Listening to reason on radio merger

When satellite radio broadcasters Sirius and XM argued that they should be allowed to merge into a monopoly because they actually compete against terrestrial radio, iPods, cellphones and other listening choices, I didn’t buy it.

Now, like the song says, I’m a believer.

The Justice Department gave its blessing this week to a $4.6-billion buyout of XM Satellite Radio Holdings Inc. by rival Sirius Satellite Radio Inc., despite intense opposition from consumer groups that rightly argued that this would give a single company control of the market.

The Federal Communications Commission still has to weigh in, but the betting line among telecom analysts is that this is a done deal. The Justice Department’s antitrust investigation was seen as the more formidable hurdle.

Justice basically bought Sirius’ and XM’s pitch that consumers won’t be harmed by a merged company because they have so many other audio options available to them.

This, in turn, will serve as a deterrent to Sirius-XM (or whatever it’s called) jacking up prices willy-nilly once the company has the satellite radio field to itself.

In a lengthy statement, the Justice Department’s antitrust division “concluded that the evidence does not demonstrate that the proposed merger of XM and Sirius is likely to substantially lessen competition, and that the transaction therefore is not likely to harm consumers.”

I was wary of that idea when the merger was first announced in February 2007. My gut told me that a monopoly is a monopoly, and if a single company controlled satellite radio, customers would be held hostage to whatever pricing or conditions the company set.

Then I moved to Los Angeles. And I started living half my life on the freeway. And I became a Sirius subscriber.

Now I can say without hesitation that commercial-free radio is a godsend and well worth the $12.95 a month. But I can also say that I wouldn’t think twice about canceling my subscription if the price crept only marginally higher.

I’d have no problem going back to flipping between KPCC-FM and KRTH-FM on my terrestrial radio dial and filling in the gaps with my too-voluminous collection of CDs. Or I’d finally break down and purchase that iPod, and keep all my tunes at my fingertips.

In other words, I’d do exactly what Sirius and XM said I’d do.

Winnetka resident Frank Guerrero, 44, feels pretty much the same. He told me he spends about two hours commuting every day to and from work in Burbank. He subscribed to Sirius a couple of years ago when Howard Stern brought his act to the service.

“Other than Howard Stern, I get all the football scores and traffic news,” Guerrero said. “But if I want music, I have my iPod.”

Indeed, all he has to do is slip his music player into a slot in his car, and he’s in total control of his playlist. Guerrero said he spends about half his commute listening to Sirius and half to his iPod.

Antitrust officials made the right call on this one. Music and talk have broken free of traditional distribution methods, and consumers can pick and choose among a wide variety of options.

(I’d like to wax similarly upbeat about the way information has broken free of newspapers. The big difference is that Sirius, KRTH and iTunes may be able to profitably coexist. Nobody in the newspaper biz knows how to stop the Internet from eating our lunch.)

Nevertheless, a merged Sirius-XM will still constitute a monopoly, albeit a niche monopoly, and that’s something regulators need to keep an eye on. To sweeten the deal for the feds, Sirius and XM said they’d introduce a la carte pricing to offer even more attractive programming choices.

This is a good thing, allowing people to pay only for the channels they want. Let’s hope cable, phone and satellite TV providers follow suit.

But something tells me that Sirius-XM will soon start itching for increased revenue, and the company will start testing new price points for its subscribers. Yes, the market will decide how much the company can get away with charging.

At the same time, though, this deal was predicated on the notion that consumers won’t be harmed in any way. And I think most people would agree that getting nickeled-and-dimed for telecom services has become a too-common irritant in the modern world.

Sirius and XM are getting a free pass on the antitrust front not just because consumers have other audio choices but also because, without the merger, we’d probably lose satellite radio altogether.

To date, neither company has seen any profit, and the sky-high cost of launching satellites serves as a major barrier to entry for other market participants. Sirius and XM are being given a reprieve to see whether they can make this costly technology work.

My hunch is that as it becomes easier to receive satellite programming on most car stereos, and as a la carte pricing as low as $6.99 monthly makes the service more affordable, satellite radio will find a core audience loyal enough to keep the business in the black.

If, on the other hand, Sirius-XM starts behaving like the cable industry, raising rates at all-too-frequent intervals just to keep shareholders happy, it will be time for regulators to step in.

I know I said a moment ago that I’d balk at paying more than I currently pay for Sirius. But the reality is that, like many people, I’d probably rationalize paying another dollar a month, and then two, and then three, just to avoid the blizzard of ads on commercial radio.

Sirius and XM know this -- they’ve probably done tons of market research.

They know about people like Fullerton resident Chris Kirby, 49, who told me he’s so passionate about XM that he listens in the car, at work via the Net, and then at home through his DirecTV hookup.

“I’m so in love with it,” Kirby said, “I’d pay twice what I’m paying now.”

Consumers have choices, no question about it. But the reason Apple’s iTunes charges only 99 cents for songs is that some other provider (can you say Wal-Mart?) would happily charge less if Apple raised its rates.

Satellite radio subscribers have no such alternatives. They’re about to be captive to a monopoly. And history hasn’t been kind to consumers on that score.

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Consumer Confidential runs Wednesdays and Sundays. Send your tips or feedback to david.lazarus@latimes.com.