FCC

According to the Wall Street Journal, FCC commissioner Tate is set to approve the proposed merger of Sirius and XM with a fine of $20 Million fine that is said to resolve several enforcement issues surrounding satellite radio.

Should this news be accurate, the satellite radio companies now have the green light to move forward with their merger.

Once the deal is consummated, each share of XM will receive 4.6 shares of Sirius.

Position: Long Sirius, XM.

[ Via Wall Street Journal]

With four of the five FCC commissioners having cast their votes, two in favor and two against, the audio entertainment world is now waiting on FCC commissioner Tate to cast her deciding vote. The events of today actually help us better understand exactly where the merger stands. The fact that democrat commissioners did not wait and delay the process by 10 days bodes well for the process.

Thus we wait on commissioner Tate, and a number of headlines, some of which are Howard Stern type material, come to mind.

• “Tate Is Late, Sirius and XM Expecting”
• “Tate Plays Hard To Get”
• “Tate Will Be Casually Late For The Event”
• “Can’t Consummate Without Tate”

The list could go on and on, but the bottom line is that commissioner Tate is holding all of the cards. In the minds of many, the outcome is already known, it is just a matter of how much Tate grows the pot in the process. Most think that Tate will not be too greedy, but only time will tell.

The positive in recent events, is that once Tate votes, the process is complete. People are now betting on the mindset of Tate, and her decision could come at any time.

Position: Long Sirius, XM.

FCC Commissioner has withdrawn his original merger proposal offer from the table and cast a no vote on the deal. This leaves the decision on the shoulders of commissioner Tate, who will perhaps cast her deciding vote in very short order.

In a statement Adelstein said, “”I was hoping to forge a bipartisan solution that would offer consumers more diversity in programming, better price protection, greater choices among innovative devices and real competition with digital radio. Instead, it appears they’re going to get a monopoly with window dressing. We missed a great opportunity to reach a bipartisan agreement that would have benefited the American people.”

The Adelstein statement seems to indicate that he feels Tate will approve the deal with minimal added concessions.

Position - Long Sirius, XM

FCC Commissioner Copps has opted not to bring a counter proposal to the table, and simply go with a “NO” vote on the proposed Sirius and XM merger.

According to the Wall Street Journal, Copps rendered his decision on Monday, July 22nd. The “NO” vote by Copps represents the first commissioner to go against the proposed merger. The merger now has had three of the five commissioners cast their votes:

• MARTIN - YES
• MCDOWELL - YES
• COPPS - NO
• ADELSTEIN - UNDECIDED
• TATE - UNDECIDED

It is widely anticipated that commissioner Tate will vote in favor of the deal, but wants some “teeth” in the deal to ensure regulatory compliance. Adelstein has offered a counter proposal to the Draft Order Issued by Martin, and has stated he is open to negotiation.

Most who follow the sector believe that Sirius and XM are negotiating with Tate, who in theory would want fewer concessions than Adelstein, in hopes of obtaining the third vote needed.

Position: Long Sirius, XM.

FCC Commissioner Adelstein has made statements that there is wiggle room in his position on the merger. According to Broadcasting and Cable, the democrat commissioner has indicated that he is willing to negotiate the terms that he outlined last week.

Adelstein said Monday at an annual Minority Media & Telecommunications Council conference in Washington, D.C., that his conditions were negotiable: “I am always open to discussion about what the best outcome is, so, it is not fixed in stone. I am certainly open to discussion”

Likely the largest stumbling block in Adelsteins proposal centers on the requirement to give up 25% of the spectrum. How far Adelstein is willing to negotiate is anyone’s guess. In my opinion, Sirius and XM are likely concentrating on commissioner Tate, who many view as having a more favorable stance on the merger, and would by extension have fewer concessions.

Many feel that Tate will seek more stringent regulatory control rather than concessions such as a give-back of spectrum.

At this point we have the following:

• Martin: YES
• McDowell: YES
• Tate: Undecided
• Adelstein: Undecided
• Copps: Undecided

Position: Long Sirius, XM.

Now AlphaStar wants to get involved in satellite radio. The company filed a letter with the FCC stating that should the merger be approved, that 20% of the spectrum should be leased to a independent entity. AlphaStar is a broadcasting and broadband company capable of delivering television, audio as well as broadband services.

AlphaStar boasts that they already have the infrastructure to facilitate bringing a viable service to the market, and that if required, they would dedicate programming to women, minorities, small business, and noncommercial programming. They also went so far as to state that the interests of Public Knowledge and Media Access Project would easily be handled by the company. The offer goes even deeper. AlphaStar has offered to fully demonstrate their capabilities to the FCC commissioners.

The listed capabilities of the company were born from the “Star Wars” initiative under President Reagan. The company seems quite impressive, and their resume would seem to qualify them to be able to act on their proposal.

