURTHER ORDERED that pursuant to Sections 4(i), 4(j), and
     310(d) of the Communications Act of 1934, as amended, 47 U.S.C. §§
     154(i), 154(j), 310(d), that the Petitions to Defer Action filed by
     National Association of Broadcasters and U.S. Electronics, Inc. ARE
     DENIED.

187. IT IS FURTHER ORDERED that pursuant to Sections 4(i), 4(j), and
     310(d) of the Communications Act of 1934, as amended, 47 U.S.C. §§
     154(i), 154(j), 310(d), that the Motion to Consolidate and the
     Petition filed by Primosphere Limited Partnership ARE DENIED.

188. IT IS FURTHER ORDERED that pursuant to Sections 4(i), 4(j), and
     310(d) of the Communications Act of 1934, as amended, 47 U.S.C. §§
     154(i), 154(j), 310(d), that the Petition to Designate Application
     for Hearing and the Motion to Designate and for Summary Decision
     filed by U.S. Electronics, Inc. ARE DENIED.

189. IT IS FURTHER ORDERED that this *Memorandum Opinion and Order and
     Report and Order*, including the repeal of the rule prohibiting one
     SDARS licensee from acquiring control of the other SDARS licensee,
     SHALL BE EFFECTIVE upon adoption.[^561]

190. IT IS FURTHER ORDERED that the Commission's Consumer and
     Governmental Affairs Bureau, Reference Information Center, SHALL
     SEND a copy of this *Memorandum Opinion and Order and Report and
     Order*, including the Final Regulatory Flexibility Analysis
     Certification, to the Chief Counsel for Advocacy of the Small
     Business Administration.

     FEDERAL COMMUNICATIONS COMMISSION

     Marlene H. Dortch

     Secretary

     **APPENDIX A**

     **Licenses to be Transferred**

The Consolidated Application filed by XM and Sirius includes
applications pertaining to the Commission authorizations and licenses
listed below. They are separated below by the type of authorization or
license, and, within each category, listed by licensee/registrant name,
application file number, call sign, and/or other service-specific
information, as appropriate. Interested parties should refer to the
Consolidated Application for a more detailed listing of the
authorizations or licenses. Each of Applicants' subsidiaries or
affiliates may hold multiple authorizations or licenses of a particular
type.

> **Part 25 -- Satellite Communications**

**[File No.]{.underline}** **[Licensee/Registrant]{.underline}** **[Call
Signs]{.underline}**

**Satellite Space Stations**

SAT-T/C-20070320-00054 XM Radio Inc. S2118

S2119

S2616

S2617[^562]

SAT-T/C-20070320-00053 Satellite CD Radio, Inc. S2105[^563]

S271

**Satellite Earth Stations**

SES-T/C-20070320-00380 XM Radio Inc. E000158

> E000724
>
> E040204

SES-T/C-20070320-00379 Sirius Satellite Radio Inc. E040363

E060276

E060277

> E990291

SES-T/C-20070625-00863 Sirius Satellite Radio Inc. E060363

**Part 90- Wireless License**

**[File No.]{.underline}** **[Licensee]{.underline}** **[Call
Sign]{.underline}**

0002948781 Sirius Satellite Radio Inc. WPTX369

> **Part 5- Experimental License**

**[File No.]{.underline}** **[Licensee]{.underline}** **[Call
Sign]{.underline}**

0004-EX-TC-2007 XM Radio Inc. WB2XCA

**APPENDIX B**

**Voluntary Commitments**

June 13, 2008

The Honorable Kevin J. Martin

Chairman

Federal Communications Commission

445 12th Street, SW

Washington, D.C. 20554

> **Re:** **Consolidated Application for Authority to Transfer Control
> of XM Radio Inc. and Sirius Satellite Radio Inc.,\
> MB Docket No. 07-57**

Dear Chairman Martin:

The record in the above-referenced proceeding provides clear evidence
that the merger of Sirius Satellite Radio Inc. ("Sirius") and XM
Satellite Radio Holdings Inc. ("XM") will benefit consumers and should
therefore be approved promptly and without conditions. Sirius and XM
have demonstrated that consumers will benefit substantially and the
public interest will be served by approval of this transaction. The
Commission should not impose conditions in this proceeding that will
have the effect of reducing these public interest benefits.

Nevertheless, this letter is to inform you that, if the merger is
approved, the combined company will implement the voluntary commitments
listed below. These commitments are being made to further demonstrate
that the merger is in the public interest and in the interest of
facilitating the speediest possible approval of the merger by the
Commission.

***Programming.***

1\. [A La Carte Programming]{.underline}: The combined company will
offer the following a la carte programming options:

-   50 Channels will be available for \$6.99 a month and will allow
    consumers to choose either 50 Sirius channels from approximately 100
    Sirius channels or 50 XM channels from approximately 100 XM
    channels. Additional channels can be added for 25 cents each, with
    premium programming priced at additional cost. However, in no event
    will a customer subscribing to this a la carte option pay more than
    \$12.95 per month for this programming.

-   100 Channels will be available on an a la carte basis for \$14.99 a
    month. This a la carte option will allow Sirius customers to choose
    from the Sirius programming line-up and some of the best of XM's
    programming, and XM customers to choose from the XM programming
    line-up and some of the best of Sirius' programming.

> Within three months of the consummation of the pending merger, the
> first a la carte-capable radios will be introduced in the retail
> after-market and the combined company will commence offering a la
> carte programming.

2\. "[Best of Both" Programming]{.underline}: Within three months of the
consummation of the pending merger, the combined company will offer
customers the ability to receive the best of both Sirius and XM
programming. Current XM customers will continue to receive their
existing XM service, *and* be able to obtain select Sirius programming.
Likewise, current Sirius customers will continue to receive their
existing Sirius service, *and* be able to obtain select XM programming.
This "best of" programming will be the same "best of" programming
included as part of the 100 Channel A La Carte offering, and will be
available at a monthly cost of \$16.99.

3\. [Mostly Music or News, Sports and Talk Programming]{.underline}:
Within three months of the consummation of the pending merger, customers
will have the option of choosing an option of "mostly music"
programming. Subscribers will also be able to choose an option of news,
sports and talk programming. Each of these programming options will be
available on existing satellite radios at a cost of \$9.99 per month.

4\. [Discounted Family-Friendly Programming]{.underline}: Within three
months of the consummation of the pending merger, consumers will be able
to purchase a "family-friendly" version of existing Sirius or XM
programming at a cost of \$11.95 a month, representing a credit of
\$1.00 per month. Current Sirius customers will also be able to choose a
family-friendly version of Sirius programming that includes select XM
programming, and current XM customers can choose a family-friendly XM
programming option that includes select Sirius programming. This
programming will cost \$14.99 per month, representing a credit of \$2.00
per month from the cost of the "best of" programming.

These programming options were previously described in the companies'
July 24, 2007 joint filing and are subject to individual channel changes
in the ordinary course of business and, in the case of certain
programming, the consent of third-party programming providers.

***Public Interest and Qualified Entity Channels.*** The combined
company will set aside 4 percent of the full-time audio channels[^564]
on the Sirius platform and on the XM platform, respectively, which
currently represents six channels on the Sirius platform and six
channels on the XM platform, for noncommercial, educational and
informational programming within the meaning of 47 C.F.R § 25.701(f)(2)
of the DBS set aside rules.

In addition, within four months of the consummation of the merger, the
combined company will enter into long-term leases or other agreements to
provide a Qualified Entity or Entities[^565] rights to four percent of
the full-time audio channels on the Sirius platform and on the XM
platform, respectively; which again currently represents six channels on
the Sirius platform and six channels on the XM platform. As digital
compression technology enables the company to broadcast additional
full-time audio channels, the combined company will ensure that four
percent of full-time audio channels on the Sirius platform and the XM
platform are reserved for a Qualified Entity or Entities;
[provided]{.underline} that in no event will the combined company
reserve fewer than six channels on the Sirius platform and six channels
on the XM platform.

The Qualified Entity or Entities will not be required to make any lease
payments for such channels. The combined company is willing not to be
involved in the selection of the Qualified Entity or Entities. The
combined company will have no editorial control over these channels.

***Equipment.*** The merged company will permit any device manufacturer
to develop equipment that can deliver the company's satellite radio
service. Device manufacturers will also be permitted to incorporate in
satellite radio receivers any other technology that would not result in
harmful interference with the merged company's network, including hybrid
digital (HD) radio technology, iPod ports, internet connectivity, or
other technology. This principle of openness will serve to promote
competition, protect consumers, and spur technological innovation.
Within one year following the consummation of the merger, the combined
company shall offer for license, on commercially reasonable and
non-discriminatory terms, the intellectual property it owns and controls
of the basic functionality of satellite radios that is necessary to
independently design, develop and have manufactured satellite radios
(other than chip set technology, which technology includes its
encryption and conditional access keys) to any bona fide third party
that wishes to design, develop, have manufactured and distribute
subscriber equipment compatible with the Sirius system, the XM system,
or both. Chip sets for satellite radios may be purchased by licensees
from manufacturers in negotiated transactions with such manufacturers.
Such technology license shall contain commercially reasonable terms,
including, without limitation, confidentiality, indemnity and default
obligations; require the licensee to comply with all existing and
applicable law, including the rules and regulations of the Federal
Communications Commission and applicable copyright laws of the United
States; and require the licensee and qualified manufacturer to satisfy
technical and quality assurance standards and tests established by the
combined company from time to time and applicable to licensees and
qualified manufacturers. Further, the merged company will not execute
any agreement or take any other action that would bar, or have the
effect of barring, a car manufacturer or other third party from
including non-interfering HD radio chips, iPod compatibility, or other
audio technology in an automobile or audio device. Each licensee shall
be responsible for, and bear all costs associated with, the design,
development, manufacturing, including parts procurement, logistics,
warranty, sales, marketing, and distribution of such satellite radios.

***Service to Puerto Rico*.** Within three months of the consummation of
the merger, the combined company will file the necessary applications to
provide the Sirius satellite radio service to the Commonwealth of Puerto
Rico using terrestrial repeaters and will, upon grant of the necessary
permanent authorizations, promptly introduce such satellite radio
service to the Commonwealth.

***Interoperable Receivers.*** Within one year of the consummation of
the merger, the combined company will offer for sale an interoperable
receiver in the retail after-market.

***Rates.*** The combined company will not raise the retail price for
its basic \$12.95 per month subscription package, the a la carte
programming packages described in paragraph 1 of this letter, and the
new programming packages described in paragraphs 2, 3 and 4 of this
letter for thirty six months after consummation of the merger.
Notwithstanding the foregoing, after the first anniversary of the
consummation of the merger, the combined company may pass through cost
increases incurred since the filing of the combined company's FCC merger
application as a result of statutorily or contractually required
payments to the music, recording and publishing industries for the
performance of musical works and sound recordings or for device
recording fees. The combined company will provide customers, either on
individual bills or on the combined company's website, specific costs
passed through to consumers pursuant to the preceding sentence.

If you have any questions, please do not hesitate to contact us.

Sincerely,

Richard E. Wiley Robert L. Pettit\
*Counsel for Sirius Satellite Radio Inc.*

Gary M. Epstein James H. Barker

*Counsel for XM Satellite Radio Holdings Inc.*

cc: Commissioner Michael J. Copps

Commissioner Jonathan S. Adelstein

Commissioner Deborah Taylor Tate

Commissioner Robert M. McDowell

July 25, 2008

The Honorable Kevin J. Martin

The Honorable Michael J. Copps

The Honorable Jonathan S. Adelstein

The Honorable Deborah Taylor Tate

The Honorable Robert M. McDowell

Federal Communications Commission

445 12th Street, SW

Washington, D.C. 20554

Re: Consolidated Application for Authority to Transfer Control of XM
Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc., MB Docket
No. 07-57

Dear Mr. Chairman and Commissioners:

The record in the above-referenced proceeding provides clear evidence
that the merger of Sirius Satellite Radio Inc. ("Sirius") and XM
Satellite Radio Holdings Inc. ("XM") will benefit consumers and should
therefore be approved promptly and without conditions. Sirius and XM
have demonstrated that consumers will benefit substantially and the
public interest will be served by approval of this transaction. The
Commission should not impose conditions in this proceeding that will
have the effect of reducing these public interest benefits. Sirius and
XM have already agreed, in a June 13, 2008 letter, to implement
voluntary commitments that leave no doubt that this merger is in the
public interest.[^566]

Nevertheless, this letter is to inform you that, if the merger is
approved, the combined company will implement the voluntary commitments
described below, which supplement or clarify the voluntary commitments
described in the companies' June 13, 2008 letter. As with the prior
voluntary commitments, these commitments are being made to further
demonstrate that the merger is in the public interest and in the
interest of facilitating the speediest possible approval of the merger
by the Commission.

***Satellite Radio Terrestrial Repeater/WCS Proceedings.*** The
Commission first commenced a proceeding to establish rules for satellite
radio terrestrial repeaters in 1997.[^567] The successor to that
original proceeding is still pending.[^568] Sirius and XM have
participated at every step of those proceedings in good-faith; the
companies have submitted thousands of pages of pleadings, several
engineering studies and even proposed rules.[^569] Sirius and XM believe
that testing with FCC oversight can quickly bring these proceedings to a
conclusion. Accordingly, the combined company will commit to provide the
Commission whatever assistance it requests to allow the Commission to
oversee such testing and resolve these proceedings by the end of 2008.

***Interoperable Receivers.*** Sirius and XM clarify that immediately
after the merger, the combined company will make the design and the
specifications for an interoperable radio available for license to
equipment manufacturers in accordance with the companies' commitment
contained in Sirius' and XM's June 13, 2008 *ex parte* letter. Moreover,
within nine months of the consummation of the merger, the combined
company will offer for sale an interoperable receiver in the retail
after-market. This accelerates the companies' previous voluntary
commitment to do so within one year.

***Local Programming and Advertising.*** Sirius and XM have committed,
and reiterate their commitment, not to originate local programming or
advertising through their repeater networks.[^570]\
\
***Copyright Royalty Payments**.* In accordance with the Copyright Act,
both Sirius and XM pay millions of dollars in royalties in connection
with their public performance of sound recordings.[^571] The combined
company's a la carte and other programming proposals were not intended,
and are not anticipated, to reduce revenue from copyright royalty
payments. They were designed to provide more choice and lower prices and
hopefully increase revenue, which should have a positive effect on
copyright royalty payments to artists and record companies.

***Rates*.**  Sirius and XM clarify that the combined companies' June
13, 2008 "Rates" voluntary commitment establishes a price freeze lasting
thirty-six months for the combined company's basic \$12.95 per month
subscription package, the a la carte programming packages described in
paragraph 1 of the June 13, 2008 letter, and the new programming
packages described in paragraphs 2, 3, and 4 of the June 13, 2008
letter, except for a pass through of certain cost increases. This does
not affect any FCC authority to review this price freeze prior to its
expiration.

***Equipment Non-Exclusivity.*** Sirius and XM have not entered into any
agreement that would bar, or have the effect of barring, a car
manufacturer or other third party from including non-interfering HD
radio chips, iPod compatibility, or other audio technology in an
automobile or audio device. Sirius and XM have not entered into any
agreement to grant, or that has the effect of granting, a device
manufacturer an exclusive right to manufacture, market and sell
equipment that can deliver the company's satellite radio service. 
Following the consummation of the merger, the combined company will not
enter into any agreement that grants, or that would have the effect of
granting, a device manufacturer an exclusive right to manufacture,
market and sell equipment that can deliver the company's satellite radio
service. This supplements XM's and Sirius' June 13, 2008 voluntary
commitment. Sirius and XM also clarify their June 13 letter that they
will provide, on commercially reasonable terms, the intellectual
property "to permit any device manufacturer to develop equipment that
can deliver the company\'s satellite radio service." The encryption,
conditional access and security technology is embedded in chip sets that
can be purchased from third party manufacturers.

***Public Interest Channel Set Asides*.**  To clarify the commitment
contained in Sirius' and XM's June 13, 2008 letter, Sirius and XM will
not select a programmer to fill more than one non-commercial,
educational or informational channel on each of the Sirius and XM
platforms as long as demand for such channels exceeds available supply.

If you have any questions, please do not hesitate to contact us.

Sincerely,

*[/s/ Richard E. Wiley]{.underline}*

Richard E. Wiley\
*Counsel for Sirius Satellite Radio Inc.*

[/s/ Gary M. Epstein]{.underline}

Gary M. Epstein

*Counsel for XM Satellite Radio Holdings Inc.*

**APPENDIX C**

**Timeline of Commitments**[^572]

-   Immediately upon consummation of the merger:

    -   The combined company must offer for license, on commercially
        reasonable and non-discriminatory terms, the intellectual
        property it owns and controls of the basic functionality of
        satellite radios that is necessary to independently design,
        develop and have manufactured satellite radios (other than chip
        set technology, which technology includes its encryption and
        conditional access keys) to any bona fide third party that
        wishes to design, develop, have manufactured and distribute
        subscriber equipment compatible with the Sirius system, the XM
        system, or both. In addition, Applicants will not bar, by
        agreement or otherwise, a car manufacturer or other third
        parties from including non-interfering HD Radio chips, iPod
        compatibility, or other audio technology in an automobile or
        audio device. Therefore, Applicants are prohibited from taking
        any action that would thwart, hinder, or obstruct any receiver
        manufacturer, automobile manufacturer, or chip manufacturer from
        including HD Radio technology in SDARS receivers. We note that
        this commitment serves to prohibit Applicants from entering into
        exclusive contracts with parties that control the chip set and
        encryption technology.

    -   The combined company shall not raise the retail price for its
        basic \$12.95 per month subscription package, the a la carte
        programming packages, and the new programming packages nor
        reduce the number of channels in either their current packages
        or new packages for at least 36 months. Six months prior to the
        expiration of the commitment period, the Commission will seek
        public comment on whether the cap continues to be necessary in
        the public interest. The Commission will then determine whether
        it should be modified, removed, or extended. After the first
        anniversary of the consummation of the merger, the combined
        company may pass through cost increases incurred since the
        filing of the combined company's FCC merger application as a
        result of statutorily or contractually required payments to the
        music, recording and publishing industries for the performance
        of musical works and sound recordings or for device recording
        fees.

    -   The combined company must make available 4 percent of the
        full-time audio channels on the Sirius platform and on the XM
        platform, respectively, which currently represents six channels
        on the Sirius platform and six channels on the XM platform, for
        noncommercial educational and informational programming provided
        by programmers that satisfy the qualifications set forth in 47
        C.F.R § 25.701(f)(2) of the DBS set aside rules. Programming
        provided pursuant to this set-aside requirement must be
        available to the public no later than six months after the
        transaction's consummation. In fulfilling this commitment, the
        combined company shall adhere to the additional requirements set
        forth in the Order.

-   Within three months of consummation of the merger:

    -   The first a la carte-capable radios must be introduced in the
        retail after-market and the combined company must begin offering
        a la carte programming.

    -   The combined company must offer customers the ability to receive
        the best of both Sirius and XM programming at a monthly cost of
        \$16.99.

    -   Customers must have the option of choosing an option of "mostly
        music" programming and an option of news, sports and talk
        programming at a monthly cost of \$9.99 for each of these
        programming options.

    -   Consumers must be able to purchase a "family-friendly" version
        of existing Sirius or XM programming at a cost of \$11.95 a
        month, representing a credit of \$1.00 per month. Current Sirius
        customers must also be able to choose a family-friendly version
        of Sirius programming that includes select XM programming, and
        current XM customers must be able to choose a family-friendly XM
        programming option that includes select Sirius programming. This
        programming will cost \$14.99 per month, representing a credit
        of \$2.00 per month from the cost of the "best of" programming.

    -   The combined company must file applications with the Commission
        to provide the Sirius satellite radio service to the
        Commonwealth of Puerto Rico using terrestrial repeaters and must
        promptly introduce such service upon grants of permanent
        authority by the Commission to operate these repeaters.

-   Within four months of consummation of the merger:

    -   The combined company must enter into long-term leases or other
        agreements to provide a Qualified Entity or Entities rights to 4
        percent of the full-time audio channels on the Sirius platform
        and on the XM platform, respectively, which currently represents
        six channels on the Sirius platform and six channels on the XM
        platform. As digital compression technology enables the company
        to broadcast additional full-time audio channels, the combined
        company must ensure that 4 percent of full-time audio channels
        on the Sirius platform and the XM platform are reserved for a
        Qualified Entity or Entities; provided that in no event will the
        combined company reserve fewer than six channels on the Sirius
        platform and six channels on the XM platform.

-   Within nine months of consummation of the merger:

    -   The combined company must offer for sale an interoperable
        receiver in the retail after-market.

**STATEMENT OF**

**CHAIRMAN KEVIN J. MARTIN**

Re:      *Applications for Consent to the Transfer of Control of
Licenses, XM Satellite Radio Holdings Inc., Transferor, to Sirius
Satellite Radio Inc., Transferee, MB Docket No. 07-57.*

The applications of XM and Sirius satellite radio to merge did not
present the Commission with an easy case. When the Commission originally
issued each company its license, the Commission determined that it would
not be in the public interest for the same company to hold both
licenses. Yet that is exactly what XM and Sirius asked to do.

I said at the time that the two companies announced their intent to
merge that I thought they had a high hurdle to meet if they wanted to
prove that the transaction would be in the public interest. It has taken
some time, but I do believe that with the essential voluntary
commitments they have made, the parties have met this burden.

In particular, I commend the parties for committing to offer consumers
more choice and flexibility in how they purchase channels. I have long
believed that consumers should be able to buy and pay for only those
channels that they want. Such a free market approach to programming --
whether its music or television -- would benefit consumers through lower
prices and more control. Consumers will be able to enjoy the best of
programming on both services and pick and choose channels at lower
prices. With these options as well as the companies' agreement not to
raise prices for three years, consumers should be better off as a result
of this merger.

I am pleased that the parties have committed to offering consumers, for
the first time, with a specific percentage of diverse programming. The
two companies have agreed to dedicate eight percent of their channels
\-- 24 channels in total \-- to minority and public access programming.
This will create greater opportunities for more voices to be heard on
satellite radio, covering the issues that are important to those
communities that may have traditionally been ignored in the past.

I also support the parties' commitment to an open technical standard
that will allow for a competitive market to develop for radios that
carry the satellite radio signals. Any device manufacturer will be able
to develop satellite receivers and to incorporate other technology, such
as HD radio, iPod ports, and Internet connectivity so long as it will
not result in harmful interference with the merged company\'s network.

Finally, I support the Commission soon issuing a notice of inquiry to
gather more information about whether HD chips or any other audio
technology should be included in all satellite radio receivers.

In conjunction with this merger, I directed Commission staff to
negotiate a Consent Decree resolving the two companies' numerous
violations regarding the placement and technical properties of their
radios and repeaters. I believed these violations to be significant, and
was unwilling to support proposed fines that I did not believe held the
companies accountable for their disregard for the Commission's rules. I
am pleased that the companies eventually agreed to fines collectively
totaling approximately \$19.6 million. The Commission will continue to
monitor the combined company to ensure that it operates in the public
interest and in accordance with all of our rules.

**DISSENTING** **STATEMENT OF**

**COMMISSIONER MICHAEL J. COPPS**

 

Re:      *Applications for Consent to the Transfer of Control of
Licenses, XM Satellite Radio Holdings Inc., Transferor, to Sirius
Satellite Radio Inc., Transferee, MB Docket No. 07-57.*

The majority's own findings provide a compelling case for rejecting this
merger:

(1) We must assume that this is a merger to monopoly;[^573]

(2) The merged company will possess the incentive and ability to impose
    monopoly price hikes on consumers;[^574]

(3) Consumers will need protection for the foreseeable future
    because (a) the merged company's incentive and ability to impose
    monopoly price hikes will only grow over time,[^575] and (b) the
    emergence of another satellite radio competitor is unlikely;[^576]
    and

(4) The pricing restrictions imposed on the merged company will expire
    in three years.[^577]

The inescapable logic of the majority's findings is that by 2011
satellite radio subscribers will face monopoly price hikes by a company
with the incentive and ability to impose them.[^578] No one has been
able to explain to me how this could possibly serve the public
interest.[^579]

The majority's argument is that it can stack up enough "conditions" on
the merged entity---spectrum set-asides, price controls, manufacturing
mandates, etc.---to tip the scale in favor of approval. In essence, the
majority asserts that satellite radio consumers will be better served by
a regulated monopoly than by marketplace competition. I thought that
debate was settled---as did a unanimous Commission in 2002 when it
declined to approve the proposed merger between DirecTV and Echostar:

> In essence, what Applicants propose is that we approve the replacement
> of viable facilities-based competition with regulation. This can
> hardly be said to be consistent with either the Communications Act or
> with contemporary regulatory policy and goals, all of which aim at
> replacing, wherever possible, the regulatory safeguards needed to
> ensure consumer welfare in communications markets served by a single
> provider, with free market competition, and particularly with
> facilities-based competition. Simply stated, the Applicants' proposed
> remedy is the antithesis of the 1996 Act's "pro-competitive,
> de-regulatory" policy direction.[^580]

That preference for competition is why the Commission has almost never
permitted a single commercial licensee to hold all of the spectrum
allocated to a particular service, and why (until today) the Commission
required that there always be at least two satellite radio licensees. I
understand why the companies would prefer to escape the rigors of
competition. What I cannot understand is why the majority thinks
consumers will be better off without it.

Some may say that the majority isn't really permitting a
merger-to-monopoly because satellite radio is part of a larger audio
entertainment market that includes iPods, terrestrial radio, and a
plethora of new technologies that everyone "knows" are just around the
corner. But that is not the majority's position. The majority finds that
no one has proved that the relevant product market includes anything
other than satellite radio and that competitive entry is unlikely for
the foreseeable future. So the majority itself takes the argument away.

Others may say that whether the combined entity is a monopoly is beside
the point because one or both of them would not survive anyway---so
there's no harm in letting them merge. But the merging companies do not
seek approval on the basis of financial distress and the majority makes
no findings in that regard. So this claim is not before us. I have said
many times that I am willing to consider mergers where financial
viability is at stake. But that's not this merger. We must assume that
the marketplace can support two financially viable competitors.

I have said from the outset that approving this merger would be a steep
climb for me. It proved to be just that. In the end, after cutting
through all the heat and noise and lobbying this proceeding has
generated, we are left with the unshakable reality of a
merger-to-monopoly in a market that could sustain competition. I can
find no precedent or public interest justification for that outcome. I
dissent.

**DISSENTING STATEMENT OF**

**COMMISSIONER JONATHAN S. ADELSTEIN**

Re:      *Applications for Consent to the Transfer of Control of
Licenses, XM Satellite Radio Holdings Inc., Transferor, to Sirius
Satellite Radio Inc., Transferee, MB Docket No. 07-57.*

Sirius and XM (collectively the "Applicants") currently offer dynamic
and competitive audio programming to consumers. Their marketplace
competition with each other has undoubtedly contributed to their cutting
edge appeal. It also has exacerbated their difficult financial
circumstances, as they have competed for compelling programming and
driven up the costs for each other dramatically. Partly in response to
this one-upmanship, which has improved the quality of programming and
benefited consumers, the Applicants have sought to merge rather than
compete.

It is precisely because the Applicants provide such a valuable service
to consumers that it was critical for the Commission to respond
appropriately to their dramatic effort to combine. They both now provide
an outstanding service that their subscribers find extremely engaging.
They employ creative and innovative talent who put on shows that many of
their subscribers cannot easily live without. I truly hope the merged
entity succeeds, and maintains its edge, and does not become a fat and
happy monopoly.

I was hoping we could achieve a bipartisan consensus that would offer
consumers more diversity in programming, better price protection,
greater choices among innovative devices and real competition with
digital terrestrial radio. Disappointingly, that was not accomplished.
Instead, consumers will get a monopoly with window dressing. And, the
dream of greater women and minority participation in media will be
deferred once again.

It is not just me who considers this a monopoly. On that point, the
majority and I do agree. The entire *Order* is appropriately premised on
the reality that this is a "merger to monopoly."[^581] Rather than
accept the Applicants' broad definition of the market, today's *Order*
defines the market narrowly and, thus, deliberately endows the
Applicants with a monopoly over the entire licensed satellite radio
service. To do so, the majority repeals the existing safeguard
prohibiting the common ownership of the two satellite radio licenses,
and instead relies on nominal conditions.[^582] Incredibly, the merged
entity will now have *more* spectrum than the AM and FM bands combined.
Given the inadequacy of the merger conditions, this decision better
serves the Applicants' self-interest rather than the public interest, so
I am unable to support it.

The instant order follows in the wake of the Department of Justice (the
"DOJ") Antitrust Division's questionable decision to close its
investigation of the merger without requiring any conditions.[^583] The
DOJ explained that it could not find that such a merger would
substantially lessen competition, in part, because of a lack of
competition between the parties even without the merger. Thus, the DOJ
concluded that the merger would not make matters much worse --- hardly
consolation for consumers.

Ostensibly, the DOJ relied on two key premises in reaching its decision:
long-term sole source contracts with automobile manufacturers and the
lack of an interoperable radio. Even though the DOJ acknowledged that
the Applicants competed on the terms of automotive contracts, including
the amount of equipment subsidization, it readily dispensed with this
consumer benefit, because many of the sole-source contracts were locked
up for extended periods. Further lack of competition between the
Applicants was explained by their decision not to bring an interoperable
radio to market despite a Commission requirement to do so. It is ironic
that the DOJ relied on the Applicants' failure to comply with the
interoperability mandate as a justification for the merger. The DOJ also
gave the Applicants a pass on the financial interests and corporate
directorships held by major automotive manufacturers in the Applicants'
businesses and the merged entity's future business. While more analysis
is needed, this relationship presents a potential for discrimination
against the installation of competitive technologies in the automotive
sector going forward.

In contrast to antitrust review, where the DOJ would have borne the
burden of proving that the proposed transaction "substantially lessens
competition,"[^584] the Commission's standard of review requires merger
applicants to prove that the transaction will serve the greater public
interest, informed by the core values of competition, diversity and
localism.[^585] Yet, the Applicants have not even provided the
Commission with sufficient evidence to perform a structural market
analysis that would allow us to and predict the likelihood of
competitive harm.

