gunsmoke2
May 11th, 2002, 11:08 PM
THE GLOBE & MAIL
May 9, 2002
Canada's next protection frontier
Radio waves from deep space
by Eric Reguly
A friend of mine just moved from the United States to Canada and managed to smuggle contraband, in plain view, across the border. At least he assumed it was contraband. His car was equipped with a satellite radio receiver, the latest rage in the U.S. media market. For $9.99 (U.S.) a month, it gives the subscriber the choice of 100-plus channels, most of them commercial free.
His service, from XM Radio, is not licensed in Canada but it works well here. Satellite signals have a healthy disrespect for borders and XM's birds transmit for several hundred kilometres into Canadian territory. He urged me to drive to the nearest American city, buy the system and set up a phony U.S. billing address. No more sitting in traffic listening to commercial radio and its high-decibel ads for car tires, lotteries and contraceptives. If you want channels that broadcast exclusively reggae, 1960s rock, special studio sessions with Jethro Tull, Motorhead or, God forbid, Yanni, you've got them. So are all-news, sports and comedy channels, from the BBC to NASCAR Radio.
I'm sold. The problem is that the Canadian government and its broadcast regulator, the Canadian Radio-television and Telecommunications Commission, isn't. In case you hadn't noticed, the Supreme Court of Canada just ruled that the use of unlicensed equipment to receive U.S. satellite TV, offered by DirecTV and others, is illegal. The grey market suddenly became black. Unless you want to risk criminal status, you will have to buy your satellite programming from licensed Canadian distributors such as Bell ExpressVu or Star Choice.
Given the court ruling, it's impossible to imagine that American satellite radio would win if it tried to gain a licence in Canada where American satellite TV lost. My friend with the XM Radio box in his car, if not a criminal now, seems destined to become one.
Given the billions of dollars in startup costs for satellite radio, there's about zero chance that a mass market, home-grown version could be launched (the CRTC has licensed two satellite audio services, CBC Galaxie and Shaw DMX, but they are small and not available in cars, the one market that counts). The Canadian market just isn't big enough. The good news for Canadian radio buffs is that U.S. satellite radio is there for the taking if you have the energy to drive over the border and buy the hardware, which starts at about $200. At this stage, the CRTC isn't prepared to make a stink about the new service because it's a brand new industry with few Canadian subscribers.
Watch this change, though, if the service becomes widespread and Canadian commercial radio companies, such as Standard Broadcasting and CHUM, start losing market share. Canadian broadcasters hate the idea of competing; far easier to play the Canadian culture card and get foreign competitors banned from the market.
Satellite radio could get really big really fast. An April report by Robertson Stephens, a U.S. investment firm, said that "[the] satellite radio market has substantial potential . . The battle between satellite and terrestrial radio should be heated." The firm expects half a million U.S. subscribers by the end of this year, rising to 10 million by 2005 and 37 million by 2010. The growth should come from cars. Indeed, the auto makers have signed on as partners of both XM Radio and Sirius, the only two players in the U.S. satellite radio market.
General Motors plans to include XM radios as optional equipment in many of its 2003 models. Ford has teamed up with Sirius and will probably offer the radios in its 2004 lineup. The tens of millions of commuters trapped on highways and roads across America represent a huge untapped market for XM and Sirius.
Only a few months ago, satellite radio was little more than a concept backed by a licence from the U.S. Federal Communications Commission. The idea had been around for years, but the funding and logistical challenges were daunting. XM, for example, spent $800-million just to launch two satellites from a floating launch site in the Pacific. Sirius, which has invested $1.8-billion in startup costs, had to go to Kazakhstan to find discount launch rockets.
One of the industry pioneers was David Margolese, a Vancouver native and university dropout. More than a decade ago, he formed a company in New York called CD Radio and started to fight for FCC approvals. In 1997, CD Radio and its only rival, XM, overcame resistance from the commercial radio lobby and received the coveted licences.
At that point, CD Radio was the clear leader but squandered its early mover advantage. The company has since recruited new management (Mr. Margolese went from chief executive officer to chairman) and was renamed Sirius. XM, meanwhile, forged ahead and began national broadcasting last November. At the end of March, it had 76,000 subscribers and expects 350,000 by the fourth quarter. Sirius began limited broadcasting three months ago. The stock prices of both companies has dived on the Nasdaq because of the horrendous development costs and investors' fears that profits are many years off, if they come at all.
Recruiting Canadian subscribers, of course, is about the last thing XM and Sirius are concerned about as they roll out their service. But both companies admit Canada is a natural extension of their market. The CRTC may determine otherwise. If satellite radio catches on in Canada, watch the commercial radio companies plead for protection.
