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COMPETITION AND THE FUTURE OF

DIGITAL MUSIC

HEARING

BEFORE THE

ANTITRUST TASK FORCE

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

FEBRUARY 28, 2007

Serial No. 110–3

Printed for the use of the Committee on the Judiciary

(

Available via the World Wide Web: http://judiciary.house.gov 

(II)

COMMITTEE ON THE JUDICIARY 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

MARTIN T. MEEHAN, Massachusetts 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

LINDA T. SA ́ NCHEZ, California 

STEVE COHEN, Tennessee 

HANK JOHNSON, Georgia 

LUIS V. GUTIERREZ, Illinois 

BRAD SHERMAN, California 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

ARTUR DAVIS, Alabama 

DEBBIE WASSERMAN SCHULTZ, Florida 

KEITH ELLISON, Minnesota 

[Vacant] 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

DANIEL E. LUNGREN, California 

CHRIS CANNON, Utah 

RIC KELLER, Florida 

DARRELL ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TOM FEENEY, Florida 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio

PERRY APELBAUM, Staff Director-Chief Counsel 

SEAN MCLAUGHLIN, Deputy Chief Minority Counsel/Staff Director 

ANTITRUST TASK FORCE

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

STEVE COHEN, Tennessee 

ANTHONY D. WEINER, New York 

ARTUR DAVIS, Alabama 

DEBBIE WASSERMAN SCHULTZ, Florida 

STEVE CHABOT, Ohio 

RIC KELLER, Florida 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

BOB GOODLATTE, Virginia 

CHRIS CANNON, Utah 

DARRELL ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

LAMAR SMITH, Texas, Ex Officio 

PERRY APELBAUM, Staff Director-Chief Counsel 

SEAN MCLAUGHLIN, Deputy Chief Minority Counsel/Staff Director 

(III)

C O N T E N T S 

FEBRUARY 28, 2007

OPENING STATEMENT 

Page 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, Chairman, Committee on the Judiciary, and Chairman, 

Antitrust Task Force ............................................................................................ 1

The Honorable Lamar Smith, a Representative in Congress from the State 

of Texas, and Member, Antitrust Task Force .................................................... 2

WITNESSES 

Mr. David K. Rehr, President and CEO, National Association of Broadcasters 

Oral Testimony ..................................................................................................... 21

Prepared Statement ............................................................................................. 23

Ms. Gigi Sohn, President and Founder, Public Knowledge 

Oral Testimony ..................................................................................................... 42

Prepared Statement ............................................................................................. 44

Mr. Mark Cooper, Director of Research, Consumer Federation of America 

Oral Testimony ..................................................................................................... 56

Prepared Statement ............................................................................................. 58

Mr. Charles E. Biggio, Wison, Sonsini, Goodrich and Rosati 

Oral Testimony ..................................................................................................... 69

Prepared Statement ............................................................................................. 72

Mr. Mel Karmazin, CEO, Sirius Satellite Radio 

Oral Testimony ..................................................................................................... 83

Prepared Statement ............................................................................................. 85

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Prepared Statement of the Honorable Sheila Jackson Lee, a Representative 

in Congress from the State of Texas, and Member, Antitrust Task Force ..... 4

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Response to post-hearing questions submitted by the Honorable John Conyers, Jr. to Mel Karmazin, CEO, Sirius Satellite Radio ................................... 121

(1)

COMPETITION AND THE FUTURE OF

DIGITAL MUSIC 

WEDNESDAY, FEBRUARY 28, 2007

HOUSE OF REPRESENTATIVES, COMMITTEE ON THE JUDICIARY, Washington, DC.

The Task Force met, pursuant to notice, at 3:05 p.m., in Room 

2141, Rayburn House Office Building, the Honorable John Conyers, 

Jr. (Chairman of the Task Force) presiding. 

Mr. CONYERS. Good afternoon. 

The first hearing of the Antitrust Task Force for the 110th Congress will come to order. 

I welcome all of our Members, especially our Ranking Member, 

Steve Chabot of Ohio, who will be joining us momentarily. 

The very first hearing of our Antitrust Task Force involves a discussion of the issue of competition in digital media as exemplified 

by the proposed merger of Sirius and XM Radio. 

We come to this hearing with an open mind. But we recognize 

that the companies have the obligation to convince the Congress, 

the regulators and, most importantly, the American people, that 

this combination will improve the competitive playing field and 

benefit consumers. 

And so, here are the concerns I would like to lay on the table. 

The critical issue in this hearing to me is whether the relevant 

market is all forms of digital music and retail music and radio, or 

simply satellite radio. Proponents of the merger would note that 

the retail music industry exceeds $12 million in annual revenue, 

includes more than 230 million people who listen to ordinary radio, 

and 50 million people who listen to Internet radio, more than 100 

million iPods are going around the country, but yet there are 14 

million satellite radio subscribers. 

If we are to define the market as broadly as merger supporters 

advocate, what sort of precedent are we setting for other businesses? 

Now, several commentators have suggested that the reason this 

deal is being pushed is that the present Administration’s appointees will be able to give their approval before the next election. 

Excuse me for being so candid about this consideration. And from 

at least one perspective, this merger can be said to turn a duopoly 

into a monopoly circumstance. 

And, finally, my concern is about the potential for non-interoperability of competing technologies. How are we going to ever get the 

consumers who have already purchased equipment for either XM 

or Sirius to be able to use the equipment in a post-merger world? 

2

These consumers could be left high and dry and there could be 

complications that we hope to examine about how this could be 

made technologically smooth. 

I look forward to a full and frank discussion with our distinguished witnesses and urge that we all be as concerned as we can 

for the public interest issue that overlies this hearing. 

Our witnesses are David Rehr, the president and CEO of the National Association of Broadcasters. Our next witness, Ms. Gigi 

Sohn, president and founder of Public Knowledge, a nonprofit public interest organization that focuses on issues involving intellectual property as it applies to the communications sector. Our third 

witness is Mark Cooper, director of research at the Consumer Federation of America, who has testified on numerous occasions about 

communications and media matters. Our fourth witness is Mr. 

Charles Biggio, partner of a very prominent firm and who has himself served as Deputy Assistant Attorney General in the Antitrust 

Division in earlier Administration. And finally, Mr. Mel Karmazin, 

CEO of Sirius Satellite Radio, previously president of Viacom. 

And since our Ranking minority Member has been unavoidably 

detained, I now recognize the full Committee Ranking Member, Mr. 

Lamar Smith of Texas. 

Mr. SMITH. Thank you, Mr. Chairman. 

Let me just augment what you have said. The Ranking Member 

of the Task Force, the gentleman from Ohio, Mr. Chabot, has been 

detained at the House Administration Committee where he is testifying on behalf of the Small Business Committee, that he is also 

Ranking Member of. So that is the reason for his absence. 

And in his absence, I too want to thank you for convening this 

first hearing of the Antitrust Task Force. 

Vigorous, unimpeded competition sustains our economy and 

keeps it strong. It leads to innovative products that better our lives 

and keep prices low. The Judiciary Committee has a long history 

of oversight to ensure that American markets retain healthy competition. 

This hearing gives us the opportunity to examine one of the newest technologies emerging in our economy. In the last decade, the 

options for receiving music, sports, news and other programming 

have increased dramatically. Consumers also have the choice of two 

satellite radio companies, XM and Sirius. These companies provide 

hundreds of channels of unique programming options to millions of 

customers nationwide. 

Listeners have access to numerous choices in music, news, sports 

and talk programming that would have been unimaginable even 10 

years ago. Often these programming options come without commercial interruption and without the content restrictions that exist on 

terrestrial radio. 

Now those two companies have announced that they want to 

merge. They argue that a combined company would allow them to 

compete more effectively against broadcast radio, the Internet and 

a number of emerging technologies. They argue that efficiencies in 

the merger will allow them to provide even more choice to consumers at a competitive choice. 

Critics of the merger contend that this will reduce the number 

of satellite radio offerings from two to one and that approval of the 

3

merger would amount to a Government-sanctioned monopoly. They 

further argue that this merger would allow the combined XM-Sirius to raise subscription prices to consumers without providing any 

new or innovative services for those higher prices. 

Mr. Chairman, it is important we not prejudge the proposed 

merger. We are at the beginning of a very long process. Both the 

Federal Communications Commission and the Department of Justice will review this proposal. I trust that both the FCC and the 

DOJ will do a thorough job of reviewing the evidence and will also 

take into consideration the oversight findings of this Task Force. 

With that in mind, Mr. Chairman, I too look forward to listening 

to our witnesses and I yield back the balance of my time. 

Mr. CONYERS. Thank you very much, Mr. Smith, for stepping in 

in such a timely fashion. 

We will accept all other opening statements to be inserted in the 

record, without objection. 

[The prepared statement of Ms. Jackson Lee follows:]

4

PREPARED STATEMENT OF THE HONORABLE SHEILA JACKSON LEE, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF TEXAS, AND MEMBER, ANTITRUST TASK FORCE


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Mr. CONYERS.T1 MR. DAVID REHR, PRESIDENT OF NAB, YOU ARE

ON FOR 5 MINUTES. 

TESTIMONY OF DAVID REHR, PRESIDENT AND CEO,

NATIONAL ASSOCIATION OF BROADCASTERS 

Mr. REHR. Thank you, Mr. Chairman. Good afternoon, everyone, 

and thank you for the opportunity for me to be here today. 

I want to commend you, Mr. Chairman, Ranking Member Chabot 

and Ranking Member Smith on the Judiciary Committee and the 

Members of the Antitrust Task Force for exploring the issues surrounding what is in effect a Government-sanctioned monopoly. 

In my time today, I would like to make five points. 

Number one, the national satellite radio market is currently a 

two-company duopoly trying to become a Government-sanctioned 

monopoly. 

Number two, such a monopoly would violate FCC rules and 

precedent, congressional policy and antitrust principles. 

Number three, this Government-sanctioned monopoly would undermine audio content competition, not enhance it. 

Number four, even worse, two entities that have a pattern and 

practice of violating the terms of their FCC licenses cannot be 

trusted with monopoly power. 

Five, finally, by their own admission, both XM and Sirius are not 

failing companies and should not receive a Government bailout. 

First, the national satellite radio market is currently a two-company duopoly trying to become a Government-sanctioned monopoly. 

There are two companies in the market for nationwide multi-channel mobile audio programming services. They are asking to become 

one company. 

They want the power to set subscription rates without constraint 

from a competing service. They want the power to eliminate the 

need to compete with each other to acquire programming and talent. They want the power to demand exclusive deals and the ability 

to cross-subsidize to unfairly compete against local radio broadcasters. And the fact is, this monopoly would reduce innovation for 

services and equipment for consumers since there will be no competition in the defined market. 

Two, such a monopoly would violate FCC rules and precedent, 

congressional policy and antitrust principles. The FCC specifically 

refused to sanction a monopoly when it establish a national radio 

service in 1997, saying licensing at least two providers will help assure that subscription rates are competitive as well as provide for 

diversity of programming voices. 

Ironically, the argument for greater competition came from Sirius, then called CD Radio. They argued that multiple providers 

were necessary to ‘‘assure intra-service competition.’’ They said 

more players would have ‘‘compelling market-based incentives to 

differentiate themselves from competitors.’’

Perhaps most telling, Sirius explicitly stated that no satellite 

provider should never be permitted to combine with another provider because ‘‘such a development would have serious anticompetitive repercussions.’’

In fact, in 1997, at the urgings of the parties, the FCC explicitly 

prohibited any such future merger, stating one licensee would not 

22

be permitted to acquire control of the other. The only parallel circumstance to this instance is when the FCC refused in 2002 to permit a merger of the only two nationwide satellite television companies, EchoStar and DirecTV. The commission rejected this merger 

by a unanimous vote. 

The commission found that the antitrust laws are hostile to proposed mergers that would have these impacts on competitive structures because such mergers are likely to increase the incentive and 

ability to engage in anticompetitive conduct. 

Moving from a duopoly to a monopoly, as is the case here, would 

also be inconsistent with congressional policy favoring competition 

over monopoly as expressed in the 1996 Telecommunications Act 

and with long-standing enforcement of Federal antitrust laws. 

Three, this Government-sanctioned monopoly would undermine 

audio content competition, not enhance it. A satellite radio monopolist could undermine competition by using its national market 

power to force content providers, like sports programmers, to deal 

only with them. It could also use cross-subsidies to engage in anticompetitive behavior against local radio broadcasters. 

Four, two entities that have a pattern and practice of violating 

their FCC licenses cannot be trusted with monopoly power. Both 

companies certified 10 years ago that they would comply with an 

FCC rule to develop a device that works with both services. Still 

today, 10 years later, no consumer device is available. 

Both companies routinely violated FCC Part 15 rules, which govern the production and distribution of receiver equipment. Both 

companies routinely and regularly violate FCC technical rules. XM 

operated more than 142 repeaters at unauthorized locations. 

Mr. CONYERS. Mr. Rehr, you are the first witness to go over time. 

Mr. REHR. I am sorry. 

Let me conclude by saying, point five: Some have suggested the 

merger is necessary for the survival of these companies, but by 

their own admission, this is not true. 

Thank you, Mr. Chairman. And thank you. 

[The prepared statement of Mr. Rehr follows:]

23

PREPARED STATEMENT OF DAVID K. REHR


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Mr. CONYERS. Thank you very much. 

We welcome now Ms. Sohn. 

TESTIMONY OF GIGI SOHN, PRESIDENT AND FOUNDER, 

PUBLIC KNOWLEDGE 

Ms. SOHN. Thank you, Chairman Conyers, Ranking Member 

Chabot, Ranking Member Smith and other Members of the Task 

Force for inviting me to discuss the merger of XM and Sirius Satellite Radio. 

The proposed merger presents a dilemma for public interest advocates. On one hand, the only two providers of satellite radio service, which have vigorously competed for the past 5 years, are seeking to consolidate, raising questions about the impact on prices and 

choice for consumers. On the other hand, this vigorous competition 

has led to a spending war for new and better programming, leaving 

both competitors weakened in a world where Internet radio, broadcast and HD radio, cable radio and other multi-channel music, entertainment and information services have become increasingly 

popular. 

Regardless of the financial woes of the companies and any 

change in the market structure, the salient question is this: will 

consumers be better off. 

I believe that if the merger passes antitrust scrutiny, consumers 

will be better off if the merger is approved subject to conditions 

that protect consumer choice, promote diverse programming and 

keep prices in check. 

The antitrust questions raised here are very complex and ultimately depend on information to which public knowledge does not 

have access. For instance, the foremost question is how narrowly 

or broadly defined the relevant market? While I believe the market 

should be defined more widely to include a wide variety of radio, 

wireless, mobile and multi-channel music services, it is unclear 

whether consumers would turn to those services if satellite radio 

prices were raised. 

Anecdotal evidence suggests that there is nothing shortage of 

substitutes. On the other hand, we cannot ignore the fact that 

there are real differences between satellite radio and its competitors. Consumer data and other evidence would be helpful in determining whether these competitors are indeed substitutes and 

would constrain prices. 

Should the merger survive antitrust scrutiny however, I believe 

that the public interest would be served by permitting the merger 

subject to conditions that promote diversity, preserve consumer 

choice, and keep prices in check. I have reached this conclusion for 

several reasons. 

First, consistent losses and flattening subscribership at both 

companies make it less likely that they will take a chance in alternative programming and programming that meets the needs of underserved communities. A combined subscriber base would allow 

the new company to distribute the high fixed cost of a satellite system across a larger consumer base, reducing the cost for the subscriber and enabling new programming and/or lower prices. 

Second, consumers would gain access to channels that they could 

not receive unless they subscribed to both services. 

43

Third, eliminating duplicative channels will create more capacity 

for new and diverse programming. 

Still, the magnitude of this merger warrants strong protections. 

Thus, it should only be approved subject to three conditions. 

First, the new company should make available to its consumers 

a la cart and tier programming choices. 