In the *Order*, the majority assumes the "worst-case" scenario,
specifically that satellite radio has no real competitors and that the
proposed transaction represents a merger to monopoly. In adopting this
approach, the majority professes to create a high public interest
standard by subjecting the merger application (with the Applicants
retaining the burden of proof) to the most exacting scrutiny. Granting
the merger under this approach should require significant conditions,
proportional to the significant public interest harm assumed, in order
to mitigate the extreme concentration of market power. Regrettably, the
majority's acceptance of the Applicants' "voluntary commitments" fails
to meet this professed prophylactic public interest standard because of
gaping loopholes in them.

***Price Cap.*** Though the Applicants have committed not to raise the
retail rates on their existing and newly proposed programming packages
for three years after the consummation of the merger, the *Order* fails
to justify why the three-year period is sufficient and merely adopts the
Applicants' terms and conditions. Although the majority is unable to
identify competitors likely to constrain the merged entity's ability to
raise prices, it is unwilling to impose a meaningful price cap for a
reasonable period of time.

Even during the three-year period itself, the merged entity could evade
or undermine this consumer protection in several significant respects.
The manner in which this condition is crafted suffers from a myopic
perception of satellite radio pricing. Retail rates of programming
packages constitute only one element in the ultimate price of satellite
radio service. The item completely overlooks additional implicit pricing
elements of the service, such as equipment subsidies,[^586] ancillary
services,[^587] activation fees,[^588] termination fees,[^589] and
transfer fees,[^590] all of which the merged entity could manipulate to
undermine the consumer protection intent of the price cap. It also fails
to adequately address the concern that the merged entity may have the
incentive and ability to raise real prices by reducing content quality,
either by increasing advertising or through other means. Sirius Chief
Executive Officer Mel Karmazin has stated as much, declaring to
investors that the post-merger "advertising line is going to contribute
significantly in the future towards \[average revenue per user\]."[^591]
Consumers might as well prepare for a barrage of new commercials,
because now they will have nowhere else to turn if they want satellite
radio service.

Additionally, the merged entity could evade the price cap by siphoning
off programming from the capped packages to new and presumably uncapped
packages.[^592] Indeed, not only do both Applicants already have service
clauses to this effect, but they assert that the proposed "programming
options ... are subject to individual channel changes in the ordinary
course of business and, in the case of certain programming, the consent
of third-party programming providers."[^593] While the decision imposes
a floor on the number of channels in the existing and proposed
programming packages, the Applicants are left to exploit a loophole to
siphon off high-quality channels to unregulated tiers while replacing
them with lower cost, and possibly lower quality, channels. Thus, while
this approach would maintain the same quantity of channels, it cannot
guarantee consumers the same or better quality of programming. Precedent
for this type of strategic behavior exists in the previous attempts to
regulate cable rates.[^594]

The *Order* provides an explicit loophole to the so-called "price cap"
by allowing the merged entity to pass through statutory or contractual
programming costs to the consumer one year after the merger is
complete.[^595] While the genesis of this exception is left unexplained,
the winners and losers are apparent. The Applicants benefit by passing
the cost on to the consumer. And of course, consumers will be left to
find out about these "programming costs" through increases in their
bills.

Finally, even assuming the success of the price cap, there is nothing to
prevent the merged entity from instantaneously increasing retail prices
once it expires. To remedy this oversight, the duration of the price cap
period should have been extended beyond three years (correlated with
expected entry of sufficient competition to restrain prices) or, in the
alternative, presumptively renewed with the merged entity bearing the
burden of proving that the restriction is no longer necessary because of
competition. Though there is some sort of interim review, the
Commission's standard of review and the burdens of proof are left
ambiguous.

***Programming*.** While the majority accepts the Applicants' "voluntary
commitment" to offer newly defined and a la carte programming packages,
the benefits, never mind the merger-specific benefits, of such offerings
are far from clear. With respect to the newly defined programming
packages, it accepts the Applicants' unjustified assertion that such
packages could not be offered absent a merger and summarily finds that
such packages present merger-specific benefits.

At its core, the decision rests on the single assumption that new
programming packages will increase consumer choice and, therefore,
improve consumer welfare. However, the Commission failed to inquire into
whether the newly proposed programming packages maximize consumer
welfare or even estimate the magnitude of the claimed welfare gain. Does
offering consumers more channels for more money or fewer channels for
more money per channel create a cognizable public interest benefit? Is
it "choice," in any meaningful sense of the word, if the relative value
of the offering diminishes? By this logic, a decision to offer one
channel at one hundred times the price of the total current package
would also increase "choice" and improve consumer welfare. The same is
true for the "safety valve" claim, that lower priced options correct the
ills of take-it-or-leave-it offers by a monopolist. Would not one less
channel for one less cent also create such nominal "choice?"

Even if so, a significant obstacle remains; namely, the exclusivity
provisions found in talent contracts prevent the merged entity from
offering certain channels, potentially the most popular channels, on
both systems. As adopted, the *Order* notes that the Applicants have
pledged to seek third party consent to such arrangements and willingly
permits the merged entity to pass the cost of such consent directly on
to the consumer.

A la carte makes its appearance here without any empirical analysis or
any discussion reflective of the controversy surrounding the
Commission's own a la carte inquiries.[^596] Nor is there any
acknowledgment of the effects of a la carte policies on the public
interest concern of diversity of programming. Without further analysis,
this "voluntary commitment" is, at best, inconsequential to our merger
review.

***Noncommercial and Qualified Entity Channels*.** The Applicants'
commitment to set aside four percent of full-time audio channels for
noncommercial educational and informational programming as well as four
percent for qualified entity programming is small step in the right
direction. There is no explanation, however, as to why these commitments
are significant enough to offset the potential public interest harms
created by a merger to monopoly.

In terms of noncommercial educational and informational programming, the
acquiescence in the Applicants' "voluntary commitment" merely enshrines
the status quo. The Applicants currently already offer an equivalent
amount of such programming on their combined systems. The voluntary
commitment adds nothing to offset the effects of the merger. We should
have required substantially more spectrum to be set aside for such
public interest programming.

In terms of diverse programming by qualified entities, it is far from
clear that a paltry four percent set-aside will be commercially viable.
Several commenters have expressed that there is no business case for
such a small offering. The decision today rejects the guidance of
members of Congress, state Attorneys General, and public interest
organizations that have called for a larger spectrum set-aside to ensure
competition and diversity in satellite radio service to offset the
massive concentration that is being permitted. And, it is left entirely
unclear how the qualified entities will be selected, leaving the entire
provision unintelligible and unpredictable. "We will determine the
implementation details for use of these channels \[for qualified
entities\] at a latter date,"[^597] is a clear indication of the
Commission's historic pattern of neglecting minority access to the
communications industry. Once again, rather than taking a decisive step
forward to improve the plight of women and people of color in media, the
Commission has taken a step to the side.

***Interoperable Receiver*.** The *Order* characterizes the Applicants'
interpretation of the Commission's interoperability requirement as "not
unreasonable" to excuse their earlier failure to develop and market
interoperable receivers. The Applicants' noncompliance created switching
costs for consumers and, thus, limited pre-merger competition between
the Applicants. Adding this condition today is virtually meaningless,
because the merged entity will have every incentive to offer
interoperable devices anyway. The point was to enforce the requirement
before, not after, the merger. Doing it now is clearly a case of closing
the barn door after the cows got out. At least the *Order* recognizes
that this claimed benefit simply cannot be deemed merger-specific.

***Open Access.*** The *Order* uncritically embraces the Applicants'
proffered open access scheme,[^598] concluding that commercially
reasonable, non-discriminatory licensing will effectively mitigate any
potential vertical harm from the satellite radio monopoly. However,
there is no effective mechanism to deliver a truly open, competitive
market. The open access provision should function to ensure competition,
innovation, and the delivery of advanced technologies in the satellite
radio receiver, and to some extent, the broader audio equipment
manufacturing market. By shortsightedly permitting the merged entity to
retain control of the design, manufacture and distribution of satellite
radio receivers, it allows the merged company to maintain gatekeeper
authority over the market. This is letting the fox guard the henhouse.
We should have, as I proposed, required an independent laboratory to
certify compliance with the technological specifications and quality
standards.

***HD Radio.*** One of the mechanisms the merged company will use to
maintain its lock on the equipment market will be through product
subsidies. While many consumers will find these beneficial, we should
have guarded against the use of them for anticompetitive purposes. While
some proposed that we require HD radio technology be incorporated into
all new satellite receiver models capable of receiving analog
terrestrial radio, I proposed we require it only in subsidized models.
That way, if there were truly an open market for devices, as an
independent process for certification would have ensured, the market
would determine whether to integrate HD radio into the devices. Where
the merged company sought to alter market dynamics through subsidies or
other mechanisms, it would be prevented from discriminating against
competing HD radio technology. Instead, the *Order* allows the merged
company to avoid subsidizing models that include HD radio, thus using
their market power to thwart the very competition the Applicants cited
as justifying the merger.

While I am pleased that the *Order* is explicitly conditioned on
compliance with the voluntary commitments, we should have instituted an
independent monitor to assist the Commission in reviewing complaints and
enforcing even these meager conditions. This is particularly necessary
in light of the fact that the Applicants just paid record fines for
widespread and flagrant violations of Commission rules over a number of
years.

In looking back over the torturous and excessively long period during
which this merger was under consideration, one commentator has
criticized the commitments as mere "crumbs that have fallen off the
table."[^599] It is remarkable that the Commission took so long to do so
little.

While the *Order* repeats a public interest incantation over and over
again, it does little to explain why each particular condition has gone
far enough to protect the public interest. With unchecked optimism, the
*Order* concludes that the public interest is precisely satisfied by the
proffered "voluntary commitments" and other nominal conditions. Because
the proposed transaction, as structured, has not been shown to serve the
public interest, the merger application should be designated for
hearing.

For the foregoing reasons, I dissent.

**STATEMENT OF**

**COMMISSIONER DEBORAH TAYLOR TATE**

Re:      *Applications for Consent to the Transfer of Control of
Licenses, XM Satellite Radio Holdings Inc., Transferor, to Sirius
Satellite Radio Inc., Transferee, MB Docket No. 07-57.*

In my two years at the Commission, few decisions have been more
difficult than the one before us today. As a strong supporter of
free-markets and limited government regulation, I am predisposed to
allow private companies the autonomy to make business decisions without
the heavy hand of government regulation. By law, we are required to
review this merger application because it involves the transfer of a
radio license, and more specifically, the Commission's rule against one
SDARS licensee holding both SDARS licenses. Our consideration
necessarily presents unique and complex challenges because of the
infancy of the satellite radio market, the past actions of the two
companies, and the potential public interest benefits that would accrue
from the merger. In approaching this analysis, I thought it more prudent
to first address the multiple violations committed by the Applicants
over the past five years, and then consider the merger application. The
forfeitures imposed against these companies, in combination with the
strict compliance plan they will submit to, convince me that it is now
reasonable to consider and approve the merger application. With the
sluggish economic outlook and the Dow Jones Industrial Average closing
down almost 100 points in mid-July, compounding this environment with a
negative regulatory decision could greatly harm both companies and, more
importantly, their subscribers. While the FCC is only a tiny piece of
the economic puzzle, I believe it is our responsibility to contribute to
a vibrant, healthy marketplace within those sectors under our purview.

In order to fulfill my statutory obligations, and appropriate due
diligence, I met repeatedly with both SDARS companies, their top
management, consumer groups, members of Congress, minority broadcasters,
terrestrial broadcasters from all across the country, religious,
noncommercial, and public interest broadcasters, automobile
manufacturers, previous SDARS bidders, investors, public citizens,
mayors, local community leaders, state attorneys general\-- and then
there were the nearly 15,000 formal and informal comments the Commission
received. My personal office received hundreds of phone calls from
individual citizens and organizations in at least 30 states. It seems
that every segment of society has an interest in this merger---I even
hear about it at the grocery store and when I open my local newspaper. I
believe that everyone involved knows that I have listened to all sides
openly and equally, and weighed their arguments thoughtfully.

In the end, I voted to approve this merger because I believe that the
free terrestrial broadcast radio industry that has been part of the
fabric of our country will not only survive, but flourish in this new
digital age, and competition from satellite radio will continue to
challenge local broadcasters to deliver the type of high-quality, local
product they have delivered for the last hundred years. If you don't
believe me, look at those who have staked their businesses on the future
of terrestrial radio and its reach to 95% of the radio-listening market,
like Rush Limbaugh who recently signed an eight-year, \$400 million deal
with Clear Channel.

Section 310(d) of the Communications Act requires parties seeking to
transfer a license to demonstrate that the proposed transaction will
serve the "public interest, convenience, and necessity." The Commission
weighs the potential public interest benefits against the potential
harms. The Applicants have the burden of proving that the proposed
transaction, on balance, serves the public interest by a preponderance
of the evidence. While my remaining concerns are many, I find that the
Applicants have shown that this merger, with the voluntary conditions
and concessions, and the previously agreed upon consent decree for their
violations, on balance, will serve the public interest.

**[I. ENFORCEMENT]{.underline}**

From the beginning, it was imperative to me that before I could review
the merger application, the Commission must take enforcement action,
either by entering into a consent decree or otherwise resolving the
pending violations. I believe that the agreement that was reached
appropriately penalizes the companies, with minimal impact on their
subscribers. The almost \$20 million these parties will pay is a
reflection of the seriousness of the violations. Thus, the forfeitures
and the compliance plans the parties will be subjected to are an
appropriate form of retribution, rehabilitation, and reconciliation.

The parties before the Commission today have knowingly violated a number
of Commission rules and guidelines. For this reason, I felt it was
necessary to resolve the issues through enforcement action first, and
then proceed to consider the merger application. XM has agreed to pay
\$17,394,375 and Sirius has agreed to pay \$2,200,000 million for
violating modulator and terrestrial repeater rules. In addition, both
companies have entered into consent decrees that mandate strict
compliance with certifications, reporting requirements, and penalties
associated with future violations. Specifically, they have agreed to
hire compliance officers whose primary responsibility will be to ensure
compliance with FCC rules. They will adopt a Procedural Guide for
satellite radio receivers, establishing step-by-step procedures that
employees must follow in connection with testing and obtaining FCC
certification for new receivers. They will adopt a Repeater Change
Guide, which will establish procedures to be followed before *any*
changes can be made to the terrestrial repeater network. They will shut
down, or bring into compliance, 100 repeaters and all others will be
processed according to standard FCC guidelines. I find this compliance
plan, in conjunction with the monetary forfeitures, sufficient to allow
me to consider the merger application.

**[II. PRO-CONSUMER]{.underline}**

With daily rumblings about a possible recession - and nearly universal
consensus that we are in a pattern of economic slowdown - good economic
policy from our government is more important than ever. It is not the
job of the FCC to prop up failing companies. However, it is our job to
support efficient and affordable radio communications. Section 7(a) of
the Telecommunications Act says, \"\[i\]t shall be the policy of the
United States to encourage the provision of new technologies and
services to the public.\"  The Commission aims to ensure audio options
that provide lower prices, and unique choices such as "family friendly
programming" tiers. Through this Order we ensure that for at least three
years consumers will see a price cap on every price tier and package
that the merged entity offers. The FCC will revisit the need for this
price cap six months prior to its expiration.

**[III. Concentration of Spectrum/Set-asides]{.underline}**

Since this merger was first proposed, I have continued to voice concern
regarding the concentration of 25MHz of spectrum in the hands of a
single entity. Divestiture, which I initially proposed to both parties,
is impractical, if not impossible, and would result in almost certain
disruption of service to millions of subscribers. It could have resulted
in disruption of service possibly lasting several years as the
Commission attempted to create rules and consumers migrated from one
SDARS system to the other. Therefore I recognize the practical necessity
of reversing the Commission's 1997 rule barring either party from
holding both SDARS licenses.

Thus, the purposes of spectrum divestitures are to at least some degree
accomplished by the set-aside requirements we adopted. Four percent of
all channels on both systems must be set aside for non-commercial
educational programming, and four percent must be set aside for use by
"qualified entities" such as minority broadcasters. Only one programming
channel per programmer will count towards the set-aside. This will
promote a greater diversity of voices, and grant complete editorial
control to other programmers and owners. Public interest groups, while
pushing for an even greater number of set-aside channels, have applauded
this condition. The FCC will determine the appropriate process for
selecting programmers to occupy set-aside channels. The Applicants will
not be part of this process.

**[IV. Price Cap]{.underline}**

Because SDARS is a relatively new service, and prices have remained
constant, it is difficult to anticipate how a merger will affect future
prices. The parties have agreed to a three year price cap on the
services they currently offer. This is not a sufficient fix to prevent
the anticompetitive pricing schemes that could arise as a result of this
merger. Thus, the Order imposes a review by the Commission before the
lifting of the price cap in three years. At that time the merged entity
will have the burden of demonstrating to the Commission that lifting the
price cap will not result in the merged entity raising and holding
prices at a level they could not otherwise maintain, but for the lack of
competition in the satellite radio market.

**[V. HD CHIP]{.underline}**

As a lifelong champion of the music industry and local broadcasters, I
am sympathetic to the needs of the HD radio industry and promises it
holds as another audio choice for consumers. However, many commenters,
particularly those in the automobile industry oppose a government
mandate requiring inclusion of HD chips in all radios, and the resulting
increase in cost. HD radio is already in cars manufactured by BMW,
Mercedes, Land Rover, Mini Cooper, Hyundai, Rolls Royce, and Jaguar. In
2009, it will also be available from Volvo and Ford. I do not believe
the record of performance by this nascent technology supports a mandate
for inclusion of the HD chip in every satellite radio. I do, however,
support the Order's prohibition on any attempts by the Applicants to
bar, by agreement or otherwise, a car manufacturer or other third party
from including HD radio chips, iPod compatibility, or other audio
technology. The merged entity must provide open access. In fact, I
demanded that the technical specifications be available immediately,
rather than in a year, as originally proposed.

In considering this difficult issue, I consulted the auto industry,
where satellite radio has established a strong foothold. Without
exception, the auto manufacturers I spoke with urged the Commission to
forbear from imposing an HD chip requirement. Their estimate of the cost
per car was, on average, two, three, or four times the cost suggested by
iBiquity. With this level of disparity in information, it is impossible
to do a proper cost-benefit analysis. Additionally, at a time when the
auto industry is struggling, it would be unreasonable to require them to
assume a cost, or, even worse, pass a cost on to their consumers, for a
technology that has not yet proven the strength of consumer demand.

Thus, I believe the proper path for the Commission to take is to review
the issue, along with the price cap, in three years. In addition, we
will launch a Notice of Inquiry to examine what the resulting costs
would be and whether HD should be mandated. In the interim, I encourage
the HD radio industry to find new and innovative incentives to offer car
manufacturers to include their technology in automobiles, just as other
technologies have done, to increase their uptake and adoption, perhaps
including an innovative revenue-sharing model.

**[VI. RIAA]{.underline}**

Of the many concerns that were brought to my attention throughout this
process, one of the most disturbing to me, as a life-long resident of
Nashville- Music City- was the potential threat to the music industry.
XM and Sirius, unlike terrestrial broadcasters, pay million of dollars
in royalties to the record labels whose music they play. This is an
important source of income for labels and musicians. With the adoption
of new non-music tiers, concerns were raised about a potential reduction
in revenue to the music industry. However, even the "News, Sports and
Talk" tier includes music channels, such as Radio Disney, which will
result in royalty payments. In addition, I requested, and XM and Sirius
have provided, assurances that it is not their intent to do anything to
decrease royalties through gamesmanship of these new programming tiers.
Their primary business has been, and will continue to be, music---not
news and sports. In fact, the impetus for these decisions is just the
opposite---increasing revenues is mutually beneficial for both parties.
I will continue to monitor the effects of this transaction on the music
industry and anticipate the parties will work with the Commission to
protect this important source of revenue for America's music industry.

**[VII. Tiered Choices]{.underline}**

As a long-time supporter of family-friendly media choices, I shared the
concern of many

commenters regarding the level of coarse programming on satellite radio.
I associated myself with the comments of Senator Brownback who said,
"Both XM and Sirius prominently feature sexually explicit programming
that is highly inappropriate and contributes to the increasing
coarseness of American society." (Letter of June 28, 2007). With this in
mind, I was pleased to see the parties offer to provide a
"Family-Friendly" tier of programming, a less expensive alternative to
their full lineup of channels that will not include any indecent or
profane content. I was also pleased to see that they have a tier
available that allows consumers to choose any 50 or 100 channels they
wish to receive from the entire programming lineup. This, too, will
allow parents the option of removing those channels they find offensive
or inappropriate for their family. Finally, the "News, Sports, and Talk"
tier will be free from much of the content parents may not wish their
children to hear. Just as in the video industry, I believe that keeping
inappropriate content on subscription services that consumers must
invite into their homes, and pay for, such as satellite radio and cable
television, serves the public interest.

**[VIII. Local Programming/Ads]{.underline}**

Many broadcasters contacted the Commission regarding the merged entity's
threat to local programming and advertising. Because local advertising
revenue traditionally accounts for over 70% of radio revenues, it is
critical to local broadcaster's business model. The original licenses,
and this Order, unambiguously prohibit local programming- including
local advertising. Likewise, the parties have agreed that they do not
now, nor do they intend to, air local programming. This Order
specifically finds that they must refrain from airing any local
programming or advertising whatsoever over terrestrial repeaters or
future technologies. All programming aired by the merged entity will be
available strictly on a nationwide basis. This is yet another area where
the FCC will be carefully monitoring the compliance of the companies.
Parties that feel a violation of this prohibition has occurred are
encouraged to contact the Commission and file a complaint.

**[IX. Open Access]{.underline}**

At my request, the parties agreed to make the technical specifications
for their equipment available immediately, rather than in a year, as
originally proposed. Third parties will be able to access the technology
necessary to produce satellite radio receivers for sale at retail and to
automobile manufacturers sooner. Thus, competition in the satellite
radio equipment market should begin to emerge in upcoming months.

**[X. Compliance Plan]{.underline}**

As part of the consent decree the parties have agreed to a strict
compliance plan, which includes the following:

-   Hire FCC Compliance Officer responsible for ensuring future
    compliance with Act and Commission rules;

-   Adopt Procedural Guide establishing procedures for testing,
    certifying and making modifications to satellite radio receivers and
    Repeater Change Guide establishing procedures for making any changes
    to terrestrial repeater network;

-   Conduct audits of randomly selected satellite radio receivers to
    ensure compliance with FCC requirements;

-   Establish an FCC Compliance Training Program for all employees who
    engage in activities subject to FCC regulation;

-   Provide notices to subscribers offering various technical fixes to
    non-compliant radio receivers at no cost to subscriber via its
    website, subscriber newsletter and automated telephone response;

-   Broadcast on-air notices to subscribers regarding non-compliant
    radio receivers;

-   Turn off or bring into compliance 100 terrestrial repeaters, and
    send the others to FCC's International Bureau for processing;

-   Replace non-compliant radio receivers returned by consumers for
    repair or warranty claims with compliant devices; and

-   Submit periodic compliance reports to FCC.

> In addition, the parties will be subject to a combined forfeiture of
> approximately \$20 million. All future violations will be subject to
> the maximum monetary penalties, and will be considered in light of
> these past violations.

**[CONCLUSION]{.underline}**

In conclusion, I voted to approve this merger in light of the many
public interest benefits, such as the three year price cap, lower-priced
tiers, the family-friendly programming tier, the set-aside for
diversity, the set-aside for non-commercial, educational programming,
the ban on agreements to prevent HD radio or other audio technologies
from being integrated into satellite radios, the prohibition on
intentionally reducing revenues paid to musicians and record labels, and
the prohibition on exclusive contracts for sports programming.

I will continue to encourage the merged entity to work with the WCS
licensees toward resolution of the rules regarding interference issues
in the WCS band. In the absence of an industry agreement, I will
encourage my colleagues to adopt rules in the near future. I hope we can
soon resolve this issue which has been outstanding for ten years.

The FCC will oversee the compliance of these two companies, and I
personally intend to follow up with the merged entity, and the FCC's
Enforcement Bureau, to assure they are fulfilling the terms of the
enforcement and merger agreements. The Commission will seek to ensure
that the merged entity uses the spectrum it has been allocated
efficiently, as one of our country's most important public resources.
The Commission will also ensure that the spectrum is used in a way that
serves the public interest by enhancing diversity and giving voice to
minority and noncommercial broadcasters.

**STATEMENT OF**

**COMMISSIONER ROBERT M. McDOWELL**

Re:      *Applications for Consent to the Transfer of Control of
Licenses, XM Satellite Radio Holdings Inc., Transferor, to Sirius
Satellite Radio Inc., Transferee, MB Docket No. 07-57.*

I am pleased to support this merger and look forward to the consumer
benefits that will result from the combination of XM and Sirius.

Competition in the audio market has grown substantially in the past few
years. Barely one generation removed from AM and FM radio and vinyl
albums, we now have a still vibrant AM/FM dial, full of music, news and
talk radio of all stripes, HD radio with its multicast streams of
content, mp3 players, Internet radio and much more. When discussing this
merger, it is important to keep in mind that satellite radio -- both XM
and Sirius combined -- comprises only five percent of that audio
marketplace.

Despite these highly-competitive market realities, this merger order is
one of the most heavily-conditioned in FCC history. With the obligations
we have imposed, and those that the companies have voluntarily
undertaken, the combined company, post-merger, will offer several new,
attractively priced programming packages for consumers, will open up
opportunities for noncommercial educational programmers and
minority-owned programmers to gain carriage on the satellite radio
platform, and will create opportunities for competition in the satellite
radio equipment market, so that consumers can enjoy more choices.

I am also pleased that we have resolved the enforcement issues regarding
terrestrial repeater and radio equipment violations admitted by XM and
Sirius. As the consent decrees demonstrate, the Commission takes such
rule violations seriously and will carefully examine the ongoing
compliance of the combined company with our regulations.

[^1]: Consolidated Application for Authority to Transfer Control of XM
    Radio Inc. and Sirius Satellite Radio Inc., XM Satellite Radio
    Holdings Inc., Transferor, and Sirius Satellite Radio Inc.,
    Transferee (Mar. 20, 2007) ("Application"). The Media Bureau placed
    the Application on public notice on June 8, 2007, establishing a
    comment cycle for this proceeding. *See Sirius Satellite Radio Inc.
    and XM Satellite Radio Holdings Inc. Seek Approval to Transfer
    Control of FCC Authorizations and Licenses*, 22 FCC Rcd 1032 (2007)
    ("Jun. 8, 2007 Public Notice"). On June 25, 2007, Applicants
    supplemented their Application with a further license transfer
    application. *See* Letter from Jennifer D. Hindin, Wiley Rein LLP,
    on behalf of Applicants, to Marlene H. Dortch, Secretary, FCC (June
    25, 2007), attaching Form 312, Call Sign E060363. The supplemental
    application was accepted for filing on September 26, 2007. *See*
    Report No. SES-00966 (Earth Station Application
    SES-T/C-20070625-00863). That supplemental filing is deemed
    associated with the Application, which incorporates by reference the
    applications for approval of the transfer of control of those
    facilities listed in Appendix A hereto. On March 29, 2007, the
    Commission released a public notice designating this proceeding as
    "permit but disclose" for purposes of the Commission's *ex parte*
    rules. *See XM Satellite Radio Holdings, Inc. and Sirius Satellite
    Radio, Inc. Seek Approval To Transfer Control Of Licensee Entities
    Holding FCC Licenses and Other Authorizations,* 22 FCC Rcd 5548
    (2007). On June 27, 2007, the Media Bureau initiated a rulemaking
    proceeding in MB Docket No. 07-57 seeking comment on whether
    language included in the 1997 Order establishing SDARS, which
    prohibited the transfer of control of one SDARS licensee to the
    other, constitutes a binding rule. *Applications for Consent to the
    Transfer of Control of Licenses, XM Satellite Radio Holdings, Inc.,
    Transferor, to Sirius Satellite Radio Inc., Transferee,* Notice of
    Proposed Rule Making, 22 FCC Rcd 12018 (2007) ("*2007 SDARS NPRM*").
    See Section VII.A. for discussion of the rulemaking proceeding. On
    December 7, 2007, Sirius filed an informational Form 312 application
    for a new space station license that was granted to Sirius on April
    16, 2007, approximately one month after the Application was filed.
    Sirius requests that the Commission take the new license into
    account in its processing of the Application. *See* Letter from
    Jennifer D. Hindin, Wiley Rein LLP, Counsel for Sirius, to Marlene
    H. Dortch, Secretary, FCC (Dec. 7, 2007). We grant the request and
    associate the new space station license with all other
    authorizations and licenses as identified in Appendix A.

[^2]: 47 U.S.C. § 310(d); 47 C.F.R. §§ 1.948, 25.119.

[^3]: Application at 2.

[^4]: Letter from Richard E. Wiley, Robert L. Pettit, Wiley Rein LLC,
    Counsel for Sirius, and Gary M. Epstein, James H. Barker, Latham &
    Watkins LLP, Counsel for XM, to Kevin J. Martin, Chairman, FCC (June
    16, 2008), Attachment, Letter dated June 13, 2008 from Richard E.
    Wiley, Robert L. Pettit, Wiley Rein LLP, Counsel for Sirius and Gary
    M. Epstein, James H. Barker, Latham & Watkins LLP, Counsel for XM,
    to Kevin J. Martin, Chairman, FCC (June 13, 2008) ("Applicants' June
    13, 2008 Ex Parte"); Letter from Richard E. Wiley, Counsel for
    Sirius and Gary M. Epstein, Counsel for XM, to Kevin J. Martin,
    Chairman, Michael Copps, Commissioner, Jonathan Adelstein,
    Commissioner, Deborah Tate, Commissioner, and Robert McDowell,
    Commissioner, FCC (July 25, 2008), transmitted by Letter from Robert
    L. Pettit, on behalf of Applicants, to Marlene H. Dortch, Secretary,
    FCC (July 25, 2008) ("Applicants' July 25, 2008 Ex Parte").