GS2
May 9, 2002
Canada's next protection frontier
Radio waves from deep space
by Eric Reguly
A friend of mine just moved from the United States to Canada and managed to smuggle contraband, in plain view, across the border. At least he assumed it was contraband. His car was equipped with a satellite radio receiver, the latest rage in the U.S. media market. For $9.99 (U.S.) a month, it gives the subscriber the choice of 100-plus channels, most of them commercial free.
His service, from XM Radio, is not licensed in Canada but it works well here. Satellite signals have a healthy disrespect for borders and XM's birds transmit for several hundred kilometres into Canadian territory. He urged me to drive to the nearest American city, buy the system and set up a phony U.S. billing address. No more sitting in traffic listening to commercial radio and its high-decibel ads for car tires, lotteries and contraceptives. If you want channels that broadcast exclusively reggae, 1960s rock, special studio sessions with Jethro Tull, Motorhead or, God forbid, Yanni, you've got them. So are all-news, sports and comedy channels, from the BBC to NASCAR Radio.
I'm sold. The problem is that the Canadian government and its broadcast regulator, the Canadian Radio-television and Telecommunications Commission, isn't. In case you hadn't noticed, the Supreme Court of Canada just ruled that the use of unlicensed equipment to receive U.S. satellite TV, offered by DirecTV and others, is illegal. The grey market suddenly became black. Unless you want to risk criminal status, you will have to buy your satellite programming from licensed Canadian distributors such as Bell ExpressVu or Star Choice.
Given the court ruling, it's impossible to imagine that American satellite radio would win if it tried to gain a licence in Canada where American satellite TV lost. My friend with the XM Radio box in his car, if not a criminal now, seems destined to become one.
Given the billions of dollars in startup costs for satellite radio, there's about zero chance that a mass market, home-grown version could be launched (the CRTC has licensed two satellite audio services, CBC Galaxie and Shaw DMX, but they are small and not available in cars, the one market that counts). The Canadian market just isn't big enough. The good news for Canadian radio buffs is that U.S. satellite radio is there for the taking if you have the energy to drive over the border and buy the hardware, which starts at about $200. At this stage, the CRTC isn't prepared to make a stink about the new service because it's a brand new industry with few Canadian subscribers.
Watch this change, though, if the service becomes widespread and Canadian commercial radio companies, such as Standard Broadcasting and CHUM, start losing market share. Canadian broadcasters hate the idea of competing; far easier to play the Canadian culture card and get foreign competitors banned from the market.
Satellite radio could get really big really fast. An April report by Robertson Stephens, a U.S. investment firm, said that "[the] satellite radio market has substantial potential . . The battle between satellite and terrestrial radio should be heated." The firm expects half a million U.S. subscribers by the end of this year, rising to 10 million by 2005 and 37 million by 2010. The growth should come from cars. Indeed, the auto makers have signed on as partners of both XM Radio and Sirius, the only two players in the U.S. satellite radio market.
General Motors plans to include XM radios as optional equipment in many of its 2003 models. Ford has teamed up with Sirius and will probably offer the radios in its 2004 lineup. The tens of millions of commuters trapped on highways and roads across America represent a huge untapped market for XM and Sirius.
Only a few months ago, satellite radio was little more than a concept backed by a licence from the U.S. Federal Communications Commission. The idea had been around for years, but the funding and logistical challenges were daunting. XM, for example, spent $800-million just to launch two satellites from a floating launch site in the Pacific. Sirius, which has invested $1.8-billion in startup costs, had to go to Kazakhstan to find discount launch rockets.
One of the industry pioneers was David Margolese, a Vancouver native and university dropout. More than a decade ago, he formed a company in New York called CD Radio and started to fight for FCC approvals. In 1997, CD Radio and its only rival, XM, overcame resistance from the commercial radio lobby and received the coveted licences.
At that point, CD Radio was the clear leader but squandered its early mover advantage. The company has since recruited new management (Mr. Margolese went from chief executive officer to chairman) and was renamed Sirius. XM, meanwhile, forged ahead and began national broadcasting last November. At the end of March, it had 76,000 subscribers and expects 350,000 by the fourth quarter. Sirius began limited broadcasting three months ago. The stock prices of both companies has dived on the Nasdaq because of the horrendous development costs and investors' fears that profits are many years off, if they come at all.
Recruiting Canadian subscribers, of course, is about the last thing XM and Sirius are concerned about as they roll out their service. But both companies admit Canada is a natural extension of their market. The CRTC may determine otherwise. If satellite radio catches on in Canada, watch the commercial radio companies plead for protection.
GS2