The FCC order permits FM’s HD licensees to increase their digital power by 6dB without prior notice or by as much as 10dB by first filing an informal request. It has been alleged over the years that HD causes interference of its own. Through the process, the FCC did have request for review and a petition for reconsideration filed, but it seems that it will be ignored, and HD Radio will begin boosting signal strength today.

It is anticipated that the roll out will not be at all stations. Some stations have costly build-out issues that will prevent them from jumping onto the additional power band wagon as yet. It is anticipated that the bigger markets will see the boosts first.

Position – Long Sirius XM Radio

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.

The DSRC reflects the objectives of the Condition in the Merger Order because:

1) The channels would be leased to a diverse multiethnic group of parties that each meets the definition of Qualified Entities.

2) The DSRC includes parties with significant experience in the media and communications sector but with little present media ownership interests.

3) The DSRC consists of small businesses that ordinarily and traditionally have been unable to access ownership and carriage opportunities in the terrestrial and satellite radio platforms.

4) The DSRC respects the fact that channel capacity was made available voluntarily by Sirius XM and intends to fully engage and coordinate with Sirius XM.

5) Selecting the DSRC to lease the channels would eliminate further delay in the fulfillment of the Condition.

6) Finally, the new program content the DSRC would provide arguably would assist in increasing the Sirius XM subscriber base by the new demographics of unserved radio audiences the DSRC intends to target.

AlphaStar has maintained their interest in the minority channels throughout the merger process, and even long after. Other entities such as Chester Davenport have fallen off the radar altogether. The issue of the twelve channels has been postponed a couple of times already, but it appears that various proposals are gaining ground through aligning their efforts. The latest postponement gave Sirius XM until June 29th, to come into compliance, and as yet no resolution has been announced CORRECTION – The date for compliance is August 29, 2009). While the issue could see more delays, it is quite possible that the company is in active negotiations with parties interested in leasing these channels. If negotiations with DSRC are indeed happening, implementation could happen quite fast. However, given FCC involvement, look for things to drag out a bit longer as various parties jockey for position. In theory, once resolved, satellite radio will be able to boast an even more diverse channel line-up.

If you thought that you never had to read another FCC filing again, welcomed to the world of hammering out FCC conditions.

Position – Long Sirius XM Radio

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.

The National Association of Broadcasters Dennis Wharton stated, “Regardless of today’s opinion, broadcasters will continue to offer programming that is reflective of the diverse communities we serve. Nonetheless, we’re disappointed the court majority seemingly failed to understand the need for clear and consistent regulatory policies, especially in light of the various ways audiences now receive broadcast programming. We continue to believe that voluntary self regulation — coupled with blocking technologies like the V-chip — is far preferable to government regulation of program content, and we question why speech restrictions should apply only to broadcasters.”

Clearly the NAB is referring to other media forms in use by consumers today. Cable, satellite radio and satellite television do not have the same constraints as over the air broadcasters, and this is indeed one of the challenges that NAB members face going forward.

Yet another reason to have satellite radio.

Position – Long Sirius XM

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

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

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 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.

This is where “Super Channels’ comes into play. As many are aware, Sirius XM agreed to supply 12 channels to minority and informational programming as part of the merger. Radio One proposes that the first group of Super Channels be on the Sirius system, and simulcast to the XM system. The remaining channels would not necessarily be simulcast, and could carry a wide variety of programming.

For Super Channels, Radio One proposes that the following criteria be met:

• Propose to serve a Black, Hispanic, or Asian audience
• Certify that the applicant has a proven track record as a broadcaster
• Certify that the applicant has a national platform through ownership or operation in at least 10 different geographic markets.
• Commit to a five year lease term
• Satisfy the requirements of a Qualified Entity, meaning an entity with 51% voting power in the hands of minorities
• Propose 24/7 operation
• Certify that the entity has sufficient financial resources to provide the programming on a 24/7 basis.
• Not currently operate a channel on Sirius XM.

The Radio One proposal is very detailed, and at a minimum provides some good points for discussion. Personally I feel that there are aspects of the proposal that put limits on the number of participants who may qualify. If the goal is to get minority programming into the pipeline, shouldn’t it be the quality of the programming that matters more than the race of ownership, or the size of the company?

By example, the criteria set forth by radio One would exclude an entity such as Media Ventures, which filed a letter with the FCC expressing interest in participating in the process. Media Ventures does not own or operate in 10 geographic markets, and therefore by the Radio One definition would not qualify. Also potentially excluded would be a company such as AlphaStar , who would be highly qualified in all respects except that the company is not “minority” owned.

It is time that we stop and look at the goals of these channels. Companies that are capable of satisfying those goals should not be hampered because of race or their size. The idea of Super Channels is great, but implementing them should not be exclusionary.

As the issue heats up, and more suggestions come in, we may begin to hear more about Super Channels. Let’s hope that the FCC has the wisdom to make the selection process fair, and allows it to proceed with a speed that will allow broadcasting to happen.

Position: Long SIRI

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

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.

AlphaStar makes some interesting points that show the seriousness of their proposal:

1. They have the capability to accomplish their slice of the work via their own infrastructure, and can even upload that to Sirius XM Radio’s satellites without having to pass through Sirius XM Radio. This makes them a true independent entity that is capable of handling the entire process.
2. They are prepared to launch their service immediately. This would deliver consumer benefit faster than any other entity, and could feasibly bring virtually instantaneous services that the FCC has desired to reality.
3. They have proposed a multi-platformed minority programming package that would include African American, Latino, Asian, women’s programming, and others.
4. They have already been in communication with programming sources, funding sources and industry professions to provide a seamless solution for this merger requirement.

