PUBLIC NOTICE Federal Communications Commission 445 12th St., S.W. Washington, D.C. 20554 News Media Information 202 / 418-0500 Internet: http://www.fcc.gov TTY: 1-888-835-5322 DA 11-129 Released: January 25, 2011 MEDIA BUREAU SEEKS COMMENT ON EXTENSION, MODIFICATION OR REMOVAL OF CAP ON SIRIUS XM RETAIL PRICES MB Docket No. 07-57 Comment Date: February 24, 2011 Reply Comment Date: March 11, 2011 By this Public Notice, the Media Bureau seeks comment on whether to extend, modify, or remove the price cap imposed by the Commission when it approved the applications of Sirius Satellite Radio Inc. (“Sirius”) and XM Satellite Radio Holdings Inc. (“XM” or, jointly, the “Applicants”) to transfer control of the licenses and authorizations they held for the provision of satellite digital audio radio service (or “SDARS”) in the United States.1 The grant of these applications authorized the merger of Sirius and XM subject to voluntary commitments made by Sirius and XM, as well as other conditions.2 In the Merger Order, the Commission accepted the Applicants’ voluntary commitment to cap the retail prices on their basic subscription package and on certain new programming packages that they committed to offer.3 The voluntary commitment stated: Applicants voluntarily commit to not raise the retail prices on their basic $12.95 per month subscription package, their a la carte programming package, their “best of both” programming packages, their “mostly music” and their “news, sports, and talk” programming packages, and their discounted family-friendly programming package. Applicants voluntarily commit to these price caps for at least 36 months after consummation of the merger. Notwithstanding the voluntary commitment, after the first anniversary of the consummation of the merger, the combined company may pass through cost increases incurred since the filing of the merger application as a result of statutorily or contractually required payments to music, recording and publishing industries for the performance of musical works and sound recordings or for devise recording fees.4 1 Applications for Consent to the Transfer of Control of Licenses from XM Satellite Radio Holdings Inc., Transferor to Sirius Satellite Radio Inc., Transferee, MB Docket 07-57, Memorandum Opinion and Order and Report and Order, 23 FCC Rcd 12348 (2008) (“Merger Order”). On July 28, 2008, the transaction was consummated, and on August 5, 2008, the merged company was renamed Sirius XM Radio Inc. See Letter from Jennifer D. Hinden, Wiley Rein LLP, Counsel, Sirius XM Radio Inc., to Marlene H. Dortch, Secretary, FCC (Aug. 20, 2008). 2 Issues upon which the Commission imposed conditions and the entities made voluntary commitments include, among other things, pricing, programming packages, interoperable receivers, and open access for consumer equipment devices. See Merger Order, 23 FCC Rcd at 12433-41, Appendix B (Voluntary Commitments), Appendix C (Timeline of Commitments). 3 See Merger Order, 23 FCC Rcd at 12395, ¶ 108. 4 See Merger Order, 23 FCC Rcd at 12394, ¶ 107. 2 The Commission concluded that this voluntary commitment would mitigate the harm from any post-merger price increases. While some commenters proposed a longer price cap, the Commission imposed the price cap for at least three years after the merger was consummated (i.e., until July 28, 2011).5 It also stated that it did not know what the competitive landscape would be like in three years, and committed to review the price cap six months prior to its expiration by seeking public comment on whether the price cap continues to be necessary in the public interest and whether the price cap should be modified, removed, or extended.6 Issues for Comment On January 20, 2011, Sirius XM submitted a letter stating its view that there is no reason to extend or modify the price cap condition, in light of changes in the competitive landscape and practical considerations that it asserts militate against extension.7 Sirius XM requests that the Commission allow the price cap to expire at the end of three years. We seek comment on Sirius XM’s view that the price cap condition is no longer necessary Alternatively, we seek comment on whether the public interest would be best served if the price cap condition were extended beyond three years. If a price cap is still necessary, should the price cap be extended in its current form or should it be modified? If it should be extended, for what period of time should it continue? Any commenter who proposes that the price cap be extended is asked to explain why such extension is necessary and would serve the public interest under current market conditions. Any commenter who proposes that the price cap be modified is asked to propose specific modifications and to explain how its proposals will serve the public interest. If the