Second, the new company should ensure program diversity by 

making available 5 percent of its capacity for noncommercial, educational, informational programming. This would resemble section 

335 of the Communications Act, which requires DBS providers to 

reserve 4 percent to 7 percent of their channel capacities for such 

uses. 

Third, the new company should be prohibited from raising prices 

for 3 years after the merger is approved. 

I would like to conclude by raising two other concerns. 

First, public knowledge strongly opposes any merger condition 

involving limitations on the ability of the consumers to record these 

satellite radio services. Such a condition would be tantamount to 

repealing the Audio Home Recording Act which specifically protects 

a consumer’s ability to record digital music. 

Second, we also strongly oppose any merger condition that would 

limit satellite radio from providing local programming. Broadcasters’ opposition to this merger is incredibly hypocritical given 

their own current regulator efforts to consolidate and their desire 

to prevent satellite services providing local content is anticompetitive in its own right. 

Even assuming that broadcasters take seriously their statutory 

duty to serve local communities with programming that serves 

their needs, there is no reason why in 2007 any media service 

should have a Government-granted monopoly over local programming. 

Instead, Congress and the FCC should consider permitting satellite radio to provide more, not less, local programming. 

To finish, I just want to add that it is curious that for an industry that claims that it wants a ‘‘level playing field,’’ it seeks not 

only to restrict satellite radio and its programming but also refers 

to efforts to require them to pay performance royalties to artists as 

a tax. And this may be the only time that I agree with the recording industry, and thanks to the broadcasters we do, but I think 

that is an outrage and Congress should look at it. 

I want to thank the Task Force again for inviting me to testify. 

I look forward to your questions. 

[The prepared statement of Ms. Sohn follows:]

44

PREPARED STATEMENT OF GIGI B. SOHN


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Mr. CONYERS. Thank you so much. 

Mr. Cooper, welcome. 

TESTIMONY OF MARK COOPER, DIRECTOR OF RESEARCH, 

CONSUMER FEDERATION OF AMERICA 

Mr. COOPER. Thank you, Mr. Chairman, Members of the Task 

Force. I appreciate the opportunity to testify on the proposed merger between XM and Sirius. 

Ms. Sohn wants to regulate the resulting monopoly. We haven’t 

yet given up on competition. The merger of the only two satellite 

subscription radio companies should raise a red flag for both antitrust officials and communication regulators whose job it is to promote competition and consumer choice in the marketplace. 

Not only are XM and Sirius prohibited from merging as condition 

of their licenses, the growth of satellite subscription at very substantial monthly charges and consumer equipment costs over the 

past few years demonstrate that this is a service which in fact can 

be distinguished quite clearly from other things that are out there. 

We believe companies who seek to merge so soon after they came 

into existence after they promised not to merge, after they demonstrated that subscription can gain a significant audience, carry 

an enormous burden to show that regulators should abandon the 

normal rules of antitrust oversight to allow such a merger as this, 

a merger to monopoly. 

We remain unconvinced by the excuses we have heard to justify 

this merger. The product in geographic characteristics of satellite 

radio are easily identifiable. Satellite is national, mobile, and programmed. Those are the essential characteristics. You have added 

two more today, Mr. Chairman, or Ranking Minority Member. 

There are generally advertising-free and content-unrestricted. 

They have put products in the world that are require consumer 

purchases of large bundles of over 100 channels. The alternatives 

that the companies suggest or substitute do not possess these characteristics. This is a unique set of characteristics and further entry 

into this market is limited by the need to have a license to broadcast over a spectrum that can get the job done. There are only two 

such licenses. 

Consumer switching costs are substantial. This is a classic case 

of a distinct product with competitive problems. Two is not really 

enough for good competition. Remember, there is an expression in 

economics: Four is few, and six is many. We are talking about two 

and three in most cases these days. 

The track record of inter-modal competition disciplining competitive use is poor at best. Bank shot competition, where people compete indirectly with badly matched products, has not disciplined 

pricing abuse. I submit that cable TV is a perfect example where 

satellite and over-the-air have failed to protect the consumer from 

abuse. Head-to-head competition is what gets the job done. Intermodal competition is a very, very poor second best. 

The suggestion that free over-the-air radio will discipline price 

increases is ludicrous. They raised prices a few years ago by 30 

percent. Free over-the-air didn’t do it when they were competing 

head-to-head. What makes you think it is going to discipline prices 

57

when they aren’t even competing head-to-head with well-matched 

products? 

Perhaps the most outlandish of all the claims being circulated by 

the merging parties is the argument that consumers will be better 

off with a benevolent monopolist than vigorous competitors. We reject that ultra-short-term view. In that view, competition is defined 

as wasteful since redundant facilities lie unutilized. Monopolists’ 

claims to serve everyone while using fewer resources and promising 

not to abuse the resulting market power. 

Without the stick of competition, however, the costs savings simply will not be passed through to consumers and innovation will 

slow rather than speed up. It is competition that is the driver of 

innovation in our economy; competition is the best form of consumer protection. And head-to-head competition is the best form of 

competition. 

Offers of conditions on this merger really, we don’t give much 

credence to. The recent track record of conditions on mergers has 

been abysmal and the satellite radio industry has already demonstrated that the promises and commitments it makes to interoperability, to noninterference, to nonuse of terrestrial repeaters, 

all shows that they will be difficult to oversee if we adopt that approach. 

So we are not talking conditions anymore. We want to give competition a chance. If the authorities change their mind, we will 

have plenty time to figure out what conditions should be imposed. 

Finally, a satellite radio merger to monopoly is to really about an 

avalanche of mergers. If the antitrust authorities in Federal communication oversight adopts such a loose definition of products and 

markets to allow a merger to monopoly on the basis of inter-modal 

competition, then a tsunami of mergers will ripple through the digital products space at the worst possible moment. From our point 

of view, there is a humongous hurdle that the merging parties have 

to overcome and they haven’t even begun to put facts on the table 

that would lead us to believe there is any way to make this a socially responsible merger. 

Thank you. 

[The prepared statement of Mr. Cooper follows:]

58

PREPARED STATEMENT OF MARK N. COOPER


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Mr. CONYERS. Thank you, Mr. Cooper. 

Mr. Biggio, we welcome you for your testimony at this point. 

TESTIMONY OF CHARLES BIGGIO, WISON, SONSINI,

GOODRICH AND ROSATI 

Mr. BIGGIO. Thank you. I would like to thank the Chairman, 

Ranking Member Chabot, Ranking Member Smith, for the opportunity to testify on the antitrust aspects of the merger between XM 

and Sirius. 

This merger obviously raises important policy and law enforcement considerations, but whether the combination of XM and Sirius is a two-to-one merger to monopoly or a merger in a much larger market is a question of fact, and right now we don’t have the 

facts necessary to determine the legality of the merger. 

The facts will come out. However, merger review is essentially a 

law enforcement exercise and the enforcement agencies, the Antitrust Division in particular, along with the Federal Communications Commission, are best equipped to find the relevant facts and 

my recommendation is that no firm conclusions be formed about 

this merger until the agencies have completed their review. 

It is important to note that a merger need not create a monopoly 

in order to violate section 7 of the Clayton Act. At the same time, 

a merger that results in very high market shares and high market 

concentration does not automatically violate section 7. 

Mergers in concentrated industries can be lawful if the market 

conditions are such that the merger would in fact have no anticompetitive effect. So the XM-Sirius merger may violate section 7 

even if it turns out not to be a two-to-one merger to monopoly. And 

at the same time, it may pose no competitive threat, even if the 

market ultimately is defined as highly concentrated. 

The evaluation of this merger will start with an evaluation of the 

nature of competition between XM and Sirius. They have been vigorous competitors and it is fair to ask the question of whether 

eliminating the competition will lead to higher prices or lower quality. In answering this question, the Antitrust Division and the Federal Communications Commission will look at how competition between the two services has affected price and quality and then ask 

whether the other alternatives advanced by the parties are likely 

to produce the same competitive outcomes. 

The key question is whether the competition between XM and 

Sirius is the factor determining the subscription price for the two 

services and the quality of the product being offered, or whether 

some or all the other alternatives will provide a comparable competitive check. 

Now, ordinarily markets are defined narrowly to include only 

those products that have a meaningful impact on price. Mergers between close competitors or next-best substitutes are usually problematic because other products may not be sufficiently viable substitutes to impose a significant price constraint. Once the close substitutes merge, there may be substantial room for price increases 

before the pricing constraint offered by a more remote substitute 

kicks in. 

The key aspect of merger analysis is identifying the best consumer to test the significance of possible competitive substitutes. 

70

Markets are defined by the marginal consumer. Thus, even if many 

consumers would not substitute away from satellite radio to some 

other product in the face of a price increase, the market could still 

be defined broadly to include other products if enough marginal 

satellite radio customers would switch. And the key point is that 

the marginal customers need not predominant in order for the market to be defined broadly. 

We all have our own individual views of what we would do or 

wouldn’t do if prices for satellite radio would go up after this deal. 

It is a classic problem in merger review, to substitute anecdotal 

and subjective opinion for hard evidence. The real answer lies in 

a rigorous economic evaluation of whether enough consumers 

would switch in the face of an effort to raise prices post-merger. It 

is a highly technical question that the parties and the Antitrust Division and the FCC can work out during the investigation. 

I would also like to comment quickly on some of the possible benefits of the merger that Mr. Karmazin has outlined in his statement. I agree that these benefits, if substantiated and shown to be 

possible only through the merger, would weigh heavily in favor of 

the deal. However, in making their merger benefits case, I think 

the parties would have to answer some pretty tough questions. 

First, Mr. Karmazin contends the merger will increase choice, 

but the parties will have to explain how choice is increased when 

the merger will eliminate one of the key choices now available. The 

parties will have to explain how competition in some important 

way is an impediment of choice, because ordinarily competition 

maximizes choice. 

In particular, the parties argue that the merger will allow subscribers to get XM and Sirius content with one subscription, but 

they will have to explain why the differentiation between XM and 

Sirius is a bad thing that can be fixed only by the merger. Ordinary, the kind of exclusive deal that makes Howard Stern available 

only on Sirius is justified because the exclusives are the best way 

for a competitor to add subscribers. But here the argument seems 

to be that the marketing strategy requiring exclusive content is actually impeding subscriber acquisition. 

If so, the parties will have to explain why the merger and not 

the elimination of exclusive programming is the only way to 

achieve this benefit. And the parties will have to explain why having a single firm bundle content into differentially priced tiers is 

better than having competing firms with differentiated content. 

The competitive significance of the consumer being able to get 

the pull range of content from a single firm cannot be evaluated 

without also understanding how that single firm will bundle and 

price that content after the elimination of a competitive. 

Ultimately, XM and Sirius will have to articulate merger benefits 

that the two firms could not have achieved themselves as independent firms competing in the marketplace. While there appears 

to be plausible efficiencies that will be generated by the merger, 

some of the claimed benefits will need to be further evaluated. 

The best way to get the answers to these questions will be 

through the merger review process conducted by the Department of 

Justice and the Federal Communication Commission, by looking at 

the real world factors that go into the marginal consumer’s calculaVerDate 0ct 09 2002 14:14 May 03, 2007 Jkt 000000 PO 00000 Frm 00074 Fmt 6633 Sfmt 6601 F:\WORK\ANTITRUS\022807\33627.000 HJUD1 PsN: 33627
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tion of what he or she will pay for satellite radio. And the evidence 

will come from the parties’ documents and an evaluation of how 

and why consumers choose to spend their money on satellite radio. 

Thank you very much. I would be glad to take any questions. 

[The prepared statement of Mr. Biggio follows:]

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PREPARED STATEMENT OF CHARLES E. BIGGIO


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Mr. CONYERS. Thank you so much. 

Mr. Karmazin, it is all yours now. You are the final witness, and 

you have been referred to more than once here. 

TESTIMONY OF MEL KARMAZIN, CEO,

SIRIUS SATELLITE RADIO 

Mr. KARMAZIN. Well, thank you very much. And good afternoon. 

Thank you very much, Chairman Conyers, Congressman Smith, 

Congressman Chabot and the Members of the Antitrust Task 

Force, for this invitation to talk to you about the pending merger 

between XM and Sirius satellite radio. 

I am speaking today on behalf of both companies. With me here 

today is Gary Parsons, chairman of XM. 

With your permission, I think what I would like to do, because 

I think it would be more meaningful, is to abandon my opening 

comments, which I will be happy to make them available to you, 

and spend a little bit of time talking about this merger and what 

we think it means for consumers and the public. 

So far, I agree with everything that was said. I think it is the 

very early stages of this merger. I can tell you that we look forward 

to working with Congress, working with the regulators, and convincing everybody that this merger is in the best interest of the 

public. 

I think that our obligation is going to be twofold. We will have 

an obligation to demonstrate that this merger is not anticompetitive. I hear that we will probably be working with the DOJ and I 

am convinced that we will give them enough information and they 

will get their own information to make that determination. 

I can tell you for sure that satellite radio competes with the 

10,000 terrestrial radio stations. We compete with over the 1,000 

HD radio stations on the air today. We compete with the Internet 

for Internet radio. We compete with all kinds of services that, interestingly enough, weren’t available at the time when our licenses 

were given. 

So, you know, the idea of comparing where we are from a technology point of view today and comparing it to where it was 10 or 

12 years ago, when statements were made, we think is sort of not 

very consumer-friendly because the world has changed. 

So number one, we know that both with the Justice Department 

and with the FCC, we are going to have to convince them that this 

is not anticompetitive. I think even more important, if there is 

something more important than that, is that I believe in order to 

convince Congress and the regulators that this deal should be approved, is that we are going to have to demonstrate that this is in 

the consumers’ best interest, because if we cannot convince everybody that this is in the consumers’ best interest, then this merger 

will not be approved. And I am confident that the members of the 

FCC, if they didn’t believe it, would not vote for it and we wouldn’t 

get antitrust approval. 

We are absolutely convinced that this merger is in the consumers’ best interest. This merger will give people more choice 

than they have before and lower prices and, very importantly, less 

confusion. So if you think about the way it is today without the 

merger, there are two different radios that a consumer needs to 

84

buy. It would be like buying one for AM radio and one for FM 

radio. But it was obviously determined that a receiver that would 

get both services would be in the consumer’s best interest. 

There is a great deal of confusion in the marketplace because 

they are interested, when they buy a car and they go and buy a 

General Motors car and that comes with an XM radio and that XM 

radio doesn’t enable the consumer to pick up the NFL, that is not 

very consumer-friendly. And we believe that this merger will absolutely give the consumer more benefits. 

So number one, one of the benefits will be is that no radio will 

be obsolete. I heard that mentioned earlier and there was a concern 

that the people who have bought an XM radio or they bought a Sirius Satellite Radio, those radios would be obsolete. And we can 

guarantee that is not the case. 

We also have said that there would be more choice for consumers 

and we believe that by consolidating these companies, we are going 

to be able to offer the consumer who wants to be able to have the 

NFL and wants to be able to have Major League Baseball, instead 

of them buying two radios and paying $25.90 a month, that they 

will be able to do it at a cheaper price. 

So what we believe will serve the consumer’s best interest would 

be to give them more choice. We are committed to giving the consumer more choice. Count on it. Okay? 

And if you want to count on it in some other ways other than 

us saying it, I am sure that the FCC and the Justice Department 

could absolutely keep our feet to the fire on that kind of commitment. 

And, number two, what we are committed to doing is offering 

lower prices. We are saying we are not going to raise our price and 

we are going to offer the consumer something that they have not 

had before. 

So, Sirius has never, ever raised its price. We started our service, 

the first subscriber paid $12.95. They are currently paying $12.95. 

Our vision would be that, because we are competing with free 

radio, because $12.95 has only enabled us to get 10 million subscribers nationally, we are competing with the 200 million cars 

that have AM and FM radio, we are competing with 109 million 

homes that have four radios in it. So the idea of raising a price to 

compete with free is bizarre and doesn’t seem to work. 