[^5]: *See* *American Mobile Radio Corporation Application for Authority
    to Construct, Launch, and Operate Two Satellites in the Satellite
    Digital Audio Radio Service*, Order and Authorization, 13 FCC Rcd
    8829 (Int'l Bur. 1997) ("*1997* *XM Authorization Order*"), modified
    by 16 FCC Rcd 18484, application for review denied, 16 FCC Rcd 21431
    (2001), *aff'd sub nom.* *Primosphere Ltd. Partnership v. FCC* (Case
    Nos. 01-1526 and 1527), 2003 WL 472239 (C.A.D.C. Feb. 21, 2003); *XM
    Radio Inc.*, Order and Authorization, 20 FCC Rcd 1620 (Int'l Bur.
    2005) ("*2005 XM Authorization Order*"). The Commission originally
    licensed Sirius to launch and operate two satellites in
    geostationary orbit at the 80° and 110° West Longitude orbital
    locations. *See* *Satellite CD Radio, Inc. Application for Authority
    to Construct, Launch, and Operate Two Satellites in the Satellite
    Digital Audio Radio Service*, Order and Authorization, 13 FCC Rcd
    7971 (Int'l Bur. 1997) ("*1997* *Sirius Authorization Order*"),
    application for review denied, 16 FCC Rcd 21458 (2001), *aff'd sub
    nom.* *Primosphere Ltd. Partnership v. FCC* (Case Nos. 01-1526 and
    1527) ), 2003 WL 472239 (C.A.D.C. Feb. 21, 2003). Sirius later
    requested, and was granted, authority to change its satellite
    configuration from two geostationary satellites to three satellites
    in non-geostationary satellite orbits (NGSO). *See* *Sirius
    Satellite Radio Inc., Application for Minor Modification of License
    to Construct, Launch and Operate a Non-Geostationary Satellite
    Digital Audio Radio Service System*, Order and Authorization, 16 FCC
    Rcd 5419 (Int'l Bur. 2001). SDARS is commonly referred to as
    "satellite radio." The Commission's rules define SDARS as "\[a\]
    radio communication service in which audio programming is digitally
    transmitted by one or more space stations directly to fixed, mobile,
    and/or portable stations, and which may involve complementary
    repeating terrestrial transmitters, telemetry, tracking and control
    facilities." 47 C.F.R. § 25.201. The term "DARS" refers to the same
    service that we refer to in this document as "SDARS."

[^6]: Application at 3, 5.

[^7]: *Id*. at 4, 6.

[^8]: Sirius "Backseat TV" is currently offered in Dodge, Chrysler and
    Jeep vehicles. The service includes live television from three
    networks: Nickelodeon, Disney Channel and Cartoon Network. *See*
    Sirius, <http://www.sirius.com/backseattv> (visited June 24, 2008).

[^9]: XM Radio reported 9.03 million subscribers as of December 31,
    2007. *See* XM Radio Holdings Inc. SEC Form 10-K for the Fiscal Year
    Ended Dec. 31, 2007 ("XM Form 10-K") at 34. Sirius reported
    8,321,785 subscribers as of that date. Sirius Satellite Radio, Inc.
    SEC Form 10-K for the Fiscal Year Ended Dec. 31, 2007 ("Sirius Form
    10-K") at 3.

[^10]: See Sections II.A-B for a complete description of the services
    offered by Applicants.

[^11]: Application at ii.

[^12]: See Section V.B.1. for discussion of new programming packages and
    prices, including A La Carte I and A La Carte II options. Applicants
    indicate that in the near term, subscribers will have to own two
    legacy receivers (one Sirius receiver and one XM receiver) to
    receive the complete offerings of both services because the combined
    company must continue to operate both legacy systems. Application at
    12 n.27. The a la carte programming features will be available to
    customers who select their channels through the Internet and
    purchase next-generation radios. Joint Opposition at 11; *see also*
    Applicants' Supplemental Comments Regarding the Benefits of A La
    Carte ("Supp. Comments") at 2; Applicants' June 13, 2008 Ex Parte.

[^13]: Applicants indicate that the combined company will provide
    subscribers a credit or rebate on their subscription fee if they
    choose to block adult programming. Application at 10, n.25, 12; *see
    also* Supp. Comments at 4.

[^14]: Supp. Comments at 10.

[^15]: *Id*. at 5.

[^16]: Applicants' June 13, 2008 Ex Parte at 5. Applicants state that
    they may pass on some increases in programming costs after the first
    anniversary of the merger's consummation. *Id*.

[^17]: 47 U.S.C. § 310(d); *see also Applications for Consent to the
    Assignment And/Or Transfer of Control of Licenses, Adelphia Comm.
    Corp., (and Subsidiaries, Debtors-In-Possession), Assignors, to Time
    Warner Cable Inc.* (*Subsidiaries*), *Assignees*, *Adelphia Comm.
    Corp.*, (a*nd Subsidiaries, Debtors-In-Possession*)*, Assignors and
    Transferors, to Comcast Corp. (Subsidiaries), Assignees and
    Transferees,* 21 FCC Rcd 8203, 8217 ¶ 23 (2006) ("*Adelphia
    Order*"); *General Motors Corp. and Hughes Elec. Corp., Transferors,
    and The News Corp. Ltd., Transferee, for Authority to Transfer
    Control*, 19 FCC Rcd 473, 485 ¶ 18 (2004) ("*News Corp.-Hughes
    Order*"); *Application of EchoStar Comm. Corp., General Motors
    Corp., Hughes Elec. Corp*.*,* (*Transferors*), *and EchoStar Comm.
    Corp.,* (*Transferee*)*,* Hearing Designation Order, 17 FCC Rcd
    20559, 20574 ¶ 25 (2002) ("*EchoStar-DIRECTV HDO*").

[^18]: *News Corp.-Hughes Order,* 19 FCC Rcd at 477 ¶ 5.

[^19]: *Id.* at 483 ¶ 15.

[^20]: *See* Section VI.C.1.

[^21]: *Compare Applications of Ameritech Corp., Transferor, and SBC
    Comm., Inc., Transferee*, 14 FCC Rcd 14712, 14712 ¶ 2 (1999)
    ("*SBC*-*Ameritech Order*").

[^22]: In 2002, the Commission adopted a single DAB transmission
    standard referred to as in-band, on-channel ("IBOC" ), developed by
    iBiquity Digital Corp. ('iBiquity"), as the technology that would
    permit AM and FM radio broadcasters to introduce digital operations.
    "HD Radio" is part of iBiquity's brand name for its digital AM and
    FM radio technology. HD Radio, <http://www.hdradio.com/faq.php>. The
    term "HD Radio" in this Order refers to DAB operations. *See*
    Section VI.B.4, *infra*.

[^23]: Application at 4.

[^24]: XM Form 10-K at 29.

[^25]: Application at 4.

[^26]: SDARS is a domestic implementation of the Broadcasting Satellite
    Service (sound) (BSS (sound)) that was created as a result of the
    1992 World Administrative Radio Conference. *See* International
    Telecommunications Union, *Final Acts of the World Admin. Radio
    Conf.* (Malaga-Torremolinos, 1992). The Commission originally
    allocated 50 megahertz of spectrum for SDARS on a primary basis in
    the 2310-2360 MHz frequency band to match the international
    allocation for BSS (sound) in this band. *See* *Amendment of the
    Commission's Rules with Regard to the Establishment and Regulation
    of New Digital Audio Radio Services*, Report and Order, 10 FCC Rcd
    2310 (1995) ("*SDARS Allocation Order*"). Congress, however,
    subsequently directed the Commission to reallocate spectrum at
    2310-2320 MHz and 2345-2360 MHz for terrestrial wireless services.
    *See* Omnibus Consolidated Appropriations Act, 1997, Pub. L.
    104-208, 110 Stat. 3009 (1996). As a result, 25 MHz of spectrum at
    2320-2345 MHz remains allocated exclusively for SDARS, although the
    Commission retained SDARS as a primary allocation throughout the
    2310-2360 MHz frequency bands. *See* U.S. Table of Frequency
    Allocations, 47 C.F.R. § 2.106.

[^27]: *See* Public Notice, "*FCC Announces Auction Winners for Digital
    Audio Radio Service,*" 12 FCC Rcd 18727 (1997) ("1997 SDARS Public
    Notice").

[^28]: XM Form 10-K at 2. In addition, XM states that it has advertising
    sales offices in several major media markets to sell directly to
    advertising agencies and media buying groups, and has sold
    advertising programs and sponsorships to hundreds of advertisers and
    agencies, including many Fortune 500 companies. *Id*. at 7.

[^29]: *Id*. at 34. "XM Canada" launched its satellite radio service in
    Canada in November 2005, offering over 130 channels for a monthly
    subscription fee of CDN \$14.99. Subscribers to XM Canada are not
    included in the subscriber totals for the United States. *Id*. at 6.

[^30]: XM's college sports programming includes the Atlantic Coast
    Conference, Pacific-10 Conference, Big Ten Conference, Big 12
    Conference, Southeastern Conference and Big East Conference, PGA
    Tour, U.S. Open Tennis, and XM Deportivo. *Id.* at 3.

[^31]: XM offers a variety of talk formats, news and religious
    programming, such as "Oprah & Friends," the "Dr. Laura Show," the
    Food Network, HGTV, the "Good Morning America Radio Show," Fox News,
    CNN, and C-Span. XM offers comedy channels, including the "Opie &
    Anthony Show," and a medical information channel called ReachMD. XM
    has additional news/talk/information/entertainment programming,
    including CNBC, Bloomberg, Fox Talk, CNN Headline News, The Bob
    Edwards Show, BBC Worldservice, The Power and CNN en Español. *Id*.
    at 3-4.

[^32]: *Id*. at 4.

[^33]: Application at 5.

[^34]: XM Form 10-K at 7. XM Online, a subset of XM's satellite radio
    service, is available over the Internet as part of the basic radio
    subscription price of \$12.95 per month, and can also be purchased
    as a standalone service for \$7.99 per month. XM Online includes
    many of the commercial-free music channels available on XM's
    satellite radio service, several channels which are exclusively
    programmed for XM Online and various XM original
    news/talk/information channels, including XM Kids, P.O.T.U.S. '08,
    The Bob Edwards Show, XM Comedy, Laugh USA, Oprah & Friends, and The
    Virus, featuring Opie & Anthony. *Id.* at 6. Through DIRECTV, XM
    offers several channels of XM's music, children's and talk
    programming to DIRECTV's customers. *Id.*

[^35]: *Id*. at 7.

[^36]: *Id*. at 4. XM also has agreements with automotive manufacturers
    Ferrari, Isuzu, Lotus, Subaru, Suzuki, Porsche and Harley-Davidson
    as either a dealer and/or factory-installed option in several
    models. *Id.* at 5.

[^37]: *Id*. at 5.

[^38]: *Id.* at 7.

[^39]: *Id.* at 5.

[^40]: *Id.*

[^41]: *Id.*

[^42]: *Id.*

[^43]: *Id.*

[^44]: Application, Attachment A.

[^45]: *1997* *XM Authorization Order*, 13 FCC Rcd at 8850 ¶¶ 51-52;
    *2005 XM Authorization Order*, 20 FCC Rcd at 1620 ¶ 1.

[^46]: Application at 6.

[^47]: *Id*. *See also* *XM Radio Inc., Application for Special
    Temporary Authority to Operate Satellite Digital Audio Radio Service
    Complementary Terrestrial Repeaters*, Order and Authorization, 16
    FCC Rcd 16781 (Int'l Bur. 2001) ("*XM Radio STA Order*"); *XM Radio,
    Inc*., Order, FCC 08-177 (adopted July 25, 2008) ("*XM Consent
    Decree Order*"), as discussed in Section VII.B., *infra*.

[^48]: Application at 53.

[^49]: *Id*. (call sign WB2XCA).

[^50]: Sirius Form 10-K at 13.

[^51]: *Id*. at 24.

[^52]: *See* 1997 SDARS Public Notice.

[^53]: Application at 3; *see also* Sirius Form 10-K at 5.

[^54]: Sirius Form 10-K at 3. In 2005, Sirius Canada launched its
    service in Canada offering 110 channels of commercial music and
    news, sports, talk and entertainment programming, including 11
    channels of Canadian content and the Howard Stern 100 channel for
    CDN \$14.99 per month. As of October 2007, Sirius Canada had more
    than 500,000 subscribers. Subscribers to Sirius Canada are not
    included in the subscriber total for the United States. *Id.* at 10.

[^55]: Application at 3.

[^56]: Sirius Form 10-K at 5-6. Sirius carries play-by-play coverage of
    football, basketball and other sports from 18 NCAA Division I
    Conferences, and has the right to broadcast all games of the NCAA
    Division I men's basketball tournament through 2009. Sirius also
    airs Wimbledon Championships, Arena Football League, National
    Lacrosse League and horse racing. *Id*. at 6.

[^57]: *Id*. Religious programming includes the Catholic Channel,
    programmed with the assistance of the Archdiocese of New York. Other
    religious programming includes EWTN Global Catholic Radio Network
    and Family Net Radio, programmed by Family Net, an affiliate of the
    Southern Baptist Convention. *Id.*

[^58]: *Id.* Sirius also carries CNN, Fox News, National Public Radio
    and the World Radio Network. *Id.* Additional content services
    offered by Sirius include Sirius Music for Business, a music service
    for commercial entities available through Applied Media Corporation,
    Dynamic Media, Turn Key Media and Info Hold Inc. *Id*. at 10.
    Sirius's marine weather service features information on weather and
    wave heights to sea surface temperatures for recreational boaters
    and covers the 48 contiguous states and waters extending hundreds of
    miles into the Atlantic and Pacific Oceans, Gulf of Mexico and
    Caribbean. *Id.*

[^59]: *Id*. at 6; *see also* Application at 3. The metropolitan areas
    covered are New York, Boston, Philadelphia, Los Angeles, Chicago,
    St. Louis, Washington D.C., Baltimore, Atlanta, Miami, Dallas,
    Houston, Detroit, Las Vegas, San Francisco, Seattle, Phoenix, San
    Diego, Tampa, and Orlando. SIRIUS,
    <http://www.sirius.com/trafficweather> (visited June 17, 2008).

[^60]: *See* Sirius, SIRIUS Satellite Radio Launches the First
    Aftermarket Satellite Radio Tuner That Can Receive SIRIUS Backseat
    TVTM (press release) Aug. 15, 2007.

[^61]: *See* Application at 3. Sirius offers graphic information on road
    closings, traffic flow and incident data to consumers with
    in-vehicle navigation systems, and a marine weather service that
    provides a range of information, including sea surface temperatures,
    wave heights and extended forecasts to recreational boaters. *See*
    Sirius Form 10-K at 4. Sirius states that it intends to launch
    Sirius Travel Link, a suite of data services that includes real-time
    traffic, tabular and graphical weather, fuel prices, sports
    schedules and scores, and movie listings. Sirius Travel Link is
    expected to be standard on Ford's next generation navigation system
    and offered on select Ford, Lincoln and Mercury vehicles in 2008.
    *Id.*

[^62]: Sirius Form 10-K at 7. Sirius satellite radio is available in
    Chrysler, Dodge, Jeep, Mercedes-Benz, Ford, Mitsubishi, BMW,
    Freightliner LLC, Volkswagen, Kia, Audi, Lincoln, Mercury, Mazda,
    Land Rover, Jaguar, Aston Martin, MINI, Maybach, Bentley Motors
    Inc., Rolls-Royce, Toyota, Sterling, Peterbilt, Kenworth, Volvo,
    International and Scion vehicles. *Id.* at 7-8.

[^63]: *Id*. at 3. Sirius also offers a variety of portable radios.
    *Id*. at 3.

[^64]: Sirius Form 10-K at 4.

[^65]: Application at Attachment A.

[^66]: The Commission originally licensed Sirius to launch and operate
    two satellites in geostationary orbit at the 80° and 110° West
    Longitude orbital locations. *1997* *Sirius Authorization Order*, 13
    FCC Rcd at 7971, 7994. Sirius later requested, and was granted,
    authority to change its satellite configuration from two
    geostationary satellites to three satellites in a highly elliptical
    non-geostationary orbit (NGSO). *Sirius Satellite Radio Inc., Minor
    Modification of License to Construct, Launch and Operate a
    Non-Geostationary Satellite Digital Audio Radio Service System*,
    Order and Authorization, 16 FCC Rcd 5419 (Int'l Bur. 2001).

[^67]: *See* *Sirius Satellite Radio Inc., Application for Authority to
    Launch and Operate SIRIUS FM-5, a Geostationary Satellite, to
    Provide Satellite Digital Audio Radio Services*, IBFS File No.
    SAT-LOA-20060901-00096 (granted April 16, 2007). The Commission had
    not yet granted this application at the time of filing of the
    Transfer Application, but Applicants specifically request that the
    Commission include authority to transfer control of any applications
    issued during the period between submission of the Transfer
    Application and Commission action on the same. *See* Application at
    Part VI.B. In addition, Sirius subsequently filed an "informative"
    Form 312 to include this authorization as part of the transfer of
    control application. *See* n.1, *supra*.

[^68]: *See, e.g.,* *Sirius Satellite Radio, Inc., Application for
    Special Temporary Authority to Operate Satellite Digital Audio Radio
    Service Complementary Terrestrial Repeaters*, Order and
    Authorization, 16 FCC Rcd 16773 (Int'l Bur. 2001) ("*Sirius STA
    Order*"). *See* *also* *Sirius Satellite Radio Inc*., Order, FCC
    08-176 (adopted July 25, 2008) ("*Sirius Consent Decree Order*"), as
    discussed in Section VII.B., *infra*. Sirius states that it plans to
    deploy a significant number of additional terrestrial repeaters in
    the future. Sirius Form 10-K at 18.

[^69]: *See* Application at 54; *see also* Application to Transfer
    Control of Sirius Satellite Radio Inc. Earth Station Authorizations
    to Sirius Satellite Radio Inc., IBFS File No. SES-T/C-20070320-00379
    (Call Signs E990291, E040363, E060276, E060277); File No.
    SES-T/C-20070625-00863 (Call Sign E060363).

[^70]: *See* ULS File No. 0002948781 (filed Mar. 20, 2007) (seeking
    Commission consent to the transfer of control of an
    Industrial/Business Pool license, call sign WPTX369, from Sirius
    Satellite Radio Inc. to the merged entity); *see also* Application
    at 54.

[^71]: Agreement and Plan of Merger dated as of February 19, 2007, by
    and among Sirius Satellite Radio Inc., Vernon Merger Corporation,
    and XM Satellite Radio Holdings Inc. ("Merger Agreement").
    Application at 1, 6. Pursuant to the Merger Agreement, a wholly
    owned subsidiary of Sirius, Vernon Merger Corporation, will be
    merged with and into XM, with Sirius being the surviving corporation
    of the subsidiary merger. At the effective time of the merger, each
    outstanding share of XM common stock will generally be converted
    into the right to receive 4.6 shares of common stock of Sirius, and
    each outstanding share of XM Series A Convertible Preferred Stock
    will be similarly converted into the right to receive 4.6 shares of
    a newly designated series of preferred stock of Sirius having
    substantially the same qualifications as the stock so converted. XM
    will continue to hold the stock of its subsidiaries, and XM and its
    subsidiaries will continue to hold all of the FCC authorizations
    that they held prior to the merger. *Id.* at 6.

[^72]: Application at 6-7, Attachment A. These licenses are held
    pursuant to Section 310(d) of the Communications Act.

[^73]: *See* Application at 6-7*.* Following the merger, the surviving
    company's Board of Directors will consist of the following: four
    members selected by Sirius and four members selected by XM, each of
    whom shall qualify as an independent director pursuant to NASDAQ
    Market Rules; the Chief Executive Officer; the Chairman of the Board
    of Directors; and two additional members, one of whom is expected to
    be designated by General Motors and the other by American Honda.
    *See* Application at 7. *See* Slacker, Inc. Comments at n.413,
    *infra*.

[^74]: *See* Applicants' Joint Opposition to Petitions to Deny and Reply
    Comments ("Joint Opposition").

[^75]: *Id*. at 10-14. *See also* XM and Sirius, *XM and SIRIUS to Offer
    A La Carte Programming* (press release) Jul. 23, 2007.

[^76]: Joint Opposition at 11-14.

[^77]: *Id*. at 13-14.

[^78]: Applicants' June 13, 2008 Ex Parte at 1; Applicants' July 25,
    2008 Ex Parte at 1.

[^79]: Applicants define a "qualified entity" as any entity that is
    majority-owned by persons who are African American, not of Hispanic
    origin; Asian or Pacific Islanders; American Indians or Alaskan
    Natives; or Hispanics. Applicants' June 13, 2008 Ex Parte at 1 at 3
    n.2.

[^80]: Applicants state that they "may pass through cost increases
    incurred since the filing of the combined company's FCC merger
    application as a result of statutorily or contractually required
    payments to the music, recording and publishing industries for the
    performance of musical works and sound recordings or for device
    recording fees." Applicants' June 13, 2008 Ex Parte at 4. *See* ¶
    107, *infra*.

[^81]: Applicants' July 25, 2008 Ex Parte at 2.

[^82]: Applicants' June 13, 2008 Ex Parte at 3.

[^83]: *Id*.

[^84]: *Id*. at 4.

[^85]: Application at 12 n.27.

[^86]: XM Nov. 16, 2007 Response to Information and Document Request,
    Narrative at 25 (XM filed a duplicate submission on Dec. 4, 2007 to
    correct a formatting issue with the Nov. 16, 2007 filing. In this
    Order, we cite to the Nov. 16, 2007 filing).

[^87]: Application at 12, n.27.

[^88]: *See infra* Section VI.B.3; *see also* Sirius Nov. 16, 2007
    Response to Information and Document Request, Narrative at 67 ("it
    is anticipated that consumers who want to access all of the
    programming offered by the merged company will have to purchase new
    interoperable radios capable of receiving signals on the spectrum
    now licensed separately to Sirius and XM").

[^89]: *See infra* Section V.B.4.

[^90]: XM Nov. 16, 2007 Response to Information and Document Request,
    Narrative at 25-29; Sirius Nov. 16, 2007 Response to Information and
    Document Request, Narrative at 37-40.

[^91]: *2005 XM Authorization Order*, 20 FCC Rcd at 1620 ¶ 1
    (authorizing XM to launch and operate the XM-3 and XM-4 satellites
    and to operate the XM-1 and XM-2 satellites as in-orbit spares).

[^92]: Sirius Nov. 16, 2007 Response to Information and Document
    Request, Narrative at 38.

[^93]: Sirius states that the receive antennas of XM's and Sirius'
    radios are optimized differently in order to provide the best
    reception given the different elevation angles needed to view XM's
    satellites in geostationary orbit and Sirius's satellites in
    highly-elliptical orbits. *See* Sirius Nov. 16, 2007 Response to
    Information and Document Request, Narrative at 38-39.

[^94]: Sirius states that it needs fewer repeaters than XM due to the
    high angle of elevation of Sirius' satellites in highly-elliptical
    orbit. *See* Sirius Nov. 16, 2007 Response to Information and
    Document Request, Narrative at 39.

[^95]: Sirius states that its satellites in highly-elliptical orbits
    require uplink antennas with full motion to track the satellites
    across the sky, whereas XM's satellites in geostationary orbit do
    not. *See id*.

[^96]: XM's two operational satellites, XM-3 and XM-4, were launched in
    2005 and 2006, respectively, and have expected operational lifetimes
    of 15 years. *See* XM, *XM Radio*'*s XM-4 Satellite Successfully
    Delivered to Transfer Orbit* (press release) Oct. 30, 2006; XM, *XM
    Radio's Satellite Successfully Delivered to Orbit* (press release)
    Mar. 1, 2005. Sirius' current operational satellites were launched
    in 2000, and Sirius is in the process of implementing replacement
    satellites. *See* Satellite CD Radio, Inc., Application for
    Modification of Authority, IBFS File No. SAT-MOD-20080521-00110
    (filed May 21, 2008) (requesting authority to launch and operate the
    FM-6 satellite as an eventual replacement for two in-orbit Sirius
    NGSO satellites). Because SDARS is the only commercial satellite
    service authorized to use the 2320-2345 MHz frequency band in the
    United States, it is unlikely that either Applicant would be able to
    sell its satellite infrastructure to a non-SDARS provider.

[^97]: XM Nov. 16, 2007 Response to Information and Document Request,
    Narrative at 29; Sirius Nov. 16, 2007 Response to Information and
    Document Request, Narrative at 37.

[^98]: Sirius Nov. 16, 2007 Response to Information and Document
    Request, Narrative at 40.

[^99]: *Id*. at 44-45.

[^100]: XM Nov. 16, 2007 Response to Information and Document Request,
    Narrative at 26. In addition, Applicants have committed to the
    public that no customer will need to purchase a new radio to keep
    "substantially similar service" after the merger. *Id.* at 27 n.11.

[^101]: *See* Sirius Nov. 16, 2007 Response to Information and Document
    Request, Narrative at 41, 44-45.

[^102]: *See* 47 U.S.C. § 310(d); Consolidated Application.

[^103]: Jun. 8, 2007 Public Notice, 22 FCC Rcd at 1032. Comments were
    due July 9, 2007, and responses and oppositions were due on July 24,
    2007.

[^104]: *Establishment of Rules and Policies for the Digital Audio Radio
    Satellite Service in the 2310-2360 MHz Frequency Band*, Report and
    Order, Memorandum Opinion and Order and Further Notice of Proposed
    Rulemaking, 12 FCC Rcd 5754, 5823 ¶ 170 (1997) ("*1997 SDARS Service
    Rules Order*").

[^105]: *2007 SDARS NPRM*, 22 FCC Rcd at 12018 ¶ 1.

[^106]: A summary of the *2007 SDARS NPRM* was published in the Federal
    Register on July 12, 2007, 72 FR 38055 (July 12, 2007). The
    following day, the Media Bureau issued the Public Notice setting
    forth deadlines for filing comments and reply comments to the *2007
    SDARS NPRM*. Public Notice, *Media Bureau Announces Comment and
    Reply Comment Dates for the Notice of Proposed Rule Making Regarding
    Applications for Consent to the Transfer of Control of Licenses, XM
    Satellite Radio Holdings Inc., Transferor, to Sirius Satellite Ratio
    Inc*., Transferee, 22 FCC Rcd 13036 (Med. Bur. 2007). Comments were
    due by August 13, 2007, and reply comments were due by August 27,
    2007.

[^107]: *See* Petition to Deny filed by Mt. Wilson FM Broadcasters, Inc.
    ("Mt. Wilson Petition"); Petition to Deny filed by the National
    Association of Broadcasters ("NAB Petition"); Petition to Deny filed
    by Common Cause, Consumer Federation of America, Consumers Union and
    Free Press ("Common Cause Petition"); Petition to Deny filed by
    American Women in Radio and Television, Inc. ("AWRT Petition");
    Petition to Deny filed by the Consumer Coalition for Competition in
    Satellite Radio ("C3SR Petition"); Petition to Deny filed by The
    Telecommunications Advocacy Project ("TAP Petition"); Petition to
    Deny filed by The National Association of Black Owned Broadcasters
    ("NABOB Petition"); Petition to Deny filed by National Public Radio
    ("NPR Petition"), and Petition to Deny filed by Forty-Six
    Broadcasting Organizations ("46 Broadcasters Petition"). An untimely
    Petition to Deny was filed by the National Association of
    Telecommunications Officers and Advisors ("NATOA"). The NATOA
    Petition will be considered as a comment in the proceeding.

[^108]: *See* Informal Objection filed by Prometheus Radio Project, U.S.
    Public Interest Research Group, and Media Access Project
    ("Prometheus Radio Objection"). This filing will be considered as a
    comment in the proceeding.

[^109]: On July 11, 2007, the Media Bureau adopted a Protective Order
    under which third parties were allowed to review confidential or
    proprietary filings and documents submitted by Applicants. *See*
    Applications of Sirius Satellite Radio, Inc. and XM Satellite Radio
    Holdings Inc. For Approval to Transfer Control, Protective Order, 22
    FCC Rcd 12822 (Med. Bur. 2007) ("*First Protective Order*"). On
    November 2, 2007, the Bureau issued a request for information from
    Sirius and XM. Letter from Monica Shah Desai, Chief, Media Bureau,
    FCC, to Richard E. Wiley, Robert L. Pettit, Peter D. Shields and
    Jennifer D. Hindin, Wiley Rein LLP, Counsel for Sirius (Nov. 2,
    2007) ("Sirius Information Request"); Letter from Monica Shah Desai,
    Chief, Media Bureau, FCC, to Gary M. Epstein, James H. Barker and
    Brian W. Murray, Latham & Watkins LLP, Counsel for XM (Nov. 2, 2007)
    ("XM Information Request"). On November 16, 2007, the Bureau issued
    a second Protective Order regarding additional conditions applicable
    to third party review of highly confidential competitively sensitive
    documents. *See* Applications of Sirius Satellite Radio, Inc. and XM
    Satellite Radio Holdings Inc. For Approval to Transfer Control,
    Protective Order, 22 FCC Rcd 19924 (Med. Bur. 2007) ("*Second
    Protective Order*").

[^110]: *See* Letter from Peter D. Shields, Wiley Rein LLP, Counsel for
    Sirius, to Marlene H. Dortch, Secretary, FCC (Nov. 16, 2007); Letter
    from Gary M. Epstein, Latham & Watkins LLP, Counsel for XM, to
    Marlene H. Dortch, Secretary, FCC (Nov. 16, 2007); Letter from Gary
    M. Epstein, Latham & Watkins LLP, Counsel for XM, to Marlene H.
    Dortch, Secretary, FCC (Mar. 3, 2008); Letter from Jennifer D.
    Hindin, Wiley Rein LLP, Counsel for Sirius, to Marlene H. Dortch,
    Secretary, FCC (Mar. 4, 2008); Letter from Gary M. Epstein, Latham &
    Watkins LLP, Counsel for XM, to Marlene H. Dortch, Secretary, FCC
    (Mar. 18, 2008); Letter from Jennifer D. Hindin, Wiley Rein LLP,
    Counsel for Sirius, to Marlene H. Dortch, Secretary, FCC (Mar. 18,
    2008); Letter from Gary M. Epstein, Latham & Watkins LLP, Counsel
    for XM, to Marlene H. Dortch, Secretary, FCC (Apr. 10, 2008); Letter
    from Jennifer D. Hindin, Wiley Rein LLP, Counsel for Sirius, to
    Marlene H. Dortch, Secretary, FCC (Apr. 10, 2008).

    C3SR asks that Applicants provide them in electronic form with
    documents submitted as Highly Confidential under the Second
    Protective Order.  Letter from Julian L. Shepard, Williams Mullen,
    Counsel for C3SR, to Monica Shah Desai, Chief, Media Bureau, FCC
    (Dec. 4, 2007).  However, those documents were marked "Copying
    Prohibited" and C3SR stated that it did not want to argue about
    whether the documents were correctly designated.  *Id.* at 2. 
    Further, C3SR did not contend that it was unable to review the
    documents in paper form.  Accordingly, we deny C3SR's request.

[^111]: 15 U.S.C. § 18.

