Merger to slash satellite Cancon
by Vito Pilieci
Canwest News Service
Tuesday, April 01, 2008

OTTAWA -- The flow of Canadian content to an estimated million consumers across the country could be cut in half if the proposed merger of Sirius Satellite Radio and XM Satellite Radio in the United States goes ahead.

Such a union would likely force the satellite broadcaster's Canadian counterparts to join forces, potentially cutting the number of Canadian channels offered over satellite radio.

"It's going to be really interesting to see how this all shakes out. Definitely it's going to be the Canadian tail getting wagged by the American dog," said Ian Morrison, a spokesman for Friends of Canadian Broadcasting. "The (CRTC) has already bent over backwards to accommodate them. The whole argument in 2004-2005 was, 'you have to approve this, otherwise everyone will just go to the grey market and buy the American signal'."

The CRTC approved broadcasting licences for both Sirius and XM in Canada in 2005, ordering each company to supply one Canadian station for every nine American stations available. Today, there are around 20 Canadian stations available on XM and Sirius combined. But a merged company would likely cut that count in half.

"They won't need 20 stations, they will need 10 stations," said Hugh Thompson, publisher of DigitalHome.ca. He says people involved in the U.S. merger have told him the plan is to cut back on Canadian content.

Such a drop would effectively allow the companies to circumvent Canadian content regulations -- which broadcasters have long complained are costly and ineffective.

Another concern that the CRTC faces is whether a forced merger of the two Canadian businesses would change their ownership structure to allow greater foreign ownership of the new business. Currently, XM owns 20 per cent of XM Canada -- the remainder is held by Canadian Satellite Radio Holdings Inc -- and Sirius owns 20 per cent of Sirius Canada, the remainder of which is jointly owned by the CBC and Standard Radio Inc.

CRTC regulations state that no foreign business can own more than 33 per cent of a Canadian broadcaster.

On Sunday, a CRTC official said the commission has put Sirius Canada and XM Canada on notice that should their American counterparts merge, the CRTC will review the company's Canadian operations. It would also likely see the company re-negotiate its broadcasting schedule and ownership structure.

The two services claim to provide satellite radio services to around one million Canadians.

Earlier this week the U.S. Department of Justice approved the $9-billion US merger of the two companies, pending a decision from the Federal Communications Commission, which is due any day.

Given the money-losing nature of the business so far -- XM Canada has lost $196 million since 2005, while Sirius Canada posted losses of around $9 million for the first nine months of 2006 but now says it is operating on a break-even basis -- Canadians may see the CBC sell off its shares in Sirius Canada, said Morrison. "This would be a time when the CBC would have the option of bailing, taking its money and redeploying it," he said.