Paul Gluckman

Sirius projects subscriptions will rise to 321,000 by year-end 2003 from 29,947 activations as of Dec. 31, reaching 1.3 million subscribers by end of 2004. So said Sirius in preliminary proxy statement filed with SEC for as-yet- unscheduled special shareholder meeting to ratify terms of company’s proposed $1.2-billion recapitalization deal. Projections on Sirius subscriber growth would put it roughly year behind progress of rival XM, which began commercial service nationally 8 months earlier than Sirius. XM announced at CES it had reached 360,000 subscriptions Dec. 31 and projected growth to million by end of 2003. Sirius expects its activations to reach 2.9 million by end of 2005, 4.9 million by end of 2006, it said in proxy filing. Sirius has projected it will reach cash flow breakeven in 2005 at 2 million subscribers, assuming recapitalization plan is approved.

LAS VEGAS -- Rebranding of Sirius as deliverer of independent music to public turned off by deficiencies of traditional commercial-supported radio or music TV was among highlights of marathon news conference Wed. on eve of CES here. Sirius also has dropped words “Satellite Radio” from its corporate name, apparently in keeping with plans to stream data and video content to mobile receivers.

Seven of country’s largest cable MSOs, representing 75% of subscribers, and 14 major consumer electronic (CE) manufacturers announced Thurs. that they had reached agreement on national “plug and play” digital TV standard for “one-way” cable services. Agreement consists of package of voluntary commitments by companies and rules proposed in filing to FCC, including new encoding rules that would set standard on how copyright holders could limit ability of consumers to manipulate content with such codes as “copy never,” “copy once” or “copy freely.”

XM Satellite Radio had 201,544 subscribers at Sept. 30 close of its 3rd quarter, up 47% with addition of 64,836 since end of 2nd quarter, company said Thurs. It also reaffirmed it was on track to meet projected subscriber target of 350,000 by year-end and for first time said it was forecasting reaching 1.2 million by end of 2003. CEO Hugh Panero told financial analysts XM had met all Wall St. expectations on subscriber targets and earnings projections, but he conceded XM had failed to reach internal goal of procuring new financing by announcement of 3rd-quarter results. He indicated talks with new and existing investors could yield agreement by mid-Dec. Meanwhile, to “stretch” $84.3 million in existing cash reserves, company was negotiating deferred or reduced payments under existing contracts and was cutting work force -- eliminating 80 of 448 jobs recently. XM said it had been in talks with GM for deferral of up to $200 million in payment obligations, including $100 million due in 2003 and 2004. But deal with GM is contingent on XM securing at least $200 million in new financing and making unspecified “modifications” in its capital structure. Other developments: (1) Panero said XM had seen no competitive impact from rival Sirius. (2) XM now estimated life expectancy of its first orbiting Boeing 702- class satellite, “Rock,” at 6.75 years vs. 16 years of original estimate because of progressive degradation of solar output power.

Talks on reaching agreement on DTV-cable interoperability “continue to move forward,” and CEA remains “optimistic and committed to the process,” CEA Pres. Gary Shapiro said at our Fri. deadline. Because parties hadn’t reached final agreement, he said, “it is premature and inappropriate for anyone to comment on the details of these ongoing negotiations at the point.” Nov. 4 and later Nov. 8 were to have been when cable and CE negotiators were expected to submit proposed plug-and-play standard to FCC (CD Nov 5 p5). Informed sources have said no hitch has emerged in talks, but that last finite details still were being put on paper, pushing agreement into another week. “Negotiations between cable operators and consumer electronic TV manufacturers concerning ‘plug and play’ DTVs continue on a constructive path,” said NCTA Pres. Robert Sachs. “A final agreement has not been entered into by the parties.”