[^112]: DOJ, *Statement of the Department of Justice Antitrust Division
    on its Decision to Close its Investigation of XM Satellite Radio
    Holdings Inc.'s Merger with Sirius Satellite Radio Inc*. (press
    release) (March 24, 2008),
    <http://www.justice.gov/opa/pr/2008/March/08_at_226.html> ("Mar. 24,
    2008 DOJ Press Release").

[^113]: 47 U.S.C. § 310(d).

[^114]: Section 310(d) requires that the Commission consider the
    applications as if the proposed transferee were applying for the
    licenses directly. 47 U.S.C. § 310(d). *See News Corp. and DIRECTV
    Group, Inc. and Liberty Media Corp. for Authority to Transfer
    Control*, 23 FCC Rcd 3265, 3276 ¶ 22 (2008) ("*Liberty Media-DIRECTV
    Order*"); *SBC Comm. Inc. and AT&T Corp. Applications for Approval
    of Transfer of Control*, 20 FCC Rcd 18290, 18300 ¶ 16 (2005)
    ("*SBC-AT&T Order*"); *Verizon Comm., Inc. and MCI, Inc.
    Applications for Approval of Transfer of Control*, 20 FCC Rcd 18433,
    18443 ¶ 16 (2005) ("*Verizon-MCI Order*"); *Applications of Nextel
    Comm., Inc. and Sprint Corp.*, *for Consent to Transfer Control*, 20
    FCC Rcd 13967, 13976 ¶ 20 (2005) ("*Sprint-Nextel Order*"); *News
    Corp.-Hughes Order*, 19 FCC Rcd at 483 ¶ 15; *Applications for
    Consent to the Transfer of Control of Licenses from Comcast Corp.
    and AT&T Corp., Transferors, to AT&T Comcast Corp., Transferee*, 17
    FCC Rcd 23246, 23255 ¶ 26 (2002) ("*Comcast-AT&T Order*").

[^115]: *See, e.g., Liberty Media-DIRECTV Order*, 23 FCC Rcd at 3276 ¶
    22; *SBC-AT&T Order*, 20 FCC Rcd at 18300 ¶ 16; *Verizon-MCI Order*,
    20 FCC Rcd at 18442-43 ¶ 16; *Applications for Consent to the
    Assignment of Licenses Pursuant to Section 310(d) of the
    Communications Act from NextWave Personal Comm., Inc.,
    Debtor-in-Possession, and NextWave Power Partners, Inc.,
    Debtor-in-Possession, to Subsidiaries of Cingular Wireless LLC*, 19
    FCC Rcd 2570, 2581 ¶ 24 (2004) ("*Cingular-NextWave Order*");
    *EchoStar-DIRECTV HDO*, 17 FCC Rcd at 20574 ¶ 25.

[^116]: *See* *Liberty Media-DIRECTV Order*, 23 FCC Rcd at 3276-77 ¶ 22;
    *SBC-AT&T Order*, 20 FCC Rcd at 18300 ¶ 16; *Verizon-MCI Order*, 20
    FCC Rcd at 18443 ¶ 16; *Sprint-Nextel Order*, 20 FCC Rcd at 13976 ¶
    20.

[^117]: *See Liberty Media-DIRECTV Order*, 23 FCC Rcd at 3277 ¶ 22;
    *SBC-AT&T Order*, 20 FCC Rcd at 18300 ¶ 16; *Verizon-MCI Order*, 20
    FCC Rcd at 18443 ¶ 16; *Sprint-Nextel Order*, 20 FCC Rcd at 13976 ¶
    20; *News Corp.-Hughes Order*, 19 FCC Rcd at 483 ¶ 15; *Comcast-AT&T
    Order*, 17 FCC Rcd at 23255 ¶ 26.

[^118]: *See Liberty Media-DIRECTV Order*, 23 FCC Rcd at 3277 ¶ 22;
    SBC-AT&T Order, 20 FCC Rcd at 18300 ¶ 16; *Verizon-MCI Order*, 20
    FCC Rcd at 18443 ¶ 16; *Comcast-AT&T Order*, 17 FCC Rcd at 23255 ¶
    26; *EchoStar-DIRECTV HDO*, 17 FCC Rcd at 20574 ¶ 25.

[^119]: 47 U.S.C. § 309(e); *see also Liberty Media-DIRECTV Order,* 23
    FCC Rcd at 3277 ¶ 22; *News Corp.-Hughes Order,* 19 FCC Rcd at 483
    n.49; *EchoStar-DIRECTV HDO,* 17 FCC Rcd at 20574 ¶ 25.

[^120]: *Liberty Media-DIRECTV Order*, 23 FCC Rcd at 3277 ¶ 23; *AT&T
    Wireless Services, Inc. and Cingular Wireless Corp. for Consent to
    Transfer Control of Licenses and Authorizations*, 19 FCC Rcd 21522,
    21544 ¶ 41 (2004) ("*Cingular-AT&T Wireless Order*"); *News
    Corp.-Hughes Order*, 19 FCC Rcd at 483 ¶ 16; *Comcast-AT&T Order*,
    17 FCC Rcd at 23255 ¶ 27; *EchoStar-DIRECTV HDO*, 17 FCC Rcd at
    20575 ¶ 26; *MediaOne Group, Inc., Consent to the Transfer of
    Control (Transferor) to AT&T Corp. (Transferee)*, 15 FCC Rcd 9816,
    9821 ¶ 11 (2000) ("*AT&T-MediaOne Order*"); *Applications of
    VoiceStream Wireless Corp. or Omnipoint Corp., Transferors, and
    VoiceStream Wireless Holding Company, Cook Inlet/VS GSM II PCS, LLC,
    or Cook Inlet/VS GSM III PCS, LLC, Transferees*, 15 FCC Rcd 3341,
    3346-47 ¶ 11 (2000); *AT&T Corp., British Telecomm., PLC, VLT Co.
    L.L.C., Violet License Co. LLC, and TNV* \[*Bahamas*\] *Limited
    Applications*, 14 FCC Rcd 19140, 19146 ¶ 14 (1999) ("*AT&T
    Corp.-British Telecom. Order*"); *Application of WorldCom, Inc., and
    MCI Comm. Corp. for Transfer of Control of MCI Comm. Corp. to
    WorldCom, Inc*., 13 FCC Rcd 18025, 18030 ¶ 9 (1998) ("*WorldCom-MCI
    Order*").

[^121]: 47 U.S.C. § 521(6) (one purpose of statute is to "promote
    competition in cable communications and minimize unnecessary
    regulation"); 47 U.S.C. § 532(a) (purpose of section is "to promote
    competition in the delivery of diverse sources of video programming
    and to assure that the widest possible diversity of information
    sources are made available to the public from cable systems in a
    manner consistent with growth and development of cable systems");
    *see also Liberty Media-DIRECTV Order,* 23 FCC Rcd at 3277 ¶ 23;
    *Applications for Consent to the Transfer of Control of Licenses and
    Authorizations by Time Warner, Inc. and America Online, Inc. to AOL
    Time Warner Inc.*, 16 FCC Rcd 6547, 6555-56 ¶ 22 (2001) ("*AOL-Time
    Warner Order*").

[^122]: *See, e.g.,* Telecommunications Act of 1996, Pub. L. No.
    104-104, 110 Stat. 56 § 706 (1996) (providing for the deployment of
    advanced telecommunications capabilities).

[^123]: 47 U.S.C. § 521(4); *see also* 47 U.S.C. § 532(a).

[^124]: *See Liberty Media-DIRECTV Order,* 23 FCC Rcd at 3277-78 ¶ 23;
    *Cingular-AT&T Wireless Order*, 19 FCC Rcd at 21544 ¶ 41;
    *Comcast-AT&T Order*, 17 FCC Rcd at 23255 ¶ 27; *AT&T-MediaOne
    Order*, 15 FCC Rcd at 9821-22 ¶ 11; *WorldCom-MCI Order*, 13 FCC Rcd
    at 18031 ¶ 9.

[^125]: *See Liberty Media-DIRECTV Order,* 23 FCC Rcd at 3278 ¶ 23;
    *Comcast-AT&T Order*, 17 FCC Rcd at 23255-27; *AT&T-MediaOne Order*,
    15 FCC Rcd at 9821-22 ¶ 11; *WorldCom-MCI Order*, 13 FCC Rcd at
    18031 ¶ 9.

[^126]: *Liberty Media-DIRECTV Order,* 23 FCC Rcd at 3278 ¶ 24;
    *Cingular-AT&T Wireless Order*, 19 FCC Rcd at 21544 ¶ 42; *News
    Corp.-Hughes Order*, 19 FCC Rcd at 484 ¶ 17; *EchoStar-DIRECTV HDO*,
    17 FCC Rcd at 20575 ¶ 27; *Application of GTE Corp. and Bell
    Atlantic Corp. for Consent to Transfer Control of Domestic and
    International Authorizations and Application to Transfer Control of
    a Submarine Landing License*, 15 FCC Rcd 14032, 14046 ¶ 23 (2000)
    ("*Bell Atlantic-GTE Order*"); *Comcast-AT&T Order*, 17 FCC Rcd at
    23256 ¶ 28; *WorldCom-MCI Order*, 13 FCC Rcd at 18033 ¶ 13.

[^127]: *See, e.g*., *Liberty Media-DIRECTV Order,* 23 FCC Rcd at 3278 ¶
    24; *Verizon-MCI Order*, 20 FCC Rcd at 18444 ¶ 18; *SBC-AT&T Order*,
    20 FCC Rcd at 18302 ¶ 18; *Rainbow DBS Company LLC, Assignor, and
    EchoStar Satellite L.L.C., Assignee, Consolidated Application for
    Consent to Assignment of Space Station and Earth Station Licenses,
    and Related Special Temporary Authorization*, 20 FCC Rcd 16868,
    16874 ¶ 12 (2005); *Sprint-Nextel Order*, 20 FCC Rcd at 13978 ¶ 22;
    *EchoStar-DIRECTV HDO*, 17 FCC Rcd at 20575 ¶ 27. *See also
    Satellite Business Systems*, 62 FCC 2d 997, 1088 (1977), *aff'd sub
    nom. United States v. FCC*, 652 F.2d 72 (D.C. Cir. 1980) (*en
    banc*); *Northern Utilities Service Co. v. FERC*, 993 F.2d 937,
    947-48 (1st Cir. 1993) (public interest standard does not require
    agencies "to analyze proposed mergers under the same standards that
    the Department of Justice . . . must apply").

[^128]: 15 U.S.C. § 18.

[^129]: *See Liberty Media-DIRECTV Order,* 23 FCC Rcd at 3278 ¶ 25;
    *Bell Atlantic-GTE Order*, 15 FCC Rcd at 14047 ¶ 23; *AT&T
    Corp.-British Telecom*. *Order*, 14 FCC Rcd at 19147-48 ¶ 15;
    *Comcast-AT&T Order*, 17 FCC Rcd at 23256 ¶ 28.

[^130]: *Liberty Media-DIRECTV Order,* 23 FCC Rcd at 3278-79 ¶ 25;
    *Cingular-AT&T Wireless Order*, 19 FCC Rcd at 21545 ¶ 42; *AOL-Time
    Warner Order*, 16 FCC Rcd at 6550, 6553 ¶¶ 5, 15.

[^131]: *Liberty Media-DIRECTV Order,* 23 FCC Rcd at 3279 ¶ 26;
    *Cingular-AT&T Wireless Order,* 19 FCC Rcd at 21545 ¶ 43; *Bell
    Atlantic-GTE Order*, 15 FCC Rcd at 14047 ¶ 24; *AT&T Corp.-British
    Telecom. Order,* 14 FCC Rcd at 19148 ¶ 15; *see also WorldCom-MCI
    Order,* 13 FCC Rcd at 18032 ¶ 10 (stating that the Commission may
    attach conditions to the transfers); *Applications of VoiceStream
    Wireless Corp., Powertel Inc. and Deutsche Telekom AG for Consent to
    Transfer Control of Licenses and Authorizations,* 16 FCC Rcd 9779,
    9782 (2001) (conditioning approval on compliance with agreements
    with Department of Justice and Federal Bureau of Investigation
    addressing national security, law enforcement, and public safety
    concerns).

[^132]: 47 U.S.C. § 303(r). *See Liberty Media-DIRECTV Order,* 23 FCC
    Rcd at 3279 ¶ 26; *Cingular-AT&T Wireless Order*, 19 FCC Rcd at
    21545 ¶ 43; *Bell Atlantic-GTE Order,* 15 FCC Rcd at 14047 ¶ 24;
    *WorldCom-MCI Order*, 13 FCC Rcd at 18032 ¶ 10 (citing *FCC v. Nat'l
    Citizens Comm. for Broadcasting*, 436 U.S. 775 (1978) (upholding
    broadcast-newspaper cross-ownership rules adopted pursuant to
    section 303(r)); *U.S. v. Southwestern Cable Co*., 392 U.S. 157, 178
    (1968) (holding that section 303(r) permits the Commission to order
    a cable company not to carry broadcast signal beyond station's
    primary market); *United Video, Inc. v. FCC*, 890 F.2d 1173, 1182-83
    (D.C. Cir. 1989) (affirming syndicated exclusivity rules adopted
    pursuant to section 303(r) authority).

[^133]: *See, e.g., Liberty Media-DIRECTV Order,* 23 FCC Rcd at 3279 ¶
    26; *Cingular-AT&T Wireless Order*, 19 FCC Rcd at 21545 ¶ 43; *News
    Corp.-Hughes Order*, 19 FCC Rcd at 477 ¶ 5; *Bell Atlantic-GTE
    Order*, 15 FCC Rcd at 14047-48 ¶ 24; *WorldCom-MCI Order*, 13 FCC
    Rcd at 18034-35 ¶ 14.

[^134]: *See News Corp.-Hughes Order*, 19 FCC Rcd at 507 ¶ 69.

[^135]: *See* ABA Sec. of Antitrust Law, *Antitrust Law Developments*
    327 (5th ed. 2002); [Kip Viscusi, John M. Vernon and Joseph E.
    Harrington, Jr., Econ. of Reg. and Antitrust 192]{.smallcaps} (3d
    ed. 2000) ("[Viscusi]{.smallcaps}*, et al*.").

[^136]: *See* [Viscusi]{.smallcaps}*, et al*. at 233. A merging of the
    firms, however, is not required for a vertical relationship to
    exist. Exclusive dealing arrangements between upstream and
    downstream firms, referred to as "vertical restraints," can
    accomplish the objectives of vertical integration. *Id.*

[^137]: *See DOJ/FTC Horizontal Merger Guidelines*, 57 Fed. Reg. 41552,
    §§ 1.11, 1.12 (Sept. 10, 1992), revised, 4 Trade Reg. Rep. (CCH) ¶
    13104 (Apr. 8, 1997). The *Guidelines* similarly define the relevant
    geographic market as "a region such that a hypothetical monopolist
    that was the only present or future producer of the relevant product
    at locations in that region would profitably impose at least a
    'small but significant and nontransitory' increase in price, holding
    constant the terms of sale for all products produced elsewhere."
    *Id.* at § 1.21.

[^138]: One generally starts with a small relevant product market and
    asks if a hypothetical monopolist could profitably increase price in
    that market. If the price increase is not profitable because
    consumers will substitute to another competing product (i.e., if the
    cross-price elasticity between the products is large), then the
    SSNIP test is repeated, but the potential product market is expanded
    to include the next-best substitutes. The procedure continues until
    a hypothetical monopolist over all the included products can
    profitably raise price, identifying that set of products as the
    relevant product market. *DOJ/FTC Horizontal Merger Guidelines* at §
    1.11.

[^139]: Joint Opposition at 36-37; Joint Opposition, Exh. A, CRA
    International, Economic Analysis of the Competitive Effects of the
    Sirius-XM Merger at 9-10 ("Joint Opposition, CRA Study").

[^140]: Joint Opposition at 37. *See also* Americans for Tax Reform
    Comments at 4; Citizen Outreach Project Comments at 1 (arguing that
    SDARS competes with terrestrial radio); CEI Comments at 6-10
    (arguing that the product market should include anything that
    delivers audio entertainment services); Crutchfield Corp. Comments
    at 1-2 (arguing that HD Radio and Internet radio are competitors to
    SDARS); Foust Comments at 3-4 (arguing that SDARS competes with
    broadcast radio, smart phones, PDAs, and iPods); Free State
    Foundation Comments at 2-6 (arguing that SDARS is part of a larger
    audio entertainment and information services market); Heritage
    Foundation Comments at 2-3 (arguing that SDARS competes in a dynamic
    market, including broadcast radio and MP3 devices, because all offer
    audio entertainment); Public Knowledge Comments at 3, 10 (arguing
    that the relevant product market includes terrestrial radio, HD
    Radio, Internet radio, MP3 players, mobile/cellular telephones, and
    emerging mobile Internet radio services); League of Rural Voters
    Comments at 2-5 (arguing that consumers have numerous choices,
    including broadcast radio, if XM and Sirius merged); Letter from
    Brent Wiles, Exec. Dir., League of United Latin American Citizens,
    to Marlene H. Dortch, Secretary, FCC (May 11, 2007) at 2 (arguing
    that the relevant product market includes terrestrial radio and
    downloadable music devices).

[^141]: *See, e.g.,* C3SR Petition at 13-14; Decl. by J. Gregory Sidak
    Concerning the Competitive Consequences of the Proposed Merger of
    Sirius Satellite Radio, Inc. and XM Satellite Radio, Inc. (Mar. 16,
    2007) at 25-32, transmitted by Letter from Julian L. Shepard,
    Williams Mullen, Counsel for C3SR ("C3SR, Sidak Decl.); NAB Petition
    at 11-23; NPR Petition at 9-15 (arguing that consumers have no other
    alternatives to SDARS for 100 plus channels of unregulated music,
    news, entertainment, and talk formats); Common Cause Petition at 36;
    AWRT Petition at 3-4 (arguing that no other product is a true
    substitute for SDARS); NATOA Petition at 6-9 (arguing that other
    audio entertainment services are not comparable to the services
    offered by SDARS); AAI Comments at 22-24 (arguing that alternatives
    to SDARS have significant limitations in constraining an SDARS
    monopolist from exercising market power, and lack some or all of
    SDARS unique attributes); Blue Sky Comments at 6 (arguing that, when
    compared with SDARS, no other service offers comparable program
    diversity, portability, or sound quality); Entravision Comments at
    8-15 (arguing that other audio services will not provide an adequate
    check against anti-competitive harms arising from the merger);
    Prometheus Comments at 2 (arguing that HD Radio, MP3 players,
    terrestrial broadcast stations and Internet radio are complementary
    products, not substitutes for SDARS); Letter from U.S. Sen. Herb
    Kohl, Chairman, Subcommittee on Antitrust, Competition Policy, and
    Consumer Rights, to Kevin J. Martin, Chairman, FCC (May 23, 2007) at
    1-2 (arguing that SDARS is the only medium offering hundreds of
    channels, programming on a national basis with superior sound
    quality, commercial free programming, and portable capabilities);
    Letter from U.S. Reps. James T. Walsh and John McHugh, to Kevin J.
    Martin, Chairman, FCC (May 9, 2007) at 1 (arguing that SDARS is a
    separate product market because it is a national multichannel audio
    service that users can use anywhere whereas local radio stations
    provided limited signal reach).

[^142]: Elasticity is a measure of how much the sales of a product will
    rise or fall in response to a change in price. The own-price
    elasticity of demand is the percentage change in the quantity
    demanded of good A divided by the percentage change in the price of
    good A. The cross-price elasticity of demand is the percentage
    change in the quantity demanded of good A divided by the percentage
    change in the price of good B.

[^143]: *See* Mar. 24, 2008 DOJ Press Release, n.112, *supra*.

[^144]: In addition to the price of a monthly subscription, subscribers
    listening to XM or Sirius programming in their automobile must also
    obtain a receiver and have it installed. XM and Sirius often
    subsidize the price of the receiver and the price of installation.
    C3SR, Sidak Decl. at 55.

[^145]: We find unpersuasive Sidak's estimated own-price elasticity of
    demand. While Sidak estimates a "critical" own-price elasticity of
    demand for SDARS of -1.52 using current operating margins of 65
    percent and an assumption of constant own-price elasticity of
    demand.  Sidak then explains why the "actual" own-price elasticity
    of demand is less than -1.52 (in absolute terms) using information
    from XM's price increase from \$9.95 to \$12.95, churn rates,
    conversion rates, and marquee content (specifically, indecent
    content).  Sidak concludes that this is evidence that SDARS
    represents a distinct product market.  C3SR, Sidak Decl. at 9-14. 
    Hazlett asserts that there are several deficiencies in Sidak's
    approach and conclusions.  Specifically, Hazlett argues that "there
    is no measurement of the actual, purportedly 'low' elasticity, and
    therefore nothing to specifically compare to the critical
    elasticity."  *See* Thomas W. Hazlett, The Economics of the
    Satellite Radio Merger (June 14, 2007) at 29-32, transmitted by
    Letter, on behalf of Applicants, from Thomas Hazlett, Prof. of Law &
    Econ., George Mason Univ., to Marlene H. Dortch, Secretary, FCC
    (June 14, 2007) ("Hazlett Study").  CRA also disagrees with Sidak's
    estimates and conclusions regarding SDARS own-price elasticity.  CRA
    argues that (1) Sidak's approach does not employ an objective and
    appropriate benchmark for XM's growth in the absence of the price
    increase from \$9.95 to \$12.95; (2) there were numerous other
    changes affecting demand that occurred around the same time as the
    price increase; (3) a finding that XM's demand is inelastic is
    inconsistent with standard profit-maximization conditions; and (4)
    Sidak's analysis was based only on the near-term impact on
    subscribers and profitability, not on the longer-term impact that is
    more relevant in growing market like this one.  Joint Opposition,
    CRA Study at 44-45, n.170.

[^146]: Joint Opposition, CRA Study at 14-16; *also see* Timothy H.
    Savage, Martino De Stefano, and Steven R. Brenner, CRA, *Further
    Analysis of Econometric Evidence that Satellite and Terrestrial
    Radio are Demand Substitutes*, transmitted by Letter from Jennifer
    D. Hindin, Wiley Rein LLP, on behalf of Applicants, to Marlene H.
    Dortch, Secretary, FCC (Jan. 11, 2008) ("Applicants, CRA Further
    Analysis").

[^147]: Sidak points out that this analysis is not measuring the
    cross-price elasticity of demand for SDARS with respect to
    terrestrial radio, but is instead attempting to observe the
    elasticity of demand for SDARS with respect to changes in the number
    of terrestrial radio stations. Third Supplemental Decl. of J.
    Gregory Sidak, transmitted by Letter from Julian L. Shepard,
    Williams Mullen, Counsel for C3SR, to Marlene H. Dortch, Secretary,
    FCC (Oct. 1, 2007) at 21 ("C3SR, Sidak Third Supp. Decl.").

[^148]: *See, e,g*., [Jeffrey Wooldridge]{.smallcaps}, [Intro.
    Econometrics: A Modern Approach]{.smallcaps} 95-99 (3d ed. 2005).
    [Peter Kennedy]{.smallcaps}, [A Guide to Econometrics]{.smallcaps}
    3, 78-80, 88 (4th ed. 1998); [William H. Greene, Econometric
    Analysis]{.smallcaps} 401-04 (3d ed. 1997); and [Jack Johnson and
    John DiNardo]{.smallcaps}, [Econometric Methods]{.smallcaps} 110
    (4th ed. 1997).

[^149]: C3SR, Sidak Third Supp. Decl. at 22; Letter from Julian L.
    Shepard, Williams Mullen, Counsel for C3SR, to Marlene H. Dortch,
    Secretary, FCC, Att. Preliminary Review of CRA Regression Analysis,
    J. Gregory Sidak, Georgetown Univ. Law Center, and Hal J. Singer and
    Allan Ingraham, Criterion Eon. (Dec. 7, 2007) ("C3SR, Review of CRA
    Analysis").

[^150]: Arbitron, "Satellite Radio Channels Account For 3.4 Percent of
    All Radio Listening In Fall 2006 Arbitron Survey" (press release),
    Feb. 27, 2007 (stating that "satellite listeners spent an average of
    33 hours a week with radio compared with the typical listener who
    listened approximately 19 hours a week to radio. Also, people who
    listened to satellite spent more time with AM/FM radio (14 hours)
    than they did with satellite radio (10 hours 45 minutes) or Internet
    (8 hours 15 minutes)"); *see* *also* C3SR, Review of CRA Analysis at
    13.

[^151]: C3SR, Review of CRA Analysis. C3SR asked that we seek the data
    underlying CRA's study.  Letter from Julian L. Shepard, Williams
    Mullen, Counsel for C3SR, to Marcia Glauberman, Deputy Chief,
    Industry Analysis Division, Media Bureau, FCC (Sept. 11, 2007). 
    Because we reject the results of CRA's study based on the
    information submitted by Applicants, we find that access to the
    underlying data is unnecessary.

[^152]: This result is consistent with the *1997 SDARS Service Rules
    Order*, where the Commission predicted that while "not, of course,
    perfect substitutes," the SDARS providers would "face competition
    from terrestrial radio services, CD players in automobiles and
    homes, and audio services delivered as part of cable and satellite
    services." *1997 SDARS Service Rules Order*, 13 FCC Rcd at 5786 ¶¶
    77-78; *see also 2006 Quadrennial Regulatory Review* - *Review of
    the Commission's Broadcast Ownership Rules and Other Rules Adopted
    Pursuant to Section 202 of the Telecommunications Act of 1996*,
    Report and Order and Order on Reconsideration, 23 FCC Rcd 2010,
    2071-72 ¶ 114 (2008) (finding a lack of evidence to conclude that
    terrestrial radio is in the same product market as SDARS).

[^153]: Letter from Benjamin D. Arden, Williams Mullen, Counsel for
    C3SR, to Marlene H. Dortch, Secretary, FCC (Apr. 3, 2008), Att. NRG
    Research Group, Survey of Satellite Radio Users (Feb. 8, 2008) ("NRG
    Survey"); Letter from Julian L. Shepard, Williams Mullen, Counsel
    for C3SR, to Marlene H. Dortch, Secretary, FCC (Apr. 3, 2008), Att.
    Analysis of the Proposed XM-Sirius Merger, J. Gregory Sidak, and Hal
    J. Singer, Criterion Economics at 9-10 ("C3SR, Sidak, Singer
    Analysis").

[^154]: Wilson Research Strategies, Exec. Summary, Survey of Satellite
    Radio Subscribers at
    [http://www.w-r-s.com/press/WRS_NAB%20Sat%20Radio%20Survey_PressRelease_070710.pdf](http://www.w-r-s.com/press/WRS_NAB Sat Radio Survey_PressRelease_070710.pdf)
    (visited June 25, 2008); C3SR Petition, Exh. B, Supplemental Decl.
    of J. Gregory Sidak at 18-19 ("C3SR Petition, Sidak Supp. Decl").

[^155]: In particular, the phrasing of the questions, the order of the
    questions, and the specific distribution of responses are not
    available.

[^156]: C3SR, CRA Study at tbls. C1-C6.

[^157]: *See*, *e.g.,* AAI Comments at 29; C3SR, Sidak Decl. at 28; C3SR
    Petition, Sidak Supp. Decl. at 34; Letter from Philip M Napoli,
    Dir., Donald McGannon Communication Research Center, to Marlene H.
    Dortch, Secretary, FCC, Att. Market Definition in Satellite Radio:
    Why the Sirius/XM Merger Would Result in Anti-Competitive Conditions
    at 3-7 (June 29, 2007) ("McGannon June 29, 2007 Ex Parte"); NAB
    Petition at 11-16; NPR Petition at 15-16; Common Cause Petition at
    14.

[^158]: *See, e.g.,* C3SR Reply at 7-11 (arguing that the geographic
    market is not national due to the differences in the availability of
    substitutes); John Smith Comments at 3-4.

[^159]: 47 U.S.C. § 309(e); *see also Liberty Media-DIRECTV Order*, 23
    FCC Rcd at 3276-77 ¶ 22; *News Corp.-Hughes Order*, 19 FCC Rcd at
    483 n.49; *EchoStar-DIRECTV HDO*, 17 FCC Rcd at 20574 ¶ 25.

[^160]: *See, e.g*., *Comcast-AT&T Order*, 17 FCC Rcd 23256-57, 23270 ¶¶
    30, 66.

[^161]: *See, e.g., DOJ/FTC Horizontal Merger Guidelines* § 3.0 ("A
    merger is not likely to create or enhance market power or to
    facilitate its exercise, if entry into the market is so easy that
    market participants, after the merger, either collectively or
    unilaterally could not profitably maintain a price increase above
    premerger levels. . . . Entry is that easy if entry would be timely,
    likely, and sufficient in its magnitude, character and scope to
    deter or counteract the competitive effects of concern.").

[^162]: The *DOJ/FTC Horizontal Merger Guidelines* require that, for
    such potential entry to be considered, it must be "timely, and
    likely, and sufficient in its magnitude, character and scope to
    deter or counteract the competitive effects" of the proposed
    transaction. With respect to timeliness, DOJ will generally consider
    only entry "that can be achieved within two years from initial
    planning to significant market impact." *Id*. at § 3.0. According to
    NAB, "\[t\]his is extremely unlikely in the case of satellite DARS,
    as evidenced by the fact that it reportedly took XM and Sirius
    nearly four years from the grant of spectrum by the FCC to
    commercial availability, including the technically difficult step of
    launching broadcast satellites." Analysis of Antitrust Concerns
    Regarding the XM/Sirius Merger, Crowell Moring at 8-9, transmitted
    by Letter from Lawrence A. Walke, NAB, to Marlene H. Dortch,
    Secretary, FCC (May 22, 2007) ("NAB, Antitrust Analysis Memo"). NAB
    adds that other entry barriers are extremely high, including capital
    costs, programming acquisition costs, and subscriber acquisition
    costs. *Id.* at 9. For example, NAB states, a new satellite could
    cost more than \$300 million. *Id*. Therefore, NAB concludes, even
    if the Commission were to allocate additional spectrum to permit
    entry by a new SDARS provider, the threat of such entry is not
    likely to constrain short-term price increases by the merged firm
    and would not be sufficient to ameliorate the certain
    anticompetitive effects of the proposed transaction. *Id*.

