Satellite Radio Who said video killed the radio star? Listen up: XM's digital service is out of this world.
By Peter Lewis

(FORTUNE Magazine) – Before the arrival of cable TV, the skeptics asked, "Who in his right mind would pay to see television?" Before Perrier flowed to these shores, those with parched imaginations scoffed, "Pay for water? Absurd." And now, on the eve of the nationwide introduction of XM Satellite Radio, once again the skeptics are asking, "What kind of idiot would pay $10 a month to listen to radio?"

And to them I answer, "Howdy!"

Times are hard, and asking consumers to pay hundreds of dollars for a special receiver and $120 a year in service fees is bound to generate static. But based on my test ride around Dallas--one of several Southwestern cities where XM's service will make its debut ahead of the national rollout in November--satellite radio is the best thing to happen to car radio since FM emerged some 40 years ago. The sound isn't of CD quality, as the company claims, but it's close enough, definitely better than FM. And the programming--71 music channels, of which 30 are commercial-free, along with 29 news, talk, sports, and entertainment channels--is a vast improvement over the choices in even the most cosmopolitan cities. Beyond the cities or in the cabs of long-haul trucks, satellite radio is heaven-sent.

XM uses two powerful satellites--"Rock" and "Roll," hovering over the East and West coasts--to beam digital signals to special receivers below. Because the signals blanket the continent, any channel can be received clearly and seamlessly as one drives coast to coast, in all but the most remote areas. In our test drive, the signal remained strong as we passed under bridges and through canyons of city buildings. Underground parking garages can thwart reception.

A rival company, Sirius Satellite Radio, plans to offer a similar service by the end of the year for $13 a month. The XM and Sirius receivers--which will also receive traditional AM and FM broadcasts--are not compatible, and the programming will differ as well.

Both XM and Sirius have lined up partners in the automotive, consumer electronics, and media industries. Cadillac Seville and DeVille models will offer optional factory-installed XM receivers this fall, with at least 20 more General Motors models following next year. Sirius will be offered by BMW, Mercedes, Ford, Jaguar, Jeep, and Volvo. Porsche will let drivers choose.

More than a dozen radio manufacturers (including Pioneer, Alpine, and Delphi-Delco) plan to sell either Sirius or XM radios for "after market" installation, replacing current dashboard radios. Typically consisting of the dashboard radio, a trunk-mounted receiver, and a roof-mounted antenna, they are expected to cost $250 to $850, not counting installation or service fees. Although install-it-yourself satellite radio kits will be available, for most people going to a specialist is a wiser choice.

Receivers will vary by maker and model, but some will have a digital display that shows not just the channel number but--at last!--the name of the artist and the song title as well.

Sony has a particularly interesting receiver, a $300 unit that works both in the car and in the home. In the car it draws power from the cigarette lighter and connects to the car's speakers through a cassette adapter. In the home, with a $150 adapter kit, it attaches to a stereo unit. Because each satellite radio system contains a special chip set that must be activated and linked to the customer's account, the Sony is the only model thus far that allows users to listen to satellite radio at home and in the car without paying twice.

It doesn't matter how good the signal is if there's nothing interesting to hear. XM's 100 channels are divided into "neighborhoods," including 15 pop music channels, ten channels of rock, six channels of jazz and blues, six of country and bluegrass, seven hip-hop and soul channels, six varieties of world music, five Latin channels, four classical, and even individual channels for music from each decade from the '40s to the '90s. There are a dozen news channels, five sports channels, three comedy channels, two kids' channels, and a bunch of special-interest channels spanning African-American topics to Christian talk radio to a channel especially for truckers.

Some news services will overlap the two rivals, like CNN, ESPN, Bloomberg, CNBC, the BBC, and the Weather Channel. XM boasts exclusive deals with C/NET and Nascar; Sirius counters with NPR, National Lampoon, and the Hispanic Radio Network.

The appeal of satellite radio became obvious to me while driving in southwestern Texas, three hours from the nearest Wal-Mart. The truck radio coughed up a few scratchy Mexican AM stations and a lonesome pirate FM station. Out there, 100-channel radio has obvious appeal. "It'll sell like hotcakes," said John Karges, a biologist for the Nature Conservancy in Alpine, Texas, which has one twangy AM-FM station, making it the largest media center for 150 miles.

Whether it will sell in the city remains to be seen. XM has spent more than a billion dollars to launch its system, and to succeed, it needs more than a handful of cowboys, truckers, and Caddy owners. For this listener, however, satellite radio is music to my ears. Beam me up.

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