FCC OKs 4 bidders for digital radio rights

WASHINGTON — The FCC cleared the way Monday to allow four companies to bid for the rights to beam, via satellite, digital radio signals delivering CD-quality sound.

The decision could lead the way to the first major development in radio since the introduction of FM. But the road ahead is highly uncertain. Not only must the companies secure the rights to the two licenses at auction, but they must all shell out at least another $500 million in order to get their satellites up and running. Each license will allow the owner to provide up to 30 channels of CD-quality music.

In order to receive the Digital Audio Radio Satellite (DARS) signal, consumers will have to buy new radios able to receive the transmission from space.

DARS radios are currently expected to cost at least $200 more than regular radios, but they will provide both FM and AM frequencies in addition to the digital reception. The antennas will be about the size of a silver dollar and may be installed in cars. Monthly subscription rates are expected to start at approximately $10 a month.

The four companies approved by the FCC to participate in the bidding process are: CD-Radio of Washington, American Mobile Satellite Corp. in Reston, Va., Digital Satellite Broadcasting in Seattle and Primosphere in New York.

The broadcasting industry has been working hard for almost a decade to keep DARS on the ground. Broadcasters argue that it will be difficult for radio stations to compete with a company that can reach virtually every consumer in the U.S. However, DARS penetration will be limited by the number of satellite radios and subscribers it signs up in the next century.

“Satellite-delivered radio threatens the thousands of community radio stations which provide local news, weather and sports and have made the U.S. system of broadcasting the envy of the world,” said National Assn. of Broadcasters spokesman Dennis Wharton.

CD-Radio CEO David Margolese says it will be another three years before the first digital radio company is up and running. Margolese emphasized Monday that the business was “highly speculative” and will depend on the development of a niche audience in order to take off. He estimates that his company has spent $20 million over the last seven years to develop the DARS technology. Margolese would not speculate on the price the DARS license will fetch at auction, but he did warn that it could be nothing more than a “license to spend money.”

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