Target: Radio birds

XM repeater strategy painted as Trojan horse for local service

XM Satellite Radio's efforts to boost its satellite signals with terrestrial repeaters has some traditional terrestrial broadcasters seeing red, concerned that their new competitor is trying to lay the groundwork, literally, for a local programming service should its national model fail.

In New York State, two local planning boards have rejected XM Satellite Radio's requests to mount repeaters for boosting its satellite signal to hard-to-reach areas. The Mt. Vernon planning board does not want to grant XM authority to build a repeater when the company has only a temporary FCC license. The Harrison board said it didn't know enough about XM's plans to make a decision.

"I think this is almost like our Star Wars," says Bill O'Shaughnessy, owner of Whitney Radio, New Rochelle, N.Y. "Broadcasters are going to need something like a Ronald Reagan missile shield. I hope we're not on a tank with these things shooting at us from the sky."

The National Association of Broadcasters, of which O'Shaughnessy is a member, is concerned that neither XM nor its competitor Sirius Satellite Radio is clear enough about how it will use the repeaters, even though both companies and analysts say satellite radio companies have no interest in offering local programming.

Specifically, broadcasters worry about a phrase in a recent Sirius FCC filing suggesting its repeaters would provide "nearly
simultaneous" transmission of the programming from the satellite. The filing was not clear what that meant, say NAB lawyers.

"We continue to be concerned because there is never a straight story with these repeaters," says NAB general counsel Jack Goodman. "We want the same programming going over the satellite and through the repeaters at the same time."

But the satellite radio companies dismiss the concern, saying they chose the phrase to most accurately describe the way the transmissions take place. "The signals don't arrive at the same time from the repeaters and the satellites," says Pat Donnelly, general counsel of Sirius.

Moreover, says XM Senior Vice President Lon Levin, although the FCC thus far has issued only temporary permission for the repeaters, rules are in place that the satellite radio companies are treating as permanent.

"The FCC addressed that issue in 1997," Levin said. "The requirement that was put on us is that whatever is transmitted from the satellite, the same information must be transmitted by the repeater." By March 18, the FCC must renew the license, make it permanent or revoke it.

XM hasn't had problems getting repeaters mounted in other communities, Levin said. "This is an incredibly isolated incident. I have talked to the NAB about it, and they say they are not doing anything. It is just this one person [O'Shaughnessy] who has decided to do this."

Meanwhile, after launching in late September, XM has received fairly warm consumer reception. Julia Topping, an analyst at consulting firm The Carmel Group in Carmel, Calif., predicts that satellite radio will have 30,000 subs by the end of the year, all of which are XM's because Sirius has delayed any launch until February. Fortune
magazine's Dec. 24 issue, named XM its "Product of the Year," calling it "way, way, way above the rest" of technologies rolled out in 2001.

Topping expects satellite radio to have gained 300,000 customers by the end of 2002, helped by the rollout of satellite radio equipment in new cars. The companies should more than break even by 2004, with nearly 5 million subscribers between them, she says.

XM's year has been smoother than Sirius's. The New York-based firm delayed its December national launch, replacing it with a February launch in three markets—Phoenix, Houston and Denver—and a gradual rollout throughout the rest of next year.

In October, Sirius announced that its CEO, David Margolese, would be stepping aside. In December, it replaced him with Joseph Clayton, and Margolese stayed on as chairman of the board.

The announcement initially rattled the markets, but Wall Street seems to think Clayton is a good choice and Sirius's stock has been rising ever since.