Friday, March 02, 2007

Mr. Rehr....Calling You Again

March 2, 2007

Bellow are the opening comments of Mr. David Rehr of the NAB at the hearings on February 28, 2007. SSG comments in Red.

Good afternoon.

Thank you Mr. Chairman for the opportunity to be here today.

Your very presence at the hearing indicates that you feel that satellite radio is competition to your members.

I want to commend you Mr. Chairman, Ranking Member Smith, and the members of the Antitrust Task Force, for exploring the issues surrounding a government sanctioned monopoly.

Mr. Rehr, this hearing is about exploring issues around the proposed merger, it is not about the issues surrounding a "government sanctioned monopoly". The government has not deemed the merger a monopoly, and you are getting a bit ahead of yourself here with this statement and stance.

I would ask that my written statement be part of the record.

Glad to see it part of the record. It shows quite clearly that the NAB membership sees itself as a competitive force to satellite radio.

In my time today, I would like to make five points:

1. The national satellite radio market currently is a two-company duopoly trying to become a government-sanctioned monopoly.

You are correct that there are two companies that deliver audio and informational content by means of satellites. You fall very short in the definition of the competition however. Your narrow definition is also narrow minded.

2. Such a monopoly would violate FCC rules and precedent, congressional policy and antitrust principles.

Are you or are you not at this point in time seeking to have traditional radio station ownership guidelines relaxed? Further, are you or are you not also seeking to have cross media ownership rules relaxed? You know the answer to these questions. Further, Antitrust principles take into consideration with a space, and clearly your membership lists satellite radio as competition.

3. This government-sanctioned monopoly would undermine audio content competition, not enhance it.

May I ask how you come to this conclusion?

4. Even worse, two entities that have a pattern and practice of violating the terms of their FCC licenses cannot be trusted with monopoly power.

Sir, in comparison to your membership, the satellite radio companies have been virtual saints!!!! How many payola investigations are ongoing with your membership right now? Further, you don't even pay for the music.

5. Finally, by their own admission, both XM and Sirius are not failing companies, and should not receive a government bailout.

This statement is an oxymoronic statement. If they were failing, a bail-out could be a reason for seeking a merger. They are not failing, and thus are not seeking such reasoning in their application. So, if you feel that they are not failing, why would you term the merger a government bailout? Do you feel that they are failing Mr. Rehr?

First, the national satellite radio market currently is a two-company duopoly trying to become a government-sanctioned monopoly.

Again, you need to look deeper Mr. Rehr. They play songs.....you play songs.....I-Pods play songs....Internet radio plays songs......cell phones play songs. Your narrow definition of the market is narrow minded.

There are two companies in the market for nationwide, multichannel mobile audio programming services.

"nationwide, multichannel mobile audio programming services" You said that a lot in the hearing. We understand that. Might I suggest you listen to the classic George Carlin sketch about the term shell shock evolving to battle fatigue, then operational exhaustion, then finally ending at post traumatic stress disorder (If you have never heard it you can likely catch it on one of Sirius or XM's comedy channels). Face it Mr. Rehr......they deliver audio programming just like your membership does.

They are asking to become one company. They want the power to set subscription rates without constraint from a competing service.

Yes, they set subscription rates. There are however many constraints. The first that comes to mind is that they are competing with your memberships fee......FREE

They want the power to eliminate the need to compete with one another to acquire programming and talent.

There is a synergy here. They do compete with your membership though. Ever hear Rush Limbaugh on satellite radio? How about Mancow? In fact, doesn't your membership have a lot of talent that is not available on satellite radio?

They want the power to demand exclusive deals and the ability to cross-subsidize to unfairly compete against local broadcasters.

Excuse me, but doesn't your membership have exclusive deals? I do not seem to recall a time where the morning DJ's on one terrestrial station make a guest appearance and do shows at another station.

And the fact is, this monopoly would reduce innovation for services and equipment for consumers since there will be no competition in their defined market.

Who made you the decision maker in what the defined market is? Or are you still being narrow minded at this point? As for your assertion that innovation and services would be hampered......perhaps you could be so kind as to not fight every innovation and delivery of service that these companies propose. I will be watching for you to remove your objections to the repeater networks.

2. Such a monopoly would violate FCC rules and precedent, congressional policy and antitrust principles.

The FCC specifically refused to sanction a monopoly when it established national satellite radio service in 1997, saying licensing at least two providers will help ensure that subscription rates are competitive as well as provide for diversity of programming voices.

