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Friday, June 20, 2008

XM and Sirius Merger

I've read a little bit about the XM and Sirius merger. They are satellite radio providers. You buy special equipment, installed in your car or home, and you can get radio via satellite.

XM and Sirius' biggest competitors are *NOT* each other. Their biggest competitors are cell phones, iPods, and the Internet. Pretty soon, people will be able to get radio/music on their cellphone. The Internet and iPods are another viable alternative. People can download music ahead of time, rather than listening to live streaming.

The merger is currently blocked for a stupid reason. When the FCC gave XM and Sirius permission to start operating, it made them agree to never merge. The competitive landscape has changed, and a merger makes economic sense. However, the FCC wants there two be two satellite radio vendors instead of just one.

The obvious solution has not been mentioned. The FCC should allow XM and Sirius to merge, *BUT* require them to give up half their channels. Then, those channels can be auctioned and sold to a new market participant. That seems like the fairest solution to me. The FCC should allow the merger, but auction the right to sell satellite radio service to a new competitor.

Of course, there's extensive State regulation of the communications market. If I wanted to launch my own satellite and radio service, I'm barred from the State. I can't launch my own radio or cellphone service, because the State gave away the monopoly right to broadcast at most frequencies. Fortunately, the Internet is changing the equation. I can offer an Internet-based radio/vlog/podcast service at low cost.

2 comments:

Tristan said...

Its rather like transport.

So often I hear people saying that rail is a 'natural monopoly' and you can't have competition between rail companies (which is wrong anyway, because they can compete over different routes to the same place or over trying to get you to locate your business on their line, not a competitors and so on).

In reality however, rail competes with road, aeroplanes and even canals.
It is the field of transport as a whole which they compete to provide a better service.

propertarian said...

So often I hear people saying that XM and Sirius are 'natural conditions' resulting in "free market" and you can't have more than two satellite radio companies. This is wrong, because the FCC satellite regulations prohibit new satellites to be launched. And because of our corruption is often hidden, it is impossible to estimate whether corruption was significant in the radio monopolies.

In reality, defending the merger is an aspect of vulgar libertarianism. iPods, iPhones, videophones and some trivial ideas like Internet radio and cell phone radio are patented.

If all these patents are repealed, our society would be very different than currently-existing capitalism. In repealing patents on trivial ideas like e-education and work from home, our society would be much wealthier and technological.

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