Now that an interoperable device has finally arrived in the form of the Sirius XM MiRGE, it is appropriate to think about the potential of what interoperable devices can bring satellite radio subscribers. For a long time, there have been those that thought interoperable devices would streamline the consumer adoption of SDARS by removing a barrier in which service was the best one to subscribe to. With the merger between Sirius XM, and the consolidation of channels, much of that worry has disappeared. The MiRGE was a requirement of the FCC approval of the merger. Whether the company expands this concept beyond this radio (the requirement was to build and market an interoperable receiver, i.e. at least one) is unclear, but there are a lot of reasons to consider going the interoperable route.

1. Streamline The Retail Channel. While a decent selection of radio choices at various price-points is good, it makes little sense to do this with two distinct brands. Having the interoperable capabilities across all future radios would help eliminate shelf space, technical support, and overall consumer confusion. Consumers, when activating, can simply be asked which service they want as their base service. Those familiar with XM will choose XM, and those familiar with Sirius can choose Sirius. The hard core fan can choose the full enchilada. Further, the sales reps at big box stores, who already seem ill informed, will have less to remember and digest when dealing with SDARS.

2. Make Use Of Full Satellite Constellations. Devices that are interoperable now produce an element of redundancy at the hardware level that did not exist before. Additionally, these new radios can make use of the full satellite constellations that exist today. The importance of this is that should a service disruption happen with one system ( as happened to XM in the past), there is a backup in place for consumers with these radios. The more of these radios that get into the marketplace, the better for the company.

3. Interoperable Devices Buy The Company Time and Accelerate Synergies. As part of the merger, the company promised that legacy receivers would continue to receive their respective services. This promise is great from a consumer standpoint, but slows down spectrum consolidation for the company. By Consolidating the channels, certain synergies have already developed. The company is still broadcasting on both networks, but the content is almost identical. The more that interoperable radios infiltrate the subscriber base, the easier it will be for the company to begin the ultimate merger synergy of bandwidth. There may come a point in time where the company will need to buy off or subsidize switch-over of some remaining equipment, but interoperable devices in the retail and OEM channel could begin to limit the exposure that the switch will deliver, and perhaps even help to mitigate the expenses involved.

While the interoperable device is not as big a deal now as it would have been two years ago, it has the potential to be a real important factor over the coming two years. Ironically, the demand of an interoperable device was made to deliver consumer benefit, but these devices may benefit the company even more.

Position - Long Sirius XM