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Sirius XM said it would carve out stations for minorities when it merged but 2 years later has failed to do so

As a condition of Sirius satellite radio and XM Satellite radio merger on July 25, 2008, the companies “voluntarily” agreed to spin off 4 % of their channel capacity which back then amounted to 8 Sirius Channels and 8 XM channels to a so-called “qualified entity” or entities.  The companies decided that only African American, Hispanic American, Asian American or Native American run entities would qualify and the purpose of the spin off was to  perpetuate the interest of  diversity among owners of broadcast companies and networks.

Not only has the combined entity not been able to lease not even one station to a “qualified entity”, it has been granted a series of extensions by the FCC to enter into long term leases or some other arrangement.  I think there has been four such extensions granted to date with the latest being issued August 19, 2010  giving the company until November 19, 2010 to meet the merger condition.  At this point, I am not sure SiriusXM even takes the FCC seriously given the agency has been so lenient and willing to let it continue in existence without meeting its merger obligations.

I am at a loss for words as to whether it has even made attempts to do so.  I represented a couple of clients that wanted to take a stab at the job.  Specifically, American Independent Radio  (AIR) would have been a collaboration between a satellite company I represent, AlphaStar, and Malik Shakur, an LA entertainment attorney.  I even attempted to set up meetings with Sirius and XM to start the process but it got no where.

Certainly, it appears as if SiriusXM is looking to punt it back to the FCC to implement this particular condition because it  is reluctant to do so itself and I am not sure why.   However,  the reason the FCC did not take the responsibility in the first place, besides it not necessarily having the expertise to decide who would best program Sirius XM stations, is that without having studies to justify using a race-based classification, the FCC cannot take back the job with the definition of  “qualified” being a person of color.  A Supreme Court decision in the Adarand Construction v. Pena case  held that racial classifications imposed by the federal government must be analyzed under  a standard of “strict scrutiny,” the most stringent level of review which requires that racial classifications be narrowly tailored to further compelling governmental interests.

That being said, I hear rumblings of a move by the FCC to indeed take back the responsibility of implementing the merger condition, not that it doesn’t already have enough on its hands, and maybe changing the definition to be something broader like anyone who has never owned a broadcast station before.

Boy does that open up the field to…I don’t know…the UNIVERSE!!!  If the definition is changed so broadly, what good would it have been to institute a condition to ensure diverse ownership in the first place?   There would be nothing stopping the company, the FCC or a third party from assigning these stations to a non-minority and continue status quo as is.  In the terrestrial radio world, minorities own a tiny fraction of broadcast stations, just over 3 percent of all stations.

For sure, there are other classifications that are less broad that would not implicate or trigger Adarand that would more likely ensure that the pool is ao limited so that minorities have a fair shake to compete.

While it is true that the Internet has opened the door for more minorities to be able to create and produce radio content, me included with my Right of Black show,  the reach and power of Internet radio cannot surpass terrestrial and satellite radio at all.

With November 19, 2010 just around the corner, I am hopeful and optimistic that the FCC will not do anything to compromise and jeopardize the integrity of the basis for its original decision and the original merger condition.

As a disclaimer, I mentioned that I  once represented a collaboration of two companies, AIR,  that was looking to manage the stations.  I no longer represent the endeavor but I see that half of the original entity, Malik Shakur, is still making a run at it.

Good luck, there, feller.

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22 comments

  • Sirius XM’s reluctance to abide by the terms for its merger likely comes down to its interpretation of “qualified entity” is very different from that of the FCC. The term, IMO, is vague enough to permit the corporation considerable wiggle room on a timetable for opening its network to 3rd-party programmers owned by minority concerns. A ’50+% minority ownership’ standard seems clear enough (as does the definition of ‘minority’), but the FCC — consistent with its traditional approach — apparently defers to Sirius XM as to what constitutes ‘qualified’. It’s not exactly the most pro-consumer or economically responsible approach to take with a monopoly.

    My guess is Sirius XM defines ‘qualified’ in financial terms, as would a McDonald’s or Subway when qualifying a potential franchisee. If so, the terms themselves may be so prohibitive they effectively pre-empt ‘minority’ firms, like AIR, from qualifying for channels. Given the FCC’s politicization, the agency wouldn’t have much of an option but grant Sirius XM deadline extensions when presented with such evidence.

  • Yes, William, it would be easy enough to set the standard to be 51%, but you are correct, that financially qualified would also be a factor. Certainly, Sirius XM does not want its brand tainted with an entity, organization or group that is not credible or sustainable. However, I know for a fact that Radio One is an entity that was interested in programming one or more of the 8 stations. For sure, Radio One is qualified. Further, even if we are in a weak economic climate, I am sure that an entity would be able to get some financial backing if it knew its investment had the support of Sirius XM.

