Giving XM and Sirius a monopoly on data

The Justice Department has approved the merger of XM and Sirius satellite radio (story). That leaves the Federal Communications Commission as the last line of defense for consumers. The main argument that the Justice Department used to grant these folks a monopoly on satellite radio is that it isn’t a monopoly on music. A person could use an MP3 player, listen to standard AM and FM stations, or hire a violinist to sit in the back seat of his or her car.

What has been lost in the press coverage of this event is that XM and Sirius are the only companies equipped to offer nationwide data broadcast services. Each 64 kbps data stream could be used for a music channel or to broadcast aviation weather, traffic jam information, or any other data important enough for people to pay. These data channels are more lucrative than the music channels. Aviation weather costs $50 per month for one channel, none of which need be paid out as a royalty because the information is all provided free by the federal government. Traffic information is $10 per month for one channel. Music costs about $13 per month for 100 channels.

Will there be any hope of competition once the merger goes through?  The mobile phone networks don’t provide adequate coverage for many uses, such as aviation.  The cost of launching new satellites would be prohibitive and any new entrant to the market would have to content with the fact that XM/Sirius has exclusive agreements with popular sources such as Howard Stern, NPR, and various sports leagues.  Our government, saddled with a $3 trillion bill for making Iraq safe for Iraqis, seems unlikely to attempt any kind of public wireless Internet.

I predict that the cost to consumers of this merger will be at least a doubling of the long-term rates paid for data provided via satellite.  That will discourage a lot of people from signing up for traffic information, which will lead to less efficient use of our road network, thus increasing our consumption of oil from countries that hate us, thus increasing our military expenditures to keep those countries under our thumb.  CO2 emissions and other forms of pollution will also be increased.  Work time will be lost as Americans are stuck in traffic, thus reducing our GDP and our competitiveness with more efficient countries.  In the air, the high price of weather already keeps a lot of pilots from subscribing; the $600/month is nothing for jet owners, but is about equal to the cost of insurance or maintenance on an old Cessna.  There will be some additional deaths each year due to people flying into bad weather that they could have learned about.

[These are also sad times for audiophiles.  With XM and Sirius competing, there was some hope that eventually one would offer improved audio quality on at least some stations.  With the two combined, it will be “any quality you want, as long as it is the muddy sound from 64 kbps and the CODEC that we designed in the late 1990s” (compare this to the 128 kbps of a standard MP3 stream or 192 kbps for a somewhat better MP3).]

If we must give a company a monopoly on satellite audio, it is a shame that the Federales didn’t say “You can have your radio monopoly, but you have to carry at cost any data that touches on public safety or environmental quality.”

7 thoughts on “Giving XM and Sirius a monopoly on data

  1. Any estimate on how much revenue the combined company can generate from current and (possibly) future data services. Possible future data services could be automatic downloads of updates to the maps used in the car GPS systems, advertising data (vendor funded) to be used in conjunction with GPS systems in cars (i.e local resturant specials of resturants your car is about to pass around lunch time), etc. etc.,

  2. Well, there are large financial barriers to entry, but anybody can technically launch a satellite constellation on the terms they launched theirs.

    Omnidirectional LEO should really be sparsely used — mainly for rural mobile, which include aircraft. Using it for music in the city is silly and wasteful.

    Strictly, using radio for music is silly. Everybody who wants mobile music should just use a digital music player which syncs up with new music (from whatever sources, including radio station style programmers who insert DJs) whenever they are close to a high bandwidth connection (such as their home 802.11, or on the ground.)

    Leave the live bandwidth for useful data services, and news. Who wants 64kbit music? Why does it have to be beamed through the sky when the spectrum could be used for something that actually needs real time data.

  3. Google maps mobile already provides traffic info for free so does yahoo I think. I can check road conditions on my blackberry live while driving and make route adjustments. So there is no need for XM or any other subscription traffic channel. Getting weather in the car is no big deal either-I can load noaa info via the cell phone data link.

    As for the airplane, well it’s not a cheap hobby by any stretch. But if you could get some kind of internet link in the plane I imagine you would be able to get free weather. May be there is some hope for airplanes in using the just auctioned off “open source” 700 MHz spectrum for data services. XM/Serious will be out of data business very quickly as soon as someone figures out how to provide a wide area internet connection. I think high flying solar/radioisotope powered gliders with repeaters on board can be an answer.

  4. We have National Public Radio. We have public / educational tv allocated bandwith over broadcast, cable and Directv satellite. What prohibits the government from sponsoring/commandeering some of the space and mandating it be provided free/low cost for the public good ?

  5. Philip,

    I’m not too sure about the data thing, but do consider the following options for good music:
    * Nothing prevents you from going to the nearest music store and ripping a CD to whatever level of clarity you want
    * There’s HD radio which will provide good competition to satellite-based music
    * Yahoo collaborated with Sandisk some time ago to provide a music store over Wi-Fi

    When it comes to data for pilots and other users, consider that people have been flying since the Wright Brothers and satellite radio has been a relatively very recent phenomenon. If it turns out that XM/Sirius overcharge, presumably enough numbers of customers will defect to whatever they were using pre-XM/Sirius to moderate any price gouging by the merged entity? Also with all those satellites up in space (e.g. from companies such as Dish Network, DirectTV, etc) a competitor will see enough financial incentive at some price point to start offering a competitive service?

  6. If the DOJ approval never happened, you would end up with one company anyway. Both companies are hemoraging, losing money each quarter, and stuck with high fixed costs. Eventually one company would have been forced into bankruptcy. And on top of it, they are now competing with mp3 players, internet radio, hd radio, etc. The merger makes sense, and gives bababooey a bigger audience.

  7. Man did you hit that nail on the head. When I found your site, I was doing google to get frequencies to see if my old sporty’s a300 worked before I put it on ebay. I haven’t flown in a while but I can only imagine what avgas goes for now. I cringe filling up my car. All this money to protect Iraq and we pay this much for gas. Yeah we need an xm sirrus merger about as much as we need a billions bailout of bear sterns. BTW we know who services our mortgage, but does anyone knows who owns the thing?

    I look foward to reading many more of your posts.

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