How XM-Sirius Merger Could Cost Consumers

As the merger of the satellite radio stations XM and Sirius creeps closer to becoming a reality, experts, as well as the companies themselves, disagree on how the potential union will affect millions of current customers of both services, as well consumers at large.

XM and Sirius argue that the merger will give consumers more choice, but consumer groups say that the math just doesn't add up.

The Justice Department announced Monday that it will allow the proposed merger to proceed, ruling that it is not likely to lessen competition or to harm consumers. The department argued that the companies aren't really competing and that there are alternative services such as the use of MP3 players in cars.

Consumer groups were outraged, citing a likely increase in prices down the line and a lack of choice for consumers. Of course, XM, with more than 9 million subscribers, and Sirius, with about 8.3 million, see it differently. They argue that the merger will give consumers the best of both worlds — Howard Stern and Oprah, football and baseball.

"XM customers would continue to receive their existing XM service, and be able to obtain certain Sirius programming," the companies said in a joint statement. "Sirius customers would continue to receive their existing Sirius service, and be able to obtain certain XM programming."

The company announced last year that it will offer eight different packages to customers; two of them are a la carte packages.

"These will be the first-ever a la carte options in subscription media," the companies' statement said. "A la carte programming will only be available for subscribers using new radios, which are in development and will be brought to market following approval of the merger."

The first, lower-priced program allows users to pick 50 channels for $6.99 a month from either Sirius or XM. The second, higher-priced program at $14.99 per month allows customers to choose a mix of up to 100 channels from both companies' offerings.

The six remaining subscriptions are tiered offerings of a mix of XM and Sirius' content. These can be accessed through equipment that existing customers already have.

In contrast, $12.95 a month already buys current customers access to 170 channels at XM and 130 channels at Sirius.

The Consumers Union, a non-profit consumer advocacy group and the publisher of Consumer Reports, was among the angered groups.

"We think that approval of the deal is plainly absurd. … I would defy anyone to find a situation where consumers have benefited from monopolies in the past," Consumers Union spokesman Bob Williams told "That sort of talk needs to be taken with a huge dose of skepticism by consumers."

Without competition, Williams argues, consumers can only be negatively affected.

"There's no competitive pressure to keep prices down," he said. "Prices are likely to go up."

With or without the a la carte programming, however, Williams remains skeptical.

"The tiers would no doubt be a way to get folks to buy something they might not buy anyways, which is what happens now," he said. "Even in the best-case scenario, having tier [subscriptions], you're talking about having a few take-it-or-leave-it packages created by companies, not consumers."

Other groups were similarly disgruntled.

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