Satellite radio companies to pay $19.7 million

WASHINGTON -- A merger of the nation's only two satellite radio companies moved closer to fruition Thursday after the pair agreed to pay $19.7 million to settle a case alleging violation of federal rules.

Federal Communications Commission Chairman Kevin Martin told The Associated Press the agency had reached an agreement late Wednesday night where XM Satellite Radio Holdings Inc. will pay $17.5 million and Sirius Satellite Radio Inc. will pay $2.2 million to resolve that issue.

The agreement, which still requires a full vote of the commission, is expected to lead to approval of Sirius's $3.9 billion buyout of XM, which has been under regulatory review for more than a year.

The violations involve complaints about interference the satellite radios cause with land-based radio stations and violations related to land-based signal repeaters the companies operate to deliver programming. Martin said XM's penalty was greater because the company's offense was more egregious.

He said that XM had a number of repeaters that were in violation of rules. "And even more significantly," Martin said, "XM had continued to operate their repeaters without authority when they were in violation."

The vote on approving the buyout is currently 2-2 with Republican Deborah Taylor Tate still undecided. According to agency officials, Tate will approve the takeover once the enforcement action is circulated to the full commission.

"This was an issue that Commissioner Tate thought was important for us to deal with prior to her supporting the merger," Martin said of the consent decree. "I think that this was a significant issue that we can take off the table that I think will allow us to move forward soon on finishing up the merger."

Tate had apparently sought a fine of $8 million, according to FCC officials who asked not to be named because the deal was not yet final.

If a majority of commissioners sign off on the enforcement action, as expected, Tate's vote approving the satellite radio buyout could occur sometime Thursday.

The approval process for the buyout has gone on for more than 16 months. The Justice Department approved the deal in March without conditions, saying the companies don't really compete because customers must buy equipment that is exclusive to either XM or Sirius, and subscribers rarely switch providers.

DOJ also agreed with the companies' argument that they compete with other forms of audio entertainment, including digital radio, Internet-based radio stations and even devices like Apple Inc.'s iPod.

FCC approval faced a steeper climb because the companies were prohibited from combining under terms of their licenses. The agency struggled to come up with a way to show that allowing a satellite radio monopoly was in the public interest.

The companies voluntarily agreed to a set of conditions, including a three-year price cap and an 8 percent set-aside of "full-time audio channels" for public interest and minority programming. They will also adopt an "open radio" standard that may lead to a greater variety of features in radios and greater competition among manufacturers.

Sirius and XM also have promised to include a limited "a la carte" offering that would be available within three months of the close of the deal and allow listeners to pay only for the channels they want to receive.

The vote on the buyout will apparently be split along party lines. Democratic commissioners Michael Copps and Jonathan Adelstein have both voted against the merger while Martin and fellow Republican commissioner Robert McDowell have voted in favor.

Adelstein had sought further concessions from the company but withdrew his offer on Wednesday after it failed to draw support.