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FOR IMMEDIATE RELEASE
February 28, 2007
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Dennis Wharton
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Oral Testimony of David K. Rehr Before the U.S. House Judiciary Antitrust Task Force

WASHINGTON, DC - NAB President and CEO David K. Rehr delivered the following oral testimony in the Hearing on Competition and the Future of Digital Music before the United States House of Representatives Committee on the Judiciary Antitrust Task Force:


Good afternoon.

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

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.

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

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.

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

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

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.

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

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

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

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

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

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

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.

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.

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.

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.

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.

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.

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

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.

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

-- 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.

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

-- 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.

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.

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?

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.


About NAB
The National Association of Broadcasters is a trade association that advocates on behalf of more than 8,300 free, local radio and television stations and also broadcast networks before Congress, the Federal Communications Commission and the Courts. Information about NAB can be found at www.nab.org.

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