Georgetown Partners Responds to Sirius-XM Filing with the FCC

Georgetown Partners Responds to Sirius-XM Filing with the FCC

- Letter to FCC questions accuracy of companies' FCC filing and highlights risk to family-oriented programming -

BETHESDA, Md., Nov. 20 /PRNewswire/ -- Georgetown Partners L.L.C., a minority-owned private equity firm, today responded to the joint filing by Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. with the Federal Communications Commission (FCC) dated November 13, 2007, in an ex parte submission to the FCC pointing out various disingenuous statements and inaccuracies in the Sirius-XM filing, including:

-- Sirius/XM's misrepresentations of the current record of support for
and opposition to their proposed merger; and
-- Sirius/XM's failure to address the fact that not a single third party
entity that is on record with the FCC opposes Georgetown's proposed
solution to the fundamental flaws in Sirius/XM's proposed merger, as
currently structured.

Georgetown's submission also points out the risk to family-oriented programming from a Sirius/XM satellite monopoly, in light of Sirius CEO Mel Karmazin's long track record of promoting programming considered by the FCC to be indecent and his championing of Howard Stern. By contrast, Georgetown commits to ensuring that, if it leases and operates broadcasting infrastructure and satellite channels, all of its programming complies with the FCC's broadcast indecency rules even though such rules do not apply to satellite broadcasting.

Following is the letter from Georgetown Partners to the Federal Communications Commission, filed with the FCC today in MB Docket No. 07-57:

To: The Commission

EX PARTE SUBMISSION OF GEORGETOWN PARTNERS L.L.C. INTRODUCTION

In filings submitted to the FCC and in meetings with FCC officials, Georgetown Partners L.L.C. ("Georgetown"), a minority owned investor, urged that the proposed Sirius/XM merger not be approved as it is now structured because such approval would have unprecedented adverse competitive effects. Georgetown suggested as a possible remedy to the adverse competitive effects an affirmative condition meeting the public interest requirements of Section 310(d) of the Communications Act. To accomplish this, the Commission should require that Sirius/XM lease (i) their broadcast infrastructure, and (ii) at least 20% of their channel capacity on a long term or permanent basis to a minority controlled entity to ensure competition and diversity in the satellite radio marketplace. Georgetown emphasized that it is prepared to negotiate such a lease with Sirius/XM.(1)

In a filing dated November 13, 2007, Sirius and XM attacked Georgetown's proposal. Below is Georgetown's response to Sirius/XM.(2)

THE SIRIUS XM MERGER CREATES A MONOPOLY

If this merger is approved as structured, the Commission will have approved the creation of a single entity with control over all 300+ nationwide satellite radio broadcast channels, thereby enabling this entity to exclude any programmer or message, for any reason, from the national satellite radio marketplace. This would be the first time such absolute control in this country is created over such an important and fast-growing medium.

THE FCC HAS RECEIVED NUMEROUS FILINGS IN OPPOSITION TO THE MERGER, INCLUDING FILINGS BY SENATOR HERBERT KOHL AND THE MAJORITY OF MEMBERS OF CONGRESS WHO HAVE EXPRESSED VIEWS ON THE MERGER

In their November 13 filing, Sirius and XM urge the Commission to reject Georgetown's minority-based spectrum divestiture remedy, citing, in part, "...the impressive record of content providers and organizations representing the interests of underserved communities supporting the merger," including several members of the Congressional Black Caucus and the National Association for the Advancement of Colored People ("NAACP")(3). While these entities previously expressed support for the merger, Sirius and XM's argument suffers from a major flaw in that it is based on a reading of the record that is both incomplete and out-of-date. A complete and current review of the record reveals a much different story.

