After a week-long, non-transparent deliberation, the Federal Communications Commission has reportedly signed off on the merger of the XM and Sirius satellite radio networks.
Many of the tea leaf-readers did not correctly forecast the outcome: most expected at least one Democratic Commissioner, Jonathan Adelstein, would vote for the merger, provided there were certain public interest obligations on the new, singular satellite broadcast entity. These would have included requirements such as a percentage of total satellite radio capacity be devoted to non-commercial, possibly public-access channels, and that the new company provide tiers of service that do not gouge existing and future subscribers. Some of these conditions will apply to the merged company, but the Commissioners’ votes themselves ultimately split along party lines.
Instead, approval of the merger centered around a much different issue: resolving the shocking fact that XM and Sirius have committed radio piracy on a scale dwarfing anything ever seen in U.S. broadcast history. This first came to light in 2006, when it was revealed that both XM and Sirius were illegally operating hundreds of terrestrial repeater stations. These repeaters help amplify the space-based satellite signal and are integral to providing nationwide coverage for both networks. Several hundred repeaters were either being operated out of variance with FCC rules (overpowered and/or misplaced); some of these were wholly unlicensed (essentially pirate repeater stations built and maintained by XM and Sirius). This behavior was condoned at the highest levels of both companies.
On top of committing piracy on the transmission-side of their airchain, both XM and Sirius knowingly and willfully designed and worked with manufacturers to sell aftermarket mobile satellite radio receivers which translate the satellite radio signal into an FM signal, which can then be picked up by a vehicle’s original stereo system. The power levels for these “transceivers” are strictly capped, but XM and Sirius ignored these technical rules – essentially turning hundreds of thousands, if not millions, of vehicles into mobile FM pirate rebroadcasters.
For two years, the FCC has been investigating these appallingly egregious violations of its rules. In order for the merger to be finalized, this investigation had to be concluded. A consent decree signed between the FCC, XM and Sirius, the language of which was finalized just hours before the last Commissioner voted on the merger, requires the two companies to pay a combined $19.7 million to settle their piracy problems. In addition, XM and Sirius agree to turn off or modify the operation of more than 100 terrestrial repeaters, which until last Friday continued to operate afoul of the FCC’s rules.
That point bears repeating: even though the FCC was well-aware that XM and Sirius were engaged in widespread, willful, and repeated violations involving unauthorized (and, in some cases, unlicensed) broadcasting, and the companies knew they were under investigation, they continued to break the rules until the last possible moment – and the FCC implicitly endorsed this practice.
Now, let’s do the math. XM and Sirius have admitted to operating at least 200 outright-pirate or out-of-tolerance terrestrial repeaters. If the consent decree were simply based on the number of transmission-related violations the two companies engaged in directly, this would work out to ~$98,000 per violation. But this figure does not include any penalty assessed for marketing those technically-rogue transceivers.
The number of these transceivers in the marketplace is not quantifiable – but if they were added into the math, each considered as a separate violation in and of itself, it would most definitely bring the per-violation penalty for each company down by several magnitudes. Were XM and Sirius your garden-variety FM pirate, and given the willful, repeated, and reportedly continual nature of their violations, the penalties should be much stiffer. Put simply, if you or I tried a caper like this, we’d most likely end up in jail.
However, a consent decree is not the same as a monetary forfeiture; mostly the preserve of corporate cases, a consent decree allows XM and Sirius to make a “voluntary contribution” to the U.S. treasury in exchange for not being held to account for any wrongdoing. Thus, a consent decree is not really a penalty at all – it is a slap on the corporate wrist, a wink-and-nod that wrong was done, but the official record will not reflect it.
The fact that the FCC treats corporate pirates much differently than your garden-variety free radio station is well-documented. Such violations are apparently standard practice within the wireless microphone industry. The notion that the XM/Sirius merger boiled down to this disparity is stunning. Fortunately, the consent decree also requires the merged company to develop a “compliance program” for its terrestrial-based RF emissions, which hopefully means it will not engage in future pirate or pirate-like practices. That being said, the fact that neither XM nor Sirius are being held seriously accountable for past bad behavior on does not make me all that confident that the new-found “compliance” itself will be much more than a charade.
Fiscal necessities – the realization that satellites alone could not provide XM and Sirius with complete, nationwide coverage, and the fact that aftermarket mobile satellite radio transceivers needed more power to make the signal listenable on a car’s FM tuner than the FCC would allow – led the companies to engage in this illegal behavior in the first place. Neither company has yet turned a profit, and there’s no guarantee that this merger, in and of itself, will fix that particular quandary. Therefore, there’s no guarantee that the new, singular satellite broadcast entity will not engage in the same behavior going forward, only this time in a more subtle and quasi-sanctioned fashion.
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