But you know what? Maybe you are concerned that you don’t 

want to deal with the economics. I am telling you today that we 

are committed, we are committed to not raising prices and committed to in fact lowering the price. So if the consumer is going to 

be able to have more choice, guaranteed no price increase and be 

able to have an option—more flexibility for a lower price—we think 

that we would meet the standard of absolutely saying that this 

merger is in the public interest. 

So I look forward to working with the regulators. I look forward 

to working with this Committee and I look forward to working with 

consumers in making sure that that they see this advantage as 

well. 

Thank you. 

[The prepared statement of Mr. Karmazin follows:]

85

PREPARED STATEMENT OF MEL KARMAZIN

Mr. Chairman, 

Good afternoon. Thank you, Chairman Conyers, Ranking Member Smith, and 

members of the Anti-Trust Task Force for the invitation to talk with you about our 

merger with XM Satellite Radio. 

I’m Mel Karmazin, the CEO of Sirius Satellite Radio. Before I came to Sirius in 

2004, I was president of Viacom, and before that, president of CBS. I’ve spent just 

about my entire working life in the broadcast industry. 

I am speaking today on behalf of both companies. With me here today is Gary 

Parsons, the chairman of XM. Gary is a veteran of the communications business, 

a real leader in the world of satellite radio. Gary and I are both looking forward 

to working together to create an exciting new company. 

Gary’s leadership and talent are crucial to this merger. He built XM into the success it is today. I should point out that XM has the largest digital radio facility of 

its kind in the country, and is headquartered right here in Washington. 

We firmly believe that this transaction is essential to preserving and enhancing 

choice for consumers. A combined company will be able to compete more effectively 

in the highly competitive and rapidly evolving audio entertainment marketplace. 

Our new enterprise will enhance the audio industry’s future. 

I appreciate this opportunity to explain why we believe so strongly that this merger will benefit American consumers. 

This afternoon I would like to focus on the two most important aspects of this 

merger:

1. How this merger will lead to increased consumer choice and lower prices; 

and

2. How this merger enhances competition in an already highly competitive market. 

CONSUMER CHOICE AND LOWER PRICES

Since the creation of satellite radio in 1997, the consumer has been at the center 

of our business plan. Consumer wants and needs have brought the technology and 

the industry to where it is today and the consumer continues to be our number one 

priority. That simple but important fact will not change post-merger. The long-term 

success of satellite radio rests on growing our subscriber base. As a single company, 

we expect to provide current and future subscribers the best and most diverse audio 

content available. 

A merged company will also give subscribers additional programming options and 

pave the way for even more programming. We expect that consumers will no longer 

have to subscribe to both services in order to receive the most popular programming. 

We want subscribers on both systems to be able to listen to both the NFL and Major 

League Baseball. Both the PGA and NCAA basketball. Both Oprah Winfrey and 

Martha Stewart. 

Moreover, in the long-term the significantly expanded channel capacity of our 

merged company will give consumers access to a greater range of programming. XM 

and SIRIUS already broadcast a wide range of commercial-free music channels, exclusive and non-exclusive sports coverage, news, talk, and entertainment programming. In the long-term, our combined company expects to be able to expand diverse 

programs for underserved interests. For example, we hope to expand foreign language and religious programming. 

The merger will also result in a combined focus on designing the best products 

and innovative services for our subscribers. By combining our research and development, we will be able to design and introduce radios and transmission infrastructure that will give satellite radio subscribers the best experience in audio entertainment. We will be able to speed the introduction of radios offering content from both 

of our services today—something that has been challenging as separate companies. 

We anticipate that together, our radios will be smaller, lighter, simpler, and more 

technologically-advanced than what each company has on the market today. Over 

time, we will look to combine our satellite and terrestrial transmission infrastructure to deliver the broadest range of content and the highest level of service quality. 

Finally, we’ll use our combined resources to improve upon our nascent non-audio 

services, like Backseat Video, real-time traffic and weather, and other infotainmentstyle data services. At the same time, we will accelerate the delivery of innovative 

services and products. 

It is important to realize, however, that our individual radios will not become obsolete as a result of this combination. Any radios or other equipment that subscribers currently use will be fully supported by SIRIUS and XM. When more techVerDate 0ct 09 2002 14:14 May 03, 2007 Jkt 000000 PO 00000 Frm 00089 Fmt 6633 Sfmt 6621 F:\WORK\ANTITRUS\022807\33627.000 HJUD1 PsN: 33627
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nologically advanced devices are ready, subscribers will make the decision to adopt 

them at a timing of their choice. 

In summary, a merged Sirius and XM will be a boon to consumers. They will receive additional programming opportunities and choice at more competitive prices. 

They will have access to advanced equipment and services, but they will have the 

flexibility to adopt technology when they wish, secure in the knowledge that their 

current radio will continue to operate. And satellite audio will continue to be a viable consumer option in the modern audio entertainment marketplace—a marketplace that has undergone incredible growth and upheaval since the birth of satellite 

radio. 

ENHANCED COMPETITION IN THE AUDIO ENTERTAINMENT INDUSTRY

We operate in an intensely competitive environment and that competition will 

continue to intensify post-merger—and continue to provide an inherent check on 

programming as well as on pricing. Our long-term success rests on growing our subscriber base, and we simply will not attract new subscribers if we are not meeting 

consumer expectations on price and programming. 

The dynamic growth in audio technology has given consumers an impressive 

array of choice—a significantly broader range of audio entertainment options from 

which to choose than was the case when we were first granted our licenses a decade 

ago in 1997. Back in 1997, an eon ago in the world of technology, audio entertainment was dominated by analog AM and FM radio. Digital broadcast radio did not 

yet exist. The Internet was still in its infancy; with multi-channel digital broadcast 

radio and broadband streaming Internet audio and radio still on the horizon. 

Today’s options paint a stark contrast to those in 1997. Of course, satellite radio 

still competes vigorously with free over-the-air AM-FM radio—a service that exists 

in virtually every home and car in the country. That competition is becoming fiercer, 

as radio moves to digital broadcasts in response to satellite’s appeal. But we also 

face growing competition for our audience from emerging audio sources, including 

multi-channel digital broadcast radio, wireless broadband and mobile phone streaming. 

But that’s just the beginning; an even wider range of new services are becoming 

mainstream. Wireless carriers are exploring new data and voice services as they deploy 3G and 4G networks. Multi-channel HD radio is spurring renewed growth in 

the terrestrial radio marketplace, with additional free programming choice. Services 

such as WiMAX and Media Flow are emerging as high-bandwidth, long-range content, and data transmission technologies. 

It has only been 10 years since satellite radio was licensed. Could we have predicted 10 years ago that the audio entertainment marketplace would look the way 

it does now? One reason for all the new technological advancements is that competition in the audio entertainment market is robust. We are seeing new entrants on 

a regular basis as the market continues to meet the needs of the consumer. The reality is that consumers can choose from a wide range of different services and technologies that offer audio entertainment. 

XM and Sirius are relatively small players in that highly competitive and rapidly 

evolving audio entertainment marketplace. Welterweights in an arena of 

heavyweights. There are 237 million vehicles in the United States, each of which 

offers a built-in AM and FM radio. There are another 230 million PCs in use that 

can access programming online, and there are 223 million weekly AM and FM radio 

listeners in the United States, and millions of cell phones for music listening, to programmed entertainment, music news, talk and information. Contrast that to Sirius 

and XM. The companies currently have about 14 million subscribers. Satellite radio 

is a David operating in a land of Goliaths and is hardly a threat to controlling the 

audio entertainment market. 

But competition is healthy, and it benefits the consumer. Today when we think 

to ourselves, ‘‘I want to hear some of the jazz greats like Louis Armstrong, John 

Coltrane or Miles Davis,’’ we have a multitude of options at our fingertips. We can 

turn on our AM/FM radio and tune in to a jazz station; we can log on to the Internet 

and find the music online; or we can turn on our SIRIUS satellite radio and tune 

into Planet Jazz, Jazz Cafe ́ or Spa 73. 

Given the expansive market—within which satellite radio is only one of many alternatives—we are certain that an accelerating level of competition will exist postmerger. There is little doubt that satellite radio faces stiff competition from many 

of the technologies and entertainment platforms that I have already described. In 

fact, I would like to note for the committee that in the SEC filings of traditional 

radio companies, they readily acknowledge that they compete with satellite radio in 

a larger market for audio entertainment:

87

—From Clear Channel Communications 2005 Form 10-K; page 24: ‘‘Our broadcasting businesses face increasing competition from new broadcast 

technologies, such as broadband wireless and satellite television and 

radio, and new consumer products, such as portable digital audio 

players and personal digital video recorders.’’

—From COX Broadcasting / COX RADIO 2005 Form 10-K; page 8–9: ‘‘In addition, the radio broadcasting industry is subject to competition from 

new technologies and services that are being developed or introduced, such as the delivery of audio programming by cable television 

systems, by satellite digital audio radio service and by digital audio 

broadcasting. Digital audio broadcasting and satellite digital audio 

radio service provide for the delivery by terrestrial or satellite means 

of multiple new audio programming formats with compact disc quality sound to local and national audiences.’’

The fact is that we are in the middle of a rapid evolution of the audio entertainment industry. Together, SIRIUS and XM can compete more effectively. We will 

have the capacity to expand our market by offering more compelling and more diverse content to a greater proportion of the population. Our goal is to have as many 

people in this country look to us as a source of content relevant to them. By combining our companies, we are absolutely convinced that we are creating a company 

with tremendous potential. We are confident that together we will be able to quickly 

and successfully integrate the two companies to deliver the greatest programming 

choices to our existing and new subscribers. 

Our merger has resulted in one unexpected harmony. There are few—if any—

issues where you’ll find the LOS ANGELES TIMES, the WALL STREET JOURNAL, USA TODAY, and the CHICAGO TRIBUNE in agreement. All four newspapers found that our merger is meritorious. The LA TIMES concluded that the 

audio entertainment market ‘‘is very competitive, particularly among the national 

players.’’ Mr. Chairman, Ranking Member Smith, and members of the Committee, 

thank you for this invitation to speak with you today about the very significant consumer benefits that this merger will produce. Sirius and XM together see great opportunities, and we believe that our growth will be faster and our service offerings 

will be more competitive on a combined basis. 

This transaction is about choice. We look forward to the day this merger is approved and we can begin to provide consumers with best-of-breed programming as 

well as the acceleration of innovative services and products that they desire. 

I look forward to answering any questions the Committee might have.

Mr. CONYERS. Thank you very much, all of the witnesses. This 

has been, I think, an extraordinarily useful way to begin an examination of this proposed merger. I compliment all of you on the details that have gone into your statement and the concern. 

I commend you, Mel Karmazin, for the defense that you have 

raised in view of their earlier discussion. 

One of the considerations is, how do we enforce promises in the 

circumstances in which we find ourselves? This Committee won’t be 

a party to the negotiations with the Department of Justice or the 

FCC, and so we are concerned about how that can happen. 

The two companies compete through pricing structures. Sirius 

currently offers a $500 lifetime subscription fee. How do we know 

that structure will remain in place in the future? 

We have, unfortunately, a not-too-good-record of performance of 

satellite radio keeping promises. That is part of the record that I 

think both companies have to overcome. There is no public interoperable radio that would work on both networks. And that was 

promised. You violated conditions about noninterference and use of 

terrestrial repeaters. 

How do we draw—I mean, trusting you isn’t going to work here, 

in this—not just today, but in this longer-term of examinations 

that you will be go going through. You have high hurdles to overcome, don’t you think? 

88

Mr. KARMAZIN. Mr. Chairman, thank you for that. 

I am not asking you just to—first of all, you can trust me. But, 

more importantly, you need something more than that, and I am 

prepared to work with this Committee, work with Congress, work 

with the regulators, to do what you need to do to have something 

beyond ‘‘trust me.’’

A couple of the facts are wrong and I just don’t want to get hung 

up on facts, but when we committed, we said that we would design 

and we would create the ability to have an interoperable radio. We 

have such a radio. It is in my office. And it is there. 

The problem with it is that there is no receiver manufacturer 

that wants to pay to supply it, and we currently are subsidizing 

our radios and we are subsidizing our radios today because we get 

a subscription from it. 

The idea of us subsidizing a radio when we may not get a subscription doesn’t make any sense for us. So we did not in any way, 

shape or form break that promise. We have developed, as our requirement was, a radio. We have offered intellectual property to receiver manufacturers, so if any receiver manufacturer wants to 

make an interoperable radio, they can make it. 

The problem is, it would sell somewhere around $700 without a 

subsidy, and that is why the merger could make it possible, because we can get a subscription. 

Regarding the interference on the terrestrial repeaters, I could 

tell you that our company, when we found out that we had 11 repeaters that were not operating in accordance with our rules—

okay, they were minor issues—we shut them off as soon as we 

found about it. These repeaters were not causing any interference. 

They weren’t causing any harm to consumers. They were operating 

at a different standard. 

So we take exception to the idea of us not following the rules. It 

would be like saying that a broadcaster who violated the political 

advertising rule, who is not giving the lowest rate was fined, they 

don’t deserve to be a licensee. Or recently one company, a terrestrial broadcaster, paying a $24 million——

Mr. CONYERS. Let me interrupt you here, because I wanted to 

find out what your opposition was to Ms. Sohn’s testimony that the 

FCC should permit satellite radio broadcasters to do more local 

programming. 

And then I might ask Mr. Cooper to use up a half minute if we 

have got that kind of—oh, we don’t have that kind of time. Sorry, 

Mr. Cooper. 

Mr. KARMAZIN. Okay. So, I will tell you that providing local content is not our business model. You know, I mean, unless you sit 

there and say that we are broadcasting the Washington Redskins 

and that is a local content, our belief is that every place you have 

a satellite radio—this is not television and this is not DirecTVEchostar. 

Every place you have a satellite radio, you have an AM and an 

FM radio. So for us to duplicate what they do very well is not part 

of our plan. But if in fact—we want to get this deal done. There 

are so many synergies that are there. We have committed to taking 

a chunk of the synergies, a good chunk of the synergies, and passVerDate 0ct 09 2002 14:14 May 03, 2007 Jkt 000000 PO 00000 Frm 00092 Fmt 6633 Sfmt 6601 F:\WORK\ANTITRUS\022807\33627.000 HJUD1 PsN: 33627
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ing it along to the consumer as a financial benefit. So, we want to 

get the deal done. 

If, in order to get the deal done, we need to make concessions, 

we are prepared to make concessions and we will work with the 

FCC on doing it. Putting in more local programming, we think, 

would not be in the consumer’s best interest, because they have 

free over-the-air radio in their market where they are doing it. 

We don’t sell local adverting. We are not in that business. We 

don’t plan to be in it, we don’t want to be in it, but if that was a 

condition, you know, we would certainly consider anything that the 

Government would ask us to do. 

Mr. CONYERS. Thank you so much. 

Steve Chabot, our Ranking Member, has the best excuse for 

being late that I have heard lately, because he was before the 

House Administration Committee getting his budget administered 

for the 110th Congress. 

I am glad that you are here now. And I am sorry that they kept 

you so long. I wish you good luck before that Committee. 

Mr. CHABOT. Thank you very much, Mr. Chairman. As you know, 

duty calls and you have to answer, and I did in that case. 

I want to take this opportunity to apologize for being late, first 

of all, but also to thank the distinguished gentleman from Michigan, Mr. Conyers, and the distinguished gentleman from Texas, 

Mr. Smith, for their leadership on this issue. 

And the topic that we are examining this afternoon demonstrates 

the Task Force’s continued commitment to carrying out its responsibilities and the critical role it will play in assessing the viability 

of our antitrust laws, especially as they relate to competition in the 

21st century. 

The promoted XM-Sirius merger highlights just one of the complex issues that the Task Force will face: examining current business conditions in an age of constant change and advancing technology and the impact that these conditions have on consumers. 

I will begin my questioning, and I will have to make it relatively 

brief as well, because we are all restricted by the 5-minute rule. 