Significantly, in a letter dated May 23, 2007, Senator Herbert Kohl, Chairman of the Subcommittee on Antitrust, Competitive Policy and Consumer Rights, urged that the Department of Justice and the FCC "take all necessary actions to deny approval of this merger and prevent the creation of this satellite radio monopoly."(4) Among the many arguments put forward by Senator Kohl was his belief that the "lack of a viable competitive alternative existing today to the satellite radio monopoly created by this merger is a sufficient independent reason to block this merger."(5)

Not only is the proposed merger itself opposed by the majority of Members of Congress who have weighed-in on the subject and who represent the interests of underserved communities, but several such Members, including two who previously wrote in support of the merger, recently announced their strong support for the minority-based spectrum divestiture proposed by Georgetown.(6)

Specifically, to date, most of the members of the Congressional Black and Hispanic Caucuses that have taken a public position on the proposed merger of Sirius and XM appear to either oppose the merger outright or support Georgetown's proposal.(7) Indeed, every one of the Congressional Hispanic Caucus ("CHC") members who have weighed-in in this proceeding express outright opposition to the merger.(8)

At the same time, there is growing support for Georgetown's proposal. For example:

[The] structure [of the Georgetown proposal] would assure the public, and
specifically our minority population, of competing diverse program service
consisting of 50-100 channels in the satellite radio marketplace. The fact
that Georgetown's proposal provides free over-the-air ad-supported
programming as its primary offering gives our minority community a choice
and is particularly appealing to me. I wholeheartedly support this
proposal.(9)

Indeed, six (6) Congressional Black Caucus members -- Rep. Albert R. Wynn, Rep. William Lacy Clay, Rep. G.K. Butterfield, Rep. Elijah Cummings, Rep. Bennie Thompson and Rep. David Scott -- are on record in a joint letter supporting the Georgetown proposal. Specifically, they urge:

[I]f the FCC does [approve the merger], we feel that a minority-controlled
entity should have rights to the broadcast infrastructure. By allowing a
minority-controlled entity to be the lessee, the Commission would serve
the public interest by achieving diversity of ownership in this large
medium and enhanced minority ownership of media in general -- two areas
that the Commission has been asked to address by advocacy groups from
various cross sections of our society.(10)

That entities other than Members of Congress -- including the NAACP -- have expressed support generally for the proposed merger is similarly countermanded by several facts. First, the support expressed by the NAACP in June 2007 cannot reasonably be used to weigh against the Georgetown proposal, given that it was proffered months before the Georgetown proposal was on the table. Second, several other major, national organizations representing the interests of underserved communities -- including the Rainbow/PUSH Coalition and the Black Leadership Forum -- are just as strongly opposed to the merger.(11) Of particular note is the opposition of the Black Leadership Forum, Inc. ("BLF"), which is comprised of thirty-five member organizations -- including the NAACP and the NAACP Legal Defense and Educational Fund -- and which represents 10 million African-Americans.(12) Finally, and most importantly, while the BLF has strongly opposed the merger from the outset, and has recently reiterated that it is "determined in [its] objections to the [Sirius/XM] merger, as currently structured," the organization now supports the minority-based spectrum divestiture proposal, and urges that the Commission "give full weight to Georgetown's proposed recommendation as a prerequisite to approving any kind of merger between Sirius and XM."(13)

Indeed, notwithstanding Sirius and XM's rather paternalistic view that the proposal of this minority-controlled entity "ultimately would deny benefits to the groups it seeks to benefit,"(14) there is not a single entity on the record of this proceeding that opposes such a requirement other than the joint applicants themselves. One would imagine that entities devoted to serving the best interests of minority and other underserved communities would recognize a bad deal for their constituency when they see it. As a complete and current review of the record of this proceeding reveals, these entities embrace Georgetown's proposal as a meaningful, practical way to give effect to the Commission's core value of promoting greater diversity in media. The Commission should heed the advice of these public interest entities by conditioning any approval of the proposed merger as proposed by Georgetown.

GEORGETOWN PROPOSES THAT THE MERGER BE RESTRUCTURED AS A CONDITION TO APPROVAL AND THAT THE FCC EMBRACE GEORGETOWN'S VISION OF FAMILY ORIENTED PROGRAMMING

This merger needs to be restructured before it can be deemed in the public interest. The FCC should exercise its authority to require that, as a prerequisite condition to approval, Sirius/XM must sublease to a minority controlled entity on a long-term or permanent basis both broadcasting infrastructure and the necessary channel capacity so that effective competition can be restored in the satellite radio marketplace. If this condition is adequately implemented, the statute's public interest objectives of diversity of content and minority participation may be satisfied. As earlier stated, Georgetown is prepared to work with Sirius and XM to realize this important public interest objective through a restructured transaction.

