Russ Roberts has a common sense post over at Cafe Hayek explaining why the federal government should not oppose the proposed merger of satellite radio companies XM and Sirius, both of which are enduring blistering competition with each other and a wide variety of other available entertainment options. As usual, even though this isn’t a close call as to whether the merger should be approved, the Federal Communications Commission is already showing some resistance to it.
One thing that Roberts doesn’t mention in his post is that the FCC’s threatened resistance is particularly incongrous because the regulatory agency dictated the playing field in satellite radio by only licensing two companies in the first place. So, instead of allowing a reasonably free market to sort out the winners and losers, the FCC’s regulatory wand made sure that there would only be two companies competing in the market, neither of which is anywhere close to turning a profit. Of course, it didn’t help that XM and Sirius have had to expend considerable funds and management time in opposing attempts by the National Association of Broadcasters and the recording industry to manipulate regulations in their favor and against satellite radio.
Which brings me to my point. Many folks believe that, inasmuch as established businesses generally abhor regulation, that must mean that regulation is good for the consumer. However, the reality is that established businesses typically use a part of their resources to deal with and manipulate regulation to their advantage and against that of new companies that seek to compete against the established businesses. A big, well-established business can absorb the high cost of regulation and pass it along to the consumer. A thinly-leveraged start-up does not have that luxury.