Former FCC Chief Economist Gerald Faulhaber thinks Sirius-XM merger should and will be nixed by the feds
The Wharton School (University of Pennsylvania’s business school and widely regarded as one of the very best in the country) has an online magazine called Knowledge@Wharton. Yesterday the magazine interviewed Gerald Faulhaber - Professor of Business and Public Policy, Management, and Law, and formerly Chief Economist at the Federal Communications Commission - about the proposed merger between XM and Sirius. Below are some snippets from the full interview.
Knowledge@Wharton: Gerry, given that you were once the chief economist for The Federal Communications Commission, what do you think the chances are that the FCC will approve this merger?
Faulhaber: Well, I would not be amiss in saying that the FCC is certainly a political organization. When these radio licenses were granted to these two companies, back during the Michael Powell days, I would have said that the chance of their being able to do this merger was nil. Now, with Kevin Martin in charge, who’s certainly a political animal and I don’t think he would deny that, I think that it’s not nil. It’s something. I don’t think it’s big, but it’s not zero.
Knowledge@Wharton: The FCC, four years ago, rejected the merger of Satellite TV broadcasters EchoStar and Direct TV. How is this different?
Faulhaber: I don’t think that it is different at all. In both cases, EchoStar and Direct TV were both fairly marginal financially and they made the argument, which potentially could have been compelling and wasn’t, that “Gee, as a single satellite company we can more effectively challenge the cable companies.” That was, in my view, a bogus argument.
It was turned down at the FCC and turned down by the Justice Department as well, and I think events have shown that that was a good decision. Like Sirius and XM, they were both in some financial difficulties and they used this as an argument to say, “We’re not financially strong enough to challenge the cable companies.” I don’t think that they were right then, I don’t think that they’re right now. I think that they are very similar. It’s a duopoly looking to merge into a monopoly. That’s where we are on this.
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I think that I would be against [the merger] for the same reason I was against the DirecTV and EchoStar merger. It’s a merger to monopoly that can’t be good for consumers. It’s on the basis of, “well we’re not really making money.” Well, yes, but you haven’t been in the market that long.
