As everyone knows by now, whether the proposed Sirius-XM satellite radio merger goes through has turns, in large part, on the definition of the market in which the companies compete.
And it’s no secret that many tech analysts, being (often) forward-looking, recognize that satellite radio’s weakness is due to the competition it faces from other market segments.
But an analyst quoted in a Times column today makes a more interesting point:
“The question they have to ask now is: what problems haven’t been solved in the car?” said Michael Urlocker, a former wireless analyst with UBS Securities who is now the chief executive of The Disruption Group, a Toronto-based consulting company. “The lack of customer sign-ups on a profitable basis should be a sign that trying to create a better iPod than Apple is a losing proposition.”
In other words, satellite radio–today, tomorrow, and forever–is a losing proposition, not a powerful duopoly.
If Sirius and XM join together today, the column explains, the combined company might be able to make a go of it providing mobile video services. But even that strategy faces big competitive risks:
As [XM’s chairman] sees it, satellite radio systems would most likely be able to provide only “a minimal amount of streaming video.” It may be preferable, he said, to simply download video from satellites to in-car hard drives for later viewing.
…
[T]here are limits to what even a combined satellite radio company can do. Satellite systems effectively do not allow two-way transmissions, ruling out services such as e-mail.
And without enormous reinvestment, the systems are not likely to approach the transmission speeds of WiMax, a new wireless technology being developed by Nortel Networks and others that will probably start operating within the year.
Those systems, like cellphone networks, will pass moving users from tower to tower and offer transmission speeds comparable to high-speed, wired connections in homes. Susan Kevorkian, an analyst with IDC, said that the satellite radio connections with automakers would give them a significant advantage over WiMax, at least in the short term.
So the best case scenario for a combined Sirius-XM is slow video downloads to cars, and maybe decent profits in the short term, before being clobbered in a few years by terrestrial cellular technology.
OK, I have to ask: Doesn’t anyone remember what happened to Iridium?!
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.
Comments on this entry are closed.