Heavenly Music

A handful of satellite start-ups are hoping to deliver global digital audio to the last analogue holdout: radio. Meanwhile, conventional AM and FM broadcasters are responding with their own digital scheme

The launch of America's first satellite-radio service was not without its hitches. XM Satellite Radio, the first firm to go live in the United States, began broadcasting late last year. But its start had already been postponed following September 11th. Eventually, when Hugh Panera, XM Radio's chief executive, was able to flip the switch, the company's two geostationary satellites began beaming 100 channels of CD- quality music and talk to listeners in San Diego and Dallas—the two first test markets.

But no sooner had the trials started than another problem emerged. The solar arrays on both of XM's Boeing 702 satellites were found to be degrading faster than expected. The estimated 15-year lifespan of the $150m satellites was suddenly cut in half. It is a good thing that XM keeps a spare.

Such technical snags do not trouble Mr Panera. Nor do they bother executives at Sirius Satellite Radio in New York, XM's only American competitor at the moment, which has been equally plagued with high- tech hiccups. If XM and Sirius succeed in rejuvenating the geriatric analogue radio industry with dozens of niche music, news and entertainment channels available to anyone, anywhere, in America's lower 48 states, even the most ardent sceptics will forgive their embarrassing start.

But XM and Sirius are not alone in the heavens. With plans to launch a third satellite within the next year, WorldSpace, based in Washington, DC, will serve South America, Western Europe, Africa and Asia with 40-odd channels in more than 20 languages—including Swahili, Tamil and Thai. WorldSpace plans to equip 30,000 Kenyan schools with receivers in the hope of profiting from a distance-learning initiative. Meanwhile, Global Radio in Luxembourg is aiming to start its satellite service in 2005. It will target Eastern and Western Europe with six “spot” beams from three satellites delivering 150 channels in ten languages.

Even conventional radio operators are diligently preparing for the inevitable shift to digital. In August 2000, a merger of Lucent Digital Radio and USA Digital Radio formed iBiquity Digital in Columbia, Maryland. Robert Struble, the company's chief executive, wants to persuade analogue radio operators to upgrade because he is convinced that flawless sound—packaged with regional news and local personalities—will keep listeners loyal to AM and FM.

It is satellite radio—with its ability to broadcast nationally or even across whole continents—that tantalises media analysts. Most expect satellite radio to aggregate niche markets that would not normally be profitable. That could shake up the antiquated radio world much as cable challenged network television in the 1980s. Mr Panera, who spent a decade with Time Warner Cable and five years at Request TV, an American pay-per-view network, remembers when the television networks scoffed at the introduction of cable. He believes that many of those broadcasters fell behind because they failed to embrace the technology.

Nevertheless, satellite radio cannot depend on the same lures as cable providers, who tempt prospective customers with complimentary receiver boxes and free home set-up. None of the satellite-radio firms will be giving away $229 receivers or doing installation for nothing. Mark Fratrick, a radio analyst with BIA Financial Network, predicts that even after satellite firms smooth out the technical wrinkles, it will still be tough to persuade millions of potential listeners to upgrade. In five to ten years, Mr Fratrick reckons that companies such as XM will win a respectable share of the market. In the meantime, XM and Sirius are going to need all the cash they have got.

In 1992, America's Federal Communications Commission (FCC) earmarked a slab of the country's radio spectrum for something called Digital Audio Radio Service. At the time, the technology for compressing packets of digital music and voice—and transmitting them from orbiting satellites 23,000 miles above the equator to cheap little receivers on the ground—was barely on the drawing-board. But two companies with a little imagination and a lot of cash snapped up chunks of the spectrum being offered in the newly available S-band (around 2.3 gigahertz). American Mobile Radio and CD Radio paid the FCC $80m each for the rights to rain digital entertainment from the heavens. American Mobile Radio became XM and CD Radio became Sirius.

Scrunching the Sound
All four satellite-radio firms—XM, Sirius, WorldSpace and Global Radio—employ similar technology to deliver their service. Music or spoken programming is first compressed using proprietary algorithms based on the Movie Picture Experts Group Audio Layer-3 (commonly called MP3). This lets broadcasters cram dozens of channels into a thin slice of bandwidth. After scrunching the audio data, operators must also decide on a bit rate—ie, the kilobits per second (kbps) of data that each signal can carry. As with streaming audio over a telephone line to a PC, a low bit rate translates into poor sound. For commercial reasons, XM does not reveal its exact bit rates, but it confirms that it uses higher levels on music channels to ensure CD-like quality. News and talk, however, transmit at much lower bit rates. Ground stations then upload the signal—now packaged as 1s and 0s of digital signalling—to satellites. These bounce the signal earthwards to mobile or (in the case of WorldSpace) stationary receivers.