WASHINGTON — Despite vowing not to raise their prices, the nation's only two satellite radio providers found their proposed merger to be a tough sell Wednesday on Capitol Hill.
"You've got some high hurdles to overcome, don't you think?" House Judiciary Committee Chairman John Conyers Jr. (D-Mich.) told Mel Karmazin, chief executive of Sirius Satellite Radio Inc.
Karmazin, who would run the new company if federal regulators approve Sirius' proposed merger with XM Satellite Radio Holdings Inc., tried to overcome those hurdles by promising not to hike for an unspecified period the $12.95 monthly subscription rate that both companies charge.
The reason for the concession is simple, Karmazin said, and is the heart of the case Sirius and XM are trying to make: They now compete with a host of technologies that don't charge a cent -- including broadcast radio, iPods and music that streams over the Internet.
"The idea of raising prices to compete with free is bizarre," Karmazin said. But he didn't say how long prices would remain unchanged.
Price is a major concern for several members of the committee's antitrust task force. Congress doesn't have to approve the deal, but its views could influence officials at the Department of Justice and the Federal Communications Commission, which must bless the merger.
"Why would we eliminate one of the two competitors here?" said Rep. Robert W. Goodlatte (R-Va.). "I believe prices are going up if you are the only one."
His fears were echoed by Mark Cooper, director of research at the Consumer Federation of America.
"Competition is the consumer's best friend," Cooper told the committee, warning that "a tsunami of mergers will ripple through the digital space" if regulators agree to the market definition urged by Sirius and XM.
Conyers also questioned what effect the potential deal might have on future mergers.
But some lawmakers agreed with Karmazin that the marketplace had changed and indicated they would support the merger with certain conditions, such as requiring a lower-priced option for a limited number of channels.
"Music is music, and it really doesn't matter much the source of it," said Rep. Rick Boucher (D-Va.)
Karmazin said the merger would give listeners more choices because they would have access to both systems' exclusive programs, such as National Football League and Major League Baseball broadcasts, and current subscribers would not have to purchase new radios.
But David Rehr, chief executive and president of the National Assn. of Broadcasters, told the committee the deal would create a "government-sanctioned monopoly" and also would violate an FCC rule prohibiting a merger, instituted in 1997 to promote competition.
The FCC can change the rule, though Chairman Kevin J. Martin said last week that Sirius and XM faced a "high" hurdle.