I will begin with you, Mr. Karmazin, as the Chairman did. Could 

you explain again why it is necessary for, you believe, the two companies to merge, and what benefits the consumers arguably would 

receive that they don’t already have in the current market and 

what inefficiencies are the two companies experiencing that makes 

merging necessary? In about 2 minutes, if you can do that. 

Mr. KARMAZIN. I will talk real fast, unlike my normal style. 

First of all, it is not necessarily. We are not making a failing 

company argument and we are not saying that if in fact our merger 

were not approved at the end of the day we would not continue to 

go along and do business. 

Why we think it should be approved is the fact that the consumer will get more choice, lower prices and the ability to have less 

confusion and more content. So we believe it should be approved 

because it is very pro-consumer. 

It doesn’t have to be approved. We can go back to sitting there 

having our existing businesses. But the idea is, if there is an interest in giving the consumer more choice and better pricing, it happens with the merger, not without the merger. 

90

Mr. CHABOT. Okay. Thank you very much. 

Mr. Rehr, if I could turn to you next, and I know that you have, 

in your written statement, adamantly opposed the merger of XM 

and Sirius because it creates a monopoly, arguably. 

Would you elaborate a bit on your opposition to the merger and 

why you believe it would not be good for consumers? 

Mr. REHR. Yes. Thank you, Congressman. 

Let me make three quick points. 

Number one, and I am not a lawyer, I am an economist by training. Monopolies in and of themselves are bad. And one of the points 

that I made in my oral testimony is that we are currently in a duopoly, a two-market—or a two-company market in, mobile national 

audio multi-channel satellite radio. 

So when you go from two companies to one company, I think you 

have to say what is the overwhelming reason why we should create 

a monopoly? Because when monopolies are created, they have a 

tendency to do bad things—raise prices, restrict supply, engage in 

dictating terms of contracts—that wouldn’t exist in a duopoly, twocompany model let alone in a multi-company model. So we have 

real concerns about creating a monopoly. 

Number two, with a monopoly, comes monopoly power and monopoly profits, profits that wouldn’t be able to be grabbed by the 

companies if they were in a competitive market. And we believe 

those will be used for exclusivity, constraints put upon programmers, as well as cross-subsidization to compete against local radio 

stations. 

Mr. CHABOT. Thank you very much. 

Mr. Biggio, if I could turn to you next. Would you describe the 

antitrust scrutiny that the proposed merger would undergo? 

Mr. BIGGIO. Yes. The merger is subject to Hart Scott Rodino, 

which means it has to be notified to both the FTC and the DOJ. 

The DOJ would review it, given its past history in this market. 

The merger also is going to be reviewed by the Federal Communications Commission and during that process, the parties will 

have an opportunity to provide a very considerable amount of information, both pursuant to a subpoena from the Government as well 

as voluntarily, to explain what the consequences of the merger will 

be. 

Both the FCC and the DOJ will do a thorough investigation not 

on the only of the parties but also of other affected firms, customers, competitors, content providers, automobile OEMs, I am 

sure, the electronic retailers and so forth, to figure out what 

choices the consumer actually has and at what price point would 

a consumer who is interested in satellite radio after the merger 

switch to some other product in order to avoid a higher price. That 

is the basic question. 

Mr. CHABOT. Let me cut you off there, if I can, because I have 

less than a minute and I want to get to Mr. Cooper. 

I apologize, Ms. Sohn, for not getting to you. 

Mr. Cooper, one of your complaints about satellite radio as it currently exists is that the companies force consumers to purchase 

bundles of channels. If the combined company chose to offer tiered 

service or was forced to do so by the FCC, would that do anything 

to ameliorate your concerns? Could you comment on that issue? 

91

Mr. COOPER. Each of the conditions that we have heard about 

ameliorates some concern. 

Mr. Karmazin has proposed the regulatory regime that, if I came 

up here and offered it, members would fall back over in their 

chairs. I mean, he is talking about price, quantity regulation, public interest obligations, all kinds of regulatory oversight. He says 

don’t trust me. Tell the regulators to impose it on me. So those 

take away the harms. 

But in the long run—I have been testifying up here for 30 years. 

And the essential message that I have learned, and I believe it, is 

that competition is the consumer’s best friend. 

So, Mr. Karmazin has said, look, impose these regulations on 

me—and in the antitrust case they won’t be permanent, so we will 

worry about what happens when they go away—and I will be good 

for a period of time. But consumers are, in fact, better serviced by 

competition. 

And let me make a point. He has talked about—he sells the consumer short. He says consumers are confused by our two products. 

Consumers see hundreds and thousands of products in the market 

every day. They are differentiated but similar. They can handle 

that difference. If there is confusion, it has been created by their 

failure to deliver—notice the way he parsed these words. ‘‘We developed an interoperable radio, but we just can’t deliver it.’’

Imagine the regulator now having to deal with that kind of double talk. 

So from our point of view, you can name these conditions, but in 

the end it will be a wrestling match with that kind of parsing of 

words. It will be time limited and it will take away the consumer’s 

best friend, which is competition. 

Mr. CHABOT. Thank you, Mr. Chairman. 

Mr. CONYERS. Mr. Howard Berman? 

Mr. BERMAN. Thank you, Mr. Chairman. 

As I listened to Mr. Rehr’s testimony, my mind wandered for a 

second, and when he was talking about merged entities that would 

control many radio channels and many local markets, I thought for 

a second he was talking about Clear Channel. 

But, Mr. Karmazin, in announcing the merger, you talked about 

the field of competition, and in the course of it, you mentioned 

over-the-air AM-FM radio, and you also mentioned iPods, which is 

really more of a distribution mechanism than a performance mechanism. 

And I was wondering, if—I had introduced last year the Perform 

Act, having reintroduced it this year, because of my concern that 

with new portable devices that turn performances into distributions, there was an issue here of whether or not the creators of the 

music are the essence of all of the business models being talked 

about here, whether they were getting fairly compensated. 

And I do note that under your leadership, Sirius reached a marketplace deal through negotiations to compensate the artists and 

their record labels. XM took a different approach and preliminary 

litigation—actually, it was a judicial decision which talked about 

what they were doing and raising the question of whether that was 

really a performance and the meaning of that term under the copyright law. 

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Will your new company plan to adhere to the perspective that 

you adopted for Sirius of ensuring adequate compensation to copyright owners? 

Mr. KARMAZIN. We believe that we made a business decision in 

paying a royalty. We thought it was the right thing for our company to do. XM had a different viewpoint and they took advantage 

of the courts, and I think that is an option. 

And I think that either XM will win or lose in court, and that 

will find its way, or they will reach an agreement. I think that——

Mr. BERMAN. Well, at some point there will be a merger, if you 

have your way, and it is not then you and XM anymore. 

Mr. KARMAZIN. And at this point, I have no idea if this litigation 

issue will be settled or resolved beforehand. I tend to like not to 

use the courts. I tend to also like to use the marketplace, so my 

point in response to the Chairman’s question on how do I know 

about pricing and other issues. The marketplace—there is no monopoly or duopoly. That is the most bizarre thing I have ever 

heard. I can’t wait——

Mr. BERMAN. I didn’t use those terms. 

Mr. KARMAZIN. I can’t wait to get the market definition. 

So I think that there is a sense that there are all of these products out there. Ninety-five percent of the products out there compete with iPod, not because we have a record function in it; just 

because if you are driving in your car and you put your iPod in a 

jack, you are listening to content. We have very few products out 

there with the record function in it so that the competition has 

nothing to do, when I mention it, with the Perform Act issue. It has 

to do with the fact that people are listening to their music on iPod 

or listening to their music on satellite radio. 

Mr. BERMAN. Well, since I raised it, I guess I am not the person 

to make this point, but it is not a hearing on that, the device’s ability to record hours of music, ability to give a play list and have people select and maintain copies is an issue. 

But let me move on to another issue, just for the recognition 

that, since you have this marketplace view, you made this deal and 

you will be the CEO of the new company, you are raising the expectations of how that issue will finally get resolved. 

Mr. Rehr, your testimony talks about wanting the level playing 

field. But the over-the-air radio station—and Ms. Sohn made this 

point, but it is worth repeating because it was so good. You operate 

a profitable business built on music, but you don’t pay artists and 

record companies, whether it is in the analog or in the digital format. 

So when every station in America at a certain time of the year 

is playing ‘‘White Christmas,’’ you don’t pay Bing Crosby or his 

heirs, you don’t pay the people who own that song. When Frank Sinatra is singing ‘‘New York, New York,’’ you are not paying his 

heirs or the people who own that song. 

The competition that you talk about, that you are concerned 

about, has to pay the performance right to the recording artist for 

the labels for that music. Why is this present situation a level playing field? Why shouldn’t we rectify something that was done originally in a different time in a very different situation? 

93

Mr. REHR. I think that is a great question, Mr. Berman. I would 

respond to it in three ways. 

Number one, radio broadcasters and artists have a long symbiotic relationship that benefits artists. We build demand for them 

in the market. I think a lot of artists recognize that. 

Number two——

Mr. BERMAN. Well, then, why are—and, so, what? These poor 

guys are suckers because——

Mr. REHR. No, no, no. I mean, I think—hopefully you, I believe, 

as the Subcommittee Chairman will be having hearings on the Performance Act and we would be more than anxious to testify on our 

viewpoint, because it is a very complicated issue. 

But in a nutshell, I don’t think it is so much of the artists. I 

think they are looking at their revenue—I think the recording labels have seen their fundamental business model changed and are 

looking for ways to not only compensate the artists, but to frankly 

compensate themselves. 

And the three things that I can say about broadcasters are, number one——

Mr. BERMAN. I don’t think that is an issue much in dispute. 

Mr. REHR. Right. We build demand for the artist——

Mr. BERMAN. And you are looking to avoid compensating both. 

Mr. REHR. No, I don’t think so, because I think we compensate 

them——

Mr. BERMAN. Wait. But you are sitting here—Webcasters are 

paying it. 

Mr. REHR. Right. 

Mr. BERMAN. Satellite radio guys are paying it. Apple is paying 

it. All kinds of new services that perform and deliver music are 

paying it. Over-the-air radio isn’t paying the performance right. 

Mr. CONYERS. The gentleman’s time has expired, regretfully. 

The gentleman from Florida, Mr. Keller. 

Mr. KELLER. Well, thank you, Mr. Chairman. 

The issue before us is controversial and simple. By allowing this 

merger, is the Federal Government encouraging competition, 

choices and low prices or are we creating a monopoly and bailing 

out two struggling competitors who may have overspent on highpriced talent. 

I remain completely open-minded on this issue, and I am trying 

to look at this issue through the eyes of a typical consumer. So I 

want to ask some pointed questions. 

I am going to ask the first to you, Mr. Karmazin, and to be fair 

about it, just realize I am going to ask Mr. Rehr some equally 

tough questions. 

But as I look at this through the eyes of a consumer, and I am 

one—you will be pleased to know I am a Sirius subscriber, and my 

favorite preset, for example, is a stand-up comedy channel. 

Now, if you decided to jack up your rates today, I would have the 

option of going to XM. Now, after the merger, I have got no place 

to go. If you decided to increase the price from 12.95 to $14 as part 

of Sirius-XM, would I pay for it? Probably, yes. I think it is probably worth it and I have got nowhere else to go. There is no competitor with the traditional AM-FM because the material on that 

particular channel is a little too edgy and adult-oriented. 

94

On the other hand, it is better to have one choice than no choice 

if you both go under. So I am sensitive to that, too. 

So let me ask you, am I correct from your testimony today that 

as a condition to securing approval from the Federal Government 

for this merger that you would agree to pricing restrictions for a 

period of time? 

Mr. KARMAZIN. Yes. 

Mr. KELLER. And how long a period of time? 

Mr. KARMAZIN. We are willing to talk to people about it. But I 

will tell you, the main reason, Congressman——

Mr. KELLER. Four years? 

Mr. KARMAZIN. Congressman, the main reason about the pricing 

is not the regulated issue. It is we compete with free. And I can 

give you alternatives——

Mr. KELLER. I understand that and I am going to follow up on 

that. 

Mr. KARMAZIN [continuing]. And that is the pricing point. 

Mr. KELLER. But when you say you are agreeing for a period of 

time, it is an impressive statement. I think you will make news 

with it. But if you are agreeing to pricing restrictions for 2 weeks, 

it is not impressive. For 4 years, it is impressive. 

Mr. KARMAZIN. Okay. So why don’t we now understand in your 

judgment what that window is and let us see if we can come to an 

agreement somewhere in that window between 2 weeks and 4 

years? 

Mr. KELLER. But you don’t have any—when you told us, and you 

testified that you were going to agree to it for a period of time, you 

had no idea in your mind whether it was 2 weeks or 4 years? 

Mr. KARMAZIN. Congressman, the reason that we believe that is 

because we believe that we need to show you and others that this 

is in the public interest. And we know that price is important. So 

we know we want to get there. We want to get there in whatever 

the regulators and we feel is the appropriate time frame. 

Mr. KELLER. Okay. And did I hear you correctly when I said you 

would agree, if necessary, to formally enter into an agreement with 

the Federal Government that you would not be competing with the 

local broadcasters with respect to local news, traffic and weather, 

if that was necessary to get the approval? 

Mr. KARMAZIN. Well, I think we would be open—I think we 

would be open to lots of things. I think that we are trying to make 

this agreement, this merger, happen for the benefit of the consumer. 

The idea of the Government saying it is not in the consumer’s 

best interest to give them more choices sounds anti-consumer. But 

if the idea of the merger is conditioned on certain restrictions, we 

would be open to those restrictions. 

Mr. KELLER. Okay. Now, as a Sirius subscriber, am I correct 

from your testimony that I am not going to have to junk my old 

radio as part of this new XM-Sirius merger and get a new radio? 

Mr. KARMAZIN. Guaranteed. 

Mr. KELLER. Okay. 

Mr. Rehr, let me turn to you. Must be pretty good news for you, 

hearing, at least, that Mr. Karmazin says he has no intention in 

their business model to engage in competition with the AM-FM 

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radio stations with respect to local news, traffic and weather. Why 

aren’t you smiling on hearing that? 

Mr. REHR. People who want to attain a Government-sanctioned 

monopoly, with all due respect, will about say and do anything to 

grab it. 

Mr. KELLER. And I promised him I would give you some hard 

questions, too. So let me just ask you what Ms. Sohn said and I 

will give you a chance to respond. 

Mr. REHR. Let me——

Mr. KELLER. You are going to have as much time as you want 

to respond, but I have got to get my question out or I get zapped 

here. 

Ms. Sohn said it is pretty hypocritical of you to come up here and 

talk about the beauty of competition when you all vehemently oppose having the satellite radio folks compete with the traditional 

AM and FM with respect to local news, weather and traffic. 

What say you to that argument? 

Mr. REHR. Let me first respond to the previous question, and 

then get to the latter question. 

Mr. KELLER. You bet. 

Mr. REHR. The previous question is, how can you tell if someone 

who is attempting to go from a duopoly to a monopoly will keep 

their commitments into the future. The only way I can judge that 

is based upon their past performance. It is questionable at best, at 

best. 

It would be one thing if the companies came before you and said, 

we fully complied with the FCC regulations to the letter, and we 

will do that into the future. It is another thing to recognize, in fact, 

that at least in three areas they have flaunted the rules, ignored 

them, and in fact, to Mr. Karmazin’s point, one of the repeaters 

that he talked about, where he said, you know what, it was in the 

wrong place, it was 67 miles away from the place they reported it 

to be. And it does cause interference problems. It caused interference problems with the wireless people. I would suggest that you 

bring them in as well to find out about what this monopoly will do 

to their business. 

To the point about competition and local advertising in local markets, you know, we need to go back to 1997 when the FCC made 

the determination of dividing the spectrum into the 25 megahertz 

that were awarded to national multi-channel audio companies. And 

I think the determination was made that it wanted to be sure that 

it could promote technology, but it would not undermine localism 

and local radio, which has been the backbone of this country since 

Marconi invented the devices. 

