Category Archives: Monopolies

Influence Peddling And The XM-Sirius Merger

Timothy Carney at the Washington Examiner reports that the National Association of Broadcasters is engaging in a high-profile campaign to block the proposed merger of satellite radio companies XM and Sirius:

While engaging in this high-priced lobbying campaign to inflict a possibly mortal wound to their competitor, the broadcasters accuse the satellite companies of “seek[ing] a government bail-out to avoid competing in the marketplace.”

The National Association of Broadcasters, an influential organization with a $20 million building in downtown Washington, D.C., and an $7 million annual lobbying budget, is leading the charge to block the proposed the merger, either through the Federal Communications Commission or the Department of Justice.

To make their case to DOJ that Sirius and XM should not be allowed to join, the broadcasters have hired the guy who used to run DOJ — former attorney general John Ashcroft. He was a Republican senator from Missouri before his appointment by President Bush as the nation’s top legal official.

As Carney reports, Ashcroft and the NAB are arguing that allowing the merger to go through would create a monopoly that would threaten their industry, but the numbers just don’t support that assertion:

Sirius and XM hardly look like the 900-pound gorilla in this fight. Compared to the $1.49 billion in combined annual revenues of Sirius and XM, Clear Channel Communications, the largest member of NAB, pulled in $1.97 billion in revenues last quarter. Clear Channel boasts of 110 million listeners, while XM and Sirius combined have 12 million subscribers.

One member of the NAB earned more money than the entire satellite radio industry combined. It has ten times as many listeners as XM and Sirius combined. And yet, according the NAB and it’s hired gun, merging the two companies would harm the broadcast industry.

There is, of course, no small degree of self-interest on the part of the NAB and it’s members in the fate of XM and Sirius. If the merger is blocked, one or perhaps both companies will be forced into bankruptcy protection where, potentially, their assets could be acquired at fire sale prices. Conceivably, one or both of these companies could go out of busines entirely. Thus, blocking the merger could mean eliminating potential competitors and acquiring an entire satellite radio network at bargain prices.

H/T: James Joyner

Satellite Radio, Monopolies, And Legislative Stupidity

Doug’s been doing a good job of keeping up with the news on the proposed XM/Sirius merger. As he’s pointed out, having one monopoly satellite radio is better than having two that go out of business. But something has been left out of the equation.

What’s wrong with a monopoly in satellite radio? After all, look back a mere 6 years, when there was no such thing as satellite radio. At the time, people functioned. The world wasn’t falling apart because there were no blues stations in BFE. People lived without satellite radio, and yet people didn’t even know they were missing it.

So what happens if XM and Sirius merge, and they change their rates to $30/month because they’ve become a monopoly? It’s simple. Only people who think that satellite radio is worth $30/month will subscribe. For example, I am an XM subscriber. Yet I live in Atlanta, one of the major radio markets in the United States. At $13/month, the current price, I find XM to be worthwhile. After all, XM gives me access to Big Ten football games that aren’t televised down here, and considering how much I hate local radio, I’ll gladly pay for commercial-free tunes and the wider programming allowed. In addition, when I’m making a long drive, it’s nice to have the knowledge that I’ll always get crystal-clear reception, without having to search for new stations every 50 miles.

But at $30/month, I most certainly would cancel my subscription. After all, I have an iPod and a car setup, so I can load it up with songs and podcasts for long drives. On the weekends when Purdue football isn’t televised, I have free internet streams I can access if necessary. And here in Atlanta, I can go back to the old habit of listening to local radio. All in all, it’s my choice to change my behavior due to a rise in price. Yet if XM and Sirius both go out of business because of government regulation, I no longer have that choice.

The problem, then, gets tougher for some people, who do value the services more highly. For example, truckers and other long-distance drivers absolutely love satellite radio, because they have access to clear reception and consistent stations all over the country. People in non-major markets, like my sister in rural Missouri and my brother in Corpus Christi, have access to a much wider range of programming than they could ever have on local radio. For truckers and people outside the major markets, a $30/month bill just might be worth it. But again, if XM and Sirius both go out of business due to government regulation, they no longer have that choice.

Now, often the argument for breaking up monopolies carries weight when it refers to necessities. After all, if you are talking about something like oil, or you’re talking about food, or you’re talking about public education, there is always a worry that people will have consumers over the barrel because they legitimately need these items. In these cases, monopoly power leads to a lack of innovation and rise in costs. But in the entertainment market, this is not an easy thing to prove, as satellite radio is not a necessity to anyone.

