XM, Sirius opposition mull next move

Groups opposing the CRTC’s decision to license two U.S.-backed satellite radio services are speaking out in the wake of a federal Cabinet committee’s decision not to refer the ruling back to the commission. "The CRTC from our point of view didn’t do its job, lacked the courage to do what it ought to have done here, and similarly the Cabinet decided not to do anything about it," says Ian Morrison, spokesperson for the broadcast watchdog organization Friends of Canadian Broadcasting. Ironically, Morrison’s group was founded in part to promote and preserve the Canadian Broadcasting Corporation, which is a 40% partner in Sirius Canada, one of the two U.S.-affiliated applicants to receive a licence. Sirius Canada is a consortium made up of the CBC, Toronto’s Standard Broadcasting Inc., which owns another 40%, and Sirius Satellite Radio Inc. of New York, which owns the remainder. The other satellite radio licence approved is that of Canadian Satellite Radio, which is owned by Canadian entrepreneur John Bitove, and is partnered with XM Satellite Radio Inc. of Washington, DC. Other Canadian music industry lobbyists and professional associations are similarly chagrined, but are saying little right now about their next moves. Cori Ferguson, executive director of the Canadian Independent Record Producers Association, says her organization is still considering its options in the wake of the Cabinet committee’s decision. One of the few options open to the opponents now is an appeal of the decision to the Federal Court of Appeal. Morrison says, "One would be that the CRTC failed to do what the act of Parliament asks it to do, and the second would be that there was a procedural deficiency in that the chairman of the commission was conflicted and did not recuse himself or even disclose to his colleagues that he had served on the board to the predecessor organization to what is now called Sirius, and had stock options," he says. In the early 1990s CRTC chair Charles Dalfen sat on the board of CD Radio Inc., which later became Sirius Satellite Radio Inc. (CNM Update, Sept. 8/05). More than 20 cultural and professional groups opposing the CRTC’s decision saw a glimmer of hope earlier this month when Canadian Heritage minister Liza Frulla asked Cabinet to refer the decision back to the commission. An ad hoc Cabinet committee – which included Frulla as well as Deputy Prime Minister Anne McLellan and house leader Tony Valeri – was struck to examine the issue on September 6, little more than a week before the 45-day period to hear the appeals of those opposed to the CRTC decision expired on September 14. The committee announced on September 9 it would allow the CRTC’s decision to stand. The timing of the initial decision and the end of the 45-day appeal period may not be coincidental, Morrison hints. "If Parliament had been in session, supposing the CRTC had announced its decision on June 30 rather than the 16, I cannot imagine that this would have happened the same way," he says. The initial decision to grant licences to Sirius Canada and CSR was an unpopular one even among the governing Liberals, Morrison claims. Although he doesn’t have any exact figures on the number of Liberals opposing the move, he says "approximately 80% of the members of the Liberal caucus wanted the CRTC’s decision referred back or set aside." However, in early September the two U.S.-backed services won over many naysayers by increasing the number of French-language channels they would each offer from three to four, and by pledging to push their U.S. partners for more Canadian content, provided the bandwidth is available. Terrestrial stations broadcasting in Canada currently must feature 35% Canadian content on their radio stations. A third subscription radio service, proposed by CHUM Ltd. and Astral Media Inc., gained approval at the same time as CSR and XM Canada. Titled CSRC, the CHUM/Astral service would not be satellite-based, but instead would rely on the companies’ terrestrial broadcast system with repeaters to extend the coverage area. CSRC had proposed to serve up 50 Cancon-compliant channels to 60% to 75% of the population upon rollout. "They told the commission last November that their business plan could not sustain head-to-head competition with one or two services that would be predominantly American," Morrison says. "It’s my understanding that CHUM and Astral won’t launch because of these circumstances, so the Cancon-compliant application approved will not be...picked up and used," he says. "Those are pretty significant consequences...we’ve lost a Canadian option." Beyond the loss of a Canadian competitor to XM Radio and Sirius, Morrison warns that the ramifications of the decision could be even more far-reaching, possibly even extending to court challenges and political defeat for the Liberals. "We are, after all, in the lead-up to a general election, so the Liberal party...will face some consequences, just from exposing themselves to attack as being not a strong defender of Canadian content," he says. Citing a letter from the Canadian Association of Broadcasters sent to the Clerk of the Privy Council on August 2 seemingly indicating that Canadian broadcasters will expect similar treatment to that accorded CSR and Sirius Canada and possibly even a loosening of Cancon requirements, Morrison says the decision "is hanging over the future of the commission: every time a radio broadcaster comes forward for a licence renewal, that issue’s going to be there. Currently there’s the issue of mobile telephones receiving television signals – that’s just an example of how the issue of Cancon will come up, and the precedent will be there." Although CSR and Sirius Canada have cleared the regulatory hurdles necessary to operate in Canada, Morrison points out that economic pressures and market forces may have the final say. "XM requires seven million subscribers to break even, and it has four-point-something right now," he says. "It’s been going for seven years, it loses hundreds of millions of dollars a year." Sirius, Morrison adds, needs a similar number of subscribers to break even, but is "down in the two million range in the United States right now. So you can see why Canada would be important to them." Further costs will likely come from Canada’s large land mass, which means covering the nation’s rural and urban areas equally "requires something like 70 ground repeater stations," Morrison says. "There’s a lot of misinformation going around that somehow CHUM and Astral were going to stick up these ground transmitters, but the other guys were relying on satellites. I’m talking to you from the 32nd floor of a 51-storey building in Toronto – it casts a huge shadow. If an automobile drives past it, there’s no service unless you have a backup." Satellite radio may also face increasing competition not just from terrestrial stations but Internet broadcasting such as the ‘podcasting’ phenomenon. "Apple’s out there with its iPods...there are a whole lot of other ways that people receive and control the audio signals they spend their time listening to," he says. All that economic and financial uncertainly could mean a merger or takeover of one of the U.S. satellite radio firms down the road, or possibly even bankruptcy for both of them, according to Morrison. "How would that affect these licences in Canada? They talk about 20 million subscribers, but since they’re largely confined to an automobile-based market, they might be wrong. There’s a God-given right to go broke in broadcasting."

XM, Sirius opposition mull next move

Broadcast | September 16, 2005

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