Tuesday, July 10, 2007

Merger Comments on Satellite-based Weather Systems

There were a couple of interesting comments posted today concerning the merger of XM and Sirius and the satellite-based weather systems (SBWS). This is an often forgotten part of the satellite radio business. Most people think about the music when they think about satellite radio, but it is much more than that. XM and Sirius to a lesser extent are the only two commercial providers of SBWS. If the two combine into a single entity, it will be a monopoly.

One filing was by Rockwell Collins. It rightly points out that in the SBWS market, the combination of XM and Sirius will be a merger from duopoly to a monopoly. However, Rockwell Collins never takes a position on the merger. Rather, it suggests that the Commission impose two conditions.: 1) that both services be maintained and that prices remain relatively unchanged; and, 2) no customer discrimination.

Rockwell Collins believes that competition in the SBWS market will keep prices down and thus promotes safety in the skies. A monopoly might raise prices making the units less affordable. Some pilots might dispense with SBWS. The second point comes about because Rockwell Collins feels that it has be locked out by exclusive agreements between XM and Garmin and Heads Up Technologies such that the playing field is not level. Rockwell Collins does make a SBWS, the Pro Line 21; however, XM has refused to enter into a direct licensing agreement with Rockwell. Rockwell Collins would like to develop and market SBWS. It seems grateful that there is an alternative in Sirius.

The second filing was by the Aircraft Owners and Pilot Association (AOPA), representing 412,000 members. Like Rockwell Collins, the AOPA takes no position on the merger. However, they would like the Commission to apply conditions. The organization insists that SBWS remain a part of satellite radio post merger. It wants the same assurances as the audio portion of satellite radio: the current subscription prices must be maintained and the equipment must not be made obsolete by the merger.

Garmin also commented back in April. It fears that XM and Sirius might settle on a different format, costing them millions of dollars. Garmin was insistent that the XM system be maintained in its present form. It was not concerned with competition and seemed to care less about Sirius. One can read the comments here.

This often forgotten service could very well derail the merger on the outside chance that it otherwise passes muster with the DOJ and FCC.

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