Mr. CONYERS.T1 MR. DAVID REHR, PRESIDENT OF NAB, YOU ARE ON FOR 5 MINUTES.

TESTIMONY OF DAVID REHR, PRESIDENT AND CEO,

NATIONAL ASSOCIATION OF BROADCASTERS

Mr. REHR. Thank you, Mr. Chairman. Good afternoon, everyone, and thank you for the opportunity for me to be here today.

I want to commend you, Mr. Chairman, Ranking Member Chabot and Ranking Member Smith on the Judiciary Committee and the Members of the Antitrust Task Force for exploring the issues surrounding what is in effect a Government-sanctioned monopoly.

In my time today, I would like to make five points.

Number one, the national satellite radio market is currently a two-company duopoly trying to become a Government-sanctioned monopoly.

Number two, such a monopoly would violate FCC rules and precedent, congressional policy and antitrust principles.

Number three, this Government-sanctioned monopoly would undermine audio content competition, not enhance it.

Number four, even worse, two entities that have a pattern and practice of violating the terms of their FCC licenses cannot be trusted with monopoly power.

Five, 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 is currently a two-company duopoly trying to become a Government-sanctioned monopoly. There are two companies in the market for nationwide multi-channel 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 each other to acquire programming and talent. They want the power to demand exclusive deals and the ability to cross-subsidize to unfairly compete against local radio broadcasters. And the fact is, this monopoly would reduce innovation for services and equipment for consumers since there will be no competition in the defined market.

Two, such a monopoly would violate FCC rules and precedent, congressional policy and antitrust principles. The FCC specifically refused to sanction a monopoly when it establish a national radio service in 1997, saying licensing at least two providers will help assure 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 never 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 would 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 a unanimous vote.

The commission found that the antitrust laws are hostile to proposed mergers that would have these impacts on competitive structures 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.

Three, 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 anticompetitive behavior against local radio broadcasters.

Four, two entities that have a pattern and practice of violating their FCC licenses cannot be trusted with monopoly power. Both companies certified 10 years ago that they would comply with an FCC rule to develop a device that works with both services. Still today, 10 years later, 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.

Mr. CONYERS. Mr. Rehr, you are the first witness to go over time. Mr. REHR. I am sorry.

Let me conclude by saying, point five: Some have suggested the merger is necessary for the survival of these companies, but by their own admission, this is not true.

Thank you, Mr. Chairman. And thank you.

[The prepared statement of Mr. Rehr follows:]

United States House of Representatives Committee on the Judiciary Antitrust Task Force

February 28, 2007

INTRODUCTION

Mr. Chairman, Task Force members, thank you very much for having me here today. My name is David K. Rehr, and I serve as the President and Chief Executive Officer of the National Association of Broadcasters.'

At the NAB, we are proud to represent more than 8,300 diverse radio and television stations across the United States, as well as broadcast networks. Our members are the backbone of our nation's communities, serving their listening and viewing audiences through public service initiatives, local news and public affairs programming, and vital community information – such as emergency warnings, severe weather alerts,

and AMBER alerts.

The National Association of Broadcasters advocates on behalf of all these stations

- large and small, urban and rural – before Congress, the Federal Communications

Commission and the general public. These stations employ nearly 250,000 hard working Americans, and reach nearly every household. Local radio and television broadcasters

provide a free, over-the-air service, keeping their communities - and your constituents informed and connected.

David K. Rehr holds an M.A. and Ph.D. in economics from George Mason University, as well as a B.S. in Business Administration from Saint John's University. He has nearly 25 years experience in regulatory and anti-trust issues. Previous experience includes serving as a professional staff member of the House Small Business Subcommittee on Antitrust and Restraint of Trade, director of federal government relations for the National Federation of Independent Business, and President of the National Beer Wholesalers Association.

The issue we are here to talk about today is of tremendous importance. It affects

not only the future of satellite radio in America, but portends great potential harm to the

American public and to the many benefits of free local radio broadcasting.

XM AND SIRIUS ARE ASKING FOR A GOVERNMENT SANCTIONED
MONOPOLY

As I explain below, the proposed merger of XM Radio Inc. and Sirius Satellite Radio Inc. must be rejected. Public policy should never allow one entity to acquire statesanctioned, monopoly control over the 25 MHz of spectrum allocated to satellite radio service. Such a merged entity would control several hundred channels of radio programming in every local market in this country without any realistic check on its ability to assert market power.

One can easily see what XM and Sirius are really asking for here. They want the ability to set subscription prices for national satellite radio service without constraint from a competing service. They want to eliminate the need to compete with another national service provider to acquire programming and talent that wish to reach the national audio market. They want the ability to demand exclusive access to attractive programming, such as sporting events. And, they want to reduce the need to spend money on innovative service and equipment for consumers.

The downsides of a government sanctioned monopoly are clear. Monopolists have the ability to raise prices and discriminate. As we saw in the telephone world for many years, monopoly providers do not respond quickly to consumer needs and wants.