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in a significant reduction in the number of competitors and a substantial increase in concentration, antitrust authorities generally require the parties to demonstrate that there exist countervailing, extraordinarily large, cognizable, and non-speculative efficiencies that are likely to result from the merger." EchoStar/DirecTV Merger Order, 17 FCC Rcd at 20604 (emphasis added). The courts have similarly stressed that proof of extraordinary efficiencies is required to rebut the presumption that a merger in a concentrated market (such as the current duopoly market for nationwide, multichannel mobile radio service) will be anticompetitive. See, e.g., FTC v. Heinz, 246 F.3d at 720-21.

Clearly, XM and Sirius will fail to meet this heavy burden. Not only are the parties unable to show "extraordinarily large," non-speculative efficiencies resulting from this merger, the proposed merger will in fact seriously impair marketplace competition and cause cognizable harms to consumers, as I have discussed in detail in this testimony. Thus, there is no reason to approve a merger that would violate FCC rules and precedent, as well as congressional policy, and would grant a state sanctioned monopoly to nonfailing companies with a long track record of breaking the rules.

NAB fully supports competition on a level playing field. When all the factors are considered, the proposed merger of Sirius and XM is simply anti-competitive. It is a monopoly in violation of the antitrust laws. It should be dead-on-arrival at the

Department of Justice and the FCC. Congress should clearly and expeditiously express

its opposition to this merger to both the Administration and the FCC.

Mr. CONYERS. Thank you very much.
We welcome now Ms. Sohn.

TESTIMONY OF GIGI SOHN, PRESIDENT AND FOUNDER,

PUBLIC KNOWLEDGE

Ms. SOHN. Thank you, Chairman Conyers, Ranking Member Chabot, Ranking Member Smith and other Members of the Task Force for inviting me to discuss the merger of XM and Sirius Satellite Radio.

The proposed merger presents a dilemma for public interest advocates. On one hand, the only two providers of satellite radio service, which have vigorously competed for the past 5 years, are seeking to consolidate, raising questions about the impact on prices and choice for consumers. On the other hand, this vigorous competition has led to a spending war for new and better programming, leaving both competitors weakened in a world where Internet radio, broadcast and HD radio, cable radio and other multi-channel music, entertainment and information services have become increasingly popular.

Regardless of the financial woes of the companies and any change in the market structure, the salient question is this: will consumers be better off.

I believe that if the merger passes antitrust scrutiny, consumers will be better off if the merger is approved subject to conditions that protect consumer choice, promote diverse programming and keep prices in check.

The antitrust questions raised here are very complex and ultimately depend on information to which public knowledge does not have access. For instance, the foremost question is how narrowly or broadly defined the relevant market? While I believe the market should be defined more widely to include a wide variety of radio, wireless, mobile and multi-channel music services, it is unclear whether consumers would turn to those services if satellite radio prices were raised.

Anecdotal evidence suggests that there is nothing shortage of substitutes. On the other hand, we cannot ignore the fact that there are real differences between satellite radio and its competitors. Consumer data and other evidence would be helpful in determining whether these competitors are indeed substitutes and would constrain prices.

Should the merger survive antitrust scrutiny however, I believe that the public interest would be served by permitting the merger subject to conditions that promote diversity, preserve consumer choice, and keep prices in check. I have reached this conclusion for several reasons.

First, consistent losses and flattening subscribership at both companies make it less likely that they will take a chance in alternative programming and programming that meets the needs of underserved communities. A combined subscriber base would allow the new company to distribute the high fixed cost of a satellite system across a larger consumer base, reducing the cost for the subscriber and enabling new programming and/or lower prices.

Second, consumers would gain access to channels that they could not receive unless they subscribed to both services.

Third, eliminating duplicative channels will create more capacity for new and diverse programming.

Still, the magnitude of this merger warrants strong protections. Thus, it should only be approved subject to three conditions.

First, the new company should make available to its consumers a la cart and tier programming choices.

Second, the new company should ensure program diversity by making available 5 percent of its capacity for noncommercial, educational, informational programming. This would resemble section 335 of the Communications Act, which requires DBS providers to reserve 4 percent to 7 percent of their channel capacities for such

uses.

Third, the new company should be prohibited from raising prices for 3 years after the merger is approved.

I would like to conclude by raising two other concerns.

First, public knowledge strongly opposes any merger condition involving limitations on the ability of the consumers to record these satellite radio services. Such a condition would be tantamount to repealing the Audio Home Recording Act which specifically protects a consumer's ability to record digital music.

Second, we also strongly oppose any merger condition that would limit satellite radio from providing local programming. Broadcasters' opposition to this merger is incredibly hypocritical given their own current regulator efforts to consolidate and their desire to prevent satellite services providing local content is anticompetitive in its own right.

Even assuming that broadcasters take seriously their statutory duty to serve local communities with programming that serves their needs, there is no reason why in 2007 any media service should have a Government-granted monopoly over local programming.

Instead, Congress and the FCC should consider permitting satellite radio to provide more, not less, local programming.

To finish, I just want to add that it is curious that for an industry that claims that it wants a "level playing field," it seeks not only to restrict satellite radio and its programming but also refers to efforts to require them to pay performance royalties to artists as a tax. And this may be the only time that I agree with the recording industry, and thanks to the broadcasters we do, but I think that is an outrage and Congress should look at it.

I want to thank the Task Force again for inviting me to testify. I look forward to your questions.

[The prepared statement of Ms. Sohn follows:]

PREPARED STATEMENT OF GIGI B. SOHN

Public Knowledge

Testimony of Gigi B. Sohn, President
Public Knowledge

Before the

U.S. House of Representatives
Committee on the Judiciary
Antitrust Task Force

Hearing On:

"Competition and the Future of Digital Music"

Washington, DC

February 28, 2007

Testimony of Gigi B. Sohn
President, Public Knowledge

Before the

U.S. House of Representatives
Committee on the Judiciary
Antitrust Task Force

Hearing on: "Competition and the Future of Digital Music"

February 28, 2007

Chairman Conyers, Ranking Member Smith and other members of the Committee, my name is Gigi B. Sohn. I am the President of Public Knowledge, a nonprofit public interest organization that addresses the public's stake in the convergence of communications policy and intellectual property law. I want to thank the Committee for inviting me to testify on the proposed merger of XM Satellite Radio and Sirius Satellite Radio.

Introduction and Summary

The merger of XM Satellite Radio and Sirius Satellite Radio presents a dilemma for public interest advocates. On the one hand, the only two providers of radio services via satellite, who have vigorously competed over the past five and a half years, are seeking to consolidate, immediately raising questions about the impact on prices and choice for consumers. On the other hand, this vigorous competition has led to a spending war for new and better programming, leaving both competitors weakened in a world where Internet radio, HD radio, cable radio and other multichannel music, entertainment and information services have become increasingly popular.

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