Very good rules for 1997. A lot has happened since then. A little device called the I-pod came to market. Cell carriers began streaming content, and internet speed and efficiency has increased substantially. Sirius and XM have clearly stated that they will not be raising rates, and they offer diverse programming. This will not change.

Ironically, the argument for greater competition came from Sirius, then called CD radio. They argued that multiple providers were necessary to "assure intra-service competition." They said more players would have "compelling market-based incentives" to differentiate themselves from competitors.

Again, the year was 1997, and the market was much different then.

Perhaps most telling, Sirius explicitly stated that no satellite provider should ever be permitted to combine with another provider because "such a development would have serious anticompetitive repercussions."


In fact, in 1997, at the urgings of the parties, the FCC explicitly prohibited any such future merger stating, one licensee will not be permitted to acquire control of the other.

Most people have moved on from 1997 Mr. Rehr. They realize that times change, markets change, and people change. Even your own membership has moved on from 1997. If I am not mistaken they have embraced and even play music that was released as late as a week or so ago.

The only parallel circumstance to this instance is when the FCC refused, in 2002, to permit a merger of the only two nationwide satellite television companies, Echostar and DirecTV. The commission rejected this merger by unanimous vote.

Different companies....different circumstances. You should read up on this subject a bit.

The commission found the antitrust laws are hostile to proposed mergers that would have these impacts on the competitive structure, because such mergers are likely to increase the incentive and ability to engage in anticompetitive conduct.

Moving from a duopoly to a monopoly, as is the case here, would also be inconsistent with congressional policy favoring competition over monopoly, as expressed in the 1996 Telecommunications Act, and with long standing enforcement of federal antitrust laws.

You keep using that monopoly term. Do you or do you not compete with satellite radio?

3. This government-sanctioned monopoly would undermine audio content competition, not enhance it.

Undermining of content competition. This coming from an organization who's membership seeks the relaxation of station ownership rules, gets most content for free, and even gets payola to favor and play certain content.

A satellite radio monopolist could undermine competition by using its national market power to force content providers like sports programmers to deal only with them. It could also use cross-subsidies to engage in anti-competitive behavior against local radio broadcasters.

In case you did not notice how content providers work.......They want to get their product out to as many outlets as possible.

4. Two entities that have a pattern and practice of violating their FCC licenses cannot be trusted with monopoly power.

Will you make this same argument in your request for relaxation in station ownership regulations? Somehow i think you see the other side of the coin when speaking at those hearings. By the way.....did satellite radio speak against you at those hearings?

-- Both companies certified ten years ago that they would comply with an FCC rule to develop a device that works with both services. Still today, no consumer device is available.

The device has been developed.

-- Both companies routinely violated FCC part 15 rules, which govern the production and distribution of receiver equipment.

Yes they did. They also corrected the issue. FM modulation to receive desired content is what the consumer wanted. If your membership had better programming on 88.7 FM (you know....more than simple static), perhaps the consumers would not utilize that channel.

-- Both companies routinely and regularly violate FCC technical rules. XM operated more than 142 repeaters at unauthorized locations and at least 19 of its repeaters without any FCC authorization at all.

This repeater issue bothers you I see. You simply do not want any repeaters. Again, both Sirius and XM have been working to rectify the issues with repeaters. Perhaps you could rectify that PAYOLA thing.

Sirius constructed at least 11 of its repeaters at different locations from what they reported to the FCC, including one in Michigan 67 miles away from its reported and authorized location.

They turned said repeaters off.

5. Some have suggested that this merger is necessary for the survival of these companies. But by their own admission, this is not true.

According to their own public statements, XM and Sirius can both continue to operate if the merger is not approved - even if they are highly leveraged because of their free spending ways.


Which begs the question, why should bad business decisions be rewarded with a government bailout?

bailout? Your thought process is an oxymoron. They are not seeking a bailout. Why are you adding this to the discussion? Did you hear that baseball begins soon? Hey, that new Toyota Tundra looks like a heck of a truck huh. Mr. Rehr, with all due respect, lets keep focused here. I mean really, do you prefer an Epson printer or an HP if I might digress.

Mr. Chairman, I appreciate the opportunity to be here today, to present the views of local radio broadcasters who do not wish to become a monopoly, do not systematically violate the rules of a regulated industry and fully support competition.

ROTHLMAO..............damn man, I just sprayed my coffee all over the computer with that last statement.

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