    It seems like a no-brainer to me. There is something else there that you and I are not privy to brewing….something wicked this way comes. 😀

  • Considering the way Radio One’s bleeding money, I seriously doubt whether they could afford another incursion into satellite radio.

    Radio One was the programmer for 4 (pre-merger) XM Radio channels; 1 channel — The Power — post-merger. The company ended up bailing out of the agreement as it could no longer afford to absorb the losses.

    For the foreseeable future, Sirius XM does not represent a sound business opportunity for most broadcasters, especially those that are independent- and/or minority-owned.

  • William, I do not underestimate the ability of creative and innovative entrepreneurs to figure it out. I have more faith than you do, I suppose.

  • By ignoring the evidence, it’s more likely you’re just irrational.

  • I am not ignoring the evidence. You are misinformed and do not even seem to know the history of broadcast ownership in the United States and the role and absence of diversity among owners and voices within that history. Nor do you seem to be familiar with the nuances of the merger, the conditions set and the process. Why don’t you do some research and then we can talk?

  • This discussion has been mooted somewhat by the FCC’s decision last week to remove ‘minority-ownership’ from its requirements for qualified entities, your ad hominems notwithstanding.

    As I understand the FCC has full legal authority to retain and enforce the minority-owner standard from the original merger, it would appear the agency took the politically expedient route in (again) permitting Sirius XM complete autonomy in selecting lessees. Now, given the fact of minority-owned companies — including Radio One — ceding channels back to Sirius XM citing prohibitive lease costs just 20 months earlier, and said companies’ tenuous financial standing, what evidence can you provide: a) Sirius XM’s lease access fees are more affordable now than previous to the merger, b) minority-owned, independent broadcasters exist with the capacity to afford 1 or more Sirius XM channels, and c) whether the lease access rules (as now amended) serve the goal of diversifying media ownership?

    There are additional questions, including whether it’s wise, especially for a vaporcorp like AIR, to invest in leasing satrad channels ahead of purchasing or leasing terrestrial stations. As I share your (presumed) commitment to increasing diversity in media, it’d be much smarter for you to engage me on the merits of arguments than embarrass yourself announcing all you don’t know about me.

  • The FCC is limited by a Supreme Court decision called Adarand Construction. According to that case, federal agencies are permitted to make any decisions that implicate race e.g. administering the provision of channel access to a regulatee using racial language as part of the parameters. So, they do not have “full legal authority to retain and enforce” the merger condition. Sirius never leased its stations but in any event, the merger condition does not call for a full lease in the traditional sense of the word. Those procedures, rules and details were not included. We are talking about an unprecedented occurrence here. Given that there is no purpose in comparison.

    Now, all that said, I apologize for being dismissive, but it is still clear that you are not that aware of all of the nuances, history and background of the merger, the conditions, the FCC’s authority, and limitations in this issue. Notwithstanding, you are correct, that is no excuse for me being rude. Apologies again.

  • “So [the FCC does not] have ‘full legal authority to retain and enforce’ the merger condition.”

    Actually they *do*. Adarand is only relevant to the requirement the gov’t satisfy ‘strict scrutiny’ when promoting diversity. Racial and gender diversity is accepted as a bona fide compelling interest for gov’t action.

    Again… because of the FCC’s decision, the issue of the agency including minority-ownership requirements as a condition of the merger has been mooted. While I understand Commissioner Copps mentioned the minority ownership requirement as problematic, Sirius XM is nonetheless operating under license from the gov’t and therefore can be mandated to satisfy ownership requirements consistent with the public’s interest in diversity. This rationale has been cited by multiple legal scholars in the Sirius XM matter, including a panel which testified before the FCC earlier this year: http://www.rbr.com/media-news/20538.html.

  • While technically true, they have the authority. You need to realize that “strict scrutiny” is a difficult burden to climb and the only way the FCC can legally impose a law using race as a criteria would be if it commissions and finalizes a series of studies to justify the use of race, hence the term “Adarand” studies. Such studies would have to show an overwhelming problem and show how past FCC actions have contributed to low minority employment at regulated industries and ownership of broadcast and wireless spectrum. THAT is the true challenge which stops the FCC from acting.

    Sirius XM’s ownership requirements do not require them to give away or lease away a portion of their spectrum to minorities. That is NOT true AT ALL. If the government were to force them to do that, they would face instant legal challenge from a bevy of watchdog groups that are waiting in the wings and biting at the bits to tear down any agency that attempts to make a race-based decision.

    What “FCC decision” are you talking about, by the way?

  • ‘Strict Scrutiny’, Jeneba, is a term to describe the burden of proof the gov’t must meet in enforcing EEO remedies against discrimination, whether that discrimination is race- or gender-based, or on account of physical capacity. It isn’t necessary to commission a study or seat a panel to conduct the due diligence involved with determining whether a pattern of discrimnation exists.

    “Sirius XM’s ownership requirements do not require them to give away or lease a portion of their spectrum to minorities.”

