A Sirius XM (NASDAQ:SIRI) subscription price hike after July? It’s looking more likely, judging from recent correspondence with the Federal Communications Commission.
When the FCC agreed to let Sirius XM satellite radio merge, one of the voluntary conditions to which the new entity agreed was to hold off on raising their “current or proposed prices” for at least thirty-six months after the consummation of the union. These included regular and premium channels.
“Six months prior to the expiration of the commitment period, the Commission will seek public comment on whether the cap continues to be necessary in the public interest,” the Order noted. “The Commission will then determine whether it should be modified, removed, or extended.”
Sirius and XM consummated the merger on July 28, 2008. That means that the voluntary price cap period ends on July 28 of this year. And that public comment period should be coming soon. Present Sirius subscription prices range from $6.99 for an a la carte package to $19.99 for the Sirius XM “all-in-one” deal.
But Sirius XM already knows what the FCC should decide on the matter. “In light of the increasingly competitive landscape for audio entertainment, there is no need for the Commission to seek to extend or modify the subject rate cap and Sirius XM requests that the FCC take no steps to do so,” the company wrote to the Commission on Thursday.
Why? In its Order, the FCC noted that it wanted to hear public comment because the agency did “not know what the competitive landscape will be like in three years.”
Sirius XM says it’s obvious now:
The audio entertainment market is even more robustly competitive today than it was in 2008 when the FCC granted the merger applications. Satellite radio competes for listeners with an expanding array of audio entertainment choices—most of which are available to consumers for free. These choices include terrestrial AM/FM radio, HD radio, iPods and other portable audio devices, and they increasingly include Internet-based services, such as Pandora, Rhapsody, Slacker, Lastfm and iheartradio.
Pandora alone is reportedly available on over 200 devices in addition to the computer. This competition for audio entertainment is especially acute in vehicles, with several automakers introducing features integrating Internet-based services, further reducing any remaining arguable hurdles to the seamless use of smartphones, iPods and other portable audio devices in vehicles.
In early January 2011, Toyota announced it would introduce ‘Entune’ in its vehicles, an integrated multimedia system designed to compete with Ford’s SYNC system and the products introduced by BMW and Mini. Such marketplace changes confirm precisely what the United States Department of Justice found when it closed its investigation of the Sirius-XM merger nearly three years ago.
In granting its consent to the merger, DOJ identified ‘competitive alternative services available to consumers’ and noted, in particular, that ‘a number of technology platforms are under development that are likely to offer new or improved alternatives to satellite radio [including] . . . the expected introduction within several years of next-generation wireless networks capable of streaming Internet radio to mobile devices.’
DOJ’s findings have been confirmed by independent parties in the FCC’s rulemaking regarding HD Radio technology and through subsequent technological developments.
Furthermore, even if the Commission thinks it has the authority to extend the expiring cap, doing so wouldn’t be practical, Sirius XM argues:
For example, the price cap was suggested by the applicants for a defined period of time. Government-set rates are something quite different. How would the FCC independently justify setting $12.95—or any other particular rate—as the appropriate rate for basic satellite subscriptions? And for what period of time? Moreover, what process would the Commission employ for determining subscription rates or the period of time they would be in effect?
No word yet on when this FCC comment period will begin. But Sirius XM subscribers should probably gird their monetary loins for rate hikes in the fall or beyond. After all, somebody’s gotta pay for Howard.
