Posted by Brad @ 6:28 pm on March 15th 2007

Rethinking Monopoly

In the New Yorker’s most recent Financial Pages section, there’s a nifty little one-page writeup of the proposed merger between XM and Sirius, the two satellite radio companies that almost literally control 50% of the satellite radio market each. Their merger would then, of course, result in a pretty much 100% total monopoly of satellite radio.

There is of course a knee-jerk reaction in favor of anti-trust laws and monopoly-busting in this country, and that’s all well and good when it’s truly leveled against companies that are clearly unleveling the playing field unfairly. Even Libertarianism grudgingly concedes that no market can be anarchic, that a bare minimum regulations and enforced laws against force and fraud are required to make sure that free markets are really free.

But it’s not as simple an issue as market share. In the case of the two satellite radio giants (well, giants in satellite radio, anyway), are they really competing against each other, or competing against commercial radio generally (AM/FM, HD and Internet Radio, the whole bag)?

Where do you draw the line, in terms of what you consider the market? If you’re making bananas, do you say “the banana market” or the “fruit market” or the “food market”? Where you draw that line is a big question, and the most fundamental concern for anybody trying to enforce a free market.

It is also rarely very clear, and requires a great deal of care in policy making, and a constant flexibility in enforcement. You don’t want anti-trust laws that are wishy-washy and mushy, inconsistently applied. But you also don’t want anti-trust laws that are iron-fisted and set in stone, and that are oblivious in the face of real and ever-changing market realities. The latter can create conditions which are problematic in the very same way that you had intended to avoid; it can tilt markets unfairly, stifle competition along more important lines, and lead to consumers getting the short end of the stick.

My own opinion is that Sirius and XM should be allowed to merge, but the satellite radio market should then be kept under a real close watch. Ultimately, for there to BE a satellite radio market at all, competition must be created BETWEEN radio markets. And the best bet for that is to allow the merger, and see what happens.

As somebody that’s pondered satellite radio but ultimately decided against it, I can tell you that the reason I chose to not go that route is BECAUSE of the competition between the two stations, and the instability and split-offerings that that’s created. Strangely, but not paradoxically at all, it’s too much choice that has resulted in too little competition in radio markets.

And, for the record, this example generalizes. Think about it, the next time mergers and monopolies get discussed.

1 Comment »

  1. […] posted about it before, but the proposed XM/Sirius merger continues to interest me, as an intriguing test case in the new […]

    Pingback by The Crossed Pond » The Great Satteline Radio Antitrust Smackdown — 4/30/2007 @ 12:32 am

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