Satellite Radio Irks NAB

Once upon a time, business competitors relied on the quality of their products and services to hang onto their shares of the market. That's the myth, at least. Increasingly, it seems they rely on regulatory and judicial intervention to stay afloat.

A request for a regulatory crackdown is the tack that US radio broadcasters are taking in response to a move into local weather and traffic reporting by satellite startups XM Satellite Radio Holdings, Inc. and Sirius Satellite Radio, Inc. Over the past couple of months, the satellite services have begun offering local weather and traffic reports to large markets nationwide. Do these useful services for subscribers, most of whom listen in their vehicles, have the potential to damage revenues for traditional broadcasters?

The National Association of Broadcasters (NAB) apparently thinks so. In mid-April, the NAB, a trade organization representing most radio and television stations in the US, filed a request with the Federal Communications Commission (FCC) seeking to block such services. "This foray into local content is directly contrary to ... repeated and express promises that satellite radio service would be limited to delivering national programming to serve the unserved and underserved," read the petition obtained by Reuters news service.

Satellite radio executives were unanimous in insisting that providing information on local weather and traffic was part of their FCC-approved mission. "The NAB wants to quell content that provides a public service, and that's wrong," said XM spokesman Chance Patterson. Sirius Radio's Jim Collins commented, "The licenses we were given were for nationwide distribution of our content, and that's what we do."

The NAB move is clear evidence that traditional broadcasters are beginning to feel the heat from satellite services. The petition was filed only a few days after the release of anti-satellite–radio ads by Entercom Communications Corporation, the fourth-largest terrestrial radio operator in the US. Among the targets of the ads are the satellite service's subscription rates (typically about $12/month) and rare signal dropouts. In the entertainment business, innovations are almost always perceived as threats. The radio industry is responding very much the way local TV stations did when cable systems were introduced in the 1970s. Satellite radio, in fact, has already been described as "the cable TV of radio," by the LA Times.

If the pattern holds, traditional broadcasters will resist but eventually accommodate to the new services, perhaps even taking a subordinate position. Cable networks HBO, Showtime, ESPN, and CNN, for example, are now arguably more important than all the traditional TV broadcasters combined. A similar fate may await terrestrial radio. The two satellite services are growing rapidly and have a combined subscribership of about two million—1.68 million with XM, and 325,000 with Sirius. The services' wide offerings of commercial-free music win thousands of new subscribers every month.