Satellite radio fee debated

Satellite radio fee debated

Sunday, July 26, 2009 3:28 AM
By Tim Feran


THE COLUMBUS DISPATCH
Satellite radio provider Sirius XM is preparing to raise prices this week, saying that the increase is caused by a jump in music-royalty fees.
But some are questioning whether the price hike is based on the royalty fee or is an end run around a Federal Communications Commission ruling.
In a letter to subscribers, Sirius said that, beginning Wednesday, "A U.S. Music Royalty Fee of $1.98 per month for primary subscriptions and 97 cents per month for multi-receiver subscriptions will be effective upon your next renewal. This fee will be used directly to offset increased payments from XM to the recording industry."
The plan already is generating dozens of consumer complaints at the FCC Web site.
"What they are doing is wrong, and they are overcharging with this fee," said Edward Hilbert of Columbus in one of the posted complaints. "I hope someone there (at the FCC) will finally look into this and help us consumers out. We just had an increase not too long ago, and they took away what we were getting as part of our subscription. … I pray that the FCC will stand up for us little guys."
When Sirius and XM merged in 2008, the new company told the FCC that it voluntarily capped its basic subscription package at $12.95 a month to answer concerns that the merger would lead to a monopoly and higher prices.
There was one exception: Sirius XM could pass along some costs associated with music royalties. But the FCC said that the company could increase costs related to royalties based only on where those costs stood on the date the merger was approved.
On that date, March 20, 2007, the royalty rate was 6 percent of the subscription fee. The rate will increase to 6.5 percent on Wednesday, an 8.3 percent jump.
[color=red][b]However, Sirius XM's $1.98 bump in the basic monthly subscription rate of $12.95 represents a 15 percent rise -- far more than the 8 percent the FCC approved in its ruling.[/b][/color]
In response to calls and e-mails to Sirius XM seeking comment, a spokesman referred to the terms and conditions section on the company's Web site: www.sirius.com/
usmusicroyalty.
On the site, one of the frequently asked questions is, "Is this fee consistent with Sirius XM's merger commitment not to raise prices for three years?"
The company's response is: "Yes. This fee is consistent with our commitment not to raise the base price of specific service plans for three years after the merger. The FCC decision approving the merger between Sirius and XM permits the companies beginning July 29, 2009, to pass through to subscribers any increases in music royalties since March 20, 2007, the day the companies first asked the FCC to approve the merger. The U.S. Music Royalty Fee implements this FCC decision."
Despite the explanation, the subscription price hike has sparked some folks to grouse that this is simply a way for Sirius XM to get around the FCC.
And those complaints might spark an FCC inquiry.
"We monitor compliance with conditions of the merger and would review any complaints," said David Fiske, an FCC spokesman.
In the comments section about the Sirius-XM merger on the FCC's Web site, various criticisms of the price increase have been filed.
"This is an outrageous abuse of their agreement with the FCC regarding the merger," wrote Eric Krieg of Munster, Ill.
"XM Sirius is now raising rates more than needed and passing it on as a fee for music royalties," wrote Vince Scarlata of Park Ridge, Ill. "If calculated right, the fee that should be passed over to consumers should be 6 cents at most."
"The post-merger price and fee increases are just what those objecting to the merger feared," wrote James Peters of Tampa, Fla.
The FCC spokesman wouldn't comment further on a possible inquiry, saying only that the commission would have jurisdiction over the situation once the price hike takes effect.
tferan@dispatch.com

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