    Not since the FCC removed that requirement as a condition for approving the merger. On October 18, 2010, the agency issued its memorandum and order that redefined ‘qualified entity’ by dropping racial classifications as a qualifier (http://www.fcc.gov/Daily_Releases/Daily_Business/2010/db1010/FCC-10-184A1.pdf).

    I recommend you read the 10/18/10 order and the original order approving the Sirius-XM merger from 7/28/08 for a full and proper understanding of events.

  • Please, sweetie. I’ve been practicing communications law for over 2 decades. How else do you think the federal agencies justify to the court that they have identified the problem? The only way they do it is by preparing what are called “Adarand” studies. Why don’t you google that?

  • Actually, check out page 96 to this report
    http://www.usccr.gov/pubs/080505_fedprocadarand.pdf that may help you clarify what agencies need to gather before enacting the laws.

    Thanks for the update about the Sirius/XM case. I see you did your homework!

  • Perhaps you’ve been practicing law poorly. I’ve only written what other legal experts have said about this particular example. Besides, who says the FCC could not have satisfied the burden of proof?

    Either way, it’s pointless to argue whether or not the FCC could have when they’ve since issued an order dropping minority-ownership as a requirement.

  • You are a funny, dude William. Half of the stuff you write on this and other people’s blogs reflect a fundamental misunderstanding (or half-understanding) of the basic tenets of whatever it is you are pontificating about….but I give you an A for effort and a C+ for trying to sound like an expert. It would be okay if you did not insist on insulting others when you respond to comments in the process. You can’t talk “down” to people about a topic you clearly do not know much about…it’s just not a good look. You need to get a new shtick!

  • Given your numerous misstatements and errors-in-fact on this and other topics, my only response is for you to show and prove in the future by supporting your opinions with evidence. It takes a special type of… um… naivete for you to believe by merely reciting some talking points you’re remotely convincing as a reliable source on broadcasting, media, or telecommunications.

    As much as I regard you as a phony authority on these matters, I’m truly interested in your alternatives for increasing the minority presense in satrad.

  • You regard me as a “phony” authority? That is so interesting considering you continue to visit my blog. That is so funny to me.

  • I appreciate you, William. Please continue to visit however. I will have to make it a point to visit your blog home more often. I am clearly missing out on a lot of fun and opportunity to banter with you back and forth. I am clearly undereducated about these things and if I am going to rise above being a “phony” authority in your eyes, I clearly need to go see how I should think on the issues. 😀

  • If you insist on going around the Internet calling me names, Wiliam, you will leave me no alternative but to block you from my site. You CLEARLY DID NOT understand the point of my post. It was merely to share an update of the history of the Sirius/XM issue not the CURRENT SITUATION OR LIMITATIONS. I WAS THERE DEALING WITH THESE ISSUES since the merger and it appears you just hopped on recently. THEREFORE, you were applying the Order the FCC recently adopted to the rumors and information I was sharing BEFORE the FCC adopted its different Standards.

    PLEASE RE-READ MY ARTICLE AND ALL COMMENTS AND YOU WILL C-L-E-A-R-L-Y SEE at NO POINT did I SAY THAT RADIO ONE OUGHT TO QUALIFY FOR A SIRIUS/XM CHANNEL UNDER THE CURRENT ORDER. NO WHERE! So I will appreciate if you not misrepresent me on other people’s sites and call me names when you MISUNDERSTOOD MY POST AND OUR ENTIRE EXCHANGE APPARENTLY! SHEESH!

  • “… at NO POINT did I SAY THAT RADIO ONE OUGHT TO QUALIFY FOR A SIRIUS/XM CHANNEL…”

    Here’s a direct quote from you on this matter:

    “For sure, Radio One is qualified.”

    Now, I’m sure you’d like to backpeddle and claim you wrote that before you knew of the FCC’s 10/18 revision, however this conversation — and many of your assertions — came previous to the agency’s subtraction of racial classifications from the order; an action you rationalized as correct, if not implicitly supported.

    I’m not going to bother reviving the other misstatements you’ve made here for it’s a full-on distraction from the central issue: increasing
    ‘minority’ representation in satrad. I had hoped you’d be able to see things as they are as to contribute to viable solutions, rather than lobby for a place on the (virtual) plantation.

    Go ahead and ban me.

  • Yes William! Re-Read the commnents AGAIN! and you will see that it was not until November 19th that YOU pointed out to me that the FCC had abandoned the old race related criteria! LIKE I SAID BEFORE, the post was made at a time when I did not know the FCC had decided to change from the initial standards. yikes!

  • Please save me your negative rhetoric. You are more akin to a troll at this point -you know trolls whose sole purpose is to taunt, degrade, denigrate and spew negativity and therefore cannot help but throw in a few hateful words every other comment. I don’t appreciate being called names either.

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