Sirius CEO faces skeptics in Senate over merger plan

WASHINGTON (AP) — A Senate committee chairman said Tuesday Sirius Satellite Radio Inc. has "a steep hill to climb" in showing that its proposed purchase of XM Satellite Radio Holdings Inc. will not hurt competition in the audio entertainment market.

Sirius Chief Executive Mel Karmazin told members of the Senate Commerce, Science and Transportation Committee a combined satellite radio provider would benefit consumers by letting them access both companies' services for a diminished price.

Both companies currently have subscription fees of $12.95. Karmazin said a merged company would be able to provide both companies' programming on one "interoperable" radio for less than the $25.90 it would currently cost to subscribe to both services.

Karmazin also said the merged company would offer consumers the option of subscribing to fewer channels for a monthly price lower than $12.95.

The combined company would consider offering regulators a guarantee that they would not raise prices in order to complete the merger, Karmazin said.

Sirius' proposed buyout faces significant regulatory hurdles.

FCC granted licenses to the two companies in 1997 on the condition that they would never merge to create a potential satellite radio monopoly.

But Karmazin argues that new technology has evolved over the last 10 years to provide significant competition in the form of high-definition radio, online radio and even iPods.

"The audio entertainment market is robust, competitive and teaming with innovation and will remain so after our merger," Karmazin said.

Karmazin received a cool response to this argument from Democratic senators, including committee Chairman Daniel Inouye, D-Hawaii.

"Given the public interest in promoting competition and maximizing a diversity of media outlets, we should be skeptical of claims that new technologies necessarily 'change the equation' and provide competition sufficient to restrain monopoly power," Inouye said.