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No. of Recommendations: 8
As a SIRI investor and with the recent run-up in SIRI stock prices, I, like a lot of you have become concerned about the viability of the Satellite Radio for the future and when and if it will ever reach profitability.

So, I've embarked on a research program to identify any potential Achilles heel for SAT Radio that would cause my long-term investment strategy to wane. As most of you should know by now, SAT Radio providers XMSR and SIRI are a duopoly. In other words, only these two companies are licensed in the US to provide Satellite Digital Audio Broadcasting (SDAB) services. Our fears for any further market penetration in the US can be laid to rest for the short term. However, SDAB is being strongly implementd by other broadcast service providers in Europe, Asia, Africa, and South America. This is a very strong limiting factor on XMSR and SIRI's ability to move beyond the US and compete in the world markets.

Digital radio is now being provided to the underdeveloped world. A satellite communications company named WorldSpace is the world's first digital satellite radio network. It has number of satellites covering the whole of Asia, Europe, Africa, Australia and The Americas. Major content partners include BBC, NPR, CNN and Bloomberg. All the channels are characterized by advertisement-less high quality programs with near to CD audio quality.

JVC, XM Radio, Hitachi, and Panasonic are the major registered marks selling WorldSpace digital satellite radios. Consumer's radio consists of a satellite receiver, which has to be placed directly under the sky, in a certain Azimuth and elevation (depending upon the geographic location) and a player. Most of the channels are paid, although a few like BBC, CNN and SGH (Sai Global Harmony) are free.

WorldSpace ( http://www.worldspace.com/) has a network of three satellites, including "AfriStar","AsiaStar", and "AmeriStar", to provide digital audio information services to Africa, Asia, and Latin America. AfriStar and AsiaStar are in orbit, and AmeriStar is expected to join them soon.

Each satellite provides three transmission beams that can support 50 channels each, carrying news, music, entertainment, and education, and including a computer multimedia service. Local, regional, and international broadcasters are working with WorldStar to provide services.

Low-cost DAB radio receivers are now available from various Japanese manufacturers, and WorldSpace has worked with Thomson Broadcast to introduce a village communications center known as a Telekiosk to bring communications services to rural areas. The Telekiosks are self-contained and are available as fixed or mobile units.

Global Radio's (based in Luxumborg) satellites will have a total of eight beams. One beam will cover the entire service area, and provide a continental programming base of about 25 channels. Seven spot beams will focus roughly on Spain, France, Germany, Italy (with a three-beam overlap for Switzerland, naturally), Great Britain and Ireland, Scandinavia and Eastern Europe.

With these two SDAB contenders slicing up the rest of the world, SIRI and XMSR will be effectively shut out of the world market even if they launch additional satellites to increase world coverage. In fact, Worldspace programs and transmits ethnic oriented content over XM birds to US subscribers who want to listen to home country programming. Worldspace potentially could expand into the US market by simply making a play on either XM or SIRI.

Simply put, with Worldspace dominance on the rise, XM and SIRI are at risk in the long term (5 to 10 years). This alone will limit my long-term investment strategy in either XM or SIRI.

Disclosure: I own SIRI, but not XMSR and do not own a sat receiver.
Scott
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