A mysterious "coalition" that is starting to look like a corporate SWAT team has filed more redacted confidential comments with the Federal Communications Commission. These demand that XM and Sirius satellite radio conduct internal staff purges and pay the United States Treasury millions of dollars in restitution for allegedly misleading the public about their intentions. "The Commission should compel XM and Sirius to disgorge their unjust enrichment," the Consumer Coalition for Competition in Satellite Radio or "C3SR" declared on Wednesday. "This forfeiture would likely be in excess of $250 million."

As Ars Technica has reported, the C3SR group is light on "consumers" and heavy on professional corporate lobbyists. These include two former officials in the Reagan administration: Steven R. Valentine and Emanuel L. Rouvelas, both of whom now work for the K&L Gates law firm. K&L Gates lobbies for Microsoft, T-Mobile USA, and dozens of other companies. C3SR also includes attorney Julian Shepard, former senior policy adviser to the National Association of Broadcasters, who now works for the coalition's legal representative: Williams Mullen.

C3SR's latest filing doesn't call for Sirius' Mel Karmazin to be sent to the slammer, but its tone comes close. It asks the Commission to demand a "mandatory disgorging of ill-gotten gains by the Merger Parties" (XM and Sirius). Why? C3SR argues that when both satellite radio companies' parties participated in FCC Auction 15 and bought the licenses that they've broadcast on since, they got a break in the price. That's because the spectrum properties were "encumbered by a public interest obligation"—the requirement that the license winners build interoperable receivers that can access all satellite radio services. XM and Sirius never kept that pledge.

The C3SR group has been sending the FCC redacted confidential papers that it claims prove that Sirius and XM's refusal to come through on interoperability should be seen as "the culmination of a coordinated plan to restrain trade in contravention of the public interest and in violation of the Commission's rules and policies and of the antitrust laws." Sirius/XM "should be required to make restitution to all parties harmed by such conduct," C3SR declared last week, although it didn't explain how. Now it has.

This won't hurt a bit

Before any merger plan is established, C3SR recommends that the FCC make XM and Sirius agree to "permanently dismiss all officers, directors, and employees of the predecessor licenses (XM and Sirius) who participated in, or had knowledge of, or conspired in violation of the FCC's rules. . . . " Although the rest of the sentence is redacted, this probably refers to what C3SR sees as XM and Sirius' dishonesty in assuring the Commission that the companies would develop an interoperable receiver.

C3SR estimates that had the FCC conducted its Auction 15 without the interoperable receiver requirement, it might have generated about $440 million in auction proceeds. The actual Satellite Digital Audio Radio Service (SDARS) auction winnings were $173.2 million. Therefore Sirius and XM owe the government at least $267 million, in the coalition's view. Plus: "restitution for lost spectrum auction proceeds must include 11 years of interest," the group calculates.

In addition, C3SR calls for XM and Sirius to "make restitution" to all the XM and Sirius subscribers who never received interoperable receivers. At minimum, all subscribers should get one now (none exists, by the way). "In addition," C3SR writes, "the Commission should require refunds to, or free interoperable receiver replacements for, those subscribers who purchased more than one satellite radio receiver."

Finally, the Merger Parties—XM and Sirius—must give up one of their satellite licenses, C3SR says. This divestiture would honor the FCC's rule against a monopoly controlling the whole SDARS service (a rule that the FCC could waive). To create a level playing field for a new satellite radio entrant, the Commission should also make the Merger Parties give up "exclusive arrangements with programmers, retailers, and manufacturers," and honor FCC established program access requirements "to permit the new entrant to acquire sufficient programming to be competitive in the short-run."

How soon is "soon"?

On the same day that C3SR launched their latest torpedo against XM/Sirius, FCC Chair Kevin Martin appeared on CNBC and fielded a variety of questions from three of the show's reporters. In the recent past Martin has said he hopes the Commission will come to a decision on the merger by the end of this month. Now he just said that "I expect the Commission will hopefully be able to do something on it soon."

That answer didn't satisfy one of his interviewers. "Aren't you under some obligation here to finally give — it's been a year and a half," he asked. "I mean how is it possible it can be so long to review a potential deal and aren't you some obligation to answer these guys if not today, tomorrow, or very soon?"

"Well you know I think we are under an obligation but I think this is a very unusual circumstance. I mean we actually have a rule that out right prohibits this merger," Martin replied. "So, I think that they're asking for something extraordinary and I think the Commission is taking a close look at it. But I do hope we will be able to get back to them soon."

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