Mr. KELLER. The Chairman has said I can give Ms. Sohn a 

chance to reply to that. 

Ms. SOHN. I think part of the problem I am having with this 

whole discussion is sort of the silo approach. Okay. We are only 

talking about satellite radio. Why are we not talking about all 

radio? 

And that is my problem with Mr. Rehr, is that, you know, 50 

years ago—excuse me, 75 years ago, you know, Congress said that 

broadcasters should have a monopoly on local programming, and 

therefore in 2007 we should keep it that way. 

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It seems to me to be ridiculous. In this day and age, radio is 

radio. Music is music. I understand that Mr. Karmazin will say 

just about anything to get his merger, but I am surprised that he 

doesn’t want to do local radio. Why not? 

And, I mean, you talk about level playing field, the Government 

bailout. You guys are asking for a Government-sanctioned monopoly on local programming and local news. And that just, in this day 

and age, makes absolutely no sense at all. 

Mr. CONYERS. Thank you. 

I am sorry, Mr. Cooper, but I will recognize Mr. Rick Boucher. 

Mr. BOUCHER. Mr. Chairman, thank you very much. Let me commend you at the outset for forming this Antitrust Task Force. I 

think that is a very useful step for this Committee to take. 

And I also want to commend you for making the Sirius-XM proposed merger the first subject to which you have drawn this Task 

Force’s attention. 

Mr. Karmazin, it seems to me that much of the decision regarding this merger will really revolve around how the relevant market 

is drawn. And so let us take just a few minutes to talk about what 

that relevant market actually is. 

It seems to me that a very powerful argument has been made. 

You have made it here today. I think perhaps Mr. Rehr’s very presence here helps to confirm this argument, that the relevant market 

really is all of radio. 

You are offering satellite radio, but you have terrestrial radio, 

Internet-based radio. Then you have the whole IP-enabled set of 

applications, including music downloads and streaming, streaming 

and downloads to portable devices like iPods. 

And as Ms. Sohn just said, music is music and it really doesn’t 

matter that much, the source of it. All of the music sources are, in 

fact, in competition, one with the other. 

There is a very interesting survey that Arbitron released this 

week and I would like to get your reaction to this. It shows that 

the satellite radio listening is only about 3.4 percent of all radio listening. So if you measure all radio and look at that entire audience, satellite radio is actually a fairly small player in that. 

It also makes the point that satellite radio listeners are avid listeners to terrestrial radio. They actually spend more time listening 

to terrestrial radio than they spend listening to satellite radio. 

Fourteen hours weekly for terrestrial, 10 hours 45 minutes weekly 

for satellite. And then they also listen to Internet radio. That is an 

average of 8 hours 15 minutes weekly. 

So when you add Internet-delivered radio together with terrestrial radio, the radio listener, the typical one who also subscribes 

either to XM or Sirius, is listening to terrestrial and Internet radio 

more than twice as much time as he is listening to XM and Sirius. 

I think these are very interesting statistics. I think they clearly 

show that this is a unified market for music delivery. 

I would like to get any comment you want to make on that. But 

before I turn that over to you, let me just ask one other question, 

and then you can have the balance of the time to respond. 

Ms. Sohn has made some proposals for conditions. And I am confident that you noted those. If not, I am sure she would be happy 

to repeat them. And I wonder what your reaction is to the proposal 

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that she has made for conditions. They appear to me to be reasonable. And I would think that if those conditions are accepted, and 

if you come to an appropriate promise with regard to freezing your 

prices, that this merger is very much in the public interest and in 

my view it should be approved. 

So if you would like to comment. 

Mr. KARMAZIN. Thank you. 

So, firstly, how do I feel about the fact that we only have 3.4 percent of the radio listening? I feel quite bad about that. I would like 

it to be higher. So I am not happy about that. But it does clearly 

reflect that anybody who believes that a market definition of audio 

entertainment is a market that is called something that was talked 

about before that I can’t even remember, but that was just saying 

that there is a duopoly. I don’t believe there is a duopoly. 

So if I don’t believe there is a duopoly, I certainly don’t agree 

there is going to be a monopoly. We compete with all of these services. Again, regarding—I was prepared for this by telling—you 

know, my people told me not to go across tables, not to get angry, 

you know, keep my hands folded and be nice. 

But I certainly don’t like this idea of the premise behind saying 

anything to get a merger approved, because you know what? At the 

end of the day the regulators are going to either approve it or not 

approve it and we are going to go on, okay. We are not making a 

failed argument. We are not saying we overpaid for content. As a 

matter of fact, we don’t believe we overpaid. We paid for it at the 

market rate and we will continue to pay for it at the market rate. 

So would we consider certain conditions? The answer is yes. We 

currently are providing public service programming. We currently 

are providing noncommercial. We provide NPR, two channels of 

NPR. So the idea of pricing—and just so you understand, and I will 

be quick on this—the reason we are not going to raise prices is because terrestrial radio and all these other choices have hundreds 

of millions of people. We have a total of 10. 

The way you get more isn’t by saying, I am not going to subscribe because it is 12.95, but I am going to subscribe because it 

is 14.95. The hope would be, based on the efficiency of this merger, 

we can lower the price, have a cheaper offering, and therefore get 

more subscribers and therefore get more than 3.4 percent of the audience. 

Mr. BOUCHER. Thank you, Mr. Karmazin. 

Thank you, Mr. Chairman. 

Mr. CONYERS. Thank you very much. 

We turn now to Lamar Smith of Texas. 

Mr. SMITH. Thank you, Mr. Chairman. 

Mr. Karmazin, yesterday I checked Sirius’s Web site. And it 

seemed to me that much of the comparison shopping, in fact all the 

comparisons, were with brand ‘‘X,’’ which I assume is XM. Is that 

right? 

Mr. KARMAZIN. I can’t speak for exactly what the Web site is, but 

sounds like it would be, sir. 

Mr. SMITH. Given the comparisons, I think all the comparisons 

were with the equivalent brand ‘‘X,’’ was the equivalent of XM. The 

appearance, therefore, is that you are not worried about other comVerDate 0ct 09 2002 14:14 May 03, 2007 Jkt 000000 PO 00000 Frm 00101 Fmt 6633 Sfmt 6601 F:\WORK\ANTITRUS\022807\33627.000 HJUD1 PsN: 33627
98

petition other than XM. And let me give you an example of why 

I think that may be the case. 

If I am driving to work in Washington, D.C., and I want to listen 

to listen to Sixties hits—and by the way, there is no more oldies 

station in D.C., much to my regret. But if I wanted to listen to Sixties hits and to BBC News and to an NBA game, where else do I 

go besides satellite radio for that? In other words, where is the 

competition? 

Mr. KARMAZIN. So, I think that clearly the fact that satellite 

radio is serving the consumer in Washington because there is no 

radio station that is playing Sixties hits is sort of another reason 

that we are competing with them, because you are, I guess, saying 

that maybe if in fact there was a free station that played Sixties 

hits, that you might not be going to satellite radio. 

There is no new music that is being made by the Sixties artists. 

These are artists that have made that music. There are plenty of 

devices that enable you to get that music there. There is tremendous competition. We want you, that if you are going to go buy satellite radio, we are going to want you to buy Sirius, and Gary Parsons at XM is going to want you to buy XM. 

So there are a bunch of things that we do to talk to the consumer 

who is going to buy one. 

Mr. SMITH. I understand. I am not sure I entirely understand the 

fact that I can’t get the Sixties or the oldies music means there is 

more competition. But I appreciate your answer and I thank you 

for that. 

Mr. Biggio, let me go to you. You are an antitrust expert and, 

hopefully, you are a little unbiased here. 

Let me make a presumption. Suppose that emerging technologies 

are not yet right. Suppose emerging technologies do not yet provide 

a significant amount of competition with satellite radio. But suppose that sometime in the future and in some coming year there 

will be significant competition from the emerging technologies. 

What is allowed under antitrust law to anticipate in that kind of 

situation? 

Mr. BIGGIO. Well, let me answer that question from both sides. 

I think part of the argument Mr. Karmazin is making is that satellite radio is in fact an emerging technology and right now it 

doesn’t have sufficient penetration to maximize and optimize its 

profitability. And so it makes no sense for the companies to raise 

price after this merger if it means they are going to maintain their 

current subscription levels. 

To the extent they can keep their prices low and expand their 

output that way, and that is an argument why the merger, in fact, 

is not anti-competitive. 

The same argument applies to the products you are talking 

about. If iPods and other products are coming on the market today 

but have not yet reached a sufficient market presence to actually 

be a competitive threat, then they should not be included in the 

market until such time as they do have a competitive constraint on 

the market. 

And that is really a question of time development and usually 

under the merger guidelines, we are talking about a 2-year period 

99

of concern that these other potential entrants aren’t sufficient constraints within 2 years, then they are typically discounted. 

Mr. SMITH. Okay, good, thank you. 

Mr. Rehr, a final question for you. In your testimony, you distinguish between local markets in which there is arguably more competition and national markets in which there might not be as much 

competition. Why is that significant? 

Mr. REHR. I think it is significant because when the FCC created 

the duopoly in 1997, they saw a nationwide multi-channel audio 

content service. The same channel that you get in Bangor, Maine, 

you get in San Antonio, Texas, you get in San Francisco, California. 

Nationwide services like Sirius and XM compete with every local 

broadcaster in this country. But does a small station in San Antonio, Texas——

Mr. SMITH. Any reason you are picking San Antonio? 

Mr. REHR. It is a coincidence. A small station in San Antonio, 

Texas, or Milwaukee or in Orlando, doesn’t compete on a national 

level with those nationwide audio multi-channel programs. 

Mr. SMITH. Thank you, Mr. Rehr. 

And thank you, Mr. Chairman. I will yield back. 

Mr. CONYERS. Thank you very much. 

The gentlelady from California, Ms. Zoe Lofgren. 

Ms. LOFGREN. Thank you, Mr. Chairman. 

And congratulations to you and the Ranking Member for establishing this Task Force. I think it is going to prove to be very useful to the Committee and to the country to have this renewed—not 

just today on this particular issue, but on the whole issue of competitiveness and antitrust overall. And I really feel that in the last 

several years we have not had sufficient attention paid to this very 

important subject. And I just think this is a first step that is just 

really very good. And I appreciate your leadership in doing this. 

Mr. Boucher asked most of the questions I was going to ask, but 

I do have, for Ms. Sohn, you made some recommendations. I was 

at the House Administration Committee, actually, suggesting that 

the Ranking Member get more money for his Subcommittee. But I 

did have a chance to read your testimony. 

I am wondering how the conditions that you have recommended 

for this merger compare to the obligations that currently exist in 

the broadcast arena. 

Ms. SOHN. Well, they are different. I mean, if I am going to be 

completely cynical, I am not sure that the broadcasters have any 

obligations any more except maybe to make time available for Federal candidates. 

So these are actually more akin to what DBS—well, some are 

anyway. I mean, the first is that the company should provide 

choice in pricing, so a la carte and tier pricing. 

Ms. LOFGREN. Obviously that is not applicable. 

Ms. SOHN. Right. But DBS has an obligation to make between 

4 and 7 percent of its capacity available for a noncommercial educational-informational programming. And this is programming over 

which they have no editorial control. I didn’t mention that in my 

oral testimony but I think that is really, really important. 

Ms. LOFGREN. It is in your written report. 

100

Ms. SOHN. Yes. That the satellite provider should not—number 

one, it should not be able to say, well, we already have NPR on two 

channels. First of all, it has got to be new programmers. I would 

think this would be a great place for some of the low-power FM 

stations that got shut out by the broadcasters several years ago. 

So they would have no editorial control. Also, you couldn’t have 

more than one channel taken up by any particular programmer. 

So it is more akin to DBS than it is to over-the-air broadcasters. 

Ms. LOFGREN. Now, your comment about—and I saw people 

grimacing when you said that there weren’t any obligations on 

broadcast. 

But to the extent that things are not as tight perhaps as they 

once were in the broadcast area, do you think if there were a condition on the merger relative to noncommercial educational-informational programming without control of editorial content on the satellite side, that that ought to be reinvigorated on the broadcast 

side? 

Ms. SOHN. Well, boy, I have so many scars from this. Yes. If we 

are talking about level playing field, probably yes. 

Ms. LOFGREN. In furtherance of that, the testimony has been 

that there are so many providers of audio experiences, all the way 

from iPods to—are we thinking that we should impose conditions 

like this, for example, on Internet radio? 

Ms. SOHN. Absolutely not. I mean, they are not asking to merge. 

That is abundant. 

Ms. LOFGREN. So it is just because there is enough competition 

and a low barrier to entry that we wouldn’t want to provide that 

kind of——

Ms. SOHN. Yes. I mean, I don’t want to give the impression that 

I foursquare think that this is going to pass antitrust muster. I was 

very relieved to see Mr. Biggio also hedging his bets, because he 

is an antitrust expert and I am not. 

So, you know, I think the key is whether these other technologies 

that I mention in my testimony are substitutable and whether they 

would constrain prices. I don’t know the answer to that. Mr. Biggio 

doesn’t know the answer to that. That is obviously the case——

Ms. LOFGREN. I am sure nobody on the Committee knows the answer to that. 

Ms. SOHN. That is the case that Mr. Karmazin and Mr. Parsons 

are going to have to make to the antitrust authorities. 

Ms. LOFGREN. I will yield back, Mr. Chairman, the time. Again, 

I appreciate your leadership in establishing this new Task Force 

and I appreciate being a Member. 

Mr. CONYERS. I thank the gentlelady. 

We now turn to the distinguished former Chairman of this Committee for so many years, Mr. James Sensenbrenner. 

Mr. SENSENBRENNER. Thank you very much, Mr. Chairman. 

Let me start out my questions with two premises. First, in 1997 

when the FCC licensed spectrum for satellite radio, they placed a 

condition on their license that there had to be more than one provider or more than one licensee. So at that time my belief is that 

the FCC made a policy decision that other mediums of transmission were not necessarily the exclusive competition, but that 

101

there had to be competition between more than one licensee for satellite radio. 

Then 4 years later, the two largest satellite TV broadcasters, 

EchoStar and DirecTV, proposed a merger. We had a hearing in 

this Committee where the CEOs of both of those firms came to testify. There was concern that was expressed at that point in the 

Committee that this was monopolistic in nature. And that merger 

was rejected. 

Now, given the fact the FCC stated the ground rules that you 

need to have two or more satellite radio providers and that they 

rejected a merger of the two biggest satellite TV providers into one, 

what is different here? 

Mr. Karmazin? 

Mr. KARMAZIN. A whole lot. 

So, first of all, we obviously are going to need to make the argument to the FCC that what was talked about 12 years ago, which 

found its way into a statement 10 years ago, is just not relevant 

today in the competitive marketplace. So we have to make that argument and we will see if we prevail. 

Mr. SENSENBRENNER. But there was competition then, too, at 

least with terrestrial radio, and the FCC didn’t look at that. They 

said you had to have two satellite broadcasters. 

Mr. KARMAZIN. And, sir, that was because there was no Internet 

radio then. There was no HD radio then. There was no iPod then. 

There were so many more things that came along in addition to 

terrestrial radio——

Mr. SENSENBRENNER. My wife, she subscribed to XM. That apparatus is in her car, so she listens to XM in her car. Now, I would 

be pretty worried if she was playing on the Internet or playing on 

her iPod while trying to access this type of entertainment in the 

car. Real worried about that. 

Mr. KARMAZIN. But let me tell you, there are receivers that are—

and we saw them at the Consumer Electronics Show and they exist 

today, not hypothetical—that are radios that enable you to get the 

Internet just like you have a satellite radio that enables you to get 

the satellite. 

But, again, I understand your point. It is there. We understand 

that it is an issue that we need to deal with the FCC. 

But let me talk about the Echostar-Direct one, because that one 

is just totally on the opposite side. 