While many companies delivered various requests during the merger process, their barks have now turned to silence. AlphaStar, a company that was very quiet during the merger process has emerged as the front-runner buy actually having follow-through. It is hard to find fault in the AlphaStar proposal, or their way of doing business. Because of the merger, consumers may have found a real gem. The process will continue, and the FCC can not simply hand over the channels, but clearly AlpaStar is a company that wants to be involved, and is not looking for the world to get started.

Position – Long SIRI

This official document, the lack of any action by the National Association of Broadcasters, and what should be the final touches on financing issues should enable Sirius and XM to consummate the merger in the next few hours. When this happens, XM shares will no longer exist.

Full press release after the jump…

FCC PRESS RELEASE

On July 25, 2008, the Commission voted to approve the application of Sirius Satellite Radio Inc. (“Sirius”) and XM Satellite Radio Holdings Inc. (“XM”; jointly, the “Applicants”) to transfer control of the licenses and authorizations held by Sirius and XM and their subsidiaries for the provision of satellite digital audio radio service (or “SDARS”) in the United States. The Commission found that grant of the application, with the voluntary commitments made by the Applicants and other conditions, is in the public interest. The transaction will benefit consumers by making available to them a wider array of programming choices at various price points and by affording them greater choice and control over the programming to which they subscribe.

Highlights of the Commission’s action are noted below, followed by details concerning the grant of the application and the separate resolution of certain enforcement matters.

• After reviewing the empirical data available as part of its competitive analysis, the Commission determined there was insufficient evidence in the record to predict the likelihood of anticompetitive harms. It therefore evaluated the application under “worst-case” assumptions, i.e., that the relevant market is limited to SDARS. This approach permitted the Commission to protect consumers from potential adverse effects of the transaction while also allowing the Commission to balance potential harms against potential public interest benefits. The Commission concluded that the merger, absent the Applicants’ voluntary commitments and other conditions, would result in potential harms. With those commitments and conditions to mitigate the harms, however, the Commission found the transaction to be in the public interest. All of the voluntary commitments must continue in effect at least three years after consummation of the merger.

• The Commission accepted the Applicants’ voluntary commitments to:

- Cap prices for 36 months after consummation of the transaction, subject to certain cost pass-throughs after one year. In addition, six months prior to the end of commitment period, the Commission will seek public comment on whether the cap continues to be necessary in the public interest and will determine whether it should be extended, removed, or modified. The merger approval is conditioned on the Commission’s ability to modify or extend the price cap beyond the three-year commitment period.

Offer to consumers, within three months of consummation of the transaction, the ability to receive a number of new programming packages, including the ability to select programming on an a la carte basis.

- Make available 4 percent of its capacity for use by certain Qualified Entities, and an additional 4 percent of capacity for the delivery of noncommercial educational or informational (“NCE”) programming, which will enhance the diversity of programming available to consumers.

- Offer interoperable receivers in the “retail after-market,” i.e., receivers available at retail outlets for installation in consumers’ automobiles or homes, within nine months of consummation of the merger.

- Refrain from entering into any agreement that would grant an equipment manufacturer an exclusive right to manufacture, market, and sell SDARS receivers. Applicants also commit to refrain from barring any manufacturer from including in any receiver non-interfering hybrid digital terrestrial radio functionality, iPod compatibility, or other audio technology. In addition, Applicants commit to make available the intellectual property needed to allow any device manufacturer to develop equipment that can deliver SDARS.

- File the applications needed to provide Sirius satellite service to Puerto Rico via terrestrial repeaters within three months of the consummation of the merger.

• Although the Commission found it unnecessary to impose a condition requiring the inclusion of hybrid digital radio technology in SDARS receivers, it recognized that important questions have been raised about hybrid digital radio that warrant further examination in a separate proceeding. The Commission therefore committed to initiating a notice of inquiry within 30 days after adoption of the merger order to gather additional information on the issues.

• The Commission reiterated that SDARS licensees are already prohibited, independent of the merger, from using terrestrial repeaters to distribute local content—including both programming and advertising—that is distinct from that provided to subscribers nationwide via satellite.

• The Commission prohibited the merged entity from entering into agreements that would bar any terrestrial radio station from broadcasting live local sporting events.

• Concurrent with grant of the application, the Commission repealed the prohibition on the merger of the two SDARS service providers as set forth in the 1997 SDARS Report and Order. For the same reasons that it approved the merger, the Commission concluded that repeal of the rule prohibiting the merger will, on balance, serve the public interest.

• In separate actions on July 25, 2008, the Commission approved Consent Decrees between it and each of the Applicants. The Consent Decrees terminated the Commission’s investigations into the Applicants’ compliance with the FCC regulations governing FM modulators and terrestrial repeaters. They provide that XM and Sirius will voluntarily contribute approximately $17.4 million and $2.2 million, respectively, to the U.S. Treasury and take additional remedial measures.

Action by the Commission, July 25, 2008, by Memorandum Opinion and Order and Report and Order (MB Docket No. 07-57, FCC 08-178). Commissioners Copps and Adelstein dissenting

• Martin Statement
• Copps Statement
• Adelstein Statement
• McDowell Statement

Position: Long Sirius, XM;