Wednesday, March 21, 2007

Bear Sterns On Senate Hearing

March 21, 2007

With the filing of the FCC application, the senate hearing seems more like last weeks news, but here is Pecks take:

First and Ten (Months That Is) -- Part III

• We attended the Senate Judiciary Subcommittee Hearing on DARS merger yesterday.

• Chairman Kohl discussed how DARS was different from other competitive services that XM
and Sirius have identified. No one else has the same 'cluster of channels' that DARS has. Ipod
is cumbersome to load and doesn't have live sports. Internet radio is not as robust and not
available in cars to most people. Terrestrial radio is not able to duplicate the lineup on DARS
and carries ads. The key questions he identified are market definition and power.

• In response, Mel talked about the numerous consumer options and how DARS has only
limited share of consumer time. He also talked about lowering prices and increasing choice.

• NAB talked about how DARS companies are the only true competitors and the FCC rule
promoted intra-industry competition. They also talked about how a MergeCo could take away
listeners and thus adversely impact them.

• Gigi Sohn discussed how the merger may be beneficial and suggested conditions, including 3
year price cap, should the deal be approved.

• David Balto, an antitrust expert, said that the relevant market is DARS. He drew similarities
to Staples/Office Depot case which wasn't allowed. He believes that a monopoly is forever,
even if promises of price caps are for a limited time. He talked about how this is similar to
cable where the regulatory agencies haven't been able to contain price increases as cable
gained market power and acquired key sports content. He also drew an allegory to NFL
Sunday Ticket, where dual revenue streams and market power have allowed cable TV to
develop exclusive offerings. He stated that no significant competition is likely to emerge in
the next 2 years which is the time frame that DOJ considers. For content companies, merger
would eliminate options with respect to national distribution platforms.

• Senators Hatch and Brownback discussed indecency at great length, and Mel did not commit
to containing/eliminating offensive content.

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3/21/2007 12:10:00 PM

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