Editor’s note: Wayne Crews is vice president for policy and director of technology studies at the Competitive Enterprise Institute, a think tank based in Washington, D.C..

WASHINGTON, D.C. – Regulators, not content with their earthbound $1 trillion realm, now chase entrepreneurs skyward.

The Federal Aviation Administration (FAA) couldn’t wait to write regulations governing the new low-Earth-orbit space flight industry heralded by SpaceShipOne’s 2004 maiden launch. Now, the struggling but hip satellite radio services XM and Sirius seek union by year end, but can’t do anything without the blessing of antitrust authorities. The Senate Commerce Committee heard testimony on the merger this week.

Objections to the proposed merger are typical: Combining the satellite radio marketplace’s only two players would stifle competition. Federal Communications Commissioner (FCC) Kevin Martin promised scrutiny, saying “The companies would need to demonstrate that consumers would clearly be better off with both more choice and affordable prices.”

But we’re talking about information in the form of news and, dominantly, entertainment. Even without tomorrow’s inevitable competing satellite ventures, competitors threaten: broadcast radio, digital radio, streaming Internet radio, music on upper-tier cable channels, loaded mp3 players (supplemented by a dashboard input jack in most new vehicles), video programming and devices of every sort.

From the rhetoric, one would think XM and Sirius maintain an impenetrable Star Wars-like fleet. But quick—guess how many satellites they have in orbit between them, presumably hogging outer space and shutting out rivals like the National Association of Broadcasters? Must be a lot to justify government involvement: 50? 75? 150 satellites? Give up? Six.

Perspective is warranted: Total combined market capitalization for XM and Sirius combined reaches just $13 billion, compared to the nearly $200 billion cumulative investment in the nation’s wireless phone network or the $57 billion market capitalization for Comcast Cable alone. With spectrum policy liberalization, several Internet multi-billionaires could join the terrestrial and satellite radio fray, especially if they pooled resources. Wal-Mart could launch a competing fleet with last year’s profit; Exxon-Mobil three.

The 14 million subscribers that the XM/Sirus combination would serve seems hardly overwhelming compared with America’s 113 million households, its 66 million cable subscribers, and an over-the-air broadcast infrastructure that reaches pretty much everybody.

Sometimes, competitive industries overshoot and need to retreat and consolidate. That describes XM and Sirius; They’ve hemorrhaged massively after trying to out-compete one another and paying for big-dollar talent like Oprah and Howard Stern.

Antitrust delays such needed realignments; but this Roach Motel, you-can-get-in-but-you-can’t–get-out mindset could waste precious months, all to forestall “monopoly” in…audio news and entertainment? As economist and “Knowledge Problem” blogger Mike Giberson noted, “Doesn’t the FCC know that by raising barriers to exit, they create barriers to entry for some future satellite radio rival?”

This isn’t the first time regulators hobbled a nascent satellite venture. The FCC scuttled the proposed DirecTV/Echostar merger in 2002, a venture that (still) could increase consumer options, remove duplication, and shave costs. Competing against established land-based telecommunications is tough, requiring vast resources and guts; sadly regulators can make it tougher.

Satellite company mergers are just one element of an evolving marketplace that increasingly magnifies consumer choice and ability to customize information. Bureaucrats cause untold damage when they undermine network industries’ efforts to orient themselves, to attain the scale appropriate to achieving such miraculous feats as moving global information to the exosphere.

If the combination doesn’t work, the companies can divide again; or failure of the deal could facilitate a buyout of all or part of the entity by a better-positioned rival.

The real irony would be if, thanks to FCC and sham “consumer group” opposition, either XM or Sirius—or both—were to be absorbed by one of the incumbents against which they now compete. Policy could hardly get more perverse.

Regulators also should refrain from using the merger review process to extract a parade of concessions from these struggling companies. But meanwhile, antitrust policy should allow aggressive competitive responses to the combination. Wall Street, investors, programmers, consumers, already-poised rivals, and new entrants collectively will discipline more thoroughly than could the FCC. That’s as it should be.

Leaving competition to the marketplace would allow policymakers to focus on more worthwhile targets, such as liberalizing spectrum, and enhancing the efficiency of global regulatory bodies that assign orbital slots. Policymakers seeking greater broadcast competition should enable new companies to launch more satellites into space—not tinker with the business plans of the ones now venturing forth.