Georgetown also proposes to offer a substantial number of free, over-the-air programs so that consumers will have choices in satellite programming. Georgetown intends that this programming include a robust selection of family oriented material; believing that more Americans favor what is generally perceived as decent programming. This view is contrary to the history of the Chief Executive of Sirius.

MR. KARMAZIN, DESIGNATED TO BE IN CHARGE OF THE NEW SIRIUS/XM COMBINED ENTITY, HAS A RECORD OF PROMOTING PROGRAMMING FOR WHICH THE COMMISSION HAS CENSURED TERRESTRIAL STATIONS

Mr. Karmazin has promoted programming considered by the FCC to be indecent throughout his radio broadcast career, typified by his long and close association with radio shock-jock Howard Stern. The New York Times has noted that "[T]hroughout his career, Howard Stern has had no more powerful and vocal champion than Mel Karmazin...."(15) This association has resulted in millions of dollars in fines levied by the Commission against stations carrying Howard Stern's broadcasts. Mel Karmazin and Howard Stern have been associated with each other since the 1980's. Indeed, Stern once stated that Karmazin "rescued" him in the 1980's by making him morning host of WXRK-FM in New York.(16) After Mr. Karmazin left Viacom, Stern stated that "[W]ith Mel gone, I am seeing the darkness at the end of the tunnel....[h]e's the guy that had my back."(17) Not surprisingly, Mr. Karmazin once again engaged Mr. Stern to broadcast over satellite radio, free of the indecency constraints of terrestrial broadcast radio. Recently, Mr. Karmazin boasted that Howard Stern "has helped satellite radio."(18)

Moreover, with Mr. Karmazin as President, Infinity Broadcasting settled a number of proposed Commission fines and forfeitures for over $1.7 million dollars due to Howard Stern programming.(19) For example, in 1992 the Commission released a notice of apparent liability for forfeiture against Infinity stations carrying Howard Stern's programming due to language that illuminated "a dwelling on sexual matters, including sexual intercourse, orgasm, masturbation, lesbianism, homosexuality, breasts, nudity, and male and female genitalia."(20) In addition, in 1994, the Commission released a notice of apparent liability for forfeiture against Infinity stations carrying Howard Stern's programming due to "language that describes sexual and excretory activities and organs in patently offensive terms."(21) This type of indecent language was used repeatedly during Howard Stern's broadcasts. With no regulatory oversight of the satellite radio broadcast channels, one can only imagine the future of this type of radio programming.

Given that Mr. Karmazin will head the new merged entity, approving this merger essentially guarantees more of this type of programming. Georgetown does not believe that more of this type of programming is needed, and such programming certainly does not support the public interest that the FCC must affirmatively find in order to approve this merger. We therefore want the FCC and the public to know that Georgetown will not engage in this sort of programming and voluntarily will ensure that all of its programming complies with the FCC's broadcast indecency rules notwithstanding that legally such rules do not apply to satellite broadcasting.

CONCLUSION

For the foregoing reasons, the Commission should reject the Sirius/XM transaction. However, any Commission approval of the Sirius/XM transaction must be conditioned upon the adoption of Georgetown's proposal, in which Sirius/XM must lease (i) their broadcast infrastructure and (ii) at least 20% of their channel capacity on a long-term or permanent basis to a minority controlled entity.

Respectfully submitted,

By: Chester Davenport
Managing Director
Georgetown Partners L.L.C.
6903 Rockledge Drive, Suite 214
Bethesda, MD 20817
Tel: (301) 530-8110

David R. Siddall
Michael Lazarus
Paul, Hastings, Janofsky & Walker LLP
875 15th Street, NW
Washington, DC 20005
Tel: (202) 551-1700

November 20, 2007

(1) See Georgetown Partners Letters filed in MB Docket No. 07-57 on
October 18, November 2, and November 5, 2007.

(2) See Letter and filing dated November 13, 2007, Consolidated
Application for Authority to Transfer Control of XM Satellite Radio
Holdings Inc. and Sirius Satellite Radio Inc., MB Docket No. 07-57,
submitted jointly by XM and Sirius ("November 13, 2007 Ex Parte").

(3) See id.

(4) See Letter from the Honorable Herb Kohl to the Honorable Thomas
Barnett and the Honorable Kevin Martin (May 23, 2007) (attached).

