• by Erik Sass  @eriksass1, August 14, 2006

In another blow for XM Satellite Radio, the broadcaster announced last week that the Federal Communications Commission (FCC) is asking for more electronic "emissions" data on a series of new radios the company planned to introduce this summer. Before receiving FCC approval, all electronic devices must be shown not to interfere with a variety of electronic communications. At the very least, the FCC's request means roll-out of the new sets will be delayed even further--and may be nixed altogether. After the announcement, XM's shares fell 36 cents to $10.82 on the Nasdaq.

The FCC said in April that XM's Delphi XM SKYFi2 model was not in compliance with emissions standards, and now is also seeking information about XM's Sportscaster, Roady XT, MyFi, AirWare, Tao and Roady 2 models, according to a letter delivered to the company on August 7th. XM said it is working with the FCC to find "remedies... to correct the situation," but with each delay its situation becomes more precarious. The FCC has the power to change technical standards at any time, meaning that new rules could make XM's radios non-compliant in ways that are harder to remedy.

This damaging news comes on the heels of a second-quarter earnings announcement on July 27th in which XM cut its year-end subscription forecast from 8.5 million to a range between 7.7 and 8.2 million. This is the second reduction in XM's forecasted subscription base, which began at 9 million in March and was reduced to 8.5 in May. The service currently has about 7 million subscribers.

XM is also the subject of a massive lawsuit from the Recording Industry Association of America (RIAA), which alleges that a new XM portable player allows consumer piracy. However, the prospects of the RIAA lawsuit against XM are unclear, according to Fred von Lohmann, an attorney with the Electronic Frontier Foundation in San Francisco. Lohmann said the RIAA's case is "a stretch," especially in light of the Audio Home Recording Act. "As far as I know, every one of these devices was designed to conform to the AHRA," Lohmann said.