    The Sidak Declaration also argues "the experience of the existing
    SDARS suppliers implies that new entry would not impose any price
    discipline within the next two years. Applicants were founded in the
    early 1990s, but did not offer SDARS until September 2001. Both XM
    and Sirius had to overcome significant fixed costs of establishing a
    nationwide radio network, including the acquisition of spectrum and
    programming." C3SR, Sidak Decl. at 35-36. Sidak notes that
    Applicants have each invested roughly \$5 billion to date and that
    such an entry cost for another SDARS provider makes it extremely
    unlikely that any firm will enter *de novo* in SDARS and have a
    constraining effect on price over the next two years. C3SR Petition,
    Sidak Supp. Decl. at 30-31.

    In contrast, CRA argues that *de novo* entry could occur through the
    use of Mobile Satellite Service frequency bands in 2008 or 2009 or
    through the use of Wireless Communication Service spectrum in more
    than two years. Joint Opposition, CRA Study at 61.

[^163]: An "uncommitted entrant" is a firm that is likely to enter the
    market "within one year and without the expenditure of significant
    sunk costs of entry and exit, in response to a 'small but
    significant and nontransitory' price increase." *See* *DOJ/FTC
    Horizontal Merger Guidelines* at § 1.32*.*

[^164]: The HHI is calculated as the sum of the squares of the market
    shares of each firm participating in a relevant market. The HHI can
    range from nearly zero in the case of an atomistic market to 10,000
    in the case of a pure monopoly. Because the HHI is based on the
    squares of the market shares of the participants, it gives
    proportionately greater weight to carriers with larger market
    shares. Changes in market concentration are measured by the change
    in the HHI. *See id.* § 1.5.

[^165]: The predicted change in HHI is based on 2007 year end SDARS
    market shares of 52 percent for XM and 48 percent for Sirius. XM,
    *XM Satellite Radio Holdings Inc. Announces Fourth Quarter and Full
    Year 2007 Results* (press release), Feb. 28, 2008; Sirius, *Sirius
    Reports Fourth Quarter and Full Year 2007 Results* (press release),
    Feb. 26, 2008.

[^166]: Section 1.51 of the *DOJ/FTC Horizontal Merger Guidelines*
    specifies that mergers that produce a post-merger HHI above 1800 and
    an increase in the HHI of greater than 100 points will be presumed
    to have an anticompetitive effect.

[^167]: [Dennis W. Carlton and Jeffrey M. Perloff]{.smallcaps}, MOD.
    INDUS. ORG. 56-120, 153-235 (3d. ed. 2000) ("Carlton & Perloff").

[^168]: *See, e.g.,* Gregory J. Werden, *Simulating the Effects of
    Differentiated Products Mergers: A Practical Alternative to
    Structural Merger Policy,* 5 [Geo. Mason L. Rev. 363
    (1997);]{.smallcaps} Roy J. Epstein & Daniel L. Rubinfeld, *Merger
    Simulation: A Simplified Approach with New Applications,* 69
    [Antitrust. L. J. 883 (2002).]{.smallcaps}

[^169]: *See* Section V, *infra*.

[^170]: Joint Opposition at 31-32.

[^171]: Joint Opposition, CRA Study at 61-63, App. A.

[^172]: *Id*.

[^173]: CRA asserts that when SDARS is mature, the market will be
    subject to intense competition from audio content over mobile
    broadband access technologies, more robust and widespread cellular
    networks, and other technological advances that will prevent the
    merged firm from exercising market power. *Id.* at 27-30, 63. In
    response, Sidak contends that claims about future constraints on the
    market power of XM and Sirius are speculative and call for an
    unusually long time horizon for assessing market power. C3SR
    Response, Exh. A, Second Supp. Decl. of J. Gregory Sidak at 19-22
    (July 24, 2007) ("C3SR, Sidak Second Supp. Decl.").

[^174]: *See* Sections VI.B.1 and VI.B.2., *infra*.

[^175]: *See, e.g.*, C3SR Petition at 25-28; NAB Petition at 3, 6; NABOB
    Petition at 5-6; Clear Channel Comments at 4-6; Entravision Comments
    at 6-8.

[^176]: *See* 47 U.S.C. § 309(e).

[^177]: *See* Section IV.B.1.a., *supra*.

[^178]: Applicants' June 13, 2008 Ex Parte at 4.

[^179]: *Id*. at 3-4.

[^180]: *Id*. at 3. According to Applicants, a qualified entity
    "includes any entity that is majority-owned by persons who are
    African American, not of Hispanic origin; Asian or Pacific
    Islanders; American Indians or Alaskan Natives; or Hispanics." *Id*.
    at n.2.

[^181]: McGannon June 29, 2007 Ex Parte at 3-4; Bert W. King ("King")
    Comments at ¶ 57; *see also* Letter from Lawrence A. Walke, NAB, to
    Marlene H. Dortch, Secretary, FCC (June 19, 2008) at 1 & Atts.
    (stating that content providers will lose negotiating leverage if
    the merger is approved).

[^182]: For a general discussion of monopsony power, see Carlton &
    Perloff, *supra* n.167, at 105-07.

[^183]: However, our current assumption that this is a merger to
    monopoly does not preclude future competition to SDARS by a new or
    nascent technology.

[^184]: The question of who benefits more from a bargain is merely a
    transfer between the two bargaining parties, not a detriment to
    efficiency that results in a societal cost. Efficiency concerns
    arise only once an entity with market power can restrict supply and
    thus change the market price from the most efficient level.

[^185]: King Comments at ¶ 57; *see also* Sirius Nov. 16, 2007 Response
    to Information and Document Request at SIRIUS-FCC-I.B.001647-001657
    **\[REDACTED\]**.

    In this Order, "REDACTED" indicates that confidential or proprietary
    information that is subject to a Protective Order in this proceeding
    has been redacted from the public version of this Order. The
    unredacted text is included in the confidential version of this
    Order, which is available upon request only to those parties who
    have executed and filed with the Commission signed acknowledgments
    of the protective orders. Qualified persons who have not yet signed
    the required acknowledgments may do so in order to obtain the
    confidential version of this Order.

[^186]: Letter from Charles H. Helein, Counsel for USE, to Robert M.
    McDowell, Commissioner, FCC (Jan. 15, 2008) at 1 ("USE Jan. 15, 2008
    Ex Parte"); *see also* Letter from Robert E. Cooper, Jr., Att'y Gen.
    of Tennessee, on behalf of Att'y Gens. of Connecticut, Iowa, Kansas,
    Louisiana, Maryland, Mississippi, Missouri, Nebraska, Ohio,
    Oklahoma, Rhode Island, Washington, and Wisconsin, to Marlene H.
    Dortch, Secretary, FCC (July 3, 2008) at 3 ("Tenn. Att'y Gen. July
    3, 2008 Ex Parte").

[^187]: USE Jan. 15, 2008 Ex Parte at 3. USE also claims that the merged
    entity's additional hard-to-detect harms to consumers could include
    reduced equipment quality, lower quality of customer service, and
    slower innovation cycles. *Id.*

[^188]: *See* USE Reply at 8 (quoting approvingly Public Knowledge's
    description of the open-device condition).

[^189]: *See Use of the Carterfone Device in Message Toll Telephone
    Service*, 13 FCC 2d 420 (1968).

[^190]: USE Jan. 15, 2008 Ex Parte at 2 (stating that the Commission
    determined that the winners of the six C Block licenses would not be
    permitted to restrict subscribers to using only those devices that
    the licensees provide).

[^191]: Letter from Parul P. Desai, Andrew Jay Schwartzman, MAP, and
    Michael Calabrese, New America Foundation, to Marlene H. Dortch,
    Secretary, FCC (Jan. 29, 2008) at 1. In addition to *Carterfone*,
    MAP mentions the Commission's 2005 cable set-top box leasing order
    as an example of Commission decisions following open access
    principles. *Id*. at 2.

[^192]: Consolidated Opposition of Sirius and XM to USE and NAB (Dec.
    26, 2007) at 2 ("Consolidated Opposition"). Applicants state that
    USE is a former Sirius licensed manufacturer whose contract expired.
    *Id*. at 3. Applicants explain that Sirius opted not to continue the
    relationship because the parties had "incompatible business
    philosophies" and, at the time of the contract's expiration, "were
    in arbitration covering almost every aspect of the parties'
    relationship." *Id*.

[^193]: Consolidated Opposition at 4 ("This market intrusion would
    undoubtedly benefit USE -- and essentially derail USE's arbitration
    with Sirius -- but it is difficult to see how it would benefit
    consumers or, in fact, make it easier for the Commission to conclude
    the WCS/Satellite Radio Terrestrial Repeater rulemaking").

[^194]: *Id*.

[^195]: *Id*.

[^196]: *Id*. at 5 (citing radio suppliers as including Delphi, Pioneer,
    Samsung, Alpine, Audiovox, Sony, Polk, Rotel, Kenwood, Clarion, and
    Visteon).

[^197]: USE Reply at 1-2.

[^198]: *I**d*. at 3. USE states that Directed Electronics, Inc. ("DEI")
    recently reported to analysts that it held 95 percent of Sirius's
    aftermarket sales in the third quarter and 62 percent of market
    share for retail satellite radio receivers. *Id*. at 2-3. With
    regard to the radio manufacturers listed by Applicants, USE states
    that Applicants have pointed to historical manufacturers and their
    historical account does not describe the market today. *Id*. at 3.

[^199]: *Id*. at 4. Applicants also argue that USE lacks standing
    because it did not file a petition to deny the merger application in
    a timely manner. Consolidated Opposition at 1. To the extent USE
    failed to timely file a petition to deny, we will treat USE's
    comments as an informal objection and address them here*. See* 47
    C.F.R. § 1.41; *Pacific Gas and Electric Company*, Memorandum
    Opinion and Order, 18 FCC Rcd 22761, 22765-66 n.47 (2003); *see also
    Nextel License Holdings 4, Inc.*, Order, 17 FCC Rcd 7028, 7033 ¶ 16
    (2002) (noting that there is no standing requirement to file an
    informal objection).

[^200]: *See, e.g.,* Sirius Mar. 4, 2008 Response to Information Request
    at SIRIUS-FCC-SUPP.000217-00018, SIRIUS-FCC-SUPP.000513-000559;
    SIRIUS-FCC-SUPP.000631-000700; XM Mar. 3, 2008 Response to
    Information Request at XM-S-0000001-0000053, XM-S-00000054-0000138,
    XM-S-0000139-0000208; XM Mar. 18, 2008 Response to Information
    Request at XM-S-001875-001928.

[^201]: *See generally* Letters from M. Anne Swanson, Dow Lohnes,
    Counsel for Garmin, to Marlene H. Dortch, Secretary, FCC (Apr. 26,
    2007 and Apr. 27, 2007).

[^202]: *Id*.

[^203]: *Id*.

[^204]: *See, e.g., News Corp.-Hughes Order*, 19 FCC Rcd at 583, 585 ¶¶
    245, 248 (finding that speculative harms "do not provide a basis for
    either denying their Application or for imposing regulatory
    conditions"); *Comcast-AT&T Order*, 17 FCC Rcd at 23308 ¶ 160.

[^205]: *See* Joint Opposition at 22-23 ("the combined company will have
    every incentive to maintain and improve upon these offerings without
    any need for Commission action.").

[^206]: In addition, we decline to intercede here in distribution
    negotiations between Applicants and RCN Corp., who urges the
    Commission to require Applicants to make assurances that SDARS
    programming will continue to be made available to RCN. *See* Letter
    from Richard Ramlall, Senior Vice Pres., Strategic & External
    Affairs and Programming, RCN Corp., to Kevin J. Martin, Chairman,
    FCC (July 17, 2008) at 2-3.

[^207]: NAB Petition at 30-32; AAI Comments at 8, 12-15; Entravision
    Comments at 17-18; Prometheus Comments at 4-5; RIAA Comments at 7;
    John Smith Comments at 2, 4; Clear Channel Comments at 7; Letter
    from Michael L. Barrera, President and CEO, United States Hispanic
    Chamber of Commerce to Thomas Barnett, Asst. Att'y Gen, Antitrust
    Div., DOJ and Kevin J. Martin, Chairman, FCC (Aug. 28, 2007) at 2-3
    ("USHCC Aug. 28, 2008 Ex Parte").

[^208]: AAI Comments at 12-13; Independent Spanish Broadcasters Assoc.
    ("ISBA") Comments at 1-2.

[^209]: NAB Petition at 31-32; Prometheus Comments at 4-5; RIAA Comments
    at 7. This argument also is addressed in part in Section IV.B.2,
    *supra*.

[^210]: AAI Comments at 14-15; Entravision Comments at 18; NABOB
    Petition at 11, 12-13; NPR Petition at 3-7; TAP Petition at 3-4.

[^211]: AWRT Petition at 5-6; NABOB Petition at 9-12; TAP Petition at 4;
    ISBA Comments at 1-2; USHCC Aug. 28, 2007 Ex Parte at 2-3.

[^212]: AWRT Petition at 5-6.

[^213]: Application at 12-13; Public Knowledge Comments at 4; CEI
    Comments at 3-4.

[^214]: Application at 12-13; Joint Opposition at 19-21.

[^215]: Application at 12-14.

[^216]: *Id.* (stating that the freed-up capacity could be used for
    expanded non-English language programming, children's programming,
    minority-oriented programming, and programming related to public
    safety and homeland security).

[^217]: Joint Opposition at 19-21; *see also* Women Impacting Public
    Policy ("WIPP") Comments at 1 (asserting that a merger would offer
    more opportunities for women and minority programmers).

[^218]: Public Knowledge Comments at 4.

[^219]: *See* Sections VI.B.5, VI.B.6, *infra*.

[^220]: NAB Petition at 33.

[^221]: *Id*. at 33.

[^222]: 46 Broadcasters Petition at 5.

[^223]: NAB Response to Comments, Wildman Decl. at ¶ 12.

[^224]: *Id*. at ¶ 28. Wildman explains that currently, due to a lack of
    significant amount of commercials on satellite radio, "local radio
    stations remain the primary audio services through which advertisers
    can reach SDARS subscribers." For this reason, Wildman suggests,
    increased SDARS subscriber counts have not had as large an impact on
    terrestrial radio's revenues as one might otherwise predict." *Id*.

[^225]: *Id*. at ¶ 26. C3SR cites to a comment of Mel Karmazin made
    during an interview on Forbes.com: "\[Sirius\] would like to see
    advertising revenue eventually make up about 10% of Sirius' total
    revenue, up from the current 4% to 5%." C3SR Oct. 3, 2007 Ex Parte,
    Att. Mr. Karmazin's statement provides insufficient evidence to
    conclude that the merged entity has immediate plans to increase
    commercial time during programming to the detriment of broadcasters.

[^226]: *See* NAB Response to Comments, Wildman Decl. at ¶¶ 18, 23-24.

[^227]: C3SR submits a presentation, which includes the calculation
    "Profitability of an Increase in Commercial Time" to show whether it
    would be advantageous for the merged entity to increase commercial
    time. Letter from Benjamin D. Arden, Williams Mullen, Counsel for
    C3SR, to Marlene H. Dortch, Secretary, FCC (Oct. 3, 2007), Att.,
    "Analysis of the CRA Submission" ("C3SR Oct. 3, 2007 Ex Parte").
    However, we note that C3SR's computation only restates the
    above-referenced economic assumption: if the increased revenue from
    additional commercials is greater than the revenue declines due to
    subscription losses, then the merged entity would consider adding
    additional commercial time. There are no additional variables
    included in the calculation to make any conclusions as to
    Applicants' course of action or whether increasing commercial time
    during programming would be economically advantageous.

[^228]: Application at 22, n.51 (citing Phil Rosenthal, *Satellite deal
    foes don't hear message*, [Chicago Tribune]{.smallcaps} (Feb. 28,
    2007) (summarizing an Arbitron study that found satellite radio
    accounted for 3.4 percent of radio listening)); see also The Katz
    Radio Group, *Satellite Radio Penetration*, [Radiowaves]{.smallcaps}
    (Dec. 2006) *at*
    <http://www.katz-media.com/pubs/RadioWaves/121206/RadioWavesDEC2006.pdf>
    (finding that satellite radio constituted 4.1 percent of the market)
    (visited June 19, 2008).

[^229]: For a related discussion concerning the prohibition on the
    insertion of local content on terrestrial repeaters, see Section
    VI.C.2, *infra*.

[^230]: For instance, we consider "any efficiencies and other benefits
    that might be gained through increased ownership or control."
    Communications Act § 613(F)(2)(D), 47 U.S.C. § 533(f)(2)(D).

[^231]: *Liberty Media-DIRECTV Order,* 23 FCC Rcd at 3330-31 ¶ 140;
    *News Corp.-Hughes Order*, 19 FCC Rcd at 610 ¶ 317;
    *EchoStar-DIRECTV HDO*, 17 FCC Rcd at 20630 ¶ 189-90; *Applications
    of NYNEX Corp., Transferor, and Bell Atlantic Corp., Transferee, For
    Consent to Transfer Control of NYNEX Corp. and its Subsidiaries*, 12
    FCC Rcd 19985, 20064 ("*Bell Atlantic-NYNEX Order*") (1997);
    *SBC-Ameritech Order*, 12 FCC Rcd at 20064 ¶ 158; *Comcast-AT&T
    Order*, 17 FCC Rcd at 23313 ¶ 173.

[^232]: *Liberty Media-DIRECTV Order,* 23 FCC Rcd at 3331 ¶ 140; *News
    Corp.-Hughes Order,* 19 FCC Rcd at 610 ¶ 317; *EchoStar-DIRECTV
    HDO*, 17 FCC Rcd at 20630 ¶ 190; *Comcast-AT&T Order*, 17 FCC Rcd at
    23313 ¶ 173*;* *see also 1992 Horizontal Merger Guidelines* § 4
    (Rev. 1997).

[^233]: *Liberty Media-DIRECTV Order,* 23 FCC Rcd at 3331 ¶ 140; *News
    Corp.-Hughes Order,* 19 FCC Rcd at 611 ¶ 317; *EchoStar-DIRECTV
    HDO*, 17 FCC Rcd at 20630 ¶ 190.

[^234]: *Liberty Media-DIRECTV Order,* 23 FCC Rcd at 3331 ¶ 140; *News
    Corp.-Hughes Order*, 19 FCC Rcd at 610-11 ¶ 317; *EchoStar-DIRECTV
    HDO,* 17 FCC Rcd at 20630 ¶ 190.

[^235]: *Liberty Media-DIRECTV Order,* 23 FCC Rcd at 3331 ¶ 140;
    *Applications of Western Wireless Corp. and ALLTEL Corp. for Consent
    to Transfer Control of Licenses and Authorizations*, 20 FCC Rcd
    13053, 13100 ¶ 132 (2005) ("*ALLTEL-WWC Order*").

[^236]: *Liberty Media-DIRECTV Order,* 23 FCC Rcd at 3331 ¶ 141; *News
    Corp.-Hughes Order*, 19 FCC Rcd at 611 ¶ 318; *EchoStar-DIRECTV
    HDO*, 17 FCC Rcd at 20631 ¶ 192 (citing *SBC*-*Ameritech Order*, 14
    FCC Rcd at 14825 ¶ 256).

[^237]: *Liberty Media-DIRECTV Order,* 23 FCC Rcd at 3331 ¶ 141; *AT&T
    Inc., and BellSouth Corp., Application for Transfer of Control*, 22
    FCC Rcd 5662, 5761-62 ¶ 203 (2007) ("*AT&T-Bell South Order*").

[^238]: Application at 10.

[^239]: *Id*. at 10-12.

[^240]: *Id*. at 12-14.

[^241]: *Id.* at 14-15.

[^242]: *Id*. at 15-16.

[^243]: *Id*. at 17-20.

[^244]: Applicants assert this increased program diversity on satellite
    radio may even stimulate more diverse programming on terrestrial
    radio. *Id*. at 13 n.32.

[^245]: *Id*. at 13.

[^246]: *See* Applicants' June 13, 2008 Ex Parte at 1-3. Applicants have
    voluntarily committed to provide these programming options, "subject
    to individual channel changes in the ordinary course of business
    and, in the case of certain programming, the consent of third-party
    programming providers." *Id.* at 3.

[^247]: *Id*. at 1-3.

[^248]: Joint Opposition at 12, 14. RIAA raised concerns about the
    impact of the transaction on the recording industry. Letter from
    Victoria F. Sheckler, Deputy Gen. Counsel, RIAA, to Marlene H.
    Dortch, Secretary, FCC (July 23, 2008). In response, Applicants
    state that the "a la carte and other programming proposals were not
    intended, and are not anticipated, to reduce revenue from copyright
    royalty payments." Instead, they explain that the programming
    packages "were designed to provide more choice and lower prices and
    hopefully increase revenue, which should have a positive effect on
    copyright royalty payments to artists and record companies."
    Applicants' July 25, 2008 Ex Parte at 2.

[^249]: WIPP Comments at 1-3.

[^250]: C3SR Reply at 17-18. C3SR also claims that subscribers will need
    a new receiver to have the option to choose smaller bundled packages
    with channels from both services. C3SR Reply at 17. Applicants
    specifically state that this is not a requirement. Joint Opposition
    at 12.

[^251]: NATOA Petition at 4.

[^252]: Applicants' Supp. Comments at 9.

[^253]: *Id*.

[^254]: Joint Opposition at 16 (citing C3SR Petition, CRA Study at 83).

[^255]: *Id.*

[^256]: KEI Reply at 2-3.

[^257]: Applicants' July 25, 2008 Ex Parte at 2; see discussion in
    Section VI.B.3, *infra*.

[^258]: Applicants' June 13, 2008 Ex Parte at 5; see discussion in
    Section VI.B.1, *infra*.

[^259]: *Adelphia Order*, 21 FCC Rcd 8307 ¶ 243 (2006)
    ("\[E\]fficiencies created by a proposed transaction can mitigate
    anticompetitive harms if they enhance a firm's ability and incentive
    to compete and therefore result in lower prices, improved quality,
    enhanced service, or new products.); *News Corp.-Hughes Order,* 19
    FCC Rcd at 610 ¶ 316; *Bell Atlantic-NYNEX Order*, 12 FCC Rcd at
    20063 ¶ 158; *Sprint-Nextel Order*, 20 FCC Rcd at 14013 ¶ 129; *see
    also* *Horizontal Merger Guidelines* § 4.

[^260]: Even if we were to consider the "best of both" package as being
    a price increase, a number of the other proposed packages are priced
    lower than Applicants' current offerings.

[^261]: Sirius Nov. 16, 2007 Response to Information and Document
    Request, Narrative at 61.

[^262]: King Comments at ¶¶ 77-78; Smith Comments at 8-11; NAB Response
    to Comments at 22-25; Letter from David K. Rehr, NAB, to Kevin J.
    Martin, Chairman, FCC (July 25, 2007) at 3-4; KEI Reply at 2-3.

[^263]: *Adelphia Order*, 21 FCC Rcd at 8314 ¶ 261.

[^264]: *See, e.g.,* XMH-008-00002391, XMH-001-00004380, and
    XME-009-00046821 **\[REDACTED\]**.

[^265]: Applicants' June 13, 2008 Ex Parte at 1-3. Applicants have
    voluntarily committed to provide these programming options, "subject
    to individual channel changes in the ordinary course of business
    and, in the case of certain programming, the consent of third-party
    programming providers." *Id.* at 3.

[^266]: NATOA asserts that consumers will receive fewer channels under
    the a la carte option while paying essentially the same \$12.95
    price as that charged for the regular XM or Sirius package. NATOA
    Petition at 4. Similarly, Common Cause argues that the opt-out
    system proposed by XM and Sirius may not save consumers money,
    depending on how channels are valued. Common Cause Petition at 44.
    *See also* NPR Petition at 18-19; NAB Reply to Opposition at 8-9.

[^267]: CS3R Reply at 17; *see also* NAB Petition at 20-21 (arguing that
    a la carte would require the manufacture and sale of next generation
    receivers).

[^268]: CS3R Reply at 17.

[^269]: Applicants' Supp. Comments at 8.

[^270]: *Id*.

[^271]: *Id*. at 8-9.

[^272]: Media Bureau, *Further Report On the Packaging and Sale of Video
    Programming Services To the Public* (Med. Bur., Feb. 9, 2006 ) at 5
    ("*Further Report on Video Programming*"), *available at*
    <http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-263740A1.pdf>.

[^273]: *Further Report on Video Programming* at 35-36.

[^274]: C3SR Reply at 17.

[^275]: NAB Petition at 37-38; NPR Petition at 19; Common Cause Petition
    at 42-43; CFA Supp. Comments at 4; C3SR Reply at 17-21, 23.

[^276]: NAB Reply to Opposition 8; C3SR Reply at 17-21, 23-24.

[^277]: NAB Petition at 37-39; NPR Petition at 19; Common Cause Petition
    at 42-43; CFA Supp. Comments at 4; C3SR Reply at 17-21.

[^278]: Applicants' July 25, 2008 Ex Parte at 2; see discussion in
    Section VI.B.3, *infra*.

[^279]: Applicants' June 13, 2008 Ex Parte at 5; see discussion in
    Section VI.B.1, *infra*.

[^280]: C3SR Comments at 34-35; NABOB Petition at 6-7; NPR Petition at
    18-19; AAI Comments at 10-12; Clear Channel Comments at 6; Common
    Cause Petition at 44; Entravision July 9, 2007 Comments at 17; King
    Comments at ¶ 78; Smith Comments at 8-11; King Reply at ¶ 24; NAB
    Response to Comments at 22-25.

[^281]: Joint Opposition at 17.

[^282]: *Id*. As noted in Section V.B.1.a., above, evidence in the
    record indicates that **\[REDACTED\]**. *See* section V.B.1.a,
    *supra*. **\[REDACTED\]**

[^283]: Application at 14-15.

[^284]: *Id*. at 15.

[^285]: NAB Petition at 42-43 (stating "nothing currently prevents the
    companies from working together to develop 'common engineering
    standards and protocols'" (citing Application at 15)); *see also*
    AAI Comments at 15 (stating that there is "no indication why such
    benefits 'would not be possible absent the proposed transaction.'"
    (citing Application at 14-15)).

[^286]: *See* Application at 14-15; Joint Opposition at 22-23, nn.62-63
    (stating that both companies currently offer integrated traffic and
    navigation systems for automobiles and that Sirius and Chrysler
    Group announced the launch of SIRIUS Backseat TV™).

[^287]: *See* Sirius Nov. 16, 2007 Response to Information and Document
    Request IV.A-B at SIRIUS-FCC-IV.000005 and SIRIUS-FCC-IV.000087.

[^288]: Application at 15-16.

[^289]: *Id*. at 16.

[^290]: *See* 47 C.F.R. § 25.144(a)(3)(ii). For a detailed discussion of
    Applicants' existing interoperable radio obligations, *see* Section
    VI.B.3, *infra*.

[^291]: *1997 SDARS Service Rules Order*, 12 FCC Rcd at 5796 ¶ 105.

[^292]: *See* Section VI.B.3, *infra*.

[^293]: Application at 17-20. See also Sirius Nov. 16, 2007 Response to
    Information and Document Request IV at SIRIUS-FCC-IV.000012-000076,
    for a more detailed description of the claimed savings.

[^294]: Application at 18-19.

[^295]: NAB Petition at 45-46 (claiming that the reduction in
    operational expenses relating to maintaining "distinct broadcast
    operations infrastructure to facilitate the scheduling, storage,
    compression, transmission, and uplink of programming and content to
    Applicants' satellites and terrestrial repeater networks" may not be
    merger specific because it is not clear whether these savings could
    not be obtained through other means. (citing Application at 17)).
    *See* Sirius Nov. 16, 2007 Response to Information and Document
    Request IV.A-B at SIRIUS-FCC-IV.000048-000049 **\[REDACTED\]**.

[^296]: Application at 17-18. *See also, e.g.*, Sirius Nov. 16, 2007
    Response to Information and Document Request IV at
    SIRIUS-FCC-IV.000026-000048. **\[REDACTED\]**.

[^297]: Most of the claimed efficiencies that might have been obtainable
    by other means would also be discounted in our analysis inasmuch as
    they would not be realized within several years of closing or the
    claimed savings would relate to a reduction in fixed costs, rather
    than variable costs.

[^298]: Mar. 24, 2008 DOJ Press Release at 4 ("It was not possible to
    estimate the magnitude of the efficiencies with precision due to the
    lack of evidentiary support provided by XM and Sirius, and many of
    the efficiencies claimed by the parties . . . were not likely to be
    realized within the next several years.").

[^299]: *See* Sirius Nov. 16, 2007 Response to Information and Document
    Request IV.A-B at SIRIUS-FCC-IV.000006-000007.

[^300]: Joint Opposition at 26-29. See Sirius Nov. 16, 2007 Response to
    Information and Document Request IVA-B at
    SIRIUS-FCC-IV.000012-000076 for a description of the claimed
    savings.

[^301]: *See* *also* Sirius Nov. 16, 2007 Response to Information and
    Document Request IVA-B at SIRIUS-FCC-IV.000018-000019.

[^302]: See Sirius Nov. 16, 2007 Response to Information and Document
    Request IVA-B at SIRIUS-FCC-IV.000086-000087 **\[REDACTED\]**. *See
    also* XM Nov. 16, 2007 Response to Information and Document Request
    IVA-B, Narrative at 25-26 (noting that XM anticipates that
    **\[REDACTED\]** million XM single-platform devices will be factory
    installed in vehicles sold for the period **\[REDACTED\]**, and are
    likely to remain in widespread use for **\[REDACTED\]**. XM also
    states that the combined company "will need to broadcast a full
    complement of programming to both the XM and Sirius platforms for
    many years, including the useful life of the XM satellite
    constellation." *Id*. at 25).

[^303]: *See* Sirius Nov. 16, 2007 Response to Information and Document
    Request IV.A-B at SIRIUS-FCC-IV.000049-000054, **\[REDACTED\]**.

[^304]: *See* Sirius Nov. 16, 2007 Response to Information and Document
    Request IV.A-B at SIRIUS-FCC-IV.0000005-000008,
    SIRIUS-FCC-IV.000012-000076 for a summary of efficiencies and
    estimated timing. For example, **\[REDACTED\]**.

[^305]: NAB Petition at 45.

[^306]: Joint Opposition at 27. *See also* Sirius Nov. 16, 2007 Response
    to Information and Document Request IV.A-B at
    SIRIUS-FCC-IV.000016-000026, for an analysis of savings that can be
    realized from the elimination of duplicative programming-related
    expenses and through economies of scale in content acquisition.

