The satellite-radio merger: What consumers should do

This past weekend's announcement that XM and Sirius, the two satellite-radio providers, would seek to merge was hardly a jaw-dropping shock to industry watchers; both services have been losing hundreds of millions a year and the merger had been rumored for months. 

Still, subscribers who haven't been reading the business pages wouldn't know about those losses. And in the days since the announcement, Sirius and XM have, alas, focused less on reassuring their customers than on placating the investment community. 

A lot is still unknown about the deal and its effect on subscribers. But here's our best advice on what satellite-radio customers need to know now: 

The merger is far from a done deal — and won't happen immediately. The companies may want to merge, but the Federal Communications Commission still needs to sign off on the deal. And its approval is far from assured, according to telecommunications experts at Consumers Union, the nonprofit publisher of Consumer Reports (CU maintains HearUsNow, a website on communications issues). There are rules on the books that prohibit a single satellite-radio company from holding all the licenses in this product market. The FCC could change its rules, our experts say, but it would need sufficient justification that the merger would produce a net consumer benefit. FCC Chairman Kevin Martin has alluded to this "high hurdle" but did hint that FCC could modify the rule. 

Any FCC decision will take time, of course, and the companies have said they don't expect the merger the merger to be complete until the end of 2007. 

Don't expect huge changes to programming. This is hardly a merger of two very different services. In our coverage of satellite radio, we've found similar high levels of satisfaction for both. Most of their programming is similar, too, save for pro sports and celebrities. The companies do say that the merger will allow sports fans, for example, to avoid having to choose between major-league baseball (available only on XM) and NFL games (only on Sirius) or (for those few who are anguished over the choice) between Howard Stern (on Sirius) and Bob Dylan (on XM).

How long your current equipment can be used is an open question. There's no information yet from Sirius on this issue. In a list of FAQs for customers, XM flatly answers "no" to the question "Will current XM subscribers need to buy new radios?" 

But, since the two services are not compatible — that is, you can't today use XM equipment to receive Sirius, and vice-versa — it's as yet unclear whether subscribers might eventually need new radios, even if the company covers the cost.

In the meantime, XM — which has the most subscribers of the two companies — tried to reassure its customers that "between today and the merger date, as well as during the period immediately after the merger date, all of your services will remain the same. The channel lineup, the customer service number, the great music technology, and the XM Radio web site will all remain unchanged and there will be no disruption to service."

There could be changes to the cost of your subscription. The companies claim that competition from other types of content providers, from Internet radio to cell-phone music services, gives them powerful incentive not to raise rates. They're also saying that the merged company will offer "consumers the ability to pick and choose the channels and content they want on a more a la carte basis," rather than using the current approach of having one rate for all programming, ($12.95 a month for either service). But CU's communications experts say that, with no offsetting competitive service, it's unclear whether a la carte would actually produce lower prices absent price regulation — or whether competition from non-satellite services would be enough of a factor to keep prices down.

If you're thinking about subscribing to satellite radio, here are a few additional considerations during the period the merger is pending:

Ask about protection before you buy. Ask the seller — equipment is sold by the providers themselves as well as by automakers and electronics retailers — what protection you have in the event that the merger renders your equipment obsolete. Ask for any assurances in writing before you buy.

Don't select a car based on which satellite service it's compatible with. A growing number of new cars come equipped with radios that are compatible with one or the other satellite service. Given the current uncertainties over satellite radio, we suggest taking that compatibility off the table when it comes to selecting the car you want. Also, use the tip above in the event that you plan to get a satellite-compatible radio as an extra-cost option with your new car.

— Paul Reynolds