If you take your consumers in your area, I would say close to 100 

percent of those people get their television from either a cable or 

satellite provider. They are not getting it with rabbit ears and they 

are not getting it over the air. So the idea of what the market 

looked like in the EchoStar—and I am not an antitrust lawyer. But 

in the idea of EchoStar and DirecTV was you had a cable company 

you paid for. You had EchoStar you paid for. And you had DirecTV 

you paid for. So it was three people going down. 

In this case, the vast majority—the vast majority—over 90 percent of the people flip the other way. They get it from free over the 

air radio, in every single home, in every single car. So you have 

free over-the-air radio there. So this one is not like cable or satellite. 

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Mr. SENSENBRENNER. I have only got a minute left, so reclaiming 

my time, utilities have been regulated monopolies. There have been 

State utility regulations commissions in all 50 States. And that 

model ended up being determined not to be good public policy in 

practically every State in the union where there was utility deregulation. Some have had disastrous consequences, like California, and 

in other States it has worked out fairly well. 

What you appear to be advocating is to make your merged company somewhat akin to an old regulated gas company, and I don’t 

see where the consumer ends up benefiting in that because the regulated utilities of old ended up being guaranteed a rate of return 

on their investment. And I don’t think that is the kind of model 

that we policy makers want to sign off on because we have already 

rejected that in other areas where regulated utilities have been. 

Mr. KARMAZIN. And what you said we are looking at is so far 

from the truth at all. We are not saying we are going to be a monopoly. We are not saying we are a monopoly. 

Mr. SENSENBRENNER. But you are a monopoly. 

Mr. KARMAZIN. We are absolutely——

Mr. SENSENBRENNER. You are going to be a monopoly. 

Mr. KARMAZIN. We are absolutely not a monopoly. I mean, the 

idea is, if you are saying you believe that the radio is——

Mr. SENSENBRENNER. Just one provider of the service is a monopoly. 

Mr. CONYERS. The gentleman’s time has expired. 

Let me turn now to the gentlelady from Texas, Ms. Sheila Jackson Lee. 

Ms. JACKSON LEE. Mr. Chairman, let me thank you very much 

for what I think is an enormously wise decision to really shine the 

light on a series of mergers. 

And in order to be fair to Mr. Karmazin, to not call it monopoly, 

but I might just say that the word has been used. And I think we 

have to be frank with each other. 

It seems unique, but I would be part of the political constituency 

or elected officials that really wants more opportunities in the 

media for people to have sources of information. I frankly think 

merged newspapers, single-town, single-newspaper cities—certainly 

we know that newspapers are competing against Web sites and 

otherwise. But still, I think we lose. I think the first amendment 

loses. 

So I raise that concern, and I thank the Chairman for his enlightenment on allowing us to have this opportunity for transparency. 

Might I also indicate very quickly that I think the Chairman has 

asked a very vital question: What is a critical market? And I raise 

these points because as I ask questions, one of the witnesses, I 

think, made the point that this seems to be too soon after the initial licensing that has occurred. And therefore it doesn’t give time 

for there to seem to be some settling. 

The Texas broadcasters are walking around, and Mr. Rehr may 

have created that presence. I saw one walking in the hallway. They 

were political enough and astute enough to just give me a warm 

greeting. 

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So I want to know that XM and Sirius are not biased. They 

didn’t bother to try to create a bias in my mind. 

But let me try to pose these questions, particularly to you, Mr. 

Karmazin, and I have given you the backdrop of my concern. 

To Mr. Biggio, I think you sound like the baseball player in 

Houston, so maybe you are related to him. But I frankly don’t 

think I want to leave the professionals only to this task, the FCC 

lawyers and Department of Justice lawyers. I have disagreed with 

them before. And their regulatory framework may not be what I 

think gives good overview of what may possibly happen. 

And my bottom line is that you extinguish, you eliminate, you 

cease and desist for the wide vastness of information. I think that 

is key. 

I am going to give you an opportunity to respond to that and the 

transparency question, meaning that we should have as much airing and hearings on this as possible. Then I am going to get to the 

meat of my concerns, and that is that all of these mergers, and in 

fact, all of these existing media entities—and if we were to go into 

the NFL, baseball and others, if we were to go into as my good 

friend from Wisconsin talked about, utility companies, et cetera, it 

is a closing down of opportunity. And one of the contingent groups 

that you close down the opportunity to—and I don’t think Sirius 

and XM have been any shining star—it is diversity. 

You are not diverse, I believe, as you exist today. And the question is what opportunities would be available once your merger occurred for a minority ownership. My view is that the participation 

would be reduced because you become a single entity. And together, now, you have shown no interest in that. 

I have a little station that is FM low-power that is struggling in 

the community. The question would be whether there would be 

some vehicle to allow those stations to have content, to sell content, 

you sell it back and whether it would be, if you will, economical, 

or at least reasonable, that the little base of listeners that they 

have could even pay. 

So let me yield to you and have you pointedly tell me about how 

what you are planning on doing doesn’t dumb down diversity. African-Americans, Hispanics, Asians, women and others, as opposed 

to up lift. And what is your record today, which I don’t perceive 

that you have a record that is strong enough to convince me. 

Mr. KARMAZIN. Well, Congresswoman, firstly, I understand that 

there is a general tone that no mergers are good mergers. There 

is no such thing as a good merger. And probably consolidation in 

the media world has been so poor to date that no merger is good. 

So if, in fact, the regulators and Congress does not allow our deal 

to go through, that is the choice. So the consumer will then go from 

not having any price competition that we are offering, not having 

any price advantage and also not having the choice, and not being 

able to get baseball and the other service. So that is a possibility——

Ms. JACKSON LEE. Did you hear me on the minority question? 

Mr. KARMAZIN. I did. But you also mentioned at the beginning 

the idea of the merger and the idea. 

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On the idea of the minority, I think my track record is extraordinary on diversity in my whole career, and I think that I can—

if you are interested——

Ms. JACKSON LEE. I am. 

Mr. KARMAZIN. I can provide you with a whole lot of information, 

including being the person who started when Chairman Kennard 

was at the FCC, this whole minority investment, and I was personally a large contributor and also my companies have been large 

contributors. 

Ms. JACKSON LEE. But you be inclined to do more? 

Mr. KARMAZIN. I believe there is always room for more. I believe 

that our service is not doing as good a job as we could. But I can’t 

tell you who is doing as good a job as we could. 

I can tell you that we have a number of channels that are, you 

know, catering to the Hispanic market, to the gay lifestyle market, 

to the African-American market. I think that if in fact we didn’t 

have to keep duplicating each other’s services for competition reasons, that we can have more choice available for more niche programming and more opportunities. 

So I don’t want to make any promise because I will only be called 

‘‘you will do anything to get the deal approved.’’ So you are damned 

if you do, damned if you don’t. If I say I want to do things, it is 

because of the merge. If I don’t say I am going to do it, it is because 

I am not cooperating. 

Ms. JACKSON LEE. But you are in the light of day. So you are 

saying it publicly, so that is good. 

Mr. CONYERS. The gentlelady’s time is expired. 

Ms. JACKSON LEE. Thank you, Mr. Chairman. 

Mr. CONYERS. And we turn now to the distinguished gentleman 

from Virginia, Mr. Goodlatte. 

Mr. GOODLATTE. Mr. Chairman, thank you very much. 

I would like to ask all of you to start out, tell me, is it a coincidence that XM and Sirius charge the same rate for their services 

now? 

Mr. Karmazin? 

Mr. KARMAZIN. Well, we started our service 5 years ago and the 

price was $12.95 then and we have not raised our price. 

XM started its service at $9.95 and chose to raise the price because of the cost of content. I could tell you that the reason that 

they are both at $12.95 and not at $14.95 or $15.95 or $16.95 is 

that we are competing with free. 

It is hard to get subscribers when you are charging $12.95. It is 

harder to get subscribers when you are charging $14.95. So the 

idea of having higher prices the way it is now doesn’t work because 

what we are competing with is not each other. If we had every one 

of their subscribers, okay—again, not poverty, just facts. We have 

lost $3.8 billion so far. Okay. So far. That is our business plan. 

That is the way it works. 

The idea of us raising prices without any cost—the cost savings 

is going to limit our ability to get subscribers. I mean, it is just real 

math. 

Why would people not be subscribing in enough numbers at 

$12.95, but they would at $14.95? 

105

So there are synergies in this deal. There are 300 million or so 

that analysts have said that you could save each year. What we are 

saying is if there are synergies in the deal, we can take a chunk 

of the synergies and provide it to the consumer if the merger is approved. If it is not, the companies will continue to be able to price—

there is no discussion on our parts. I mean, they don’t call me, we 

are not allowed to talk to each other. All right. 

So the fact is that the prices could go up after the merger, it may 

not go up after the merger. I could tell you if the merger is approved, they won’t go up. 

Mr. GOODLATTE. Mr. Rehr? 

Mr. REHR. I think that, first off, it is coincidental that it is the 

same price and whether it is price mechanisms in the market determining that price or not, I don’t know. 

But I think there needs to be a distinction between this argument being made that we are competing against free and therefore 

we can’t raise prices. If in fact it is a duopoly that has a distinct 

market of people who are willing to spend money to buy a nationwide multi-channel audio programming, it is the price elasticity 

that those people will face that will determine whether that price 

goes up or down. 

Am I willing to pay 50 cents more when there is a monopoly? 

Perhaps. Maybe a dollar? I mean, you can’t raise the price to $100 

a month and get people to sign up. 

Mr. GOODLATTE. But presumably both of these companies would 

be charging more right now if they could get more. 

Mr. REHR. Well, I think that is also a value proposition, quite 

frankly. I think that they would——

Mr. GOODLATTE. Mr. Cooper? 

Mr. COOPER. Well, you know, the interesting thing is we have sat 

here for 2 hours and no one has suggested these companies might 

have lowered their prices to increase subscriber ship. 

He has talked about, well, it is $12.95. We could go to $15. Why not $6.95 and quadruple your subscriber ship? If you do the math, 

he would have a lot bigger cash flow. 

These are companies that pick very high prices and very big bundles and said we are going to do the cable model, thank you, and 

that is the way we are going to make our money. 

In the Internet space, it is called promotion pricing. People price 

low to get subscribership and spread those costs. This is a management decision. In competitive markets, prices tend to be uniform. 

In duopoly or monopoly markets they tend to be uniformly high. 

And now we said after 10 years, well, if you let us merge to a 

monopoly, now we will lower our prices. They have never competed 

on price. They have never seen the benefit of cutting their price in 

half to quadruple their subscribership. 

Mr. GOODLATTE. Well, maybe they have or maybe they haven’t 

competed on price——

Mr. COOPER. Well, they haven’t shown it in the marketplace. 

Mr. GOODLATTE. Well, I am not sure I disagree with you, Mr. 

Cooper, but let me ask Mr. Karmazin. 

You have described all these other things that you compete with. 

But quite frankly, in that respect, you compete with almost anything. The only entity that you compete with right now on the wide 

106

array of radio services that you offer is XM Satellite Radio. I am 

an XM subscriber. I am sorry to say I like baseball better than 

football or maybe I like Oprah better than Howard Stern. I don’t 

know. 

But in any event, I have had those choices and I have made that 

choice. And it is a great service. I also listen to my local radio stations. I also listen to my iPod. I would bet that the overwhelming 

majority of your subscribers are listening in their cars. So that limits the universe of what you can actually listen to. 

But nobody else other than your two satellite companies offer the 

wide array of things like those that were describe by Mr. Keller 

and by others here, that you just cannot find on iPod or on your 

local broadcast radio station. 

So why, when we eliminate one of the two competitors here, 

aren’t we going to see a spike up? Yes, there is a limit to how much 

you can raise your prices, but I believe prices are going up if you 

are the only one in town. 

Mr. KARMAZIN. Well, I have assured you and we have discussed 

that before, that we are prepared to commit that they won’t. 

So, I mean, you can sit there and say they are, and we are saying 

that they are not. And we are willing to commit to it. 

But let me tell you, there is nothing that we are doing, you know, 

insofar as music choices. There is Major League Baseball that is 

available on your over-the-air radio station. 

Mr. GOODLATTE. Not the Boston Red Sox where I live. 

Mr. KARMAZIN. So, therefore, the idea that you could pick up the 

Boston Red Sox and the New England Patriots on the same radio 

has to be something if you were to say no to this deal that you are 

hurting the consumer. 

And right now if you want to get the New England Patriots and you want to get the Boston Red Sox, you pay $25.90. Okay? And 

that may be the way you want it to be. 

Mr. CONYERS. The gentleman’s time has expired. 

I am pleased now to recognize the gentlelady from California, 

Maxine Waters. 

Ms. WATERS. Thank you very much, Mr. Chairman. 

I would also like to thank our witnesses who are here today. 

I come to this hearing not necessarily opposed to your merger, 

but wondering what does it really mean in terms of participation 

in ownership by minorities. 

First, let me understand, who owns, for example, Sirius Satellite 

Radio. 

Mr. KARMAZIN. Both Sirius and XM——

Ms. WATERS. Sirius, I am sorry. 

Mr. KARMAZIN. No problem. 

Sirius and XM are publicly owned companies. None of them have 

a controlling shareholder. Both companies are listed on NASDAQ. 

And in the case of Sirius, we have, you know, a billion, 700 million 

shares outstanding. In the case of XM, they have 330 million 

shares. A lot of the institutions, the traditional owners of stocks, 

own the companies. 

Ms. WATERS. Well, as you know, African-Americans and people 

of color have an awful difficult time accessing the media. You don’t 

see us on the Sunday talk shows, on corporate television, and we 

107

depend a lot on radio. And we particularly depend on AfricanAmerican-owned radio. Whether it is Ms. Hughes’s station, Radio 

One, or Stevie Wonder out in California, we know that they have 

the kind of programming that we can get on, we can talk to our 

constituents, and we depend so much on it. 

My only interest is whether or not we are advantaged or disadvantaged by this merger. 

Mr. KARMAZIN. I agree with you. I think that the broadcasters 

that you mentioned, particularly Radio One, has done an extraordinary job and I have been in the radio business an awful long 

time. And they have consistently—Cathy Hughes has consistently 

done a terrific job. 

The thing that I can say to you is that we currently—and don’t 

get me—if I get the number exactly wrong—I think each of our 

services have five or six channels that are specifically devoted to 

the African-American market. 

And by the way, those services are available in every market in 

the United States, rural markets, urban markets. 

So the benefit of satellite radio and having a healthier satellite 

radio, in my opinion, is that there is a platform that gets you not 

just into the markets where there is a large African-American population and somebody could have a station there, but it gets you 

into markets where you couldn’t support an African-American radio 

station and there is none now. 

So the fact that we are providing that, I think, is a service to the 

community. 

Ms. WATERS. Could you describe that kind of programming so 

that I could try and identify with it now and know what exists 

now? 

Mr. KARMAZIN. I am not the expert on programming. We can offline get you information. But we have talk and public affairs programming dealing with it as well as entertainment. 

We just—and again, I know I am going to get into trouble by saying this, but we had a conversation with Jamie Foxx about doing 

a channel for us, which he is going to do, called The Foxx Hole. 

And the purpose of that channel was to provide urban comedy, you 

know, on a national basis. And he has agreed to do it and we will 

start that channel in April. 

So there is a spectrum ranging from music, ranging from talk, 

ranging from other types of content. But we can get you the specifics if you would like to. 

Ms. WATERS. You have talk radio and you have news also that 

is targeted to these communities? 

Mr. KARMAZIN. I can’t say that we have news, because what we 

do is we pick up the traditional services. So the news that we currently have, you know, are the Fox News and CNN News and 

Headline News and MSNBC is on there. So there is no relationship. 

XM has had a relationship with BET. XM has a relationship with 

Radio One today, that Radio One, Alfred Liggins that Cathy 

Hughes are programming a number of channels that exist on that 

service. 

108

There are some things that we have had conversations with them 

about, not related, you know, to this conversation, but about doing 

more programming along those lines. 

Ms. WATERS. Okay. Thank you very much. 

Mr. Chairman, I will yield back the balance of my time. 

Oh, just one moment, if I have some more time. I just got some 

information. 