[^307]: *See* Sirius Nov. 16, 2007 Response to Information and Document
    Request IV.A-B at SIRIUS-FCC-IV.000023-000026, and
    SIRIUS-FCC-I.B.001647-001657, XM-I-B-3-00000734, and
    XM-I-B-3-00003738-00003743. **\[REDACTED\]**.

[^308]: NAB Petition at 45, 46, 47.

[^309]: *See* Sirius Nov. 16, 2007 Response to Information and Document
    Request IV.A-B at SIRIUS-FCC-IV.000016. **\[REDACTED\]**.

[^310]: *See* Sirius Nov. 16, 2007 Response to Information and Document
    Request IV.A-B at SIRIUS-FCC-IV.000007, SIRIUS-FCC-IV.000016, and
    SIRIUS-FCC-IV.000060-.000061.

[^311]: *See* 47 U.S.C. §§ 309(a), (d); 310(d).

[^312]: *See SBC-AT&T Order,* 20 FCC Rcd at 18300 ¶ 16; *Verizon-MCI
    Order,* 20 FCC Rcd at 18443 ¶ 16; *Sprint-Nextel Order,* 20 FCC Rcd
    at 13976 ¶ 20; *News Corp.-Hughes Order*, 19 FCC Rcd at 483 ¶ 15;
    *Comcast-AT&T Order*, 17 FCC Rcd at 23255 ¶ 26; *EchoStar-DIRECTV
    HDO*, 17 FCC Rcd at 20574 ¶ 25. See Section VII.A., *infra*, for
    discussion of the applicable language in the Commission's *1997
    SDARS Service Rules Order*, prohibiting the transfer of control of
    one SDARS licensee to the other SDARS licensee. As discussed below,
    the Commission finds that the prohibition set forth in paragraph 170
    of the *1997 SDARS Service Rules Order* is a binding substantive
    rule, and that it is in the public interest to repeal the rule
    prohibiting the merger.

[^313]: *See SBC-AT&T Order*, 20 FCC Rcd at 18300 ¶ 16; *Verizon-MCI
    Order*, 20 FCC Rcd at 18443 ¶ 16; *Sprint-Nextel Order*, 20 FCC Rcd
    at 13976-77 ¶ 20; *News Corp.-Hughes Order*, 19 FCC Rcd at 483 ¶ 15;
    *Comcast-AT&T* *Order*, 17 FCC Rcd at 23225 ¶ 26; *EchoStar-DIRECTV
    HDO*, 17 FCC Rcd at 20574 ¶ 25.

[^314]: Clear Channel suggests that Applicants' voluntary commitments
    are not enforceable. Letter from Lawrence R. Sidman, Paul Hastings,
    Counsel for Clear Channel, to Marlene H. Dortch, Secretary, FCC
    (June 20, 2008) at 2. We disagree. As we state herein, grant of the
    Application is conditioned on the merged entity's fulfillment of
    Applicants' voluntary commitments and other conditions. Therefore,
    the merged entity's compliance with the voluntary commitments is an
    enforceable condition.

[^315]: Applicants dispute a narrow product market definition, arguing
    instead that satellite radio faces many competitive alternatives.
    Application at 20-48. We do not have sufficient evidence in the
    record to conclude definitively that this is the case. *See* Section
    IV.B.1.a, *supra*.

[^316]: *See* Application at 10-12. See Section IV.B, *supra*, for
    further discussion.

[^317]: NAB Petition at 26-29; *see also* NAB Response to Comments at
    17-20.

[^318]: *See, e.g.*, C3SR Petition at 13-20.

[^319]: Common Cause Petition at 14-39.

[^320]: *See generally* KEI Reply.

[^321]: AAI Comments at 16-29.

[^322]: Applicants' June 13, 2008 Ex Parte at 5.

[^323]: *See* Sections V.B.1.a-b, *supra*.

[^324]: Applicants' June 13, 2008 Ex Parte at 5.

[^325]: *Id*. *See* Tenn. Att'y Gen. July 3, 2008 Ex Parte at 3.

[^326]: *Id.*; *see* Letter from U.S. Sens. John F. Kerry, Benjamin
    Cardin, and Claire McCaskill, to Kevin J. Martin, Chairman, FCC
    (June 27, 2008) at 2 (recommending that the Commission impose
    requirements to make pricing transparent and verifiable) ("Sens.
    Kerry, Cardin, and McCaskill June 27, 2008 Ex Parte"); Tenn. Att'y
    Gen. July 3, 2008 Ex Parte at 3 (stating that the Commission should
    not endorse Applicants' proposed methods of disclosing rate
    increases because it could be viewed as a preemption of states'
    existing consumer protection laws).

[^327]: *See, e.g*., Letter from Gigi B. Sohn, Pres., Public Knowledge,
    to Marlene H. Dortch, Secretary, FCC (June 18, 2008) ("Public
    Knowledge June 18, 2008 Ex Parte"); Letter from U.S. Rep. Edward J.
    Markey, Chairman, House Subcommittee on Telecommunications and the
    Internet, to Kevin J. Martin, Chairman, FCC (July 15, 2008) at 2
    (recommending that the Commission adopt a six-year price freeze)
    ("Rep. Markey July 15, 2008 Ex Parte").

[^328]: *Cf. Cable Television Consumer Protection and Competition Act of
    1992: Development of Competition and Diversity in Video Programming
    Distribution: Section 628(c)(5) of the Communications Act: Sunset of
    Exclusive Contract Prohibition, Review of the Commission's Program
    Access Rules and Examination of Programming Tying Arrangements*,
    Report and Order and Notice of Proposed Rulemaking, 22 FCC Rcd
    17791, 17795-96 ¶ 5 (2007); *see also Adelphia Order*, 21 FCC Rcd at
    8276 ¶ 164; *News Corp.-Hughes Order*, 19 FCC Rcd at 555, 576 ¶¶
    179, 227. Although it is not part of Applicants' voluntary
    commitment, we are conditioning our approval of the merger on the
    Commission's ability to modify or extend the price cap beyond three
    years. We also are conditioning our approval of the transaction on
    the merged entity's continuing adherence to the other commitments
    and conditions, as specified herein, which continue indefinitely.

[^329]: Comments received as part of the rulemaking regarding HD Radio
    technology will help inform our decision regarding the level of
    competition in the radio market and the continuing need for a price
    cap. *See* Section VI.B.4, *infra*.

[^330]: CEI Comments at 13.

[^331]: *Id.* at 6-8, 15.

[^332]: Common Cause Petition at 46-48.

[^333]: AAI Comments at 29-30.

[^334]: NAB Response to Comments at 25-28.

[^335]: *See, e.g.,* Sirius Mar. 4, 2008 Response to Information and
    Document Request at SIRIUS-FCC-SUPP.000214-000216,
    SIRIUS-FCC-SUPP.000311, and SIRIUS-FCC-SUPP.000393; XM Mar. 3, 2008
    Response to Information and Document Request at XM-S-0000140-0000158
    and XM-S-0000869.

[^336]: We reject NPR's proposed condition to place the merged entity
    under Title II common carrier regulation. NPR Petition at 21-22.
    Applicants' voluntary commitments that we accept in this Order
    ameliorate the potential harms of this merger adequately, at a much
    lower cost and with less intrusiveness into the market.

[^337]: NAB Petition at 37-38; NPR Comments at 19; Common Cause Petition
    at 42-43; CFA Supp. Comments at 4; C3SR Reply at 17-21, 23.

[^338]: NAB Petition at 37-38.

[^339]: *Id*. at 40.

[^340]: CFA Supp. Comments at 4-5.

[^341]: C3SR Reply at 23.

[^342]: *See* Section VI.B.1.

[^343]: Applicants' June 13, 2008 Ex Parte at 2.

[^344]: 47 C.F.R. § 25.144.

[^345]: 47 C.F.R. § 25.144(a)(3)(ii).

[^346]: *1997 SDARS Service Rules Order*, 12 FCC Rcd at 5797 ¶ 106.

[^347]: *Id.* at 5795 ¶ 102. The Commission also stated that receiver
    interoperability would encourage consumer investment in SDARS
    equipment, would create economies of scale necessary to make SDARS
    receiving equipment affordable, and would promote competition by
    reducing transaction costs and enhancing consumers' ability to
    switch between competing SDARS providers. *See id.* at 5796 ¶ 103.

[^348]: *See 1997 XM Radio Authorization Order,* 13 FCC Rcd at 8851 ¶
    54; *1997 Sirius Authorization Order*, 13 FCC Rcd at 7995 ¶ 57.

[^349]: Letter from John R. Wormington, Sr. Vice Pres., Eng. and
    Operations, XM and Robert D. Briskman, Exec. Vice Pres., Eng.,
    Sirius, to Magalie Roman Salas, Secretary, FCC at 2, transmitted by
    Letter from Jennifer D. Hindin, Wiley Rein & Fielding, Counsel for
    Sirius, to Magalie Roman Salas, Secretary, FCC, IBFS File No.
    SAT-LOA-19900518-0003 (Oct. 6, 2000) ("XM/Sirius Oct. 6, 2000
    Letter"). These efforts included plans to develop interoperable
    chipsets capable of receiving both services and an agreement to
    introduce interim radios that would include a common wiring harness,
    head unit, antenna, and an interchangeable trunk-mounted box
    containing processing elements for both company's signals. *Id.* at
    4.

[^350]: XM/Sirius Oct. 6, 2000 Letter at 3.

[^351]: *Id*.

[^352]: Letter from William Bailey, Sr. Vice Pres., Reg. and Gov't
    Affairs, XM and Patrick L. Donnelly, Exec. Vice Pres. and Gen.
    Counsel, Sirius, to Thomas S. Tycz, Chief, Sat. Div., Int'l Bur.,
    FCC (Mar. 14, 2005) at 1 ("XM/Sirius Mar. 14, 2005 Letter"). This
    letter responded to a request from the International Bureau to the
    Applicants to provide "the current status of their efforts to
    develop an interoperable receiver" and "a clear timeframe for making
    such an interoperable receiver available to the public." *See XM
    2005 Authorization Order*, 20 FCC Rcd at 1625 ¶ 12.

[^353]: XM/Sirius Mar. 14, 2005 Letter at 1.

[^354]: *Id*. at 1-2. Applicants stated that they expected that a
    prototype for this type of interoperable radio would be completed in
    2005. *Id.* at 2.

[^355]: *Id*. at 2-3.

[^356]: Application at 16.

[^357]: *Id*. In addition, Applicants state that automobile
    manufacturers have not opted to include interoperable receivers in
    their vehicles. *Id.*

[^358]: *See* Joint Opposition at 95-96.

[^359]: Application at 15-16 (citing to the XM/Sirius Mar. 14, 2005 and
    Oct. 6, 2000 Letters).

[^360]: Blue Sky Reply at 2-3; Common Cause Petition at 45-46; NABOB
    Petition at 13-14; King Comments at ¶¶ 8, 82-84; Letter from U.S.
    Rep. Mike Doyle, to Kevin J. Martin, Chairman, FCC (May 30, 2007) at
    1.

[^361]: NAB Petition at 54 (quoting XM's SEC Form 10-K for the year
    ended Dec. 31, 2006 (stating "\[w\]e have signed an agreement with
    SIRIUS Radio to develop a common receiver platform combining the
    companies' proprietary chipsets, but the companies have not
    completed the final design of an operational radio using this
    platform."); s*ee also* Letter from Jane E. Mago, Sr. Vice Pres.,
    and Gen. Counsel, Legal and Reg. Affairs, NAB, to Marlene H. Dortch,
    Secretary, FCC (June 27, 2008); Memorandum from David H. Solomon,
    Wilkinson Barker Knauer, LLP, to David K. Rehr, Pres., NAB at 7-9,
    transmitted by Letter from Larry Walke, Assoc. Gen. Counsel, Legal &
    Reg. Affairs, NAB, to Marlene H. Dortch, Secretary, FCC (Apr. 6,
    2007) ("NAB Apr. 6, 2007 Ex Parte, Solomon Memo"); The Proposed
    Sirius-XM Merger White Paper, the Carmel Group, to NAB, Att. at 7,
    transmitted by Letter from Larry Walke, to Marlene H. Dortch,
    Secretary, FCC (July 3, 2007) ("NAB July 3, 2007 Ex Parte, Carmel
    White Paper").

[^362]: Michael Hartleib argues that many of the XM and Sirius radios in
    service today are capable of receiving "either/or" service and
    signals via a firmware update to the receivers. Letter from Michael
    Hartleib, to FCC at 4; *see also* Hartlieb Apr. 22, 2007 Petition at
    4.

[^363]: Letter from Julian L. Shepard, Williams Mullen, Counsel for
    C3SR, to Marlene H. Dortch, Secretary, FCC at 3-8, transmitted by
    Letter from Julian L. Shepard, Williams Mullen, Counsel for C3SR, to
    Jamila Bess Johnson, Med. Bur., FCC (May 27, 2008) ("C3SR May 27,
    2008 Ex Parte").

[^364]: C3SR May 27, 2008 Ex Parte at 1.

[^365]: *Id.* at 5-6. C3SR states that the documents also show that
    Applicants **\[REDACTED\]**. *See id.* at 7.

[^366]: *Id.* at 7.

[^367]: Letter from Julian L. Shepard, Williams Mullen, Counsel for
    C3SR, to Marlene H. Dortch, Secretary, FCC (June 4, 2008) at 2.

[^368]: *Id.* at 2-3. C3SR argues that the merged entity should be
    required to disgorge profits accrued as a result of **\[REDACTED\]**
    including treble damages for such actions. C3SR estimates the
    penalties would be in excess of \$250,000,000. *Id.* at 3.

[^369]: *Id.* at 2-4. C3SR requests that the merged entity should be
    required to reimburse the public for the misconduct C3SR alleges, in
    the form of a monetary restitution (including interest) to the
    Federal treasury to compensate for the loss of spectrum auction
    revenue value resulting from the lack of interoperable radios in the
    market. C3SR argues that the auction revenues received by the
    Federal government as a result of the SDARS auction were lower than
    they would have been had the spectrum been auctioned without the
    interoperability requirement. *Id.* at 2-3. C3SR estimates the
    difference in value of approximately \$267 million, and argues this
    amount should be required as payment from the merged entity, along
    with eleven years of interest on this sum. *Id.* at 4. C3SR further
    argues that the merged entity should be required to compensate
    consumers directly by providing all subscribers with a new
    interoperable radio device, "with comparable quality and features to
    replace each non-interoperable satellite radio purchased in
    commerce," at no charge, and to provide interoperable replacement
    units or refunds to consumers who purchased more than one
    non-interoperable receiver. *Id.*

[^370]: *Id.* at 2-3. C3SR argues that the merged entity should be
    required to adopt a compliance plan within 30 days of consummation
    requiring the merged entity to ensure truthfulness and accuracy in
    future communications with the FCC and permanently dismissing all
    officers, directors, and employees of Applicants who participated
    in, knew of, or conspired concerning the alleged violations of the
    FCC rules.

[^371]: *Id.* at 4-5. C3SR requests that the merged entity be required
    to divest itself of one of the two satellite licenses in order to
    "restore full competition to the SDARS market." *Id.* at 4. C3SR
    further states that as part of the divestiture, the merged entity
    should be required to cease exclusive agreements with programmers,
    retailers, and manufacturers, adhere to temporary restrictions on
    price increases and advertising limits, and abide by new program
    access requirements to be developed and adopted by the Commission in
    order to permit a new SDARS competitor with programming to be
    competitive with the merged entity in the short term. *Id.* at 4-5.

[^372]: Letter from Robert L. Pettit, Counsel for Sirius, and Gary M.
    Epstein, Counsel for XM, to Marlene H. Dortch, Secretary, FCC,
    transmitted by Letter from Jennifer D. Hindin, Wiley Rein LLP, to
    Marlene H. Dortch, Secretary, FCC (June 6, 2008) ("Applicants' June
    6, 2008 Ex Parte").

[^373]: *Id*. at 3.

[^374]: *Id.* at 6.

[^375]: *Id.* (stating that a Sirius satellite radio is available
    nationwide for approximately \$29, and that the most expensive
    comparable Sirius and XM radios cost less than \$170).

[^376]: *Id.* at 5, 7. Applicants also provide an affidavit from the
    author of the documents cited by C3SR which states that the
    documents "did not, and were not intended to, reflect the business
    judgment of Sirius or XM, and they were never endorsed or otherwise
    adopted by Sirius or XM." *Id.*, Decl. of Michael DeLuca at ¶ 2.

[^377]: Specifically, Applicants claim that C3SR's pleading was a *de
    facto* petition to deny that was not filed within the requisite
    30-day period after public notice of acceptance of Applicants'
    merger applications. Applicants' June 6, 2008 Ex Parte at 8-9.
    Applicants also assert that the filing is substantively deficient
    because it does not contain a showing supported by affidavit by a
    person with personal knowledge, but instead relies on "speculative
    statements and surmised interpretation." *Id*. at 9-10 (citing 47
    U.S.C. § 309(d)(1)).

[^378]: 47 C.F.R. § 25.144(a)(3)(ii).

[^379]: *1997 SDARS Service Rules Order*, 12 FCC Rcd at 5797 ¶ 106
    ("\[A\]t the very least, consumers should be able to access the
    services from all licensed satellite DARS systems and our rule on
    receiver inter-operability accomplishes this.").

[^380]: *1997 Sirius Authorization Order*, 13 FCC Rcd at 7990 ¶ 42.

[^381]: *2005 XM Authorization Order*, 20 FCC Rcd at 1625 ¶ 12.

[^382]: *1997 XM Authorization Order*, 13 FCC Rcd at 8851 ¶ 54; *1997
    Sirius Authorization Order*, 13 FCC Rcd at 7995 ¶ 57.

[^383]: *See 1997 Sirius Authorization Order*, 13 FCC Rcd at 7990 ¶ 42.

[^384]: *See Serafyn v. FCC*, 149 F.3d 1213 (D.C. Cir. 1998). In light
    of our conclusion here, we need not address Applicants' claims that
    C3SR's pleading is procedurally deficient and should be dismissed.

[^385]: C3SR May 27, 2008 Ex Parte at 4-6 (citing Sirius Nov. 16, 2007
    Response to Information and Document Request I.B. at
    SIRIUS-FCC-I.B.003104; Sirius Apr. 10, 2008 Response to Information
    Request at SIRIUS-FCC-SUPP.001051-001052, 001060-001061, 001087).

[^386]: *See* Sirius Nov. 16, 2007 Response to Information and Document
    Request I.B. at SIRIUS-FCC-I.B.003104-003139.

[^387]: *See* C3SR May 27, 2008 Ex Parte at 4, n.16, Exh. 3, XM/Sirius
    Mar. 14, 2005 Letter; *see also* Sirius Apr. 10, 2008 Response to
    Information Request, SIRIUS-FCC-SUPP.001048-001090.

[^388]: C3SR May 27, 2008 Ex Parte at 5; 47 C.F.R. § 1.65.

[^389]: C3SR May 27, 2008 Ex Parte at 3.

[^390]: Sirius Apr. 10, 2008 Response to Information Request at
    SIRIUS-FCC-SUPP.001061-001071; SIRIUS-FCC-SUPP.001078-001080.

[^391]: Applicants' June 6, 2008 Ex Parte at 6-7.

[^392]: Sirius Apr. 10, 2008 Response to Information Request at
    SIRIUS-FCC-SUPP.001060-001070; 001084-001089.

[^393]: Application at 15-16; Joint Opposition at 21-22.

[^394]: Sirius Apr. 10, 2008 Response to Information Request at
    SIRIUS-FCC-SUPP.001061-001072.

[^395]: *Id*. at SIRIUS-FCC-SUPP.001060, 001088.

[^396]: Applicants' July 25, 2008 Ex Parte at 2. Applicants also
    voluntarily commit to make available, immediately after the merger,
    the design and the specifications for an interoperable radio
    available for license to equipment manufacturers. *Id*.

[^397]: Michael Hartleib states that if the Commission does not approve
    the merger, then the Commission must enforce the interoperability
    mandate. Michael Hartleib July 5, 2007 Petition for Declaratory
    Ruling at 5.

[^398]: *See* Section V.B.3, *supra*.

[^399]: *See* Tenn. Att'y Gen. July 3, 2008 Ex Parte at 3.

[^400]: NAB Apr. 6, 2007 Ex Parte, Solomon Memo at 7-9; NAB July 3, 2007
    Ex Parte, Carmel White Paper at 7; NABOB Petition at 13-14; Letter
    from Lawrence R. Sidman, Paul Hastings, Counsel for Clear Channel,
    to Kevin J. Martin, Chairman, FCC (July 18, 2008) at 1-2 (proposing
    that the Commission require applicants to separately maintain and
    operate assets and businesses until remedial actions are complete
    and that it reserve the right for the Commission to appoint a third
    party to oversee compliance with the interoperability requirement).

[^401]: Although Applicants previously argued that interoperability has
    no relevance to the merger and should be addressed through
    traditional enforcement procedures, see Joint Opposition at 98-99
    (citing *Adelphia Order*, 21 FCC Rcd at 8306 ¶ 240*; SBC-Ameritech
    Order*, 14 FCC Rcd at 14950 ¶ 571), we note that the precedents that
    they cite are distinguishable because SDARS receiver
    interoperability presently is not the subject of another proceeding
    before the Commission, and the issue relates entirely to the parties
    before the Commission in the merger proceeding.

[^402]: Letter from Jennifer M. McCarthy, Vice Pres., Reg. Affairs,
    NextWave, to Marlene H. Dortch, Secretary, FCC (June 18, 2008)
    ("NextWave June 18, 2008 Ex Parte").

[^403]: *1997 SDARS Service Rules Order*, 12 FCC Rcd at 5795 ¶ 102.

[^404]: *See Amendment of Part 27 of the Commission's Rules to Govern
    the Operation of Wireless Communications Services in the 2.3 GHz
    Band; Establishment of Rules and Policies for the Digital Audio
    Radio Satellite Service in the 2310-2360 MHz Frequency Band*, Notice
    of Proposed Rulemaking and Second Further Notice of Proposed
    Rulemaking, 22 FCC Rcd 22123 (2007) (*"2007 SDARS Second Further
    Notice"*).

[^405]: *See* USE Reply at 8.

[^406]: USE Jan. 15, 2008 Ex Parte at 1.

[^407]: Letters from Parul P. Desai & Andrew Jay Schwartzman, MAP, and
    Michael Calabrese, New America Foundation, to Marlene H. Dortch,
    Secretary, FCC (Jan. 29, 2008, Feb. 27, 2008, Mar. 4, 2008, and Mar.
    24, 2008); Letters from Gigi B. Sohn, President, Public Knowledge,
    to Marlene H. Dortch, Secretary, FCC (Mar. 4, 2008 and May 20,
    2008); Letter from Alex Nogales, President and CEO, National
    Hispanic Media Coalition, to Marlene H. Dortch, Secretary, FCC (May
    8, 2008) at 1; Letter from State Att'y Gens. Robert McKenna
    (Washington) and Richard Blumenthal (Connecticut), to Marlene H.
    Dortch, Secretary, FCC (May 8, 2008) at 1 ("Att'y Gens. May 8, 2008
    Ex Parte").

[^408]: Letter from U.S. Reps. John D. Dingell and Edward J. Markey, to
    Kevin J. Martin, Chairman, FCC (May 1, 2008) at 2 ("Reps. Dingell
    and Markey May 1, 2008 Ex Parte"); Letter from U.S. Sen. Christopher
    S. Bond, to Kevin J. Martin, Chairman, FCC (June 4, 2008) at 1
    ("Sen. Bond June 4, 2008 Ex Parte").

[^409]: ^?^ Reps. Dingell and Markey May 1, 2008 Ex Parte at 2; Sen.
    Bond June 4, 2008 Ex Parte at 1.

[^410]: Reps. Dingell and Markey May 1, 2008 Ex Parte at 2.

[^411]: iBiquity is the "developer and licenser of HD Radio technology,
    which is transforming AM and FM broadcasting with vastly increased
    number of channels, drastically improved sound quality and an array
    of new data services." iBiquity,
    <http://www.ibiquity.com/index.php>. We note that in 2002, the
    Commission formally selected IBOC technology developed by iBiquity
    as the technical format that will permit AM and FM radio
    broadcasters to introduce digital operations efficiently and
    rapidly. *See Digital Audio Broadcasting Systems and Their Impact on
    the Terrestrial Radio Broadcast Service*, First Report and Order, 17
    FCC Rcd 19990, 19990 ¶ 1 (2002) ("*DAB First Report*").

[^412]: Letter from Robert A. Mazer, Vinson & Elkins, Counsel for
    iBiquity, to Marlene H. Dortch, Secretary, FCC at 1 (May 1, 2008)
    ("iBiquity May 1, 2008 Ex Parte").

[^413]: Sens. Kerry, Cardin, and McCaskill June 27, 2008 Ex Parte;
    Letter from U.S. Reps. Betty McCollum, Collin Peterson, Timothy
    Walz, James Oberstar, and Keith Ellison, to Kevin J. Martin,
    Chairman, FCC (June 27, 2008) ("Reps. McCollum, Peterson, Walz,
    Obertar, and Ellison June 27, 2008 Ex Parte"); Att'y Gens. May 8,
    2008 Ex Parte at 2; Rep. Markey July 15, 2008 Ex Parte at 1-2;
    Letter from U.S. Sen. Ted Stevens, to Kevin J. Martin, Chairman, FCC
    (July 15, 2008); Letter from U.S. Rep. Baron P. Hill, to Kevin J.
    Martin, Chairman, FCC (July 21, 2008); NPR Petition at 20-21. NPR
    suggests that the condition could encourage HD Radio deployment and
    consumer access to the technology, and may mitigate the merged
    entity's ability to increase prices or reduce the quality of
    service. *Id*. New ICO Satellite Services G.P. ("ICO"), the
    developer of an advanced hybrid service capable of providing
    wireless voice, data, video, and Internet services on mobile and
    portable devices, also requests that the Commission impose a
    condition prohibiting the merged entity from entering into exclusive
    agreements with automobile manufacturers that "have the effect of
    limiting the ability of other entities to provide competitive
    products or services." New ICO Comments at 2. Similarly, Slacker,
    Inc., which is developing a nationwide personal audio service, also
    requests that the Commission prohibit all current or future
    exclusive contracts between SDARS and car manufacturers. Slacker
    Comments at 3. As discussed herein, Applicants have agreed to not
    take any action that would prevent the inclusion of other audio
    technology in SDARS receivers, which resolves New ICO's and
    Slacker's concerns. Slacker also requests that the Commission
    prohibit car manufacturers from sitting on the board of directors of
    the merged entity. *Id*. We believe that Applicants' voluntary
    commitments resolve Slacker's primary concerns, and thus, we do not
    find it necessary to regulate the selection of board members for the
    merged entity.

[^414]: Letter from Robert A. Mazer, Vinson & Elkins, Counsel for
    iBiquity, to Marlene H. Dortch, Secretary, FCC (Dec. 20, 2007) at 1;
    Letter from Robert A. Mazer, Vinson & Elkins, Counsel for iBiquity,
    to Marlene H. Dortch, Secretary, FCC (Mar. 20, 2008) at 1; Letter
    from Robert A. Mazer, Vinson & Elkins, Counsel for iBiquity, to
    Marlene H. Dortch, Secretary, FCC (June 9, 2008) at 2. The HD
    Digital Radio Alliance agrees, explaining that the availability of
    HD Radio as a factory installed or factory authorized option in
    automobiles and other vehicles is very limited. Letter from Charles
    E. Biggio, Wilson Sonsini Goodrich & Rosati, Counsel for the HD
    Radio Alliance, to Marlene H. Dortch, Secretary, FCC (Jan. 24, 2008)
    at 2.

[^415]: iBiquity May 1, 2008 Ex Parte at 1. iBiquity also requests that
    the Commission require the merged entity to annually certify its
    compliance with the condition. *Id*. Earlier in this proceeding,
    iBiquity also proposed that the Commission require the merged entity
    to terminate all exclusive arrangements and, prospectively, that the
    Commission prohibit exclusive arrangements with suppliers,
    retailers, and vehicle manufacturers that could preclude the
    inclusion of HD Radio technology. Letter from Robert A. Mazer,
    Vinson & Elkins, Counsel for iBiquity, to Marlene H. Dortch,
    Secretary, FCC at 2 (Dec. 20, 2007) ("iBiquity Dec. 20, 2007 Ex
    Parte"). iBiquity reconsidered its position, however, stating that
    it does not believe that simply banning exclusive arrangements would
    ensure HD Radio technology would be included in SDARS receivers or
    would provide for a competitive landscape for terrestrial and
    satellite radio services. iBiquity May 1, 2008 Ex Parte at 2;
    iBiquity Jun. 9, 2008 Ex Parte at 1. iBiquity explains that its
    concern is focused not on formal contractual arrangements, but on
    existing business arrangements favoring satellite companies. *Id*.
    iBiquity argues that the merged entity "would have greater leverage
    to use these business relationships to disadvantage terrestrial
    digital radio." iBiquity May 1, 2008 Ex Parte at 2. iBiquity also
    does not support USE's open device proposal, arguing that it would
    not effectively ensure the distribution of HD Radio receivers to
    create a level playing field. Letter from Robert A. Mazer, Vinson &
    Elkins, Counsel for iBiquity, to Marlene H. Dortch, Secretary, FCC
    at 1 (June 6, 2008); iBiquity June. 9, 2008 Ex Parte at 1, 2.

[^416]: Joint Opposition at 101, n.358.

[^417]: Letter from Adam Goldberg, Vice President, Gov. and Indus.
    Affairs, Pioneer North America, Inc., to Marlene H. Dortch,
    Secretary, FCC (May 28, 2008); *See also* Letter from Adam Goldberg,
    Vice Pres., Gov. and Indus. Affairs, Pioneer North America, Inc., to
    Marlene H. Dortch, Secretary, FCC at 2 (June 6, 2008) ("Pioneer Jun.
    6, 2008 Ex Parte").

[^418]: Pioneer Jun. 6, 2008 Ex Parte at 1; *see also* Letter from
    Richard M. Lee, Exec. Dir., Satellite Radio Servs., General Motors
    Corp. and David W. Danzer, Grp. Vice Pres., Strategic and Product
    Planning, Toyota Motor Sales, USA, Inc., to Marlene H. Dortch,
    Secretary, FCC (July 10, 2008) at 1-2 (opposing an HD Radio mandate
    because no agreements between XM and the automobile manufacturers
    currently prohibit their ability to offer HD Radio and any mandate
    to do so would distort the normal incentives to cost reduce and
    improve the HD Radio product).

