Earthbound: XM Satellite Snafu May Impact Merger Talks

XM Satellite Radio subscribers suffered widespread service outages for the second day on Tuesday, after a software glitch temporarily put one of the company's four satellites out of service. The company eventually fixed the problem, but the technical screw-up is a reminder that XM's satellite broadcasts, while generally reliable, are vulnerable to any problems affecting the space platforms--there is no backup option.

The problem is especially pressing for XM, whose first two satellites experienced such severe technical mishaps that the company now (optimistically) terms them "spares." When the software upload problems began Monday, XM was therefore left with one functioning satellite. Because the satellites are in fixed or geostationary orbits, the service outage primarily affected subscribers in the eastern half of the U.S. and Canada.

The satellite software problems have great potential impact: They may raise questions about the advisability and timing of the company's proposed merger with Sirius Satellite Radio--an erstwhile competitor and now a potential owner.



The merger would mostly affect the two companies' earthbound operations, including marketing, sales and customer service. However, executives from both sides, under pressure from legislators to demonstrate benefit to consumers, have also talked about merging broadcast capabilities to create an "a la carte" menu that draws from both companies' programming. While a potential union would call for the production of "interoperable" radio receivers, it would likely require substantial software modifications to the satellites themselves. More generally, the merging of two separate engineering teams could also result in confusion and error.

The service outage comes on top of XM's recent decision to suspend shock jocks Opie and Anthony for 30 days, following obscene comments about Laura Bush, Condoleezza Rice and the Queen of England. Subscribers, who pay $13 a month for the service, criticized the suspension, since XM isn't bound by the same FCC indecency rules as terrestrial radio.

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