FCC

With the merger of Sirius and XM certain conditions were outlined that the company has to comply with. One of those requirements was the allocation of six channels set aside for minority programming from each service (Sirius and XM). In all, twelve channels would be allocated in the form of a lease to minority programming. As with any government condition, the issue has been embroiled in debate and red tape, but it appears that certain parties are working on finding a way to cut through the clutter, and make such channels a reality.

Alphastar and iClick2Media have teamed up to form the Diversity Satellite Radio Consortium (DSRC) with each party seeking to lease and manage six channels. The DRSC has also left the door open for other parties to enter the consortium and participate on the channels. Unlike many proposals, Alphastar and iClick2Media already have existing capabilities to make the FCC condition a reality.

According to their FCC filing, DSRC feels that they bring many facets to the table that should bolster their chances for selection.

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For satellite radio subscribers, the recent Supreme Court decision carries no real impact. After all, satellite radio is uncensored, and Sirius XM talent is free to utter just about anything they want. The Supreme Court decision does have an impact on terrestrial radio though, as it opens a door for fines even for the simple mistake of using a fleeting expletive on the air.

Until now, radio and television broadcasters had a little bit of wiggle room when it came to expletives that were broadcast. The Second Circuit Court of Appeals had found the FCC policy on fines to be arbitrary and capricious. This translated to some leniency on certain cases. The Supreme Court decision overturned the appeals court and put the power back with the FCC regarding expletives.

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With a new administration getting ready to make their own mark on Washington, the resignation of certain positions goes without saying. However, because Kevin Martin was such an integral figure over the past 2 years for investors in Sirius XM Radio, we thought readers would want to know.

Kevin Martin’s resignation was delivered today, and will be effective on January 20th. Martin first plan of action is joining The Aspen Institute, a nonpartisan think tank in Washington, D.C. He will be a Senior Fellow.

It has been rumored that President-elect Barack Obama will nominate Julius Genachowski, who was Obama’s Technology Advisor, to head up the FCC. Other possible names that have been rumored include analyst Blaire Levin, a name that should be familiar to satellite radio investors.

Martin’s letter of resignation was delivered to President Bush and stated, “During this period, we have seen a telecommunications industry undergoing rapid and unprecedented change. As a result of the market-oriented and consumer focused policies we have pursued the American people are now reaping the rewards of convergence and the broadband revolution including new and more innovative technologies and services at ever-declining prices.”

[Resignation Announcement]

Position – Long Sirius XM

Satellite receiver manufacturer Antex Electronics raises a great and compelling argument against mandatory HD inclusion in satellite receivers. For his company, the inclusion would be illegal, and is also against some current FCC regulations.

While many have debated this issue on a more general front that relates to free market, Antex points out that they manufacture receivers that are utilized for commercial use in areas like restaurants, bars, and retail stores. While some may not be aware, streaming audio content in areas such as this is illegal unless royalties are being paid. Such streaming is considered a public performance.

Antex, in a letter filed with the FCC, also notes that they are independent of Sirius XM in terms of design and manufacture of their receivers. The company concentrates on the commercial market. While the commercial market may not seem huge, consider the music you hear just about everywhere you go. Antex states that forced integration carries no benefit to the company, and in fact adds burdens and costs.

The FCC is considering a measure which would potentially force inclusion of HD technology in to all SDARS receivers. Among other issues, the FCC is weighing whether the agency even has the legal standing to mandate such an action.

[Antex FCC Filing]

Position – Long Sirius XM

While the merger between Sirius and XM is in the books, and integration of systems and content is already happening, there is still one remaining issue that relates to satellite radio that is being considered. Whether or not HD Radio technology should be required in SDARS receivers.

The most basic and fundamental question is whether or not the FCC even has the power to mandate such an issue. That being said, there are many things to consider, and the comments on the subject are starting to heat up.

Pioneer, who was staunchly against such a proposal has weighed in yet again. The audio manufacturer outlines many issues as to why such inclusion is wrong. Among the concerns expressed by Pioneer is the fact that “AM/FM/HD components have poorer AM/FM reception capability than existing AM/FM devices”

Reception and interference have been a hot button topic among HD detractors. While other audio entertainment services have had to fend for themselves in these credit markets, HD Radio has had the benefit of government support. Even with that support, adoption of the technology by consumers has been slow. Many industry watchers have speculated that the move to become included in SDARS receivers is an effort to boost acceptance by pushing the product into the market rather than as a result of consumer demand.

HD’s ability to grow has been challenged, and this last remaining issue before the FCC may be Ibiquity’s best hope of getting their HD Radio technology in front of consumers. Pioneer believes that the marketplace, and not the FCC, should be the determining factor of which devices and services survive. Personally, I agree with Pioneer.

[Pioneer Filing With FCC]

Position: Long SIRI.

Super Channels. What are they? What makes them super? How do I get to listen?

Super Channels is a term coined by terrestrial radio broadcaster Radio One, as they seek to get a grasp on exactly how the minority and public interest channels agreed to as part of the merger will come to fruition.

Radio One has taken the step of meeting with the FCC in order to help facilitate an outline and rules by which these minority channels will be leased. In the opinion of Radio One, there should be a simple process by which applicants for programming can be sorted.

The Radio One proposal seems to be a fair groundwork that will allow many entities to participate, while at the same time outlining that the broadcasters, and not Sirius XM, would be responsible for content as well as following any applicable rules and regulations. However, the proposal of Radio One also strips away the ability of many to be able to participate, by suggesting qualifiers for company size, and the race of the ownership.

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With the passage of the merger between Sirius and XM came stipulations regarding minority programming. Early in the process Georgetown Partners wanted a piece of the pie, but they have been silent ever since the merger was announced. Another company, AlphaStar, has proposed what appears to be a very viable solution, and because they already have infrastructure, could launch services right away should a deal be struck. Now, a small radio station in Texas is proposing that they would like to broadcast over the Sirius XM system.

KQBO 107.5 FM is a small 12,000 watt terrestrial radio station broadcasting in Rio Grande City Texas. The ownership, Media Ventures Unlimited, is Hispanic, and the programming caters to a Latino audience. In a filing with the FCC, Media ventures stated that they would broadcast their programming 24/7 and are willing to enter into a contract with Sirius XM radio so that operations could begin immediately.

Should Media Ventures be successful in their bid to provide minority programming, their reach would shift from a 50 mile radius to a national footprint. One interesting issue will be that of “local advertising”. Satellite radio can not carry localized advertising, but a station such as KQBO would have ads built into their programs. this could bring such a proposal to it’s knees should the NAB challenge the concept.

Position – Long SIRI

AlphaStar is a company that came out of obscurity late in the merger process to propose that they not only had the capability to deliver programming, but the infrastructure and expertise to do so as well. Late In July, AlphaStar filed an Ex Parte with the FCC noting their desires and capabilities surrounding the merger. Now AlphaStar has once again communicated with the FCC.

The latest communication, filed on August 13 but made available to the public on August 28, from AlphaStar came after merger approval, and proposes to the FCC that they still indeed have a desire to be involved with the 8% Noncommercial Educational or Informational (NCE) programming as per the order of the FCC in the granting of the licesne transfer that allowed the merger.

Interestingly, AlphaStar seems to be the first company on a post merger decision basis to not only express their interest to the FCC, but to Sirius XM Radio as well. The FCC filing makes it quite clear that AlphaStar has contacted Sirius XM Radio regarding their proposal and capabilities. As yet, there has been no interest expressed by Georgetown Partners, a company with dozens of filings during the merger process.

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