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Expert Declaration of J. Gregory Sidak Concerning the Competitive Consequences of the Proposed Merger of Sirius Satellite Radio, Inc. and XM Satellite Radio, Inc.


Gregory Sidak


Tilburg Law & Economics Center (TILEC), Tilburg University; Criterion Economics, L.L.C.

March 29, 2007

Federal Communications Commission

Abstract:     
On February 19, 2007, Sirius Satellite Radio, Inc. (Sirius) and XM Satellite Radio, Inc. (XM) announced a "merger of equals" that would combine the only two U.S. satellite digital audio radio services (SDARS) providers into a single firm. In this report, I determine whether SDARS are a relevant product market for antitrust purposes, and I assess the unilateral pricing effects of the proposed merger in the relevant product market. I ascertain the relevant product market that would be affected by the proposed merger. I use a derivative of the Merger Guidelines test known as "critical elasticity" to determine whether a hypothetical monopoly provider of SDARS could profitably impose a small, nontransitory price increase. The outcome of that test implies that SDARS are a distinct product market. I explain how indecency standards legislated by Congress and interpreted by the FCC have generated a market segmentation between broadcast content and subscription-based content. I then review how the FCC, the Department of Justice, and the federal courts have assessed market definition in analogous subscriber-based programming markets.

Next, I assess market-based evidence on substitution possibilities to determine whether consumers perceive alternative audio services such as podcasts, mobile Internet radio, terrestrial-based advertiser-supported radio, and Hybrid Digital (HD) radio to be reasonably interchangeable with SDARS. I demonstrate that under the most reasonable product market definition, the proposed merger of XM and Sirius would be a merger to monopoly. Thus, under the most reasonable market definition, the Herfindahl-Hirschman Index (HHI) in every local radio market in the United States would be 10,000 if the merger were approved. Even under a more expansive (and thus ill-conceived) product market definition that included HD signals, the proposed merger would increase HHI by more than 4,000 points in all but five of the 299 local radio markets.

Number of Pages in PDF File: 76

Keywords: XM, Sirius, satellite radio, SDARS, merger, satellite

JEL Classification: K21, L4

working papers series


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Date posted: April 3, 2007 ; Last revised: December 23, 2013

Suggested Citation

Sidak, Gregory, Expert Declaration of J. Gregory Sidak Concerning the Competitive Consequences of the Proposed Merger of Sirius Satellite Radio, Inc. and XM Satellite Radio, Inc. (March 29, 2007). Federal Communications Commission. Available at SSRN: http://ssrn.com/abstract=977318 or http://dx.doi.org/10.2139/ssrn.977318

Contact Information

J. Gregory Sidak (Contact Author)
Tilburg Law & Economics Center (TILEC), Tilburg University ( email )
Tilburg, 5000 LE
Netherlands
Criterion Economics, L.L.C. ( email )
1614 20th Street, N.W.
Washington, DC 20009
United States
(202) 518-5121 (Phone)
HOME PAGE: http://www.criterioneconomics.com
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