NAB Cites Noncompliant Repeaters as XM-Sirius Merger Concern

Noncompliant repeaters operated by XM and Sirius are being raised as a merger issue on the Hill and by NAB. The problem has plagued XM in particular, which acknowledged last year operating 240 of its 800 or so terrestrial repeaters outside FCC rules. Sirius says 11 of its repeaters violated the rules and were turned off.

The FCC’s investigation of XM’s noncompliant repeaters is likely to be completed within 2 months, before the FCC decides on the merger, an industry source said. The source noted that XM had permission to build some 1,200 repeaters but built only about 800. Only a handful were found significantly from regulatory limits and many of the variances were “de minimis” -- for example, a tower 10 feet too high or too low. XM turned down repeaters found to be overpowered after problems were uncovered and reported by XM to the FCC.

“By their own admission, XM and Sirius have violated FCC rules with impunity in regards to where they placed their vast terrestrial repeater network,” NAB spokesman Dennis Wharton said Fri. “Given their pattern and practice of not playing by the rules, these companies should not be rewarded with a government-sanctioned monopoly.” NAB last week filed a letter in the XM-Sirius merger docket at the FCC, citing a Bloomberg News report on noncompliant repeaters and asking the Commission to consider the companies’ “unlawful repeater networks” as it reviews their merger application.

The FCC could consider the repeater violations in its merger review, said Paul Gallant, an analyst with Stanford Washington Research. “The Commission has made it clear that merger reviews include prior rule violations, because it implicates a company’s fitness to hold a license,” he said.

In a Feb. SEC filing, XM acknowledged a Feb. 15 FCC inquiry about repeater violations. “We are seeking authority to continue to operate our entire repeater network despite the fact that the characteristics of certain repeaters, as built, differ from the submitted data in the original [special temporary authority] granted for our repeater network,” XM said. XM acknowledged that the proceeding could “result in the imposition of financial penalties against XM or adverse changes to our repeater network resulting from having repeaters turned off or otherwise modified in a manner that would reduce service quality in the affected areas.”

The repeater issue is getting attention on Capitol Hill. A spokeswoman for House Telecom Subcommittee Chmn. Markey (D-Mass.), confirmed Fri. that he has concerns about the noncompliant repeaters in relation to the merger. Sen. McCaskill (D-Mo.) asked Sirius CEO Mel Karmazin about noncompliant repeaters during an April 17 hearing on the merger and suggested that the repeater issue raised questions about XM-Sirius assurances prices would remain competitive after the merger closes. “In St. Louis, 9 of the 11 repeaters exhibit some kind of variance with FCC rules,” she said. “You have clearly ignored FCC requirements on repeaters in the way you have rolled them out across the nation.”

Karmazin replied that Sirius had 11 terrestrial repeaters found to violate FCC rules. “The day I found out about it I turned them off because we believe in following the rules,” he said. He didn’t comment on XM repeaters.