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Forget XM/Sirius; give satellite radio to the listeners

Merger proposals are dangerous moments for the masters of our telecommunications sector. When two or three media moguls go hat in hand to the Federal Communications Commission, asking for permission to unite, they unleash a public comment cycle on the question. That always releases the dreamers and reformers, who come up with alternative scenarios for the future.

Sometimes the reformers even get their way. AT&T had to pledge to honor net neutrality rules for at least a couple of years to get their merger with BellSouth past the FCC in late December.

Now that XM and Sirius satellite radio want permission to marry, the reformers have returned. The good folks at Public Knowledge have filed comments with the FCC on the union. They want conditions for merger to include a requirement that the new entity reserve five percent of its resources for “non-commercial educational and informational programming over which it has no editorial control.”

It’s a very reasonable suggestion, but I’m going to play dreamer this time. I say let XM and Sirius die. Then turn all of satellite radio into a listener supported, non-profit service.

XM and Sirius say they need to merge because they’ve still got a long climb to get to a sustainable plateau. Lots of smart people doubt that they will ever get there. Business Week offers a bleak prognosis under any circumstances, noting that neither firm has yet to earn “a penny of profit.”

“Whether or not Washington lets XM Satellite Radio Inc. and Sirius Satellite Radio merge seems beside the point,” a recent column on the proposal begins. “Even if they get the nod, there’s no guarantee the six-year-old business model will survive.”

The problem is that when the FCC launched its satellite Digital Audio Radio Service in 1997 (SDARS), it did not allow for the technology to go through what I call its natural non-profit period.

“The American consumer can now look forward to an exciting new radio service,” the FCC’s October 1997 press release on SDAR’s promised, forgetting that when telecommunications technologies first surface, their founders often do not know how to make money from them.

That was early radio’s story. As the historian Susan Smulyan notes in her terrific book Selling Radio, so uncertain were early broadcasters about how to monetize their industry, that in 1925 one radio magazine actually held a contest for the best essay on how to make radio profitable.

This dilemma goes all the way back to the early days of telegraph, when its investor deprived inventor Samuel Morse pleaded with Congress to take over the technology. And it appears more recently with the Internet, which functioned as a tool of universities and the Defense Department long before it morphed into America On Line.

Somehow the framers of our satellite radio service thought that they could skip this natural non-profit phase. In retrospect, their decision seems naive. FM radio struggled for decades with the same obstacles that satellite faces today: a potential audience that needed new receivers to access the service, and a new juggernaut competitor, television, that sucked away listeners and turned them into viewers.

Satellite’s competing juggernaut is not TV, but the Internet, which links to a veritable smorgasbord of terrestrial stations that I can access via my wireless laptop and a pair of good speakers. And in the battle for freeway commuters, satellite still has to trounce terrestrial radio, which, remarkably, continues to hold its own despite a drop in listeners and an overall decline in quality.

So it seems unlikely that this version of satellite radio will make it, merged or unmerged. But there is another system for developing the service that better fits the bill: listener supported non-commercial radio (which for convenience’s sake I will acronym LS-NCR).

Most radio listeners have become so accustomed to commercial broadcasting that they regard LS-NCR as a sort of weird, alien protocol. But, in fact, it’s as American as apple pie. We invented it on the west coast of the United States after the Second World War. KPFA-FM, launched in Berkeley, California, in 1949, remains the world’s longest running listener supported radio station. KPFK-FM in Los Angeles followed ten years later.

LS-NCR helped FM grow. Like XM and Sirius, KPFA founder Lew Hill sold receivers to subscribers so that they could listen to his station. A decade later a wave of “free form” radio stations, many of them strong on listeners and lighter on profits, built an even more passionate audience for FM.

In a very real sense, XM and Sirius are listener supported institutions, but they thought that they could build a loyal subscription paying audience from the top down, with auto manufacturers and cable companies as their partners, rather than from the bottom up, with the listeners. They were wrong.

I was talking about this the other day with my friend Bonnie Simmons, who ran San Francisco’s free form station KSAN for ten years. Bonnie pointed out that XM and Sirius recruited many of their deejays from terrestrial radio. Most of them had strong local or regional followings, but have not duplicated that loyalty on a national level. Bob Edwards and Howard Stern have come to satellite with a built-in national cache, but they are not typical of the genre.

And let’s face it, a lot of XM/Sirius isn’t even really radio. It’s juke box; deejayless streams of music that you can put together just as nicely with your own iPod.

Skeptics of my proposal will point to the historic under performance of listener supported radio. And they’re right to be skeptical. Most radio stations that depend primarily on subscriptions have relatively small audiences. There are two reasons for this shortfall.

First, the FCC has allocated only a tiny number of frequencies for listener supported radio stations. This has always forced them to cater to too many different audiences. As a result, “community” radio stations, which run primarily on the listener supported model, often become balkanized exercises in cultural power sharing; difficult for the average radio consumer to listen to on a regular basis.

Second, while the listener supported model sustains a radio station, it rarely capitalizes it. LS-NCR on its own usually keeps the frequency loping along on a maintenance level, but doesn’t provide the money for professional talent and on-going development.

Giving our digital satellite audio service over to a wide field of listener-supported non-profits would address the first problem. A critical mass of LS-NCRs would allow them to diversify: to create sports LS-NCRs, and all-news LS-NCRs, and music format LS-NCRs—from hip-hop to classical, rather than forcing all these tendencies to cram themselves together into a few stations on the bottom of the FM dial. To the extent that terrestrial LS-NCR’s have been able to specialize, they have become much more effective stations.

Second, the FCC, or Congress, should create a matching fund to support digital satellite LS-NCRs. Once the station reaches a threshold of subscribers, the matching fund kicks in with additional money.

And rather than coming from the highly politicized Corporation for Public Broadcasting, the fund should flow from spectrum auction sales or satellite leasing income. I would even look at the FCC’s ever evolving Universal Service Fund as a source.

But even if a steady font of income isn’t immediately identified, converting satellite radio to a listener-supported service will get the ball rolling. Because when all else fails, LS-NCRs run on fanatic power, led by “the little man with a large view,” as FCC consultant and FM booster Charles Siepmann wrote 50 years ago in his book on FM, Radio’s Second Chance.

And in the end, isn’t it always the fanatics who pioneer the future?

So here is what I suggest that the FCC do. Let XM and Sirius run their course. Then open up SDARs in a manner similar to the FCC’s widely anticipated application window for Non-Commercial Educational radio.

Launch an application period for as many digital satellite LS-NCRs as possible. Plug in the usual criterion: only non-profit organizations with accountable boards may apply. They’ve got to prove that they can run the station without income for at least three months.

But add one more requisite to the equation. Partition the matrix of licenses into about a dozen generally recognized formats: news, talk, various cultural forms, from hip-hop to a BBC Third Programme style format, even sports.

Make the applicants pick a format. Don’t let the germinators of this new service fall into the old trap of trying to please everybody who hovers on the margins of our present commercial system of broadcasting.

Trust me. This will work. Ten years from now digital satellite radio will be crammed with passionate, loyal, paying listeners.

Then corporate America will have something viable to ruin.

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