GETTING THE FREQUENCY Grant Robertson – Globe and Mail Since the inception of satellite radio, consumers have been forced to choose between two competing networks, XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc., depending on the kind of hardware they buy.
But new documents show the rival companies have designed a receiver capable of carrying both services — a development that could significantly alter the competitive landscape of the emerging industry.
However, despite spending more than $5-million (U.S.) on the project, XM and Sirius have no plans to let consumers in Canada or the U.S. get their hands on the devices.
Though the broadcast licences granted in the United States call for the development of compatible technology to give consumers more flexibility, a loophole only requires the companies to design the radios — they don't actually need to make or sell them. In Canada, the decision is being left up to the industry.
Since neither company has much incentive to introduce new radios that would make it easier for consumers who pay a monthly fee to jump to the competing service, the blueprints are likely to be shelved.
“We signed an agreement with XM Radio ... to develop a unified standard for satellite radios,” say documents filed by Sirius to the Securities and Exchange Commission.
“In 2005, we substantially completed the design of a radio capable of receiving both services.”
Despite the revelation, a spokesman for Sirius said the companies have no intention to take the matter further in the U.S., while XM said in an e-mailed statement there are no plans to bring the dual-service receivers to market in Canada.
The development has angered consumer advocates who say the companies are flouting the U.S. Federal Communications Commission licence requirements to avoid having to open their industry to increased competition. Washington, D.C.-based XM and New York-based Sirius have a duopoly in the U.S. satellite radio market, as do their affiliates in Canada.
Consumers are required to buy a receiver from either company to get access to the service. If customers want to switch networks, they must buy another receiver with a price tag of roughly $50 to $400.
That structure contributes to a very low churn rate in satellite radio — the percentage of people who cancel their monthly subscriptions — compared with industries such as the wireless sector, where cellphones are transferable across networks.
Harold Feld, a senior vice-president of the U.S. Media Access Project, a group of lawyers that represents consumers at FCC hearings, accused the industry of trying to stifle competition.
“The idea of interoperability is to encourage competition between the pay services,” Mr. Feld said. “Without it, nobody's ever going to switch, which is of course why the companies don't want to bring it to market because there's not that much in it for them.”
The FCC is looking into the matter in the U.S. However, officials would not comment. A source close to the situation said the commission originally didn't envisage the companies would react as they have. In Canada, regulators did not make dual-service receivers a requirement of the licences issued last year.
Sirius spokesman Jim Collins said the partnership between Sirius and XM was prompted solely by the FCC requirements. Otherwise, the companies would not have pursued the joint venture.
Both companies operate separate networks of distinctive channels and have been battling each other for market share in the U.S., where satellite radio launched five years ago, and in Canada, where it began in December.
“We basically worked on this as a result of the FCC asking us to do so. Would it have been something to approach had the FCC not required it? Most likely not,” Mr. Collins said. “There wouldn't have been any real impetus for it.”
Mr. Collins said there is no reason for Sirius to introduce the dual-service radios in Canada, a move that would likely shake up the business models of each company less than five months into their existence. Similarly, XM Canada said federal regulations do not require such competition and that it has no intention to pursue it.
“This idea has floated around for five years and neither company has any plans to implement interoperability and no timeline for doing so,” XM Canada said in an e-mail.
Observers have said the advent of such technology could pose a threat to both companies, forcing them to lower their prices or market their services more aggressively to retain customers.
However, Mr. Collins said the dual-service receivers may be costly to manufacture and the industry isn't convinced consumers will pay.
“If these things do in fact get built, there still is a question as to what the cost will be, which at this point we can't speculate,” Mr. Collins said. “There was no timeline set [by the FCC to develop the radios] other than the fact they wanted both companies to make a concerted effort.”
The FCC has opened a proceeding into the matter. Mr. Feld said the decision shouldn't be left up to the companies.
“The argument that the companies are putting forward — that all they have to do is design the radios, they don't have to make them — is nonsense,” Mr. Feld said. “It clearly undermines the commission's intent when it granted the licence.” |