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It’s been 17 months since the XM-Sirius satellite radio merger was announced, and in that time a typical consumer’s desire to spend discretionary income on a satellite radio subscription may have broken up into static.

Now that the regulatory process appears to be winding down and FCC Chairman Kevin Martin has given his blessing to the merger, the sour economy is proving to be a new obstacle in making this media duet sing like a Coldplay single. “I believe that consumers will begin to feel wary about many subscription-based products in general,” says Ryan Saghir of Orbitcast in an email to Gadgetell. “As rising gas prices and increased food costs continue to take their toll, some subscribers may not find value in a ‘luxury expense’ when they can listen to similar content on their iPod. Indeed, that in essence was the basis of the argument for the merger.”

Orbitcast, which tracks developments in the satellite radio industry, reports that legal counsel with XM and Sirius met last week with Republican FCC Commissioners Robert McDowell and Deborah Tate in addition to talks with Martin. XM-Sirius needs two more “yes” votes on the panel to combine and supposedly make 17 million total subscribers happier, while offering a new and improved merged company to potential new customers. But Saghir tells me that what really has to happen is some new hardware to put the spark back into the XM-Sirius marriage.

“I think a newer, cooler, and more advanced portable radio is desperately needed, but it may not be in the traditional sense,” Saghir says. “As the chips get smaller, we might start to see satellite radios in GPS devices and cellphones. Additionally, with the ‘open device’ provision that Sirius-XM have reportedly agreed to - which will allow for any manufacturer to produce satellite radios - we may begin to see receivers in places we never imagined before, and at much lower prices.”

Read [Orbitcast]

Mel Karmazin sounds like quite a character.  On Monday, he was interviewed by SmartMoney and had quite a bit to say.  He started out the interview blaming XM for the “hiccups” in the industry.  Then later in the interview, he talks of a possible merger with XM.  Mel says that he’s based his entire career on shareholder value - I’d say that forming a monopoly in the satellite radio industry would bring quite a bit of value.  It’s also notable that he no longer thinks government regulations will stop a merger from happening (to which I’m going to disagree, but he would know better than me).  He notes the following:

If there’s an iPod with terrestrial radio, it’s hard to believe government is worried about two satellite radio companies combining.

Read [SmartMoney]