Now, as I understand it, Mr. Karmazin, you were the CEO of 

Viacom. You purchased BET. Is that right? 

Mr. KARMAZIN. Mr. Johnson will tell you that I felt that the 

name of the team should be the ‘‘Mel Cat,’’ not the Bobcats, with 

the money that he got from the merger. 

So yes, I did buy——

Ms. WATERS. But I guess the question is this. This is serious 

stuff. That after you purchased it, the first thing that you did was 

to eliminate the news and public affairs programming on BET. 

Mr. KARMAZIN. That is blatantly not true, and Bob Johnson and 

Deborah Lee will tell you that Mel Karmazin nor Sumner Redstone, who is at Viacom, had anything to do with it. 

As a matter of fact, we encouraged them to expand, and you can 

find out that we absolutely did—they made a programming decision on a personality that got a lot of attention. But Bob Johnson 

would never, ever have us interfere. 

One of the conditions of our buying BET was that he stay in 

Washington, D.C., because he was committed to the district, that 

the operation not be merged into Viacom, that he be the CEO reporting into directly to me so there was nothing else. 

Now Deborah Lee has that same position in the company. 

So no, I have not eliminated news. As a matter of fact, my history has been that I have expanded news. 

Ms. WATERS. But you know that there are——

Mr. CONYERS. You are finished, Ms. Waters. 

Ms. WATERS. Thank you. Thank you. 

Mr. CONYERS. Thank you so much. 

Mr. Cannon from Utah? 

Mr. CANNON. I thank you gentleman. 

We had the biggest copper mine in North America, the CEO was 

in the other room and I had to meet with him for a minute. And 

copper is good these days, I might point out. 

Let me ask Ms. Sohn one question, just following up on your testimony. 

Can you give a little more detailed about what you would like to 

do with the a la carte option? You know, you have just under 300 

channels. At $15, we are talking, like, 5 cents a channel if you did 

it that way. 

In your testimony you talked about categories of channels. How 

would we ever create the guidelines or conditions that would work 

on that? 

And then, Mr. Karmazin, if you would follow up, is it possible 

with your current equipment or your perspective equipment to 

have an a la carte technology that would work? 

Let us start with Ms. Sohn first and then come to you. 

Ms. SOHN. I will have to admit I don’t have a very detailed analysis. I would be more than happy to provide it to the Task Force. 

109

I will give you an example. I am an XM subscriber and I don’t 

listen to the talk. Occasionally I take in a Met game. I am a huge 

Mets fan. But I would rather just pay for the music. That is what 

I listen to. 

At a bare minimum, I know there are issues around providing 

individual channels. That, obviously, is a consumer advocate’s 

dream, that you could basically pick and choose. And I would like 

to hear Mr. Karmazin’s response as well. 

But at a bare minimum, you should be able to pick tiers. You 

know, if I just want music, I should be able to pay for that and pay 

less. 

Mr. CANNON. I really love the idea of a la cart. I know the cable 

companies are not going to like that. 

Ms. SOHN. So do I 

Mr. CANNON. But at some point I would love to see that happen 

and with——

Ms. SOHN. It should happen in cable as well. 

Mr. CANNON. Mr. Karmazin, could you talk about what the technological limits are on what you have. Would it be possible to go 

to a per channel a la cart? 

Mr. KARMAZIN. I do not believe so, for lots of technical reasons. 

I don’t want to use up all your time, but I am not trying to duck 

the question. I will be happy to spend time with it. 

You know, there is no set-top box in your vehicle that has a radio 

in it. So the idea of being able to have a back channel to be able 

to tell that radio exactly which channels are there becomes problematic. 

Mr. CANNON. So currently you probably can’t do it. Could you do 

it with some tiers? 

Mr. KARMAZIN. I think we can accomplish what I am hearing, 

which is today if you want to get a portion of our service, because 

you really like baseball or because you like the music, and I have 

heard both viewpoints, you have to buy $12.95. 

So what we have said is that we think that one of the benefits 

of this merger, because it does provide synergy—it will lose revenue. I mean, if we say that at the most for a Sirius subscriber, 

the most we will get is $12.95, no scenario where we are raising 

that price, now what we are also saying is that we will provide the 

consumer with a choice to be able to get satellite radio for less 

than——

Mr. CANNON. But do you have the technology to do that? In other 

words, when the person buys the radio, would you limit the channels that it could receive at the time of sale? How would you do 

it? 

Mr. KARMAZIN. We have the ability to do a—I am using what the 

witness talked about, call it tiers. We call it choices or bundles or 

something. We have the ability of offering a number of bundles. 

But, remember, 43 cents a day, 130 channels, less than 10 cents 

a channel. Nobody has written a letter to their Congress person—

and we have asked—we know that you have heard from your constituents on the high cost of their TV bills, their cable TV bill or 

their satellite bill. We haven’t found one person who is saying that 

the $12.95, or 43 cents a day, is too high in price. 

What we are saying is, you know what, we will make it lower. 

110

Mr. CANNON. I have a couple of other questions, one for Mr. 

Rehr. 

This has been an awfully personal attack kind of hearing. I have 

been a little surprised. A little earlier you were accused of parsing 

your words and you seemed anxious to respond to that. 

Do you recall? Mr. Cooper was talking about how you parsed 

your words? You can respond or not if you wish. 

Mr. KARMAZIN. I mean, I do feel that way. Because, as I said, all 

we are asking for is to go through the regulatory process, right? I 

mean, we are not asking for anything. We are not sort of doing 

something wrong. We are American citizens, we are business people. 

All we are asking for is if there is a Hart Scott Rodino filing that 

is due, we are going to make it. If there is an application to the 

FCC, we are going to do it, and we are going to vent this thing and 

people will have a choice. 

But, you know, to sit there and tell me what my motives are, I 

mean, I just don’t like hearing it. But I am a grownup, I can handle it. 

Mr. CANNON. Mr. Rehr, let me just ask this. Mr. Boucher made 

the point that your being here, your presence is evidence that the 

satellite companies compete with broadcasters. 

Is that a fair point that he made? He didn’t ask for a response 

on that, but I would like one. Is that a fair point? And if you are 

here because it is competition, shouldn’t that be taken into account 

as we look at what constitutes the market? 

Mr. REHR. Yes. I think it is fair that we compete with a nationwide multi-channel audio programming company. I think in Salt 

Lake City, the Bonneville stations compete against satellite radio 

companies Sirius and XM. 

However, as I talked about a little earlier when you were out of 

the room, Bonneville companies do not compete on a nationwide 

basis. So it is a little complicated, but it is really one directional 

competition as opposed to a market where you are constantly competing against each other on every aspect. 

I hope that makes sense. 

Mr. CANNON. I understand it. 

Thank you, Mr. Chairman. I recognize my time is expired, and 

so I yield back what time I don’t have. 

Mr. CONYERS. Thank you so much. 

We now turn to the gentleman from Tennessee, Mr. Cohen. 

Mr. COHEN. Thank you, Mr. Chairman. 

I am at a little bit of a loss. I am pleased to hear all my senior 

Members get a chance to listen to all this radio. Because I am basically just on the phone talking to my constituents. 

And I am a little—did you really pay $80-million-something to 

Howard Stern? 

Mr. KARMAZIN. Absolutely. 

Mr. COHEN. That is rather obscene, isn’t it? 

Mr. KARMAZIN. Let me tell you, it is an awful lot of money. But 

if I were in terrestrial radio, where I spent a long time——

Mr. COHEN. You are in extraterrestrial radio? 

Mr. KARMAZIN. I am in extraterrestrial radio. 

Mr. COHEN. Yes. He is an extraterrestrial character, isn’t he? 

111

Mr. KARMAZIN. In my opinion, I would have paid him that same 

amount of money. And had their current company paid him that 

same amount of money, they would have made $70 million on top 

of what they would have paid him based on their financial results 

since he left. 

So the marketplace dictates how much money you pay the NFL 

and how much money you pay Major League Baseball and how 

much money you pay talent. And in the case of Howard Stern, he 

was paid what the market warranted, and we were fortunate 

enough to be the one that paid it to him. 

Mr. COHEN. But you are basically competing with the folks at 

XM to hire these Howard Sterns, or whatever, because you all are 

bidding to get these big names to get people to subscribe to you. 

Mr. KARMAZIN. No, I think, Congressman, I just said to you that 

we are competing with terrestrial radio, because who we hired 

Howard Stern from was a large radio company, not XM. 

We are competing—because if Howard Stern were offered more 

money to go to work at Clear Channel or Infinity Broadcasting or 

CBS, I am convinced that Howard would go there. So, no, I totally 

disagree with you, sir. 

And the idea of having—people go into their local market, whether it is Salt Lake City or wherever, and they listen to their radio. 

The idea of it is a national service, I mean, whether or not it is 

Rush Limbaugh, who is on in every market, you know, who is on 

800 stations, or Sean Hannity, the idea that we are not competing 

with terrestrial radio is just not credible. 

And as a matter of fact, just one point on that subject. If in fact 

what they are saying is true, that they don’t compete with us, then 

every one of these public companies have lied to the SEC, because 

in every one of their filings to the SEC, under the regulatory portion where it says competition, it says they compete with satellite 

radio. And I don’t believe these broadcasters, who are good broadcasters, would like to the SEC when they said that they compete 

with satellite radio. 

Mr. COHEN. Do you compete at all? I mean, Mr. Stern gave you 

a headline for your station, star performer, and that maybe got you 

to get some subscribers, the people that were hooked on him, he 

was their jones, and you got him. And the only other person who 

would have had that attempt would have been Sirius. Don’t you all 

compete for the NFL? I guess you don’t compete for the XFL. Nobody does. But for the NFL? 

Mr. KARMAZIN. Well, yes, we compete with terrestrial radio as 

well. So, I mean, as an example, right now, Rush Limbaugh is on 

terrestrial radio. One could argue, would we. The answer is we are 

not. I am not discussing it, not that it would be bad. All I am saying is that if we chose to hire Rush Limbaugh, we would be competing with terrestrial radio because he is on the 800 radio stations. 

We are not competing with XM. The market is too small, sir. If 

we got all of their subscribers, if we got them all, okay, the market 

would still not be significant enough to pay for the fixed costs of 

operating the business. So the only business model that works is 

us to be able to get more subscribers. And the way you get more 

subscribers when you are dealing—particularly when you have the 

112

money now available through some synergies, to be able to offer 

lower prices. 

We are not looking to bankrupt our company and we are not 

going to do something that is going to bankrupt our company. We 

have too many shareholders, too many employees, and we are not 

going to do something that is stupid. And the idea of just saying, 

well, you have these high fixed costs, you know, you have these 

high fixed costs, lower your price. 

We are saying no, we are not going to do that. But if there is 

a merger and there is savings created, we will give back a percentage of that savings to the consumer. 

Mr. COHEN. Well, I wish you all a lot of luck. I don’t know too 

much about this. 

XM had a little party when they opened up on the Potomac 

River. And I went over there, my friend Warren Zevon hooked me 

up with some lady friend and we went over there and I bought a 

little——

Mr. COHEN. And I bought a tiny amount of stock and I sold it, 

too. So I am happy you all are doing well because it was my tax 

loss that year. 

Mr. CONYERS. We now turn to the gentleman from Virginia, Mr. 

Forbes. 

Mr. FORBES. Thank you, Mr. Chairman. 

I want to thank all of you for being here today and your patience. 

I wish we had time to listen to each one of you and ask you some 

questions, because you have got such good experience and insight. 

But a lot of times when we are dealing with our constituents, we 

are talking to them at the McDonald’s, Sunday school class somewhere, and they just have simple questions. And sometimes it gets 

frustrating. 

I know I had, just trying to work through a phone conversation 

with one of your two companies, I won’t say which one, I felt at 

the end of it like I just wanted to pick my phone up and throw it 

out the door. 

And the question I would have that I think some of them are 

going to ask us is, if you merge these two companies, you have certain programs, XM has certain programs. Are you going to keep all 

those programs or are you going to cut some of them? 

Mr. KARMAZIN. So, our vision of the way it would work is that 

if you are an XM subscriber, you have the Major League Baseball, 

you have whatever number of channels available to you now. 

What we contemplate is that we would take some other content, 

and again we have to work with our content partners. But the hope 

would be that we would get NASCAR to agree to be on XM as well. 

We will get the NFL to agree to be on XM as well. 

We currently have a deal with NPR and XM has a deal with 

somebody else that is not NPR that we would hope to offer. 

So the radios are not obsolete, nothing lost. They get everything 

that they are getting now. They get the same channels that they 

currently are getting and we will use additional capacity that each 

company currently has to be able to share content. 

And that is where we get to the more choice. 

Mr. FORBES. So you wouldn’t envision cutting any of the existing 

programming that you have now? 

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Mr. KARMAZIN. We think that that would result in disappointing 

the consumer. We are charging them $12.95. If in fact we disappoint them, that sounds to me like we are going to get less subscribers, not more, and that is not the purpose of wanting to do the 

merger. 

Mr. FORBES. Now, the vehicles that, you know, we have some on 

car lots that are XM, some Sirius right now in their radios. How 

would it work that they would continue to be able to use those radios? Would they have to do anything to change that? Would they 

continue to be able to use the same ones and still have the same 

programming options that either one would have? 

Mr. KARMAZIN. Yes. And that is the argument that we have 

made and the conversations we have had with our OEM partners 

who make these car radios and that there are all these radios in 

the cars. And we certainly are not looking to disappoint the customer. 

So if you have a Ford vehicle that has Sirius Satellite Radio in 

them, you will not have to do anything else, okay, after the deal—

assuming the merger were approved. That if, in fact, the merge 

were approved, we would be able to provide them with more content through some of the XM content. 

Mr. FORBES. And just the last two questions. As I know you can 

appreciate, if we tell our constituents they are going to get interoperability in their radios and then we say they have them, but 

they just can’t afford them, they kind of scratch their head to that 

and say it doesn’t do them any good. 

And sometimes we make promises, even with good intentions, 

that we can’t keep. 

What is the enforcement mechanisms if we are wrong? What 

happens if the prices do go up? What happens if they have less 

choice? What are the enforcement teeth that stop that from happening, because we apparently haven’t had a lot in some of these 

other problems. 

Mr. KARMAZIN. And, again, what we are saying is that they have 

the radio currently so that it is not obsolete. So they get more 

choice coming out of that radio without having to buy a more expensive receiver. 

What the mechanism is to make sure we live up to our promises, 

I will leave to the regulators. But I am willing to say we should 

be held accountable for everything I have said here and everything 

that I will say when we meet with regulators and we meet with 

people throughout this process. 

This isn’t ‘‘trust me.’’ This is about we should be held accountable. And I have got to believe that within the infrastructure of the 

Government or however it is done, we should be able to be accountable. 

Mr. FORBES. Mr. Chairman, I see my time is expired. I yield back 

the balance. 

Mr. CONYERS. I thank the gentleman, and recognize the gentleman from New York, Mr. Anthony Weiner. 

Mr. WEINER. Thank you, Mr. Chairman. 

First of all, Mr. Karmazin, let me apologize on behalf of everyone 

for the many pronunciations of your name you have heard today. 

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But I do want to tell you on the subject of names, if you guys 

name this S&M Radio, I am off the reservation. I am just not signing up. [Laughter.] 

Can I ask you just a couple of very brief foundations foundational 

questions? 

Mr. Rehr, do your member stations compete with Mr. Karmazin’s 

product? 

Mr. REHR. They do, yes. 

Mr. WEINER. All right. Do your member stations play music, 

have music on some of them? 

Mr. REHR. Yes, 13,000 radio stations, yes. 

Mr. WEINER. Mr. Karmazin, do some of your broadcast stations 

have music? 

Mr. KARMAZIN. Yes, sir. 

Mr. WEINER. Mr. Rehr, do some of your broadcasters have talk? 

Mr. REHR. Yes. 

Mr. WEINER. Mr. Karmazin, some of your stations have talk? 

Mr. KARMAZIN. Yes, sir. 