[^419]: Applicants' June 13, 2008 Ex Parte at 3; Applicants' July 25,
    2008 Ex Parte at 2,3.

[^420]: *See* Letter from Donald W. Riegle, Jr., Chairman, Gov't
    Relations, APCO Worldwide, to Kevin J. Martin, Chairman; Michael
    Copps, Commissioner; Jonathan Adelstein, Commissioner; Deborah Tate,
    Commissioner; and Robert McDowell, Commissioner, FCC (June 19,
    2008); Letter from Charles H. Helein, Helein & Marashlian, LLC,
    Counsel for USE, to Marlene H. Dortch, Secretary, FCC (June 25,
    2005). APCO and USE claim that Applicants' open access voluntary
    commitments are inadequate to promote competition or to spur
    technological innovation. For instance, they object to the right of
    the merged entity to require licensees to comply with its technical
    and quality assurance standards and tests, claiming that such
    in-house test will allow the merged entity to pick and choose among
    manufacturers based on its own standards, without oversight. APCO
    and USE ask that the Commission impose an open access condition
    immediately following approval of the merger, require independent
    certification testing and monitoring of compliance, prohibit the
    merged entity from setting prices for receivers, and prohibit it
    from manufacturing, selling, leasing, or distributing receivers;
    *see also* Sens. Kerry, Cardin, and McCaskill June 27, 2008 Ex Parte
    at 2 (seeking enforcement of the open access commitment); Letter
    from Gigi B. Sohn, President, Public Knowledge, to Marlene H.
    Dortch, Secretary, FCC (July 15, 2008) at 1 (seeking a 60-day time
    period for Applicants to comply with voluntary commitments, running
    from approval of the Application); Letter from Robert A. Mazer,
    Vinson & Elkins, Counsel for iBiquity, to Marlene H. Dortch,
    Secretary, FCC (July 25, 2008). We find that Applicants' voluntary
    commitments address our concerns.

[^421]: *See DAB First Report,* 17 FCC Rcd at 19991 ¶ 3. Throughout the
    proceeding, the Commission articulated its objective "to foster the
    development of a vibrant terrestrial digital radio service for the
    public and to ensure that radio stations successfully implement
    DAB." *DAB Second Report*, 22 FCC Rcd at 10346 ¶ 2. *See* Letter
    from Anne Lucey, Sen. Vice Pres. for Reg. Policy, CBS Corp., to
    Marlene H. Dortch, Secretary, FCC (July 24, 2008) (urging the
    Commission to initiate a rulemaking on access to HD Radio
    technology).

[^422]: *See* Prometheus Comments at 5; Letter from Parul Desai, Media
    Access Project, Counsel for Prometheus, to Marlene H. Dortch,
    Secretary, FCC (Mar. 27, 2008) at 1 ("Prometheus Mar. 27, 2008 Ex
    Parte); TAP Petition at 7; Entravision Comments at 22; Letter from
    Chester C. Davenport, Managing Dir., Georgetown, to Marlene H.
    Dortch, Secretary, FCC (Oct. 18, 2007) at 3-5 ("Georgetown Oct. 18,
    2007 Ex Parte*"*); Letter from David R. Siddall, Paul Hastings,
    Counsel for Georgetown, to Kevin J. Martin, Chairman; Michael Copps,
    Commissioner; Jonathan Adelstein, Commissioner; Deborah Tate,
    Commissioner; and Robert McDowell, Commissioner, FCC (Nov. 20, 2007)
    at 6-7 ("Georgetown Nov. 20, 2007 Ex Parte").

[^423]: *See* 47 C.F.R. §§ 76.970-977; *see also* Communications Act, §
    612 (47 U.S.C. § 532).

[^424]: Letter from Robert L. Pettit, Wiley Rein LLP, Counsel for
    Sirius, to Kevin J. Martin, Chairman; Michael Copps, Commissioner;
    Jonathan Adelstein, Commissioner; Deborah Tate, Commissioner; and
    Robert McDowell, Commissioner, FCC (Nov. 13, 2007), Att. Joint Ex
    Parte Submission at 11-13 ("Applicants' Nov. 13, 2007 Ex Parte");
    Joint Opposition at 100.

[^425]: Applicants' June 13, 2008 Ex Parte at 3.

[^426]: *See* 47 C.F.R. § 76.1500, *et. seq*. Under the Commission's
    rules, OVS operators are required to open access to a percentage of
    the system capacity for use by non-affiliated third parties for
    competing OVS services. 47 C.F.R. § 76.1503.

[^427]: Letter from David R. Siddall, Paul Hastings and Andrew G. Berg,
    Sonnenschein Nath & Rosenthal, LLP, Counsel for Georgetown, to
    Marlene H. Dortch, Secretary, FCC (Mar. 17, 2008) at 2 ("Georgetown
    Mar. 17, 2008 Ex Parte"); *see also* Letter from David R. Siddall,
    Sonnenschein Nath & Rosenthal LLP, Counsel for Georgetown Partners,
    to Marlene H. Dortch, Secretary, FCC (July 10, 2008) (claiming that
    Sirius' allocation of capacity to the Backseat TV service
    demonstrates that the merged firm could allocate 20 percent of its
    capacity for this purpose) ("Georgetown July 10, 2008 Ex Parte");
    *see also* n.499, *infra*.

[^428]: Georgetown Mar. 17, 2008 Ex Parte at 3.

[^429]: *Id*. at 2.

[^430]: *Id*.

[^431]: *Id*. at 2-3. We note that its request for DOJ approval of
    leases is moot considering that the DOJ closed its investigation of
    the transaction without further action. *See* Mar. 24, 2008 DOJ
    Press Release.

[^432]: Georgetown Mar. 17, 2008 Ex Parte at 2. Georgetown has also
    agreed to facilitate the distribution of additional leased channel
    capacity dedicated to non-commercial and educational use, as
    advanced by MAP and Public Knowledge. Letter from Chester Davenport,
    Managing Dir., Georgetown, to Kevin J. Martin, Chairman, FCC (May
    13, 2008) at 1-2 ("Georgetown May 13, 2008 Ex Parte"); *see also*
    Letter from Andrew J. Schwartzman and Parul Desai, MAP, and Gigi B.
    Sohn, Public Knowledge (May 14, 2008) (concurring with Georgetown's
    May 13, 2008 proposal). *See also* Section VI.B.6, *infra*.
    Georgetown commits to "work with MAP, PK, and other appropriate
    parties to establish a structure suitable for selection among
    eligible programmer applicants if more apply than the FCC designated
    capacity for educational non-commercial channels can accommodate"
    and, at Georgetown's expense, accept delivery of the non-commercial
    leased program streams, encode the programming, and deliver it to
    the merged entity for broadcast. *See* Georgetown May 13, 2008 Ex
    Parte at 2.

[^433]: *See* TAP Petition at 7 (stating Applicants "might be required
    to convey control over some portion of its bandwidth -- such as one
    quarter (6.25 MHz) -- and to provide an independent minority
    competitive provider carriage services."); *see also* Letter from
    U.S. Rep. Sanford D. Bishop, Jr., to Kevin J. Martin, Chairman, FCC
    (Nov. 7, 2007) at 1; Letter from U.S. Rep. Edolphus "Ed" Towns, to
    Kevin J. Martin, Chairman, FCC (May 5, 2008) at 1; Letter from U.S.
    Rep. Bobby L. Rush, to Kevin J. Martin, Chairman, FCC (May 6, 2008)
    at 1; Letter from State Att'y Gens. Douglas F. Gansler (Maryland),
    Richard Blumenthal (Connecticut), Marc Dann (Ohio), and Rob McKenna
    (Washington), to Kevin J. Martin, Chairman, FCC (Apr. 24, 2008) at
    2; Letter from U.S. Rep. G. K. Butterfield, to Kevin J. Martin,
    Chairman, FCC (Apr. 15, 2008) at 1; Letter from U.S. Reps. Albert R.
    Wynn, Lacy Clay, G.K. Butterfield, Elijah Cummings, Bennie Thompson,
    and David Scott, to Kevin J. Martin, Chairman, FCC (Nov. 9, 2007) at
    1-2; Letter from U.S. Rep. Corinne Brown, to Kevin J. Martin,
    Chairman, FCC (Nov. 9, 2007) at 1; Letter from U.S. Rep. Gregory W.
    Meeks, to Kevin J. Martin, Chairman, FCC (May 19, 2008) at 1.

[^434]: Prometheus Comments at 5. Prometheus also states its preference
    to lease channels on a per channel basis, where the combined entity
    would hold an auction to allocate the channels, and that the FCC
    separately license the leasees and treat the service as a broadcast
    service. Prometheus Mar. 27, 2008 Ex Parte at 1.

[^435]: Entravision Comments at 22.

[^436]: Joint Opposition at 100.

[^437]: A "Qualified Entity" includes any entity that is majority-owned
    by persons who are African American, not of Hispanic origin; Asian
    or Pacific Islanders; American Indians or Alaskan Natives; or
    Hispanics.

[^438]: Applicants' June 13, 2008 Ex Parte at 3.

[^439]: *Id*.

[^440]: *Id.*

[^441]: *Id*.

[^442]: *See* Letter from Andrew J. Schwartzman, MAP, to Marlene H.
    Dortch, Secretary, FCC (June 18, 2008) at 1 (stating that MAP and
    Public Knowledge prefer that an independent party select
    unaffiliated minority programmers, and that the percent of channels
    to be set aside should be based on a percentage of channel capacity,
    and not on a percentage of live channels); Letter from William H.
    Kling, Pres. and CEO, American Public Media, to Kevin J. Martin,
    Chairman, FCC (June 20, 2008) at 2 (advocating that Applicants set
    aside 25 percent of total SDARS spectrum for non-commercial public
    service channels, minority broadcasters, and emergency services)
    ("APM June 20, 2008 Ex Parte"); Letter from David R. Siddall,
    Sonnenschein Nath & Rosenthal LLP, Counsel for Georgetown Partners,
    to Marlene H. Dortch, Secretary, FCC (June 27, 2008) at 1-2 (stating
    that Georgetown Partners, Entravision, and TSG Capital Group are not
    interested in providing programming and facilities with only 4
    percent of channels offered for commercial leased access, and that
    an advertiser-supported service available to all owners of SDARS
    receivers would be preferred); Sens. Kerry, Cardin, and McCaskill
    June 27, 2008 Ex Parte at 1-2 (arguing that setting aside 4 percent
    is inadequate to ensure a viable competitor, and instead suggesting
    that leasing 20 percent to 50 percent is necessary, along with a
    transparent and competitive process for the leasing arrangement);
    Letter from U.S. Sen. Amy Klobuchar, to Kevin J. Martin, Chairman,
    FCC (June 27, 2008) (urging the Commission to require Applicants to
    set aside more than 8 percent of channels); Reps. McCollum,
    Peterson, Walz, Obestar, and Ellison June 27, 2008 Ex Parte at 1
    (advocating 25 percent set-aside of total SDARS spectrum for
    non-commercial public service channels, minority broadcasters, and
    emergency services); Letter from Gigi B. Sohn, President, Public
    Knowledge and Andrew Jay Schwartzman, President and CEO, MAP, to
    Kevin J. Martin, Chairman, FCC (July 10, 2008) at 5 (proposing that
    the Commission appoint an independent "Monitor Trustee" to oversee
    enforcement of voluntary commitments); Letter from Albert H. Kramer,
    Dickstein Shapiro LLP, Counsel for The Word Network, to Marlene H.
    Dortch, Secretary, FCC (July 11, 2008) at 1 (proposing that
    Qualified Entities include not-for-profit entities offering
    programming designed to respond to the minority community) ("The
    Word Network July 11, 2008 Ex Parte"); Rep. Markey July 15, 2008 Ex
    Parte at 2 (recommending that the set aside be based on total
    capacity rather than specifying a set number of channels so that
    advances in digital capacity and service offerings do not diminish
    the impact of the set-aside limit); Letter from U.S. Rep. G.K.
    Butterfield, to Kevin J. Martin, Chairman, FCC (July 21, 2008)
    (supporting a 15 percent set aside for minority controlled
    programming); Letter from U.S. Rep. Bennie G. Thompson, to Kevin J.
    Martin, Chairman, FCC (July 22, 2008); Letter from U.S. Rep. Yvette
    D. Clarke, to Kevin J. Martin, Chairman, FCC (July 23, 2008); Letter
    from U.S. Rep. Elijah E. Cummings, to Kevin J. Martin, Chairman, FCC
    (July 23, 2008).

[^443]: *Promoting Diversification of Ownership in the Broadcasting
    Services*, Report and Order and Third Further Notice of Proposed
    Rulemaking, 23 FCC Rcd 5922 (2008).

[^444]: *See, e.g*., Sens. Kerry, Cardin, and McCaskill June 27, 2008 Ex
    Parte at 1-2 (arguing for the creation of a transparent and
    competitive process for the leasing arrangement); Letter from Andrew
    J. Schwartzman, MAP, to Marlene H. Dortch, Secretary, FCC  (June 18,
    2008) at 1 (expressing preference that an independent party select
    unaffiliated minority programmers); Letter from Gigi B. Sohn,
    President, Public Knowledge and Andrew Jay Schwartzman, President
    and CEO, MAP, to Kevin J. Martin, Chairman, FCC (July 10, 2008) at 5
    (proposing that the Commission appoint an independent "Monitor
    Trustee" to oversee enforcement of voluntary commitments); The Word
    Network July 11, 2008 Ex Parte at 1 (discussing the need for an
    entity independent of Applicants to administer the allocation of
    channels for minority programmers); Letter from Jose Luis Rodriguez,
    CEO, HITN, to Kevin J. Martin, Chairman, FCC (July 11, 2008)
    (advocating that the minority set-aside be reserved for stations
    managed and controlled by minority members); Letter from Jeneba
    Jalloh Ghatt, Counsel to AlphaStar, to Kevin J. Martin, Chairman,
    FCC (Jul. 16, 2008) at 1 (advocating that an independent entity
    administer leased capacity);  Letter from U.S. Reps. Charles
    Gonzalez, Hilda Solis, Ed Towns, and Bobby Rush, to Kevin J. Martin,
    Chairman, FCC (July 18, 2008) (proposing that if a financial
    institution is selected to oversee leasing commitments, then the
    Commission should ensure that the entity "has a proven history of
    and experience with minority lending and business operations," and
    that it has no financial interest in the selection process. They
    also urge the Commission to provide potential lessees with adequate
    time to develop business plans and raise capital and recommend that
    the Commission prohibit the merged entity from dropping existing
    minority programming channels in order to allocate channels for new
    minority-owned channels).

[^445]: Public Knowledge proposes that the merged entity reserve 5
    percent of channel capacity and Prometheus proposes a 4 percent
    reservation. Public Knowledge Comments at 2; Letter from Gigi B.
    Sohn, Pres.*,* Public Knowledge, to Marlene H. Dortch, Secretary,
    FCC (Feb. 20, 2008), Att., Memorandum Regarding Set Aside Conditions
    at 1-2 ("Feb. 20, 2008 Ex Parte Letter"); Prometheus Comments at 5.

[^446]: *See* 47 C.F.R. § 25.701.

[^447]: Applicants' June 13, 2008 Ex Parte at 3. The Applicants' June
    13, 2008 Ex Parte setting forth the Applicants' voluntary
    commitments states that this capacity will be made available for
    "programming within the meaning of 47 C.F.R. § 25.701(f)(2) of the
    DBS set aside rules." *Id*. We note that the cited definition
    defines a "Qualified Programmer" but does not define or describe
    specifically the programming that will be provided. Consistent with
    our approach in the DBS context, therefore, we interpret the
    Applicants' voluntary commitment to mean that Applicants will make
    available capacity to programmers that satisfy the definitions
    contained within 47 C.F.R. § 25.701(f)(2).

[^448]: Prometheus Comments at 5; Letter from Alex Curtis, Dir. of
    Policy, New Media, Public Knowledge to Marlene H. Dortch, Secretary,
    FCC (Dec. 7, 2007) at 1-2; APM June 20, 2008 Ex Parte at 1-2
    (seeking a reservation of 25 percent of the combined entity's radio
    spectrum).

[^449]: Public Knowledge Feb. 20, 2008 Ex Parte, Att. at 1-2.

[^450]: *Id.* at 2.

[^451]: For example, under a 5 percent reservation, if the merged
    company offers 200 channels, each subscriber would receive 10
    channels of noncommercial programming regardless of his or her
    particular subscription package. Public Knowledge Feb. 20, 2008 Ex
    Parte, Att. at 2; Public Knowledge June 18, 2008 Ex Parte at 1.

[^452]: Joint Opposition at 101-02.

[^453]: *1997 SDARS Service Rules Order*, 12 FCC Rcd at 5789-92 ¶¶
    85-93.

[^454]: *Id*. at 5789-90 ¶¶ 86-89.

[^455]: *Id.* at 5792 ¶ 92*.*

[^456]: *Id.* at 5792 ¶ 93.

[^457]: *Id.* (citing 47 U.S.C. § 335).

[^458]: 47 C.F.R. § 25.701.

[^459]: *See* Cable Television Consumer Protection and Competition Act
    of 1992 ("*1992 Cable Act*"), Pub. L. No. 102-385, 106 Stat. 1460
    (1992) (*codified at* 47 U.S.C. § 335).

[^460]: *See* 47 U.S.C. § 335(b)(1).

[^461]: *See Implementation of Section 25 of the Cable Television and
    Consumer Protection Act of 1992, Direct Broadcast Satellite Public
    Interest Obligations*, Report and Order, 13 FCC Rcd 23254, 23285 ¶
    74 (1998) ("*DBS PI Order*").

[^462]: *See DBS PI Order*, 13 FCC Rcd at 23286-92 ¶¶ 76-90. *See also*
    47 C.F.R. § 25.701(f)(2).

[^463]: *DBS PI Order*, 13 FCC Rcd at 23290 ¶ 86.

[^464]: *SDARS Service Rules Order*, 12 FCC Rcd at 5789 ¶ 86 (citing
    comments filed by Digital Satellite Broadcasting Corp. and American
    Mobile Radio Corp).

[^465]: Applicants' June 13, 2008 Ex Parte at 3.

[^466]: 47 C.F.R. § 25.701(f).

[^467]: *See* The Word Network July 11, 2008 Ex Parte at 1 (proposing
    that not-for-profit entities offering programming to minority
    audiences qualify for NCE set asides).

[^468]: Application at 12-14.

[^469]: *See DBS PI Order*, 13 FCC Rcd at 23302 ¶ 116.

[^470]: *Id*.

[^471]: *Id*.

[^472]: 47 C.F.R. § 25.701(f)(1). *See also* *DBS PI Order*, 13 FCC Rcd
    at 23282-84 ¶¶ 69-71.

[^473]: *See* 47 C.F.R. § 25.701(f)(1).

[^474]: *Id*.

[^475]: *See DBS PI Order*, 13 FCC Rcd at 23285 ¶ 74. *See also*
    *American Distance Education Consortium,* Declaratory Ruling and
    Order, 14 FCC Rcd 19976 (1999) (ruling that reserved channels must
    be made available to subscribers in all parts of the country).

[^476]: *See* Section VI.C.2, *infra*.

[^477]: 47 C.F.R. § 25.701(f)(5). *See also* *DBS PI Order*, 13 FCC Rcd
    at 23306-09 ¶¶ 126-34 .

[^478]: *See DBS PI Order*, 13 FCC Rcd at 23306-08 ¶¶ 126-30.

[^479]: *See* 47 C.F.R. § 25.701(f)(5). *See also DBS PI Order*, 13 FCC
    Rcd at 23282 ¶ 68.

[^480]: *See* 47 C.F.R. § 25.701(f)(7). *See also DBS PI Order*, 13 FCC
    Rcd at 23309 ¶ 136.

[^481]: Applicants' June 13, 2008 Ex Parte at 4.

[^482]: Letter from Members of the Outlying Areas Senate Presidents
    Caucus, to Kevin J. Martin, Chairman, FCC (May 19, 2008) at 1-2
    ("OASPC May 19, 2008 Ex Parte") (observing the lack of SDARS service
    to, among others, Guam, Northern Mariana Islands, and American
    Samoa); Letter from U.S. Rep. Luis G. Fortuño, to Kevin J. Martin,
    Chairman, FCC (Jan. 18, 2008) at 1 ("Rep. Fortuño Jan. 18, 2008 Ex
    Parte") (opposing the merger "\[U\]ntil such time that exclusion of
    Puerto Rico and other noncontiguous United States jurisdictions from
    coverage area of satellite radio ceases."); Letter from Chairman
    José E. Serrano of the Subcommittee on Finance Services and General
    Gov't Communications on Appropriations, to Kevin J. Martin,
    Chairman, FCC (Sept. 19, 2007) ("Rep. Serrano Sept. 19, 2007 Ex
    Parte") (asking the Commission to consider requiring Applicants to
    provide equal access to SDARS service to Alaska, Hawaii, Puerto
    Rico, and other U.S. Territories); Senate Resolution 3392,
    Commonwealth of Puerto Rico, October 1, 2007 (expressing opposition
    to the merger "until the exclusion of Puerto Rico and other
    jurisdictions not contiguous to the United States from the mandatory
    coverage area of said service, ceases.").

[^483]: Rep. Serrano Sept. 19, 2007 Ex Parte at 1 (noting that in 10
    years since adopting the SDARS service rules, SDARS still is not
    available outside of full CONUS); Senate Resolution 3392,
    Commonwealth of Puerto Rico, October 1, 2007; OASPC May 19, 2008 Ex
    Parte at 2 ("Many technological advances have occurred during the
    decade since the FCC first authorized satellite radio systems . . .
    with the result that today there exists no legitimate excuse for
    subjecting any United States jurisdiction to arbitrary exclusion
    from satellite radio services.").

[^484]: Rep. Serrano Sept. 19, 2007 Ex Parte 2; Rep. Fortuño Jan. 18,
    2008 Ex Parte at 2; OASPC May 19, 2008 Ex Parte at 2 (requesting
    that the Commission condition grant of merger on all American
    jurisdictions receiving satellite radio services within two years).

[^485]: 47 C.F.R. § 25.144(a)(3)(i) (requiring Applicants to demonstrate
    that its system will, at a minimum, serve the full CONUS).

[^486]: When adopting this rule, the Commission considered, but
    ultimately rejected, a proposal to require SDARS licensees to
    provide 50-state coverage, or 50-state plus Puerto Rico/Virgin
    Islands coverage. After reviewing the record, the Commission
    observed that 50-state coverage was not mandatory for satellite
    services at that time and that a service area beyond full CONUS
    might not be practical for first generation SDARS systems. *1997
    SDARS Service Rules Order*, 12 FCC Rcd at 5794 ¶ 99.

[^487]: In light of Applicants' voluntary commitment to provide service
    to Puerto Rico, Rep. Fortuño states that he no longer objects to the
    proposed merger. Letter from U.S. Rep. Luis G. Fortuño to Kevin J.
    Martin, Chairman, FCC (June 25, 2008).

[^488]: Sirius Nov. 16, 2007 Response to Information and Document
    Request III.G, Narrative at 49-50, n.11 (Response to Interrogatory
    Question III.G. requesting that Sirius "describe what factors went
    into the selection of the geographic coverage areas for the
    satellite network, as well any technical, economic, other
    considerations that limit the ability of the Sirius satellite
    network to serve US state and territories outside the contiguous
    United States." Sirius Information Request at 4).

[^489]: To provide a high quality of service and signal diversity, SDARS
    satellites usually need to be at a reasonable elevation angle above
    the horizon.  When the angle of elevation is too low, mountainous
    terrain and buildings may obstruct the sight lines to the satellite
    blocking the signal. In addition, with a low angle of elevation
    atmospheric attenuation and electrical noise would also degrade the
    quality of service.

[^490]: Sirius Nov. 16, 2007 Response to Information and Document
    Request, Narrative at 50 ("Coverage was not extended to all of
    Alaska and/or Hawaii due to both technical limitations (need to keep
    high power density in primary service areas combined with low look
    angles in Alaska/Hawaii) and relatively low population densities in
    those states that limit the economic benefits of extending the
    coverage.") The original application for Sirius' network indicates
    that coverage for Puerto Rico and Alaska is at a lower power level
    than full CONUS coverage. *See Application of Satellite CD Radio
    Inc. for Minor Modification of License to Construct, Launch and
    Operate a Non-Geostationary Satellite Digital Audio Radio Service
    System*, IBFS File No. SAT-MOD-19981211-00099 (filed Dec. 11, 1998).

[^491]: XM Nov. 16, 2007 Response to Information and Document Request,
    Narrative at 33-41. (Response to Interrogatory Question III (G)
    requesting XM to "describe what factors went into the selection of
    the geographic coverage areas for the satellite network, as well any
    technical, economic, other considerations that limit the ability of
    the XM satellite network to serve US state and territories outside
    the contiguous United States." XM Information Request at 4).

[^492]: *See, e.g.*, Mt. Wilson Supp. to Petition at 2 (arguing the
    merger can be condoned only if the merged entity is limited to the
    allocated spectrum of one of Applicants); King Reply at ¶ 42
    (stating that unless Applicants use one of the bands for expanded
    service, they should not be allowed to keep both bands if the merger
    is approved); Sen. Bond June 4, 2008 Ex Parte at 1 (requesting that
    the Commission require the merged entity to divest part of its
    spectrum); NPR Petition at 21; Blue Sky Comments at 7; Prometheus
    Comments at 5; Letter from U.S. Sens. Olympia J. Snowe and Claire
    McCaskill, to Kevin J. Martin, Chairman, FCC (May 21, 2008) at 2
    ("Sens. Snowe and McCaskill May 21, 2008 Ex Parte).

[^493]: Joint Opposition at 87-88 (arguing divestiture is unnecessary
    because (1) there is sufficient spectrum available for new
    competition to enter the audio entertainment market, including those
    using satellite technology; (2) requiring one of the companies to
    divest its spectrum would make half of the 14 million satellite
    radios completely inoperable because the current receiver equipment
    cannot receive the signals of both companies; and (3) reducing
    available spectrum would limit the combined company's ability to
    realize merger-specific efficiencies, including the potential for
    expanded programming choices and additional services).

[^494]: NextWave June 18, 2008 Ex Parte at 1 (arguing that spectrum
    divestiture by the merged entity could negatively impact the ability
    of terrestrial wireless services in adjacent spectrum bands to
    coexist with licensees in the SDARS band).

[^495]: Sirius Nov. 16, 2007 Response to Information and Document
    Request, Narrative at 37.

[^496]: Unlike a broadcast radio band, where re-licensing of any single
    station will not affect other stations, the individual channels in
    an SDARS system exist only at the studio and in the user's receiver.
    Between these two locations, the data from all of the channels are
    combined into a single data stream with the number of bits allocated
    to any one channel varying on an instant-by-instant basis.

[^497]: The Sirius network transmits the data in three data streams of
    approximately four MHz each. Sirius Nov. 16, 2007 Response to
    Information and Document Request, Narrative at 37. We conclude that
    Sirius could not eliminate any one of the three 4 MHz data paths
    without significantly increasing the likelihood of dropouts.
    Similarly, Sirius could not reduce the size of its individual 4 MHz
    data path and offer fewer channels to its customers, because the
    user receivers and many other network components -- including the
    receivers, terrestrial repeaters and space stations themselves --
    only recognize a data stream of approximately 4 MHz and would not
    recognize a stream of a different size.

[^498]: Unlike Sirius, XM divides each of its three data streams into
    two duplicative streams, for a total of six segments. *See* XM Nov.
    16, 2007 Response to Information and Document Request, Narrative at
    29. Thus, XM transmits the data for all its programming in six 1.8
    MHz data streams: four time-diverse satellite bands (S1A, S2A, S2B
    and S1B) and two terrestrial repeater bands (TA and TB). *See* XM
    Nov. 16. 2007 Response to Information and Document Request,
    Narrative at 17, 29. XM could divest approximately 6.25 MHz by
    divesting either the "A" bands (S1A, S2A, TA) or the "B" bands (S1B,
    S2B and TB) without requiring XM to replace existing subscriber
    radios.

[^499]: WCS Coalition questions whether Sirius is authorized to provide
    its Backseat TV service and urges the Commission to prohibit Sirius
    from launching the service until the Commission has implemented WCS
    rules. Letter from Paul J. Sinderbrand, Wilkinson Barker Knauer LLP,
    Counsel for the WCS Coalition, to Helen Domenici, Chief,
    International Bureau, FCC and Fred Campbell, Chief, Wireless
    Telecommunications Bureau, FCC (Apr. 17, 2007) at 1-2. *See also*
    Letter from David R. Siddall, Sonnenschein Nath & Rosenthal LLP,
    Counsel for Georgetown, to Kris Monteith, Chief, Enforcement Bureau,
    FCC (July 10, 2008). The Enforcement Bureau is reviewing the issues
    raised by Georgetown regarding the Sirius Backseat TV service and
    will address those issues separately.

[^500]: Primosphere Petition at 3-4 (proposing that the Commission
    require the merged entity to enter into an agreement with
    Primosphere to allow it to use a portion of the SDARS spectrum to
    begin delivering programming to consumers).

[^501]: *See, e.g.*, C3SR Petition at 12-13 (asserting that for a new
    entrant to establish itself in the market, it would take about five
    years and potentially billions of dollars).

[^502]: Primosphere Petition at 3-4; Primosphere Reply at 3.

[^503]: NAB Petition at 32-33 (arguing that the lower-priced a la carte
    and tiered service offerings proffered by the merged entity would
    likely be advertiser-supported).

[^504]: NAB Response to Comments at 21-22. *See also* McGannon at 6-7
    (observing that broadcasters primarily rely on local advertising
    dollars); Letter from Lawrence R. Sidman, Counsel for Clear Channel,
    to Marlene H. Dortch, Secretary, FCC (Mar. 5, 2007), Att. at 1-2
    (arguing that the spectrum advantage of SDARS -- 300 channels vs. a
    limit of 8 channels for terrestrial station owners in the largest
    markets -- would allow a merged company to lock up quality
    programming and to siphon off national and local advertising
    revenue).

[^505]: Clear Channel June 20, 2008 Ex Parte at 2; *see also* Sen. Bond
    June 4, 2008 Ex Parte at 2 (stating "it is vital that the new
    satellite radio company reaffirm its position as a national service
    only"); *see also* Sens. Snowe and McCaskill May 21, 2008 Ex Parte
    at 1.

