A new satellite radio powerhouse, known henceforth as Sirius XM Radio, Inc., was born on Tuesday after the FCC officially announced its approval of the XM-Sirius merger on Monday. Last Friday night, FCC Commissioner Deborah Tate cast her tie-breaking vote in favor of the $7 billion transaction after Sirius and XM signed off on a consent decree that settles enforcement issues against both companies and through which Sirius and XM agreed to pay fines of $2 million and $17 million, respectively, to the U.S. Treasury. To win Tate’s support, the companies pledged additional voluntary commitments that were outlined in a letter filed last Friday and that address, among other things, copyright royalty payments, the availability of intellectual property, and an expedited timetable for the release of interoperable radios that would enable current subscribers of either company to access programs offered on both networks. FCC consent is contingent upon the companies’ adherence to these commitments and to other conditions proposed last month by FCC Chairman Kevin Martin, including (1) a three-year freeze on subscriber rates; (2) the institution of à la carte program packages within three months that would enable subscribers to select the channels of their choice; and (3) reservation of 8% of the merged entity’s channel capacity for public, educational, governmental and minority-owned programs. Concluding that the transaction—with the conditions agreed to by the companies—would serve the public interest, the FCC predicted that the combination of XM and Sirius “will benefit consumers by making available to them a wider array of programming choices at various price points and by affording them greater choice and control over the programming to which they subscribe.” While acknowledging that the FCC’s 1997 prohibition against mergers between the agency’s two satellite radio licensees is “a binding substantive rule [and] not a mere statement of policy,” the majority further found that, “repeal of the rule prohibiting the merger will, on balance, serve the public interest.”

Upon receiving news of the FCC’s action, the companies consummated their long-awaited union on Tuesday. The new Sirius XM Radio begins life with 18.5 million subscribers, making it the second-largest subscription media business in the U.S. according to the company. In support of the FCC’s vote, FCC Commissioner Robert McDowell cited the growth of competition in the U.S. audio services market, as he noted: “it is important to keep in mind that satellite radio—both XM and Sirius combined—comprises only five percent of that . . . marketplace.”