iBiquity signals the end of NAB’s satellite radio merger opposition

In every challenge there’s an opportunity waiting to be discovered.

And the “bright idea” bulb must have been flashing over the heads at iBiquity, based on this letter to the FCC. Here are some highlights, following iBiquity’s meeting with the FCC:

At this meeting, iBiquity reviewed the competitive implications on its business relevant to the proposed merger of XM/Sirius. Specifically, iBiquity indicated that a combined XM/Sirius could be in a better position to hamper iBiquity’s ability to introduce HD Radio technology into the marketplace. iBiquity raised concerns about exclusive arrangements between XM and Sirius and automobile manufacturers that could serve as a barrier to iBiquity’s ability to sell HD Radio receivers to end users. iBiquity also expressed concern that satellite radio companies may have used subsidies and incentives paid to the automobile manufacturers and their suppliers to discourage proliferation of HD Radio products. iBiquity discussed with the Commission staff its concern that the merger has the potential to exacerbate these problems. A merged entity will have a stronger economic position and more cash to fund subsidies and incentives. As the sole provider of satellite services, the merged entity will have greater leverage over retailers, car manufacturers and suppliers. This combined satellite monopoly would be in a better position to act anti-competitively to exclude HD Radio products. Although iBiquity has no formal position on the merger, iBiquity would urge that any approval be conditioned upon agreement by the merged entity to enact the following in order to insure a level competitive playing field between satellite radio and HD Radio technology: – A requirement that HD Radio technology be included in all satellite radio receivers – A requirement that the merged entity terminate all exclusive arrangements and prohibit the merged satellite company from entering into exclusive arrangements with suppliers, retailers and automobile manufacturers in the future.

So here’s my translation of their argument:

We can’t compete against two satellite radio companies, let alone one. And for no good reason we view satellite radio as our primary competitor, not all the other techno-stuff that brings audio into new vehicles. So we’re happy to support this merger as long as we get a piece of the action in the bargain.

Interestingly, if the FCC were to buy this argument, it would no longer be possible for the radio industry to fight the merger, and the NAB’s opposition would collapse utterly. Thus, since accidents of this sort don’t happen and there’s no better reason that iBiquity would visit the FCC in the quiet news days of late December, iBiquity would never approach the FCC with this option unless the wind was perceived as blowing in the direction of merger approval.

This is, in other words, a Hail Mary pass designed to achieve an “if we can’t beat em, join em” outcome. This is the best indication yet that HD Radio’s progress with the Detroit automakers is in trouble, folks.

To be clear, iBiquity’s effort isn’t a dumb idea at all, although I have a huge amount of difficulty imagining that the FCC would ever go for it. After all, the success that satellite radio has had with the auto industry was hard-earned. And why would the FCC want to punish them for their successes and reward HD Radio for their lack of same?

The marketplace has judged winners and losers, or at least that seems to be iBiquity’s argument. Wouldn’t it be worse for the FCC to tinker with the judgments of that marketplace than to allow two satellite competitors to become one?

If iBiquity’s argument was to compel the FCC – and I really doubt it will – it would be a smart and easy way to introduce HD radio to tons of new cars as standard equipment, by piggybacking off the blood, sweat, tears, deals, and dollars of the satellite radio industry.

Nice try, but don’t count on it.

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