Assignment #1

This is the first post which is an assignment for the course this blog is an assignment for, so it is not about my sucky apartment.

For this assignment I will be posting a response to an article from Benton Foundation Headlines (www.benton.org). Because that article is short, and the RSS link will eventually expire, here is the article in its entirety:

*XM-SIRIUS MERGER CONSTITUTES A MONOPOLY
[SOURCE: Consumer Coalition for Competition in Satellite Radio press release]
Gregory Sidak of Criterion Economics has concluded a study which demonstrates that the proposed merger between XM and Sirius would create a monopoly, constituting a likely violation of the antitrust laws. Sidak, a former Deputy General Counsel for the FCC, was asked by the Consumer Coalition for Competition in Satellite Radio to determine whether subscription-based satellite digital audio radio services ("SDARS") are a relevant product market for antitrust purposes, and to assess the unilateral pricing effects of the proposed merger in the relevant product market. Sidak finds that 1) SDARS are a distinct antitrust product market; 2) The proposed merge would be anti-competitive as (i) it constitutes a monopoly under the most reasonable market definition and (ii) even under a more expansive market definition the proposed merger would increase seller concentration ratios to unacceptably high levels; 3) The majority of efficiencies identified by XM and Sirius would not benefit consumers; and 4) The conditions offered by XM and Sirius would not preserve consumer welfare.*

This is a story I've been following for a while. I am a big opponent of the homogenization of the radio industry and the Clear-Channelization of audio media. This would lead you to believe that i was a big opponent of the merger of the only two satellite radio providers in the country, however, thats not entirely true. I believe that factors outside of pure economics should be the basis of the descision making process in the FCC. However, this is not the established way, nor the direction they are going this time.

Thinking in terms of the way in which the FCC determines competition, the result of Sidak's study is unsurprising and inevitable. Any situation that equates to "any number plus any number =1 is bad" but, why? Why is it that a subscription service, which has to compete on a national footing with broadcast radio networks is its own unique market? Not to be sarcastic, but if you're listening to top market radio, in almost any format anymore, you're most likely listening to clear channel. But, because they don't own any stations in the hundreds of lower number markets, they're not a monopoly. Right. Without going into Napoli and pulling quotes out of papers i've already written, I can say I do not support this claim that the FCC should only consider this merger from the perspective of its effects on the "satellite radio market."

Yes, allowing these two to merge would be eliminating the competition in the satellite radio business. On a brighter note, this could lead to the freeing of one of the only TWO satellite licenses that are even available for issue. Apparently, neither of these companies are doing very well, so why not let them merge and let someone else enter the market? What is it really that is influencing the FCC to lean in this direction? Did they hesitate when television owners wanted to be able to own more stations and control more of the types of media outlets in towns? Well, actually, yes. However, as soon as the big media lobby kicked in, the choice was made. Congress was too scared of negative publicity, or the thought that the press might no longer cover them that they caved. Of course, neither of those two things would actually happen, but lawmakers are rational and can see past the dollar signs. Right?

The companies have admitted that they can survive outside of the thought of a merger, so it is not a "let us merge or lose this form of competition completely" situation, but that is no reason to solely look at this from an economic position.

It feels like the FCC has already made up it's mind, and with the established big meda obvioiusly happy with the descision, this seems like an open and shut case. It is a shame that there is not more qualitative research being done in markets to determine if this is actually good or bad. Analyzing numbers in a room somewhere is nice, but it really doesn't get to what the people do or dont want. That's the government for you. Numbers are more important than you are.