CE industry generally should be pleased with Republican takeover of Senate in 108th Congress, CEA Pres. Gary Shapiro told reporters Wed. Among reasons, he said, was that CEA had high regard for Sen. McCain (R-Ariz.), who will resume his chairmanship of Commerce Committee. McCain not only has close working relationship with FCC Chmn. Powell and is strong free-market advocate, but also is “very knowledgeable, very independent,” Shapiro said. He said CEA believed next Congress was likely to consider some sort of legislation on HDTV, and “you can expect more pressure coming from the Senate on broadcasters to perform,” given that McCain has believed strongly that they should have been forced to pay for HDTV spectrum. By comparison, Shapiro said Sen. Hollings (D-S.C.), who will be demoted again to ranking Democrat under McCain, was “not a free trader” during his stint as Commerce chmn., and “we were always very nervous about him because his focus on telecommunications issues was not what we had hoped it would be.” Shapiro made no mention of Hollings’ record on DRM, including his sponsorship this year of S-2048, bill that alarmed many in CE and IT communities because it would have ordered FCC to impose DRM technology mandates if privately negotiated solution wasn’t found. As for DRM legislation in next Congress, Shapiro said it was unclear whether election results would have much impact on that debate because copyright “wasn’t to a large extent a partisan issue.” At same time, he said, “so much money” flowed to Democrats from content community that Senate swing toward Republicans might favor CE and IT industries. However, Shapiro conceded he wasn’t sure “how that might play out” next year.

“The marketplace has done very well without mandatory receiver standards,” CEA Pres. Gary Shapiro said, reacting to speech by FCC Chmn. Powell at U. of Colo. at Boulder conference that most “obvious” gaps in Commission’s approach to wireless interference were lack of receiver standards (CD Oct 31 p1). Shapiro said he found remarks surprising, given Powell’s reputation as free-market advocate but hedged his comments pending an opportunity to review speech text. He said he was reluctant to interpret Powell’s message, including whether call for receiver standards applied to licensed or unlicensed spectrum or both. “People will accept a $5 or $6 clock radio on the knowledge that it’s not the best receiving device because it works and it’s very inexpensive,” Shapiro said. “If you start creating standards for something like that, prices could go up enormously, so there’s the trade-off there between performance and price, and everyone knows that.” Shapiro said CEA had found there were “a lot more products” operating in unlicensed spectrum area “than anybody ever thought,” and it had reported those findings in FCC filing in last several months. “So we've been encouraging the FCC to expand the unlicensed spectrum area because it gives an opportunity for the creation of all sorts of new products we can’t even conceive of today.” Shapiro said Powell was correct in saying emerging technologies were becoming more tolerant of interference through sensory and adaptive techniques than legacy devices. “It’s true that technology is always improving,” Shapiro said: “The problem with performance standards is the cost and the fact that the technology changes. Consumers are pretty understanding of the trade-off between price and performance. At least in the unlicensed area, the concept of standards would be novel, because the marketplace handles it.” As for devices in licensed spectrum, Shapiro said, FCC under law lacks authority to set performance standards. “If Chairman Powell is advocating that the law be changed, obviously that’s not something we would agree with.” NAB Gen. Counsel Jack Goodman said it could be argued FCC to some degree already had set up TV receiver standards by ordering TVs in future to have digital tuners, which would improve receivers. He also said it was unclear whether Powell was reaching into TV space. Goodman said wireless and TV really were different environments: “I don’t think it was clear from that alone that that’s where he was going, but it’s certainly something to consider.” NAB has long advocated receiver standards because of its concerns about interference. FCC spokeswoman said Powell’s speech spoke for itself and was specific to wireless.

At its next meeting in Nov., CEA’s video board will reconsider suit it filed Oct. 11 in U.S. Appeals Court, D.C., seeking to block FCC from imposing DTV tuner mandates (CD Oct 17 p6), informed sources told our affiliated Consumer Electronics Daily. At same time that board voted unanimously 2 weeks ago in San Francisco to reconsider suit, we're told it voted overwhelmingly to stay the course in legal fight, presumably against opposition of Thomson and Zenith, which support FCC mandates and have pressed CEA hard to withdraw suit.

Sirius Satellite Radio shares Thurs. began rebounding on late-afternoon announcement company had reached $1.2 billion recapitalization agreement with major investors. Sirius spokesman said deal, which would bring company enough cash to fund operations through 2nd quarter of 2004, would put to rest all rumors on company’s questionable future.

FCC order mandating that DTV tuners be installed in all TV receivers by July 2007 (CD Aug 9 p1) exceeds Commission’s “jurisdiction and statutory authority,” is in violation of Communications Act of 1934 and is “arbitrary, capricious” and “an abuse of discretion.” So argued CEA in petition filed Oct. 11 with U.S. Appeals Court, D.C., asking that FCC order be set aside.