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XM, Sirius: We're Not Required To Make Interoperable Receivers
WASHINGTON -- June 10, 2008: Attorneys for XM Satellite Radio and Sirius Satellite Radio have fired back at the Consumer Coalition for Competition in Satellite Radio, which has twice demanded FCC hearings on the proposed XM-Sirius merger on the grounds that documents submitted by Sirius concerning interoperable receivers "call[ed] into question the truthfulness and candor of both Sirius and XM with respect to their dealings with the commission as licensees and during this proceeding."
The letter, signed on behalf of Sirius by Wiley Rein attorney Robert Pettit and on behalf of XM by Latham & Watkins' Gary Epstein, says the "NAB Coalition" -- that's how C3SR is referred to throughout the letter, although it's never been shown definitively that the NAB is behind the group -- is ignoring an "inconvenient truth": that the FCC required XM and Sirius, as satellite licensees, only to design an interoperable radio and certify that they had done so -- and says C3SR "relies upon unsupported assertions as to the 'spirit' and 'intent'" of the rules when it argues otherwise.
The "NAB Coalition," says the letter, claims "the applicable rules required XM and Sirius to produce and market an interoperable radio, when in fact the rules required only that the companies develop designs for such a radio -- a requirement they fully met." The letter continues, "The [FCC] left the decision to manufacture, import, distribute, deploy, market, and sell interoperable receivers to the private sector."
The letter says, in fact, that XM and Sirius have gone well beyond their mandate to design a receiver and have even made prototypes. But, it continues, "The companies have not taken the ultimate step of bringing interoperable radios to market -- a step that was not mandated by the commission -- because it would not make economic sense for them to do so, since they ordinarily subsidize the production of their radios and would not be assured of recouping these subsidies for interoperable radios through subscription fees."
In a portion of the letter that is heavily redacted, the attorneys make the case that the documents C3SR relied on in making its allegations were prepared by an outside engineer and were never intended as a business or marketing plan for XM or Sirius. The letter says, "At most, the documents cited by the NAB Coalition reveal the aspirations of one person, employed by a joint venture charged with promoting interoperable radios, who was not engaged to evaluate the practical distribution and sale of interoperable radios, and whose directive was to develop interoperable technologies."
The XM-Sirius letter is in response to C3SR's May 27 filing asking for a hearing -- not the tougher filing made by the group last week that, in addition to reiterating the hearing request, demanded that XM and Sirius disgorge millions in "ill-gotten gains" and fire officers, directors, and employees who knew of alleged wrongdoing.
The XM-Sirius letter says C3SR's May 27 filing "is replete with misstatements of law and false allegations regarding the purpose and production of certain highly confidential documents."
Though both C3SR filings were redacted as to the specifics, the documents the group questions have to do with interoperable receivers, and XM's and Sirius' failure to make them available. The letter also says the group's May 27 filing fell well short of establishing questions of fact that would call for an FCC hearing.
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