Canada, Bowing to Pressure, Approves Satellite Radio Bids
June 16 (Bloomberg) -- Canada has become one of the last countries in the world to authorize satellite radio, bowing to demands from consumers such as Matthew Vukanovich, who traveled to Detroit to sign up for the service.
``There's no comparison,'' said Vukanovich, 27, one of about 100,000 Canadians who has skirted Canadian rules by subscribing to satellite radio in the U.S. ``As soon as any Canadian gives it a chance for a week, they'd never listen to local radio again.''
The Canadian Radio-television and Telecommunications Commission approved licenses today for the Canadian units of Sirius Satellite Radio Inc. and XM Satellite Holdings Inc., the two biggest satellite providers in the U.S.
The regulator, based in Gatineau, Quebec, has been reviewing the satellite applications since August 2003. With so many people tuning in to U.S. providers, the regulator had little choice but to approve them, said Iain Grant, managing director at SeaBoard Group, a Montreal firm that does consulting on technology and telecommunications issues.
``If the CRTC does not license the phenomenon of satellite radio, they risk not having control over it at all,'' Grant said. ``Satellite radio will have a place in Canada, whether it is licensed or not.''
New York-based Sirius estimates the Canadian market may exceed C$200 million ($159 million) a year by 2010. Almost 4 million Canadians would be interested in satellite radio, according to a survey by Decima Research of Ottawa, commissioned by Sirius and Washington-based XM.
Little Choice
Canadians, especially those in rural areas, want satellite radio so they can have more choice, James Rajotte, the Conservative Party lawmaker responsible for industry affairs, said in an interview. Satellite radio offers more than 100 channels across North America, compared with as few as one station for standard radio in remote parts of Canada, the world's second-largest country.
XM and Sirius have Canadian partners because the country's laws limit foreign ownership of media companies to 33 percent. Canadian restaurateur John Bitove has joined XM's Canadian Satellite Radio Inc. of Toronto.
Standard Broadcasting Inc. in Toronto, which owns 58 Canadian radio stations, and government-owned Canadian Broadcasting Corp., have teamed up with Toronto-based Sirius Canada Inc.
Sirius and XM had 4.6 million U.S. subscribers in 2004, and are expected to almost double that to 8.2 million this year. About 20 million Americans will subscribe by 2010, Forrester Research Inc. analyst Ted Schadler said in an interview.
Asia, Africa, Europe
Satellite radio is available in most countries in Asia, Africa and Europe. In Canada, Sirius and Canadian Satellite Radio expect to have a combined 2.9 million subscribers by 2012.
A made-in-Canada service isn't an option because the country doesn't own any part of the frequency spectrum and has no satellite to broadcast it.
Satellite operators will be required to meet Canadian content requirements. They must offer eight original channels produced in Canada. A maximum of nine foreign channels may be offered for each Canadian channel.
What's more, at least 85 percent of the music on the Canadian channels must be Canadian. And a quarter of the Canadian channels must be in French. The companies have 150 days to advise the regulator if they accept the conditions.
Both companies plan to go ahead with Canadian satellite service.
``We are highly confident that we will be able to launch this year,'' Canadian Satellite Radio Chief Executive John Bitove told reporters.
Conventional radio stations have to play Canadian music as much as 35 percent of the time. Since XM and Sirius can broadcast only one signal to the U.S. and Canada, they have said they can't comply with a strict application of existing rules.
Content
Content laws were implemented in 1959 to prevent the dilution of Canada's culture as a result of its proximity to the U.S. Sirius and XM each offered to add two French-Canadian and three English-language channels to help meet those requirements. Canadian Satellite Radio also plans to spend C$28 million to develop Canadian artists and add more Canadian programming on other channels, President Stephen Tapp said in an interview.
The approval of satellite radio ``will be harmful'' to traditional broadcasters, Rogers Broadcasting President Rael Merson said in an interview.
``The programming can be more interesting because they have looser restrictions,'' said Merson, whose division of Toronto- based Rogers Communications owns 46 stations in Canada. ``They'll have all this flexibility, and we're bound by Canadian standards of decency. If they are able to do that much more than we can, it will be a real threat to the business.''
Toronto-based CHUM Ltd., which operates 33 Canadian radio stations, was granted a license to start a digitally broadcast pay-radio service that would offer about 100 channels. The digital service wouldn't reach rural communities, as satellite radio does.
Outlook
The adoption of satellite radio will threaten the ``healthy and good'' outlook for traditional broadcasters, said Andrea Horan of Genuity Capital Markets in Toronto. Canadian radio broadcasters earned C$1.2 billion in 2004, up 19 percent from 2000.
Sirius will start in September, charging between C$12.95 and C$14.95 a month. It would also be available in cars sold this year by Ford Motor Co., DaimlerChrysler AG, and Volvo AB.
The approval means Vukanovich can switch to legal satellite radio. The Windsor, Ontario, resident, who sells goods on EBay Inc. for a living, ordered the parts for his receiver on the Internet and found someone to install it for C$300. He used an address in Detroit, across the river from Windsor, to get a subscription with XM.
``It was pretty tough to get,'' he said.
XM and Sirius both carry Bloomberg Radio.