(5) See id.

(6) See Letter from the Honorable Gregory W. Meeks to the Honorable Kevin
J. Martin, Chairman (Nov. 8, 2007) (attached); see also Letter from
the Honorable Corinne Brown to Chairman Kevin J. Martin (Nov. 9, 2007)
(attached).

(7) See Letter from 72 Members of the House of Representatives to Attorney
General Alberto R. Gonzales, FCC Chairman Kevin J. Martin, and FTC
Chairman Deborah Platt Majoras, MM Docket No. 07-57 (June 18, 2007)
(attached).

(8) See id; see also Letter from The Honorable Charles A. Gonzalez to U.S.
Attorney General Alberto R. Gonzales, FCC Chairman Kevin J. Martin and
FTC Chairman Deborah Platt Majoras, MM Docket No. 07-57 (May 31, 2007)
(attached).

(9) See Letter from The Honorable Sanford D. Bishop to Chairman Kevin J.
Martin (Nov. 7, 2007) (attached) and from The Honorable Corinne Brown
to Chairman Kevin J. Martin (Nov. 9, 2007) (attached).

(10) See Letter from The Honorable Albert R. Wynn, et al to Chairman Kevin
J. Martin (Nov. 9, 2007) at 2 (attached).

(11) See Press Release of the Rainbow/PUSH Coalition (Oct. 31, 2007),
(attached). see also Letter of Gary L. Flowers, Black Leadership
Forum, Inc., to Chairman Kevin J. Martin and Commissioners Copps,
Adelstein, Tate and McDowell (Aug. 3, 2007).

(12) See Letter of Gary L. Flowers, Black Leadership Forum, Inc., to
Chairman Kevin J. Martin (attached).

(13) Id. at 2.

(14) See id.

(15) "But Wait, What Does All This Mean for Howard Stern," New York Times,
June 2, 2004.

(16) "What Will Stern Do if FCC Cracks Down on His Radio Show?" USA Today,
June 13, 2004.

(17) Id.

(18) A conversation with Mel Karmazin, CEO of Sirius Satellite Radio,

dated November 9, 2007, viewed at: http://www.chicagotribune.com/services/newspaper/printedition/friday/chi- oped1109siriusnov09,0,1571993.story (last viewed on Nov. 19, 2007).

(19) See Sagittarious Broadcasting Corporation, Infinity Broadcasting
Corporation of Pennsylvania, and Infinity Broadcasting Corporation of
Washington, D.C., Order, 10 FCC Rcd 12245 (rel. Sept. 5, 1995).

(20) See Liability of Sagittarious Broadcasting Corporation, Infinity
Broadcasting Corporation of Pennsylvania & Infinity Broadcasting
Corporation of Washington, D.C., Licensee of Radio Stations WXRK(FM),
New York, New York WYSP(FM), Philadelphia, Pennsylvania, & WJFK(FM),
Manassas, Virginia for a Forfeiture, Notice of Apparent Liability for
Forfeiture, 5 FCC Rcd 7291 (rel. Dec. 7, 1990).

(21) See Mr. Mel Karmazin, President Infinity Broadcasting Corporation,
Licensee of Radio Station WJFK(AM) Baltimore, Maryland, Controlling
Parent of: Sagittarius Broadcasting Corporation Licensee of Radio
Station WXRK(FM), New York, New York, Infinity Broadcasting
Corporation of Pennsylvania, License of Radio Station WYSP(FM),
Philadelphia, Pennsylvania, Infinity Broadcasting Corporation of
Washington, D.C., License of Radio Station WJFK(FM), Manassas,
Virginia, 600 Madison Avenue, Fourth Floor, New York, New York 10002,
Notice of Apparent Liability for Forfeiture, 8 FCC Rcd 6740
(rel. Aug. 12, 1993).

Contact: Joel Steinhaus or Adam Weiner, Kekst and Company, 212-521-4800

First Call Analyst:
FCMN Contact: adam-weiner@kekst.com

Source: Georgetown Partners L.L.C.

CONTACT: Joel Steinhaus or Adam Weiner, both of Kekst and Company for
Georgetown Partners L.L.C., +1-212-521-4800

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