When I first read up on rumors that Sirius XM was considering price increases on certain packages, my initial reaction was that they must be false. I then questioned to myself that a potential loophole may exist and thought I had better research the possibility before coming to any conclusions.
Although many of the rumors sources seem to extremely credible, my opinion is now that they cannot be true. With the loss of Kevin Martin and the expectation of a democratically controlled FCC, Sirius XM would be risking their licenses if they were to increase prices in the time frame rumored. The FCC memorandum makes it abundantly clear that:
- No price increases can occur for 3 years:
- The company may ask for a review 6 months prior to the 3 year anniversary:
- That the 3 year price freeze applies to all tiers and packages that the company already offers:
- That the FCC must approve any price increases
The order itself states:
With daily rumblings about a possible recession – and nearly universal consensus that we are in a pattern of economic slowdown – good economic policy from our government is more important than ever. It is not the job of the FCC to prop up failing companies. However, it is our job to support efficient and affordable radio communications. Section 7(a) of the telecommunications Act says, “[i]t shall be the policy of the United States to encourage the provision of new technologies and services to the public.”The Commission aims to ensure audio options that provide lower prices, and unique choices such as“family friendly programming” tiers. Through this Order we ensure that for at least three years consumers will see a price cap on every price tier and package that the merged entity offers. The FCC will revisit the need for this price cap six months prior to its expiration.
IV. PRICE CAP
Because SDARS is a relatively new service, and prices have remained constant, it is difficult to anticipate how a merger will affect future prices. The parties have agreed to a three year price cap on the services they currently offer. This is not a sufficient fix to prevent the anticompetitive pricing schemes that could arise as a result of this merger. Thus, the Order imposes a review by the Commission before the lifting of the price cap in three years. At that time the merged entity will have the burden of demonstrating to the Commission that lifting the price cap will not result in the merged entity raising and holding prices at a level they could not otherwise maintain, but for the lack of competition in the satellite radio market.