Thus, for a satellite radio provider, they cannot be a true monopoly. First, they’re offering a product that didn’t even exist 6 years ago, and currently has such a tiny number of subscribers that it’s not in any way a necessity. Second, they’re competing not only against other satellite radio companies, but against terrestrial radio, internet radio, CD’s, and portable music players. If they don’t offer a product worth paying for, people won’t pay for it.

Monopolies can be a problem, particularly when (as is the case with satellite radio, or phone companies, or cable companies) they are granted monopoly power by government. However, I don’t think those rules apply in this case. Satellite radio is a luxury item which competes with entirely free alternatives. It’s a nice item, to be sure, but it’s something that we lived just fine without until 6 years ago. I simply don’t see the harm in allowing this merger, and as a paying customer of XM, I have a vested interest in the future cost and quality of this service.
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XM And Sirius vs. The FCC: The Battle Is Joined

With yesterday’s announcement of the proposed merger between XM Satellite Radio and Sirius Satellite Radio, and the announcement last month by the Chairman of the FCC that he would oppose such a merger, the battle that will determine whether this merger will go forward has begun, and it will revolve around the question of whether the FCC takes an expansive or restrictive view of what the relevant market is:

Winning approval for a proposed merger of the nation’s two satellite-radio companies turns on whether regulators buy their argument that iPods, Internet radio and other new technologies have expanded so dramatically that a monopoly would not harm consumers’ choices or purses.

It may be a difficult argument to win, but XM Satellite Holdings and Sirius Satellite Radio‘s officers say it’s worth the gamble and have assembled an expensive and experienced team of lobbyists to aid them in the fight. Alone, the companies have suffered heavy losses and spent heavily on recruiting personalities such as Howard Stern and Oprah Winfrey and on marketing to compete against each other.

Now, New York-based Sirius and XM of the District are lining up some of the best-known and highest-paid lawyers and lobbyists, while competitors and consumer groups vow to fight back. The biggest potential roadblock for the merger is a 1997 Federal Communications Commission declaration that a single owner may not control the subscriber-only satellite radio business.

But the advance of technologies such as iPods and other MP3 players, music-playing cellphones and land-based radio stations with digital broadcasts offer so much music, news and talk that the competitive climate is radically different and the FCC should waive the 1997 rule, Sirius chief executive Mel Karmazin said in a conference call yesterday. “Consumers today have a significantly broader range of audio entertainment options from which to choose,” he said.

As I argued last month, it is clear that limiting an analysis of the economic impact of an XM-Sirius merger to only the market for satellite radio is incredibly short sided. It would be like limiting an analysis of a proposed merger between a two pizza restaurant chains to just the market for pizza. There are competitors to satellite radio and they include not only traditional broadcast radio, but also the expanding technology of “high definition” radio, along with other methods of music, talk, and news delivery such as those cited by Karmazin.

More importantly, though, are the economic realities that XM and Sirius are presented with. Neither company is making money right now, and the prospects of either one of them being able to turn a profit as an independent company given the immense operating costs that they have to deal with is pretty slim. Satellite radio is still, and will likely remain for a long time, a niche technology. Most of the people who subscribe to it do so thanks to the receiver that came with the new car they bought, but not everybody wants a car with XM or Sirius capability, and not everyone can afford it.

If these are not permitted to merge, then the prospect of either or both companies ending up in Bankruptcy Court seems a likely outcome and then we could be faced with the death of satellite radio as a business.

Virginia Virtucon has it exactly right:

It would be a grave mistake to take the narrow view that the only competition that XM and Sirius face comes from one another.  Consumers have a multitude of options — traditional free FM and AM stations, iPods/MP3 players, Internet radio, etc.  XM and Sirius are looking to merge in order to survive in this competitive environment.  Would the government rather have only one satellite radio company because one went bankrupt or only have one because the two existing ones merged to form an even better combined service?  Would they rather have NO satellite radio because XM and Sirius drove each other into the ground trying to compete?

Frankly, I don’t think the FCC should be involved in this matter at all, but since they are they need to do the right thing. Let the market decide and approve the merger.

