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Satellite Radio - What's All The Fuss?

What's New in Technology

April 2005

Satellite Radio - What's All The Fuss?

Satellite radio is here to stay. If you had any doubts, the recent flurry of news announcements from the two radio satellite companies, Sirius Satellite Radio and XM Radio, about their latest deals with major carmakers should confirm that the industry is here to stay. In three years, the two rivals have signed up some 4 million subscribers. And, if that number seems unimpressive, note that cell phones took six years to reach that benchmark. Let's take a quick look at who the broadcasters are, how satellite radio works, and what its appeal is.

The Broadcasters
The concept of satellite radio started about a decade ago when the U.S. Federal Communications Commission allocated a spectrum in the S band (2.3 GHz) for nationwide broadcasting of satellite-based digital audio radio service (DARS). Two of the four contenders for licenses were granted the green light in 1997. Those two companies - now known as Sirius and XM - each paid about $80 million for their respective licensing privileges. They are the only two services currently available to U.S. consumers, and competition between them is fierce. Both boast more than 60 channels of music and also offer news, talk radio, and sports channels.

Outside the U.S., there is a third company with a far-reaching international presence. WorldSpace, which was up and running before the U.S. companies got their services underway, operates AfriStar and AsiaStar and plans to launch AmeriStar to serve South America and parts of Mexico in the near future. WorldSpace reaches many regions that cannot pick up conventional radio stations and the company believes its potential audience numbers 4.6 billion spanning five continents. Although the U.S. is not in the WorldSpace coverage area, the company has invested in XM and has agreements in place to share technological developments.

How It Works
Unlike conventional radio stations that beam signals within a footprint of 30 or 40 miles of their location, satellite radio can broadcast its signal from more than 22,000 miles (35,000 km) away. For people on the road, that means an end to dial twiddling and a way to enjoy access to the music channels you like, wherever you might be.

Satellite radio also claims to provide improved sound quality and clarity, and has few-or no- commercial interruptions. In reality, Sirius and XM use different communication methods, and reception from both services may vary, depending upon your location.
XM, which uses two Boeing HS 702 satellites (appropriately named "Rock" and "Roll") that hover over the equator in a parallel geostationary orbit, broadcasts its signals from a lower angle, and uses 800 land-based "repeater" towers. Sirius has three SS/L-1300 satellites in an inclined elliptical satellite constellation to ensure that each satellite spends approximately 16 hours a day over the continental U.S., and uses 140 "repeater" towers. Obviously, individual experiences will vary, but the XM communication method seems to provide better indoor reception in offices and homes, and Sirius appears to have the advantage in rural areas. Sirius recommends that customers place their antenna near a window or outdoors with a clear view of the sky.

What's the Appeal?
The major appeal of satellite radio is the almost unlimited range of musical options available. Americans' love affair with their automobile continues unabated regardless of gas price hikes, and satellite radio comes into its own on the highway. Unlike the same outpourings of "hit" songs and predictable "oldies" from traditional radio stations, satellite radio offers channels dedicated to almost every musical genre, with clear, uninterrupted reception. Both companies have expanded beyond music offerings to include non-music options like talk radio (with conservative and liberal hosts), rebroadcasts of cable news, and a full range of sports programming.

XM has a comfortable lead in the automobile segment-the fastest growing market for subscriptions - and seems to have scored a major coup with its recent announcement that Hyundai will install XM radio receivers as standard equipment. By the end of 2007, this will add another half million units to XM's piece of the pie. Sirius's new deal with high-end automakers - Mercedes, Jaguar and Land Rover - to install Sirius as a factory-installed option - positions Sirius in the luxury category. However installation remains an option only for those higher-end customers, and the number of possible placements in these luxury autos cannot rival the estimated 500,000 XM installations in the more plebian Hyundai vehicles.

Chose Carefully
Sirius is slightly more expensive, at about $13.00 per month versus XM's $10.00 monthly subscription. A Sirius- or XM- compatible receiver (neither can receive its competitor's programs) will cost you at least $80.00. Comparing programs is where life gets tricky, and neither service is easy to categorize. As a rule of thumb, Sirius is considered more mainstream in its music offerings and skewed to liberal chat and a more youth-oriented stance (though it does feature conservative talk-shows, too). XM offers more offbeat music choices and - generally speaking - a more comprehensive, and at times conservative, approach to its non-musical programming. Before you commit, try before you buy. Go online to www.sirius.com and www.xmradio.com to get 3-day trial passes - and let the music begin.
 

These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.

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