Which businesses compete?

I heard an interesting piece on National Public Radio's Morning Edition as I was driving to work this morning. They were talking about the two digital radio companies, XM and Sirius who want to merge but have to make a case for this not being anti-competitive, testifying before a House of Representatives committee. The companies claim, among other things, that aside from competing with each other (which they say cuts down on the options that customers have because now, customers can only hear certain personalities on one or the other companies' stations), they are, in reality, competing with regular (so called terrestrial) radio and Internet radio. Since both of these are free, the merged company would still be under pressure to keep its prices low.

So perhaps we can extend this argument to allow all the automobile companies to merge because, after all, they are competing with walking and bicycling which are free. Beverage companies could all merge because, in reality, they are competing with water which is mostly free and is, Heaven help us, subsidized by the government! Perhaps we'll end up with all the major industries merged like in the movie Rollerball where there was just one, world-wide Energy company and just one, world-wide Entertainment company. Wouldn't that be more efficient? As the ads say for all the banks that keep merging, their sole purpose in merging is, "To better serve our customers." Yeah, and to raise the rates of all their services. And to fire "redundant" workers.