price cap is extended, should we raise the dollar amount of the price cap to reflect increased costs (e.g., programming costs, labor costs, inflation)? If so, how should the amount be determined? Under the existing price cap, Sirius XM is not permitted to reduce the number of channels in the programming packages subject to the price cap during the three years.8 Should we allow Sirius XM to change the number of channels offered under a modified price cap or otherwise alter the structure of its program packaging? In March 2009, Sirius XM initiated a $2.99 per month fee for online access to programming and changed the price for subscribers for each additional monthly subscription after the $12.95 per month basic subscription package from $6.99 to $8.99 per month.9 In addition, as provided under the price cap, Sirius XM passed through certain copyright payments beginning on July 29, 2009.10 Should any modified price cap specifically cover the rates charged for online access, additional outlets, or any other fees related to a subscription to Sirius XM’s service? Should any changes be made to the permissible pass through of required statutory and contractual payments? If so, what changes should be made and why are such changes necessary under current market conditions? We seek comment on these and any other relevant issues that will allow the Commission to determine whether a price cap on Sirius XM’s subscriber rates continues to be necessary and how any extended price cap should operate. 5 See Merger Order, 23 FCC Rcd at 12394-95, ¶¶ 107-108. 6 See Merger Order, 23 FCC Rcd. at 12395, ¶ 108. The Commission stated that, although it was not part of Applicants’ voluntary commitment, the Commission conditioned its approval of the merger on the Commission’s ability to modify or extend the price cap beyond three years. Id. at 12395, ¶108 n.328. See also id. 12428, ¶ 180. 7 See Letter from Robert L. Pettit, Counsel for Sirius XM Radio, Inc., to William Lake, Chief, Media Bureau, FCC (Jan. 20, 2011) (“Sirius XM Letter”). The letter is attached to this Public Notice. Sirius XM also questions whether the Commission has authority to extend or modify the price cap condition. Id. at 3. 8 See Merger Order, 23 FCC Rcd at 12395, ¶ 108. 9 Sirius XM Radio Inc., SEC Form 10-K for the Period Ending 12/31/09 (filed Feb. 25, 2010) at 2. 10 Id. 3 Procedural Matters This proceeding will be treated as “permit but disclose” for purposes of the Commission’s ex parte rules. See 47 C.F.R. §§ 1.1200, 1.1206. As a result of the permit-but-disclose status of this proceeding, ex parte presentations will be governed by the procedures set forth in Section 1.1206 of the Commission’s rules applicable to non-restricted proceedings.11 Pursuant to sections 1.415 and 1.419 of the Commission’s rules, 47 CFR §§ 1.415, 1.419, interested parties may file comments and reply comments on or before the dates indicated on the first page of this document. Comments may be filed using: (1) the Commission’s Electronic Comment Filing System (ECFS), (2) the Federal Government’s eRulemaking Portal, or (3) by filing paper copies. See Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998). § Electronic Filers: Comments may be filed electronically using the Internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/ or the Federal eRulemaking Portal: http://www.regulations.gov. § Paper Filers: Parties who choose to file by paper must file an original and four copies of each filing. If more than one docket or rulemaking number appears in the caption of this proceeding, filers must submit two additional copies for each additional docket or rulemaking number. Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first- class or overnight U.S. Postal Service mail. All filings must be addressed to the Commission’s Secretary, Office of the Secretary, Federal Communications Commission. § All hand-delivered or messenger-delivered paper filings for the Commission’s Secretary must be delivered to FCC Headquarters at 445 12th St., SW, Room TW-A325, Washington, DC 20554. The filing hours are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes must be disposed of before entering the building. § Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD 20743. § U.S. Postal Service first-class, Express, and Priority mail must be addressed to 445 12th Street, SW, Washington DC 20554. People with Disabilities: To request materials in accessible formats for people with disabilities (braille, large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or call the Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty). For further information, contact Marcia Glauberman at (202) 418-7046 or Marcia.Glauberman@fcc.gov. Press inquiries should be directed to Janice Wise at (202) 418-8165 or Janice.Wise@fcc.gov. -FCC- 11 47 C.F.R. § 1.1206. 4 5 6 7