Interestingly, AlphaStar offered more information in a single filing than Georgetown Partners offered in nearly fifty! The AlphaStar proposal has to make Georgetown a bit nervous. They are seeking access to the same 20% as Georgetowns’ Davenport, but have put together what appears to be a much more compelling proposal. Primosphere would also have some worry with this deal.

Will such a proposal take root and have any meaning? In my opinion, a 20% give-back of spectrum is a deal breaker, and I do not see commissioner Tate asking for that much. Thus, in simple terms, this issue may be a non-issue when all is said and done. However, I see potential that AlphaStar may be a willing participant even at 10% or 15%, and if that concession is what it takes to get the deal done, it is something on the table for Sirius, XM, and the FCC to consider.

[ AlphaStar FCC Filing ]

Position: Long Sirius, XM.

According to the Associated Press, FCC Commissioner Adelstein has put an offer on the table that would enable the merger to happen. Adelstein, a democrat commissioner, was not widely considered as one of the commissioners that would support the merger. By Adelstein putting an offer on the table, there is perhaps a bit of insurance for the merger to proceed if republican commissioner Tate for some reason seeks even more stringent concessions.

Adelstein is asking that additional concessions be added to the deal in order to gain his support. Adelstein is said to be seeking:

• Pricing cap for six years instead of three.
• Commitment of 25% of the spectrum for informational and minority programming.
• Other requirements that were not specified

There were no details offered on whether the 25% of the spectrum would be under control of the merged entity.

In reference to the issue Adelstein stated, “It’s critical that if we’re going to allow a monopoly, that we put in adequate consumer protections and make sure they’re enforced.”

This latest news now puts commissioner Tate in even more of a spotlight than she was previously. Conventional thinking would have many believe that Tate would seek fewer concessions that Adelstein. Because of this, part of the finalized picture can now begin to take shape, and the street can begin to extrapolate where the conditions will fall.

Sirius and XM have not offered any official response to the Adelstein proposal. For quite some time it has been insinuated that giving back too much spectrum would be a deal breaker. Exactly where the spectrum line is drawn is unknown, but estimates in the neighborhood of 10% have been popular.

[ Via Associated Press ]

Position: Long Sirius, XM.

RCN, a cable television operator has expressed concern about the Sirius and XM merger with the FCC. In a new twist, RCN is worried that SDARS will not offer a viable competitive choice for music over cable systems. RCN is stating that Sirius and XM have expressed that they are not interested in broadcasting their talent over cable systems, or expanding their offerings any further than the existing deals with Direct TV (XM is on this service) and Dish Network (Sirius is available on this network).

The chief issue for RCN is that the only real source of audio programming will be Music Choice, a service owned by RCN competitor Comcast. RCN feels that because Sirius and XM are not looking to expand into cable that a situation is being created where there is only one source (Music Choice) that can name their own price.

Whether the concerns expressed by RCN will be fully hashed out is yet to be seen. What is interesting here is that clearly the audio entertainment landscape has evolved well beyond AM and FM.

[ RCN Filing ]

Position: Long Sirius, XM. No Position Comcast, RCN.

Washington Analysis analyst George Reed Dellinger, one of the more accurate regulatory analysts that has been following the proposed merger between Sirius and XM, issued a report today indicating that the decisive vote of Commissioner Tate could be delivered as early as the end of the week.

According to Dellinger, FCC Commissioner Robert McDowell has already cast his vote, taking no exceptions on the Draft Order issued by FCC Chairman Kevin Martin. The regulatory analyst also believes that Sirius and XM have largely addressed the list of concerns expressed by commissioner Tate, and that FCC chairman Martin has asked Tate to make any recommended changes if she has any.

Once the third vote is cast, the remaining two commissioners have up to ten business days to cast their votes. However, if the Tate vote is for the license transfer (signaling deal approval), then it is expected that any partisan opposition will come relatively quickly.

Assuming that Tate’s vote is delivered this Friday, July 18, then the latest a decision would be announced is August 1st. The earliest date would be July 21st. Of course, these dates would need to be adjusted forward or backward depending on when the Tate vote is delivered.

For sector watchers, it would appear that the end of this long process may finally be in sight.

Position: Long Sirius, XM.

Catch Sirius Buzz Radio Thursday July 17th at 10:00 PM

On the heels of a positive Washington Post article where Chairman Martin seemed to hint at merger approval, we were informed that Sirius Satellite Radio and hopeful merger partner XM Satellite Radio had meetings with the offices of all three of the republican FCC commissioners on July 9, 2008.

In contrast to previous filings where the companies typically state that they discussed “pending issues raised in recent filings”, the new language that they have now added says, “including the previously filed voluntary commitment letter.”

In order for merger approval, Sirius and XM need three out of the five commissioners to vote in favor of the license transfer. Popular thinking is that the three GOP commissioners are most most likely to approve the deal, thus allowing the merger to happen.

[ Meetings: Martins Office, Tates Office, and McDowell ]

Position: Long Sirius, XM.