[^506]: *See supra*, Section IV.C.2.

[^507]: *See, e.g., Sirius STA Order*, 16 FCC Rcd at 16780 ¶ 18. In
    addition, in the pending rulemaking proceeding to develop rules for
    the operation of SDARS terrestrial, repeaters the Commission has
    tentatively concluded that the origination of local programming from
    SDARS repeaters would be inconsistent with the allocation of the
    spectrum. *See 2007 SDARS Second Further Notice,* 22 FCC Rcd at
    22141 ¶ 55 (citing *1997 SDARS Service Rules Order*, 12 FCC Rcd at
    5812 ¶ 142).

[^508]: *See* Applicants' July 25, 2008 Ex Parte at 2.

[^509]: *1997 SDARS Service Rules Order*, 12 FCC Rcd at 5823 ¶ 170 (this
    language is found under the subheading "Safeguards").

[^510]: *2007 SDARS NPRM*, 22 FCC Rcd at 12018 ¶ 1; *see also* June 8,
    2007 Public Notice, *infra* n.1.* *

[^511]: Application at 50.

[^512]: *Id*. To the extent that the Commission considers the
    above-quoted language in the *1997 SDARS Service Rules Order* to be
    a binding rule prohibiting the proposed transfer of control,
    Applicants requested that the Commission waive, modify, or otherwise
    alter it to the extent necessary to permit the proposed merger.
    *Id*. at 51-52.

[^513]: NAB Comments at 3-4; NPR Comments at 4-9; Clear Channel Aug. 13,
    2007 Comments at 3-5.

[^514]: *CropLife America v. EPA*, 329 F.3d 876, 883 (D.C. Cir. 2003)
    ("*CropLife*"); s*ee also Wilderness Soc. v. Norton*, 434 F.3d 584,
    595 (D.C. Cir. 2006) ("*Wilderness Soc*."); *General Elec. v. EPA*,
    290 F.3d 377, 382 (D.C. Cir. 2002) ("*General Elec*.").

[^515]: *CropLife*, 329 F.3d at 883 (quoting *General Elec.*, 290 F.3d
    at 382).

[^516]: *Cf.* *Wilderness Soc*., 434 F.3d at 595 (internal agency policy
    did not read as a set of rules "as a whole" because it "lacks
    precision in its directives, and there is no indication of how the
    enunciated policies are to be prioritized"); *Brock v. Cathedral
    Bluffs Shale Oil Co*., 796 F.2d 533, 538 (D.C. Cir. 1986)
    ("*Brock*") (language in published enforcement policy did not
    establish a binding rule where it was "replete with indications that
    the Secretary retained his discretion to cite production-operators
    as he saw fit").

[^517]: *See Community Nutrition Inst*., 818 F.2d at 947 ("mandatory,
    definitive" language included in an FDA action level, which informs
    food procedures for the permissible levels of contaminants, "clearly
    reflects an interpretation of action levels as presently binding
    norms"); *Cf. Brock*, 796 F.2d at 538 ("We have ... given decisive
    weight to the agency's choice between the words 'may' and 'will.'").

[^518]: Applicants' Comments to NPRM at 3-4, n.11 (quoting *Wilderness
    Soc.*, 434 F.3d at 596).

[^519]: *Health Ins. Ass'n of America, Inc. v. Shalala*, 23 F.3d 412,
    423 (D.C. Cir. 1994). *See also Community Nutrition Inst.*, 818 F.2d
    at 947 n.8 (FDA action levels for contaminants were binding rules
    despite non-publication in the Code of Federal Regulations). Even in
    *Wilderness Soc*., the case quoted at length by Applicants, the
    court focused on publication in the C.F.R. and the Federal Register
    as a means of discerning agency intent, not for purposes of
    establishing a bright-line distinction between binding rules and
    policy statements. *See*, *e*.*g*., *Wilderness Soc*., 434 F.3d at
    596 ("*Failure* to publish in the Federal Register is indication
    that the statement in question was *not* meant to be a regulation
    since the \[APA\] requires regulations to be so published. The
    converse, however, is not true: *Publication* in the Federal
    Register does *not* suggest that the matter published *was* meant to
    be a regulation.") (emphasis in the original).

[^520]: *See Brock*, 796 F.2d at 538; *see also* *General Elec*., 290
    F.3d at 383 ("the mandatory language of a document alone can be
    sufficient to render it binding").

[^521]: *See* *2007 SDARS NPRM*, 22 FCC Rcd at 12019-21 ¶ 3.

[^522]: Application at 51.

[^523]: *See, e.g*., NAB Comments at 10-13; NPR Comments at 10.

[^524]: *Authority to Construct and Operate an Automated Maritime
    Telecom. System*, 3 FCC Rcd 4690, 4692 (1988). *See also* *Am.
    Trucking Ass'n, Inc. v. FHA*, 51 F.3d 405, 414 (4th Cir. 1995)
    ("Commonly understood, administrative 'waivers' are a mechanism 'to
    seek out the "public interest" *in particular, individualized*
    cases.' They are not a device for repealing a general statutory
    directive." (quoting *WAIT Radio v. FCC*, 418 F.2d 1153, 1157 (D.C.
    Cir. 1969) (emphasis added)); *WAIT Radio*, 418 F.2d at 1159 ("The
    court's insistence on the agency's observance of its obligation to
    give meaningful consideration to waiver applications emphatically
    does not contemplate that an agency must or should tolerate
    evisceration of a rule by waivers."). *Cf*. *WITN-TV v. FCC*, 849
    F.2d 1521, 1525 (D.C. Cir. 1988) ("The waiver concept does not serve
    in this context, for petitioner's plea ... is in essence one for
    agency reconsideration of existing policy.").

[^525]: 5 U.S.C. § 553. *See, e.g*., *Appropriate Framework for
    Broadband Access to the Internet Over Wireline Facilities*, Report
    and Order and Notice of Proposed Rulemaking, 20 FCC Rcd 14853,
    14857-60 ¶¶ 4-11 (2005) (eliminating rules after notice and comment
    rulemaking).

[^526]: We reject the arguments opposing repeal of the rule prohibition
    in Sections IV, V, and VI.B, *supra*, for the same reasons that we
    reject commenters' arguments opposing the merger. *See*, *e*.*g*.,
    NAB Comments at 13-23; NAB Reply at 3-8; NPR Comments at 11-20.

[^527]: NAB Petition at 50-51; *see also* NAB Response to Comments at
    10; NABOB Petition at 13-14; USE Petition at 13-14; Entravision
    Comments at 19-20; Letter from U.S. Rep. Nancy Boyda to Kevin J.
    Martin, Chairman, FCC (Apr. 5, 2007) at 1; Letter from U.S. Reps. F.
    James Sensenbrenner, Jr. and Gene Green, to Kevin J. Martin,
    Chairman, FCC (June 18, 2007) at 2. In addition, Blue Sky questions
    whether Applicants meet the "citizenship, character ... and other
    qualifications" test set forth in Section 308(b) of the Act, 47
    U.S.C. § 308 ("All applications for station licenses, or
    modifications or renewals thereof, shall set forth such facts as the
    Commission by regulation may prescribe as to the citizenship,
    character, and financial, technical, and other qualifications of the
    applicant to operate the station."). Blue Sky Comments at 6-7; Blue
    Sky Reply at 1-3.

[^528]: Many portable satellite radio receivers have built-in FM
    modulators or transmitters, which are designed to permit users to
    listen to satellite radio over a car radio on unused FM frequencies.
    Such modulators must comply with the Commission's Part 15 technical
    requirements and receive an equipment certification prior to
    marketing. *See* 47 C.F.R. §§ 15.3(o), 15.201, 15.239.

[^529]: NAB Petition at 55.

[^530]: Noncommercial radio stations are more likely to receive
    interference from FM modulators because FM modulators are typically
    set to operate on vacant channels near the lower end of the FM band,
    where noncommercial stations frequently operate.

[^531]: NAB Petition at 55.

[^532]: *Id*. (citing Sirius's *SEC Form 10-Q for the Quarterly Period
    Ended September 30, 2006* at 35).

[^533]: *Id*. at 56.

[^534]: *Id*. at 56-57.

[^535]: *Id*. at 57.

[^536]: *Id.* at 56 (citing Sirius Supplemental Information, IBFS File
    Nos. SAT-STA-20061013-00121, 20061013-00122 (April 26, 2007), and
    Request of Sirius for Special Temporary Authorization Regarding
    Digital Audio Radio Service Terrestrial Repeaters, IBFS File Nos.
    SAT-STA-20061013-00122 (Nov. 17, 2006)). Additionally, as stated
    above, NAB argues that both Applicants have violated the SDARS
    receiver interoperability rule. NAB Petition at 52.

[^537]: Joint Opposition at 94.

[^538]: *Id*.

[^539]: *Id*. at 96.

[^540]: *Id*. at 97-98.

[^541]: *Id*. at 98.

[^542]: *Id*. (quoting *SBC-Ameritech Order*, 14 FCC Rcd at 14950 ¶ 50
    (emphasis added)).

[^543]: *Id*. at 99.

[^544]: *Id*.

[^545]: *Sirius Consent Decree Order* at ¶ 3; *XM Consent Decree Order*
    at ¶ 3.

[^546]: Blue Sky Comments at 6-7; Blue Sky Reply Comments at 1-3. *See*
    47 U.S.C. § 308(b) ("All applications for station licenses, or
    modifications or renewals thereof, shall set forth such facts as the
    Commission by regulation may prescribe as to the citizenship,
    character, and financial, technical, and other qualifications of the
    applicant to operate the station.").

[^547]: NAB argues that the violations are "directly relevant to the
    Commission's review of the proposed merger, separate and apart from
    basic character qualifications issues," because they cast doubt on
    the reliability of Applicants' voluntary commitments. NAB Petition
    to Defer Action in MB Docket No. 07-57 (filed Oct. 9, 2007) at 3. 
    *See* NAB Petition at 55-58. NAB points to the Commission's
    recognition in *EchoStar* that the merger applicant's history of
    past conduct should be "taken into account in assessing the
    likelihood that potential beneficial conduct will occur in the
    absence of private economic incentives." *EchoStar Communications
    Corp.*, 17 FCC Rcd at 20579 ¶ 35.  In that case, however, "one of
    the prime subjects of the alleged prior misconduct," EchoStar's
    failure to adhere to its must-carry obligations, "l\[ay\] at the
    heart of the realization of the proffered public interest benefits
    claimed to flow from the merger - provision of additional
    local-into-local service pursuant to the must-carry rules."*  Id.*
    Here, in contrast, none of Applicants' technical rule violations
    pertain specifically to their voluntary commitments. One of the
    commitments does concern the receiver interoperability mandate,
    which we conclude above was violated by Applicants.  For the reasons
    discussed above, however, we do not believe that their
    interpretation of the mandate as a design requirement was
    unreasonable in light of all of the circumstances.  Therefore, we
    are not persuaded that their violation of the mandate should be
    taken into account in considering the likelihood of fulfillment of
    their commitment to make an interoperable receiver commercially
    available within one year of the consummation of the merger.

[^548]: *See SBC-Ameritech Order*, 14 FCC Rcd 14712, 14749-50 ¶ 571
    (1999) (relying on SBC's voluntary commitments aimed at opening its
    local markets to competition in concluding that the public interest
    benefits of the proposed merger would outweigh the public interest
    harms, notwithstanding commenters' arguments that SBC had "history
    of vigorously resisting competition in its existing monopoly
    markets.").

[^549]: *1997 SDARS Service Order*, 12 FCC Rcd at 5791 § 91 ("The
    rationale behind these requirements is a belief that a licensee can
    better fulfill the needs of the community, whether local or
    national, if it makes an effort to hire a diverse staff, including
    minorities and women.").

[^550]: *Streamlining Broadcast EEO Rules and Policies,* Order and
    Notice of Proposed Rulemaking, 11 FCC Rcd 5154 (1996); *see also
    Lutheran Church- Missouri Synod v. FCC,* 141 F.3d 344 (D.C. Cir.
    1998), *pet. for reh'g denied*, 154 F.3d 487, *pet. for reh'g en
    banc denied*, 154 F.3d 494 (D.C. Cir. 1998); *Review of the
    Commission's Broadcast and Cable Equal Employment Opportunity Rules
    and Policies and Termination of the EEO Streamlining Proceeding*,
    Report & Order, 15 FCC Rcd 2329 (2000); *MD/DC/DE Broadcasters'
    Association v. FCC,* 236 F.3d 13, *rehearing denied,* 253 F.3d 732
    (D.C. Cir. 2001), *cert. denied* 122 S. Ct. 920 (2002); *Review of
    the Commission's Broadcast and Cable Equal Employment Opportunity
    Rules and Policies*, Second Report and Order and Third Notice of
    Proposed Rulemaking, 17 FCC Rcd 24018 (2002) ("*2002 Broadcast EEO
    Order*").

[^551]: *2002 Broadcast EEO Order*, 17 FCC Rcd at 24062-69 ¶¶ 139-64.
    SDARS licensees therefore must refrain from discrimination in
    employment practices and engage in the same recruitment, outreach,
    public file, website posting, record-keeping, reporting, and
    self-assessment obligations required of broadcast licensees,
    consistent with Commission Rule 73.2080, 47 C.F.R. § 73.2080, the
    policies set forth in the *2002 Broadcast EEO Order*, and any other
    Commission EEO policy as explained in Public Notices, case
    decisions, or other items. This includes creating annual EEO public
    file reports and posting them on the company website and filing the
    same EEO reporting forms with the Commission used by terrestrial
    broadcasters (*e.g.*, FCC Form 396 and 397) on the same schedule,
    notwithstanding the differences in license terms for broadcast
    stations and satellite facilities. In addition, we clarify that
    SDARS licensees also will be subject to the same random audits as
    broadcast licensees and all the same investigation and enforcement
    provisions including, but not limited to, audits for cause,
    reporting conditions, and forfeitures. *2002 Broadcast EEO Order*,
    17 FCC Rcd at 24066-67 ¶¶ 153-58.

[^552]: NAB Petition to Defer Action at 1.

[^553]: *Id.* at 1-4.

[^554]: USE Petition to Defer Action at 3-16.

[^555]: USE Petition to Designate Application for Hearing at 1-3; *see
    also* USE Motion to Designate and for Summary Decision at 1-3
    (arguing that Applicants effectively conceded that material factual
    issues are in dispute by not opposing USE's designation petition).

[^556]: Letter from Wade Henderson, President and CEO, Nancy Zirkin,
    Vice President/Dir. of Public Policy, and Mark Lloyd, Chairman,
    Media/Telecom. Task Force, Leadership Conference on Civil Rights, to
    Kevin J. Martin, Chairman, FCC (July 27, 2007) at 1.

[^557]: NAB also requests that we make public certain documents that
    Applicants have submitted as confidential pursuant to our Protective
    Orders.  Letter from David H. Solomon, J. Wade Lindsay, Wilkinson
    Barker Knauer, LLP, Counsel for NAB, to Marlene H. Dortch,
    Secretary, FCC (June 3, 2008).  Consumers Union and Consumer
    Federation of America make a similar request.  Letter from Chris
    Murray, Consumers Union, Dr. Mark Cooper, CFA, to Marlene H. Dortch,
    Secretary, FCC (July 9, 2008).  We will consider their requests for
    public disclosure separately pursuant to the terms of the Protective
    Orders and our regulations, 47 C.F.R. §§ 0.459, 0.461. We note that
    NAB already has reviewed these documents, as has the Commission, and
    that other parties have done so or had the opportunity to do so
    pursuant to our Protective Orders.

[^558]: Primosphere Motion to Consolidate at 1-2; *see also* Primosphere
    Petition at 3 (addressing the same issues as its Application for
    Review).

[^559]: *See* 5 U.S.C. § 605(b).

[^560]: *See supra* n.1.

[^561]: *See* 47 C.F.R. § 1.4(b)(3). Repeal of the merger prohibition in
    the Commission's *1997 SDARS Service Rules Order* is a rule of
    particular applicability that is not subject to the Administrative
    Procedure Act's publication requirement, 5 U.S.C. § 552(a)(1)(D);
    see supra, ¶ 162 ("the prohibition against merger applies only to
    the two Applicants; it has no application beyond this proceeding."),
    and may be effective on adoption under the Commission's rules. 47
    C.F.R. §§ 1.4(b)(3), 1.103. Further, the prohibition's repeal is not
    subject to the statutory 30-day waiting period under the
    Administrative Procedure Act because it "relieves a restriction."

    5 U.S.C. § 553(d)(1). In addition, the Congressional review
    procedures of Subtitle E of the Small Business Regulatory
    Enforcement Fairness Act of 1996, 5 U.S.C. § 801, *et seq*., do not
    apply here because repeal of the merger prohibition is not a "rule"
    within the meaning of 5 U.S.C. § 804(3)(A) (excluding from the
    definition of the term "rule" "any rule of particular applicability,
    including a rule that approves or prescribes for the future rates,
    wages, prices, services, or allowances therefore, corporate or
    financial structures, reorganizations, mergers, or acquisitions
    thereof, or accounting practices or disclosures bearing on any of
    the foregoing").

[^562]: The following applications for special temporary authority
    (either pending or in effect) to operate terrestrial repeaters are
    associated with the XM Radio Inc. space stations:
    SAT-STA-20010712-00063; SAT-STA-20020311-00049;
    SAT-STA-20020815-00153; SAT-STA-20030325-00056;
    SAT-STA-20030409-00076; SAT-STA-20031112-00371;
    SAT-STA-20031219-00373; SAT-STA-20050307-00056;
    SAT-STA-20050601-00113; SAT-STA-20050712-00145;
    SAT-STA-20061002-00114;
    SAT-STA-20061013-00119;SAT-STA-20061013-00120;
    SAT-STA-20061114-00138; SAT-STA-20061211-00147;
    SAT-STA-20070205-00026; SAT-STA-20070222-00036;
    SAT-STA-20070222-00037; SAT-STA-20070330-00059;
    SAT-STA-20070628-00091; SAT-STA-20070628-00093;
    SAT-STA-20070706-00095; SAT-STA-20070706-00096;
    SAT-STA-20071012-00140; SAT-STA-20071105-00148;
    SAT-STA-20071219-00178; SAT-STA-20080117-00026;
    SAT-STA-20080303-00056; SAT-STA-20080429-00094;
    SAT-STA-20080430-00095; SAT-STA-20080522-00111;
    SAT-STA-20080701-00139, and SAT-STA-20080724-00146.

[^563]: The following applications for special temporary authority
    (either pending or in effect) to operate terrestrial repeaters are
    associated with the Satellite CD Radio, Inc. space stations:
    SAT-STA-20010724-00064; SAT-STA-20020222-00028;
    SAT-STA-20020312-00029; SAT-STA-20020312-00048;
    SAT-STA-20020827-00162; SAT-STA-20020827-00248;
    SAT-STA-20030411-00075; SAT-STA-20030827-00299;
    SAT-STA-20031106-00370; SAT-STA-20031219-00369;
    SAT-STA-20040623-00119;
    [SAT-STA-20040623-00122](http://svartifoss2.fcc.gov/myibfs/forwardtopublictabaction.do?filing_key=-69850&ssid=1218202472&pgid=6);
    SAT-STA-20050301-00053; SAT-STA-20050601-00114;
    SAT-STA-20060623-00067; SAT-STA-20061013-00121;
    SAT-STA-20061013-00122; SAT-STA-20061107-00131;
    SAT-STA-20061107-00132; SAT-STA-20061107-00133;
    SAT-STA-20061107-00135; SAT-STA-20061207-00145;
    SAT-STA-20061208-00146; SAT-STA-20070327-00057;
    SAT-STA-20070710-00097; SAT-STA-20070719-00104;
    SAT-STA-20070928-00135; SAT-STA-20071213-00174;
    SAT-STA-20071220-00179; SAT-STA-20080131-00034;
    SAT-STA-20080314-00071; SAT-STA-20080530-00116;
    SAT-STA-20080530-00117, and SAT-STA-20080728-00151.

    In addition, Satellite CD Radio (Sirius) has a pending application
    to modify its NGSO space station constellation (Call Sign S2105) by
    launching and operating FM-6, which will eventually replace Sirius'
    two existing space stations, FM-1 and FM-2. IBFS File No.
    SAT-MOD-20080521-00110.

[^564]: "Full-time audio channels" mean the aggregate number of channels
    of music, news, sports, entertainment or audio programming broadcast
    on a continuous basis, 24 hours a day, seven days a week, plus
    part-time channels aggregated on a full-time equivalent basis, on
    the Sirius platform or the XM platform, as the case may be.

[^565]: A Qualified Entity includes any entity that is majority-owned by
    persons who are African American, not of Hispanic origin; Asian or
    Pacific Islanders; American Indians or Alaskan Natives; or
    Hispanics.

[^566]: *See* Letter to Kevin J. Martin, Chairman, FCC from Richard E.
    Wiley, Counsel to Sirius and Gary M. Epstein, Counsel to XM, MB Dkt.
    No. 07-57 (filed June 16, 2008) ("Voluntary Commitments").

[^567]: *Establishment of Rules and Policies for the Digital Audio Radio
    Service in the 2310-2360 MHz Band*, Report and Order, Memorandum
    Opinion and Order, and Further Notice of Proposed Rulemaking, 12 FCC
    Rcd 5754 (1997).

[^568]: *Amendment of Part 27 of the Commission's Rules to Govern the
    Operation of Wireless Communications Services in the 2.3 GHz Band,
    Establishment of Rules and Policies for the Digital Audio Radio
    Satellite Service in the 2310-2360 MHz Frequency Band*, WT Docket
    No. 07-293, IB Docket No. 95-91, Notice of Proposed Rulemaking and
    Further Notice of Proposed Rulemaking, 22 FCC Rcd 22123 (2007).

[^569]: Neither Sirius, XM nor, to the knowledge of the companies, the
    FCC has ever received an interference complaint from a WCS licensee
    relating to a satellite radio terrestrial repeater.

[^570]: *See Sirius Satellite Radio Inc.*, DA 01-2171, ¶¶ 10-11 (Sept.
    17, 2001); *XM Radio Inc*., DA 01-2172, ¶¶ 10-11 (Sept. 17, 2001).

[^571]: 17 U.S.C. §§ 106(6); 114(d)(2); 114(f)(1).

[^572]: We also are conditioning our approval of the transaction on the
    merged entity's continuing adherence to the other commitments and
    conditions, as specified herein, which continue indefinitely. The
    descriptions of the commitments and timeframes identified in this
    Appendix C are for informational purposes only and are not
    necessarily exhaustive. The Order, which incorporates the voluntary
    commitments set forth in Appendix B, specifies the precise terms and
    timeframes of the conditions adopted. Should there be any omissions
    in this Appendix or inconsistencies between this Appendix and the
    Order, the language in the Order will prevail.

[^573]: *See* Order at ¶¶ 47-50 (finding that the Commission must
    presume that satellite radio constitutes a single, national product
    market, and that "the proposed merger is a merger to monopoly").

[^574]: *Id.* at ¶¶ 5, 50.

[^575]: *Id.* at ¶¶ 54, 104.

[^576]: *Id.* at ¶¶ 5, 49.

[^577]: *Id*. at ¶ 107. The majority's statement that the FCC will
    review the price cap before the three-year period expires is little
    more than a fig leaf. It permits the majority to imply that it is
    not leaving consumers completely unprotected in 2011, while leaving
    all of the difficult decisions to a future Commission. That
    Commission will scarcely appreciate the Hobson's choice we are
    bestowing on them: let the price caps expire in the face of a
    monopoly provider or impose a new system of rate regulation on an
    industry that has never had one in the past.

[^578]: The price cap adopted by the majority permits certain costs to
    be passed through to consumers even during the three-year period. To
    the extent that occurs, even the three-year price controls could
    prove illusory.

[^579]: None of the remaining conditions address this fundamental
    consumer harm and I therefore do not address them at length. I would
    note, however, that many of them are chock-full of holes and/or
    limitations that could render them meaningless.

[^580]: *Application of EchoStar Communications Corporation, General
    Motors Corporation, and Hughes Electronics Corporation; and EchoStar
    Communications Corporation*, 17 FCC Rcd 20559, 20665 (2002).

[^581]: *Orde*r at ¶¶ 47-50.

[^582]: *Establishment of Rules and Policies for the Digital Audio Radio
    Satellite Service in the 2310-2360 MHz*

    *Frequency Band*, 12 FCC Rcd 5754, 5823 ¶ 170 (1997) (stating, under
    a subheading entitled "Safeguards", that "\[e\]ven after DARS
    licenses are granted, one licensee will not be permitted to acquire
    control of the other remaining satellite DARS license\[,\]" and that
    "\[t\]his prohibition on transfer of control will help assure
    sufficient continuing competition in the provision of satellite DARS
    service.").

[^583]: DOJ Press Release, *Statement of the Department of Justice
    Antitrust Division on its Decision to Close its Investigation of XM
    Satellite Radio Holdings Inc.'s Merger with Sirius Satellite Radio
    Inc.* (Mar. 24, 2008), *available at*
    <http://www.usdoj.gov/opa/pr/2008/March/08_at_226.html>.

[^584]: 15 U.S.C. § 18.

[^585]: 47 U.S.C. § 310(d).

[^586]: *See* "HD Radio" *infra*.

[^587]: For example, Sirius presently provides an Internet radio service
    to subscribers for either no additional charge or an additional
    \$2.99 per month, depending on the quality of the audio. Sirius
    Internet Radio, <http://www.sirius.com/siriusinternetradio>. XM
    presently provides a similar, though not identically structured,
    Internet radio service to subscribers. *See* XM Radio Online,
    <http://xmro.xmradio.com/xstream/index.jsp>.

[^588]: Sirius currently charges a one-time \$15.00 fee "to activate,
    reactivate, upgrade or modify each Satellite Radio Service
    Subscription." Sirius Terms and Conditions,
    [http://shop.sirius.com](http://shop.sirius.com/). XM charges a
    similar activation fee of undisclosed amount. XM Customer Agreement,
    <http://www.xmradio.com/about/customer-service-agreement.xmc> ("For
    each XM Radio on your account, we may charge you a fee to activate,
    upgrade or modify your Radio Services. The addition of premium
    channels or services, if any, may require an additional activation
    fee. The fee is payable with your first subscription fee payment.").

[^589]: Sirius currently charges a \$75 termination fee "if you cancel a
    one-year or longer Subscription during the first year of service."
    Sirius Terms and Conditions,
    [http://shop.sirius.com](http://shop.sirius.com/). XM charges a
    termination fee of undisclosed amount. XM Customer Agreement,
    <http://www.xmradio.com/about/customer-service-agreement.xmc> ("From
    time to time, we may offer the Services on an annual or other
    multi-month commitment basis. In such events, you agree to make
    payments for Services to be received and that are ordered by you in
    accordance with the terms of the applicable billing plan that you
    agree to, including, without limitation, payments of any early
    termination fees if you terminate your Services prior to the end of
    such commitment period.").

[^590]: Sirius currently charges a \$75 transfer fee "\[i\]f you
    transfer a lifetime Satellite Radio Service Subscription from one
    Receiver to another or from one person to another." Sirius Terms and
    Conditions, [http://shop.sirius.com](http://shop.sirius.com/). It is
    unclear whether or not XM charges a similar transfer fee or whether
    transfer is even permitted. *See* XM Customer Agreement,
    <http://www.xmradio.com/about/customer-service-agreement.xmc>.

[^591]: Investor Presentation, Sirius Satellite Radio Inc. and XM
    Satellite Radio Holdings Inc. (Feb. 20, 2007) (transcript *available
    at*
    <http://www.sec.gov/Archives/edgar/data/908937/000095012307002469/y30604be425.htm>).

[^592]: Sirius Terms and Conditions,
    [http://shop.sirius.com](http://shop.sirius.com/) ("Accordingly, we
    reserve the unrestricted right to change, rearrange, add, or delete
    programming, including canceling, moving or adding particular
    channels, at any time, with or without notice to you."); XM Customer
    Agreement,
    <http://www.xmradio.com/about/customer-service-agreement.xmc> ("XM
    reserves the right to change programming on either or both \[XM
    Radio Online and XM Radio\] Services at any time and without notice,
    at our sole discretion, including canceling, modifying, moving or
    adding particular channels, with or without notice to you.").

[^593]: Letter from Richard E. Wiley, Robert L. Pettit, Wiley Rein LLC,
    Counsel for Sirius Satellite Radio Inc., and Gary M. Epstein, James
    H. Barker, Latham & Watkins LLP, Counsel for XM Satellite Radio
    Holdings Inc., to Kevin J. Martin, Chairman, FCC at 5 (June 13,
    2008) ("Applicants' June 13, 2008 Ex Parte").

[^594]: *See e.g.*, Thomas W. Hazlett, *Shedding Tiers for A La Carte?
    An Economic Analysis of Cable TV Pricing*, 5 J. Telecomm. & High
    Tech. L. 253, 258 (Fall 2006) ("The complexities of the video
    marketplace rendered price regulation unworkable; when rates were
    capped by authorities, cable operators and cable networks responded
    to these constraints by altering the nature, packaging, and quality
    of video programming services.").

[^595]: Applicants' June 13, 2008 Ex Parte at 5.

[^596]: *See* Media Bureau, *Report On the Packaging and Sale of Video
    Programming Services To the Public* (Med. Bur., Nov. 18, 2004); *see
    also* Media Bureau, *Further Report on the Packaging and Sale of
    Video Programming Services to the Public*, (Med. Bur., Feb. 9, 2006)
    *available at*
    <http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-263740A1.pdf>.

[^597]: *Order* at ¶ 135.

[^598]: Letter from Richard E. Wiley, Wiley Rein LLC, Counsel for Sirius
    Satellite Radio Inc., and Gary M. Epstein, Latham & Watkins LLP,
    Counsel for XM Satellite Radio Holdings Inc., to Kevin J. Martin,
    Chairman; Michael Copps, Commissioner; Jonathan Adelstein,
    Commissioner; Deborah Tate, Commissioner; and Robert McDowell,
    Commissioner, FCC at 2 (July 25, 2008); Applicants' June 13, 2008 Ex
    Parte at 4-5.

[^599]: *See* Jeffrey H. Birnbaum, *Radio Merger Under Fire From Black
    Lawmakers*, [Wash. Post]{.smallcaps}, June 17, 2008, at D01 (quoting
    Representative Elijah E. Cummings).