The National Association of Broadcaster is parcing words in their latest filing with the FCC, and in the process seeming to take the FCC Commissioners for fools. In the latest filing the NAB argues that SDARS is not a good substitute for terrestrial radio because of a portion of the Quadrennial Review from 2002 and again in 2006. Basically the NAB is pretending to act as a champion for consumers by standing up against a medium that they claim they do not compete with. Meanwhile, one of the biggest terrestrial players is making claims that satellite is indeed a threat to satellite radio.
Filings such as this one by the NAB feign stances that when looked at by a reasonable person do not pass the blush test. The NAB is stating that the FCC concluded that SDARS is not substitutable with terrestrial radio, and thus the merger would create a monopoly in SDARS.
First let's break down the original 2002 statement in the Quadrennial review, and understand what the review is about:
1. The Quadrennial reviews take an in depth look at the terrestrial radio marketplace every four years.
2. In 2002, the review stated, "we conclude that satellite radio is not yet a good substitute for broadcast radio for most listeners. The key words were NOT YET. In fact, it can be inferred from this statement that one of the commissions goals is to have satellite radio be a good substitute to promote competition.
3. In 2002 SDARS began the year with 27,733 subscribers. All were XM subscribers. At the end of 2002 SDARS had 377,106 subscribers. The implication of the FCC statement at the 2002 quadrennial review now has perspective that the NAB does not want the readers of this report (The FCC) to realize. Was satellite radio a good substitute in 2002? NO. That answer was obvious. SDARS was in it's infancy. Consumers were barely aware that SDARS existed!
4. Now, fast forward to the 2006 Quadrennial Review. The FCC concluded that the position in 2002 still held true. SDARS finished 2006 with 13,652,428 subscribers. This represents less than 4% of the radio market. Obviously, the substitutable factor FROM TERRESTRIAL TO SDARS has not yet reached proportions that would indicate to the FCC that consumers are clamoring to SDARS.
5. The NAB contends that because the FCC stated that SDARS is NOT YET (key words that the NAB ignores) a good substitute for terrestrial radio that the merger should not be allowed.
Now, with satellite radio making up less than 5% of the market, it is obvious that terrestrial radio is the 800 pound gorilla in the room. The number of consumers that have migrated to SDARS simply is not that big on a percentage basis. In point of fact, given the churn numbers of satellite, and the published 50% take rate in the OEM channel, the evidence is clear that terrestrial radio is a great substitute for SDARS, and that the numbers have not been large enough to prove that SDARS is a good substitute for terrestrial radio. If the idea of the commission is to ensure competition, SDARS is a viable entry to accomplish the goal. A merged SDARS could be more competitive, and perhaps by the 2010 Quadrennial review the words "NOT YET" can be replaced with "IS".
The NAB is acting as if the FCC Commissioners are fools. The NAB is acting as if consumers are fools. The fools here are the NAB. Parsing FCC words and using them to create and support their agenda is a fools errand. Please, NAB, don't continue to insult the intelligence of consumers and regulators.
Position - Long Sirius, Long XM