Time flies when you are having fun. The Federal Communications Commission is in the middle of taking comments on whether it should extend the price caps imposed on Sirius XM’s basic subscription radio service or allow them to expire on July 28, 2011. Sirius XM voluntarily accepted the price cap regime in exchange for approval of the merger between Sirius Satellite Radio and XM Satellite Radio.

I don’t even see where the FCC has the statutory authority to regulate satellite radio rates much less impose a price cap. The FCC was concerned about allowing competition to flourish in the radio markets. Their concerns were severely misplaced.

Price caps didn’t create competition in the market for subscriber-based satellite radio service. If the FCC wanted to see competition in that specific niche, it would have allowed Sirius to raise its rates. A rate increase would have signaled potential satellite radio competitors that there was a little extra revenue to grab before all out saturation took place.

Well, in three years, Sirius is facing serious competition not only from old fashioned radio service, but from Internet-based services such as Pandora and Rhapsody. HD radio and old-fashioned iPods provide competition as well in the “I’m sick and tired of commercials” music listening market.

It’s time for the FCC to extend satellite radio some competitive market consideration and not extend price caps for Sirius XM. Let the competition that is emerging determine the true market cap for Sirius’ rates.