Memo: The Earth Doesn’t Move

Cross posted here at Fearless Philosophy for Free Minds

Kansas’ government school science curriculum is no longer the laughing stock of the nation and the world; the dubious honor may next be bestowed on Georgia. Georgia state representative Ben Bridges has circulated a memo to other state lawmakers around the country encouraging his colleagues to challenge the teaching of evolution (while promoting of I.D. creation “science”) in court by stating that evolution is not science but part of another religion thus violating the separation of church and state. This in itself is nothing too unusual; those who promote I.D. have made that argument before. Bridges memo goes even further: evolution is part of an ancient Jewish conspiracy! Obviously, this did not sit well with the Anti-defamation League.

Just when I thought this story couldn’t get nuttier, the memo has links to a site called fixedearth.com as its authority. Fixedearth.com not only takes on well-established scientific theories of evolution and the big bang (what the site calls “big bangism”) but the very fact that…the earth revolves around the sun! According to the site the earth DOES NOT MOVE and the sun REVOLVES AROUND THE EARTH. No shit.

Marshall Hall, the sites creator and former government school teacher (scary), believes that the idea that the earth revolves around the sun is also a giant conspiracy to discredit the bible. Hall references two bible verses “The world is established and cannot move” (Psalm 93:1) and “He hangeth the Earth upon nothing” (Job 26:7). Following these verses, Hall goes on to say:

The Bible and all real evidence confirms that this is precisely what He did, and indeed:

The Earth is not rotating…nor is it going around the sun.

The universe is not one ten trillionth the size we are told.

Today’s cosmology fulfills an anti-Bible religious plan disguised as “science”.

The whole scheme from Copernicanism to Big Bangism is a factless lie.

Those lies have planted the Truth-killing virus of evolutionism in every aspect of man’s “knowledge” about the Universe, the Earth, and Himself.

I can’t say that I am all that surprised that there are such people out there who have not left the dark ages. What is a little surprising and very disturbing is the idea that a U.S. lawmaker on any level would listen to moon bats such as Marshall Hall to put forward an agenda in government schools. Had I stumbled across this site myself, I would have thought it to be a spoof to mock creationists because I know that most creationists would never question the idea that the earth revolves around the sun. Most creationists would not take Psalm 93:1 and Job 26:7 literally and would say that the descriptions made in these verses were based on the understanding people had of the universe at that time (which is a lame explanation if you ask me seeing that they were supposedly authored by the creator of the universe). In a previous post, I wrote the following statement:

Since we don’t want to offend the fragile faith of the fundies, why not allow them to substitute their own version of reality in all the other sciences? Clearly the astronomers don’t know what they are talking about either because the Bible clearly stated that the earth was flat and that the sun revolves around the earth. We ought to burn all books written which contradict the Bible. This will be no small task: we pretty much have to rid ourselves of everything we have learned about biology, geology, astronomy, anthropology, psychiatry, history, mathematics, medicine, and more.

Little did I know at the time I wrote that statement that there were fundies with influence setting out to do just that. Could there ever be a better argument for school privatization and school choice than this?

Hat tip: Nealz Nuze

Related Posts:
Sunday School Science Lesson
The End of Faith (Book Review)
Can Mysticism Co-Exist with Reason and Liberty?
The Battle for Young Minds

Freelance Hookers Rebuffed In Oz

There are few times one can talk about the economics and politics of cartels and licensing requirements, and still make it this fun:

Brothel owners accuse backpackers of selling sex in Australia

Foreign backpackers funding their Australian travels through illegal sex work are robbing the legitimate industry of profits and threatening clients’ health, a brothel lobbyist has warned.

Many young tourists to sun-soaked northeastern Queensland state were making a quick buck as black market prostitutes, undermining registered operators’ attempts to uphold health and safety standards, the Queensland Adult Business Association’s Nick Inskip claimed.

“Especially when you go up to northern Queensland, it’s not unusual for them to be working in the illegal escort industry,” Inskip said.

Having fewer overheads, they could often undercut the legal sex industry on price, making it harder for the state’s 23 legal brothels to make a profit, he said.

It sounds absurd when you hear it this way. But here in this country, pundits regularly rail against the “illegal invaders from the south taking our jobs”, and it seems perfectly acceptable to require that workers such as beauticians should be required to seek a state license.

I support relatively free immigration, and fight against government trade licensing requirements. For that reason, in the interest of ideological consistency, I also support (although don’t patronize) the rights of freelance hookers.

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