Mr. WEINER. Mr. Rehr, do some of your stations have sports? 

Mr. REHR. Yes. 

Mr. WEINER. Mr. Karmazin, do some of your stations have 

sports? 

Mr. KARMAZIN. Yes. 

Mr. WEINER. I would like to ask the panel to oblige me by stop 

throwing around the word ‘‘monopoly’’ when just about every explanation of competition has been stipulated to over and over again 

throughout this thing. 

And while it might serve to send shivers into the spine of regulators, it doesn’t have much effect if it has no foundation in the realities in the world today. In fact, it is hard to imagine how you 

can describe satellite being a monopoly when they have no ability 

to exercise monopoly power in any meaningful way. 

Can they stop someone else from getting into the marketplace? 

First of all, what moron would want to get into that marketplace? 

Do they have the ability to, in an unfettered way, raise prices? 

Well, in fact, the competition that they have, as you yourself said, 

is with your stations, who are charging zero dollars and zero cents, 

very often for the same or very, very, very similar products. 

So this notion that we are having a hearing about monopoly 

power is wildly exaggerated, particularly when you leave out the 

one most fundamental thing. Nobody needs to have a radio. No one 

needs to have this product. And, in fact, increasingly, it is anachronistic. 

You know, it was mentioned by somebody, I think Mr. Sensenbrenner, about how he doesn’t want someone tinkering with their 

Internet while they are—well, frankly, he doesn’t realize that 50 

percent of all cars rolling off the production line have an mp3 jack. 

And 100 percent of all computers have access—that have access to 

the Internet, can download content in the form of podcasts that is 

just like the comedy that Mr. Keller likes to get, just like the controversial talk that some people like to get. 

And I have to tell you, I am stunned by how many people have 

satellite radio in this room. I don’t understand—I mean, God bless 

you, Mr. Karmazin, I hope you are successful, but I don’t underVerDate 0ct 09 2002 14:14 May 03, 2007 Jkt 000000 PO 00000 Frm 00118 Fmt 6633 Sfmt 6601 F:\WORK\ANTITRUS\022807\33627.000 HJUD1 PsN: 33627
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stand. Increasingly, it is tougher and tougher for any radio to compete. 

Here is the things that I think we do need to learn. We made 

a mistake in the Echostar-DirecTV question. Mr. Rehr used it as 

an example. I think today satellite TV production and the competition that was supposed to come by keeping them apart has suffered. 

The gentleman, Mr. Cooper, has talked about how he were right 

then. You know what? Maybe if we had let those two merge back 

in 2002, we would have that promised broadband access going 

through the satellite that we thought we were going to have. We 

don’t have it. 

You know, sometimes mergers serve to help an industry and help 

choice move forward. And I have to tell you, if this notion that concentration is bad—Mr. Rehr, do you believe the concentration is inherently bad? Take a look at Clear Channel. Take a look at the 

number of communities that have less choice in terrestrial radio. 

Arguably, if you want to compete with Mr. Karmazin and win, 

you should be as much against concentration among your members 

as you appear to be on this panel. This is a new world we are living 

in. No longer is it can we be sanguine to say that, well, we don’t 

have anything that when people get together, because consumers 

wind up doing worse. 

Mr. Martin at the FCC, you know, raised a pretty high bar in 

one of his several, often disjointed comments about this. He said 

at one point, ‘‘We would need to demonstrate consumers would 

clearly be better off with more choice and affordable prices.’’

And some people have said that is an impossible test to pass. 

Well, in fact, you are going to have more choices, I think, because 

when you get into your car, you are going to have one player that 

is going to have football and baseball, where otherwise you would 

have to put another radio on top of it to be able to get both of those 

things. And you have got to include that in your discussion about 

whether prices are going to come down, Mr. Cooper. 

If you are now going to have one player that is going to be able 

to play both services, consumers are paying less. And I will go one 

step further. The innovation that is going to then be promoted by 

people being able to make hardware, invest all of the R&D hardware to come up with a better player, think, the players—and 

again, Mr. Karmazin, I apologize, are not so great. I think they still 

need a good deal. 

But people have to make a choice between developing one for XM 

and developing one for Sirius. Now I think the prices are going to 

come down on the players because you are going to have those 

things. 

So we have to stop with the 1970’s version of this discussion. And 

if Mr. Rehr admits that this is competition, the fact that he is 

fighting so hard on this means this is going to be more competition, 

which means this should probably be approved. 

Does anyone want to comment on any of that? 

Mr. COOPER. I would be glad to comment on that. 

Mr. CONYERS. The gentleman’s time is expired. 

Mr. WEINER. Can I at least get an answer, Mr. Chairman? Thank 

you. 

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Mr. COOPER. I will be glad to comment, because I actually disagree with almost everything you have said. 

Because satellite radio, we have heard it in Mr. Boucher’s numbers, 32 hours a week of radio listening. The world has changed—

32 hours a week. TV is about 56 hours a week. The world hasn’t 

changed so much. 

But Mr. Boucher and Mr. Smith give you an exact answer to 

what they do that is different than what local radio does. 

What Mr. Karmazin does is he aggregates small demand. Ms. 

Waters’s question as well. He aggregates small demand that the 

local market will not support. 

So the Sixties channels disappear in D.C. because there aren’t 

enough Sixties listeners in D.C., but Mr. Karmazin takes the listeners in D.C. and the listeners in San Francisco, aggregates them 

and can sell them. 

The Boston Red Sox—I am from the Bronx so I use the Boston 

Red Sox as an example. There are lots of Boston Red Sox fans 

spread all over the country. But the local TV station cannot deliver 

a station to those viewers or listeners because there is not enough 

of them in their little market. 

Nationwide there is enough of them so that Mr. Karmazin can 

sell the New York Yankees in Boston and San Francisco, because 

he has aggregated the market. 

And oh, by the way, he also happens to sell the San Francisco 

Giants to the Boston Red Sox. So Karmazin competes with local, 

but local can’t compete with national. That is what Mr. Rehr has 

said. And that is 32 hours. So these are compliments, not substitutes. 

Mr. WEINER. But would you agree that that is not true? Your example is not 100 percent not true as it relates to Britney Spears, 

is that correct? One hundred percent not true? 

Mr. COOPER. Britney Spears, people like Britney Spears. She 

doesn’t have a channel. Maybe she could have a channel. He will 

pay for all kinds much weird stuff. We have agreed on that. And 

he will pay a lot. So maybe he will give Britney Spears a channel. 

The local radio station can’t do that because they don’t aggregate 

demand. So what Mr. Karmazin does is he meets a specific need. 

He sells mobility. Whether it is people who move more than 25 

miles or content that moves more than 25 miles, the mobility is 

what he has because he is able to aggregate markets. 

Mr. CONYERS. Mr. Cooper, Mr. Weiner’s time has expired. 

Mr. WEINER. Mr. Chairman——

Mr. CONYERS. We thank you so very, very much. 

We now turn to Mr. Issa, the gentleman from California. 

Mr. ISSA. Thank you, Mr. Chairman. 

The extension of remarks was most interesting, and I appreciate 

hearing it. 

First of all, and I don’t want answers until we are at the end and 

the red light is on, because that works better. 

First of all, perhaps what this body should have done is said 

that, Mr. Karmazin, that you could not enter, nor could XM, have 

entered into any exclusives until there was a viable combined market. Thus we wouldn’t have had—you know, you wouldn’t have had 

the shock jock that gave you all the business. One of you wouldn’t 

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have had one sports franchise, the other wouldn’t have had the 

other sports franchise, and Gary Ackerman wouldn’t have to have 

two radios, which is tough because they are each in separate cars. 

But we didn’t do that. So one thing I want to point out, because 

I am seeing some content people in the audience, but nobody here 

is a content person. 

Isn’t it true the content community loves what has happened? 

They love the bidding up, like two sports franchises, to insane 

amounts, the cost of the content that you are supplying, which is 

part of the reason that you are not profitable. You guys have gotten 

in a bidding war, you have created a lot of money, each of you. You 

know, I don’t care whether it is NF or hockey or whatever. All of 

these things have cost you a lot. 

And that would go away to a certain extent in a merger, because 

people would have to choose whether or not to be on the global 

stage or not, so your cost of content might go down in renewals because you would have a certain greater relationship. And you 

would be much more similar to the terrestrial broadcasters who 

say, you know, I would really like to have this sports franchise, but 

it is only worth so much to me. And they, in fact, pay less. 

That is a what-if. And, Mel, before I let anyone answer, I want 

to pose one more thing because I have looked at the technology, the 

bandwidth you have, the bandwidth the satellite, the TV satellite 

providers have. 

Why is it that we are not looking here and saying, what if Clear 

Channel is able to take its national footprint of terrestrial stations, 

going digital, and decide instead of to be hi-def, to be at your resolution and in fact put 10, 12, 15, 20 channels into their existing 

bandwidth? What if this Committee said that we were going to let 

them do that, we were going to create that market? 

Obviously Energy and Commerce, Mr. Dingell, would have a little to say about it. But what if we did that? 

What if, in fact, we allowed for the 802.11 protocol to include a 

non-encrypted side so that there would be broadcast capability 

coming out of all those various 802.11s that are basically at any 

given time you can see hundreds of them on your screen if you 

have a decent high-gain antenna. 

What if we in fact took satellite radio’s 802.11 and Clear Channel 

and, by the way, let us not forget public broadcasting, which has 

an overlapping national footprint. What if we gave all of them the 

ability? Wouldn’t we in fact have plenty of competition that would 

be direct competition? 

The last what if that I have to ask is, what if we tell you that 

we reserve the right at any time to sell a whole new watt of bandwidth in the public interest that is exactly equal to what you and 

XM both have? 

Mel, what about those what ifs? 

Mr. KARMAZIN. So, I want to make sure I got them all. 

Let us take the what if on the content provider. So, if you were 

to talk to any of the content providers, they will tell you that not 

only do they have a terrestrial radio deal, that they also have an 

Internet deal. They also have a cell phone deal. So there is no 

shortage of competition if there was no satellite deal. 

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And I am particularly interested in your comment about 802.11 

and things like that. So, virtually all of the cars that are being 

made are being made with Bluetooth capability so that if you are 

interested in NASCAR, that you are able to get NASCAR from the 

local broadcaster who wants it. They certainly have local radio 

rights. They also have a deal with cell phone companies to where 

you could put that Bluetooth and get it through your audio spear. 

And again, I think the idea that there is so much technology that 

is out there, that the idea is that these content is available through 

all of these choices and how much money a company is going to pay 

for content is whether or not the consumer is going to want that 

and whether you are going to get subscribers. 

So why did we pay a lot of money for our content, is because we 

believe that we could get more subscribers if we offered the consumer more choice. 

And regarding there being additional competitors, I am not a 

hypocrite, okay. I am saying that there is a lot of competitors. If 

the Government were to say that they wanted to have more—and 

by the way, they have more because they have authorized this HD 

radio. So what you are finding is that—and I am not rapping on 

Clear Channel. They have done an awful lot of good things and I 

have friends that are there. But where every single channel exists, 

they are going to be able to have three or four channels. 

So there is going to be more choice and there are 1,100 radio stations on the air today. As a matter of fact, Clear Channel is providing a lot of the programming for these high-definition channels 

that are national channels. 

So, I am sort of pretty cool to compete. I mean, I am open for 

that. And if the technology is there, there should be choices. 

Mr. ISSA. Mr. Chairman, the only last what if would be, what if 

we allowed for further syndication of broadcasters so as to create, 

if you will, overt competition, which doesn’t exist today. I mean, basically non-Clear Channel, nonpublic broadcasting, some of these 

have a difficult time coming together to form a national footprint. 

What if we, in fact, made sure that was available? 

Thank you. 

Mr. CONYERS. That would be the subject of yet another hearing. 

Mr. ISSA. I yield back. 

Mr. CONYERS. Thank the gentleman. 

Let me first of all express my real and sincere commendations 

to all of the five witnesses. You have started a discussion that I am 

sure is going to raise a number of questions which will be coming 

to you for you to submit answers for the record. We will give you 

a week for our Members to do that. Then there will be another 

week to print up the record. 

And I want to thank you all. 

I can’t help but particularly thanking Mel Karmazin for the tremendous cooperation that he has given the Committee and the way 

that he has handled himself and the comments that have exchanged between us all. 

And I would like to also thank the guests, our spectators who 

came here, people who are—I see a lot of industry people around. 

We had an overflow first hearing, and we are going to be watching 

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carefully as the Senate rolls out its discussion. And the next year 

will be an exciting one as this subject develops. 

On behalf of the Committee, my great thanks of indebtedness to 

you all. 

And I, at this point, conclude the hearing. Thank you all very 

much. 

[Whereupon, at 5:21 p.m., the Task Force was adjourned.] 

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1http://media.yahoo.com/ncaa/splash.html 

2www.cstv.com 

3http://www.mgoblue.com/section—display.cfm?section—id=185&top=2&level=2. 

4http://cornellbigred.cstv.com/ and https://www.nmnathletics.com/SportSelect.dbml?DB—

OEM—ID=9000&KEY=&SPID=3659&SPSID=41065

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

RESPONSE TO POST-HEARING QUESTIONS SUBMITTED BY THE HONORABLE JOHN

CONYERS, JR. TO MEL KARMAZIN, CEO, SIRIUS SATELLITE RADIO

Question:

Much of the criticism of this merger proposal has focused on its monopoly character. However, there is also the monopsony issue—the reduction from two to one in 

the number of buyers of content, including college sports rights, for satellite radio 

distribution. Today college conferences and other content providers can entertain offers from two different satellite radio distributors. Competition for content between 

these two companies has been fierce. If the proposed merger is allowed, all of that 

competition will disappear and there will be only one buyer of satellite radio content. 

Why should we allow that?

Answer:

It is highly inaccurate to describe this merger as creating a monopsony on the 

content side. There currently exist many distributors of content, and these distributors can reach listeners through a variety of platforms including terrestrial radio, 

wireless networks, podcasts, and the Internet. A programmer’s options for content 

distribution are not currently limited to satellite radio, nor will they be so limited 

after the merger. Moreover, given satellite radio’s continued desire to attract subscribers from other media, its incentive to continue to offer a broad range of content 

that customers desire will remain strong, and its ability to expand that range of programming will grow over time. In short, this merger does not harm competition at 

the programming level. 

The specific example of college sports demonstrates that content providers do not 

rely on the two satellite operators to distribute their service. Like professional 

sports programming, college sports content is distributed successfully on a global 

basis via the Internet, in addition to traditional radio and television distribution. 

Using the Internet, a university, a conference, or an entire league, can distribute 

its content through a variety of partners or by itself. For example, Yahoo Sports distributes the audio broadcasts for over forty Division I schools across all sports, including teams from every Division I-A conference.1 CSTV.com offers audio and video 

for over 100 top schools, including UNC, Notre Dame, and UCLA across 30 sports.2

Universities can also offer their content through their own websites. Many individual schools offer their audio broadcasts through their Internet sites, so that 

alumni who are geographically dispersed across the world can access content. For 

example, Michigan offers free game audio through its website.3 Even schools with 

smaller sports programs such as Cornell and Harvard offer their alumni access to 

game audio across a greater variety of sports than is possible over satellite radio.4

These are just a few examples and such offerings of content on university websites 

is becoming the rule rather than the exception. 

Because satellite radio is competing against other platforms like terrestrial radio 

and the Internet, it will continue to have the incentives to gather the programming 

that current and potential subscribers want, so programmers with compelling content will continue to have access to satellite radio post-merger. Indeed, in the longterm, by enabling the consolidation of duplicative channels and freeing up capacity 

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for new channels, this merger increases the ability of programmers to reach customers via satellite radio. 

If content owners have sufficient options to distribute their content, which they 

do, the focus of the antitrust inquiry should be on the impact on subscribers. For 

subscribers, there will be an immediate benefit as the most popular content can be 

shared on both the XM and Sirius platforms. Greater access to programming is a 

cognizable antitrust benefit.

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