Dear Commissioner Tate:
iBiquity Digital Corporation, by its attorneys, hereby submits this ex parte filing to address certain issues you raised in our meeting last week. You asked iBiquity to clarify the exact terms of the condition to the XM Satellite Radio/Sirius Satellite Radio merger that iBiquity has proposed in this proceeding. You also asked iBiquity to address the cost implications of any
such condition and the implications of Commission adoption of this condition. iBiquity has provided below additional information on each of these topics. iBiquity urges you to consider the impact the proposed merger will have on terrestrial digital radio and to ensure the public interest is protected by conditioning any approval as iBiquity proposes.
Condition Concerning Protection of HD Radio™ Technology
iBiquity previously provided the following language to the Commission as a proposed condition to ensure a merged satellite entity cannot use its position in the marketplace to disadvantage the rollout of HD Radio technology:
The licensee will certify no later than June 1 of each calendar year, in accordance with the dates specified below, that any newly introduced satellite radio receiver model that operates with the licensee's satellite DARS system and includes the ability to receive terrestrial analog AM/FM signals, will also include the ability to receive digital AM/FM signals in accordance with the technical specifications for terrestrial digital radio specified in MM Docket No. 99-325. This requirement will be effective three years from the effective date of this rule for new model Original Equipment Manufactured ("OEM") automobile receivers and one year from the effective date of this rule for new model non-OEM receivers.
Based on subsequent conversations with the Commission, iBiquity encourages the Commission to further clarify that this requirement applies to all receivers whereby the consumer uses the same tuning apparatus or display for both satellite and analog AM/FM radio. Only devices that exclude analog AM/FM (satellite-only devices) or devices with a separate satellite control and
display should be exempt from the requirement to include HD Radio technology. The Commission’s requirements should be based on the consumer experience rather than the actual architecture of the device. To the extent that the consumer is using the same controls to tune to AM/FM and satellite or the consumer is viewing the same display with information about either
service, the consumer is using the device to assess the relative merits of terrestrial versus satellite programming. In this case, the public interest demands that the consumer have access to a digital platform for both terrestrial and satellite services. The Commission’s rules should not focus on
whether satellite technology is integrated in the same unit with analog AM/FM or if they are in separate units that are connected. As long as the consumer perceives them to be interchangeable due to common controls or display, the condition to include HD Radio technology should apply.
This issue is dealt with in more detail in the June 9, 2008 ex parte letter filed by iBiquity in this proceeding.
iBiquity estimates the cost of components to include HD Radio technology in most satellite receivers will be no more than $12-$15. This estimate is based on a baseband chip containing HD Radio software costing approximately $10, additional flash memory of one or two dollars and a small cost for nonrecurring engineering. The $10.00 baseband chip cost estimate is based on royalty reports from iBiquity’s licensees indicating recent sales in the
marketplace as low as $9.60 per HD Radio chip. Even for less sophisticated receivers that might require use of a complete HD Radio module, component costs should not exceed $20. These cost estimates are based on relatively low volume orders. iBiquity believes costs will decrease significantly if this condition is adopted and receiver manufacturers negotiate with suppliers for
higher volume purchases. Moreover, during the three year time frame before the condition is fully effective for OEM automobile installed receivers, iBiquity believes many receiver manufacturers will have adopted or moved toward adoption of software radios that will allow different system software to be flashed into the memory of the radio. This would reduce the marginal cost of adding HD Radio technology to the cost of memory and flashing the software.
iBiquity believes any higher cost estimates are based on out-of-date price information, low volume component orders that contain higher per unit costs, or significant supplier profit margins that may be reduced due to more robust negotiations in the marketplace.