Attorneys for Sirius and XM satellite radio took off the gloves on Friday, sending the Federal Communications Commission a twenty-page screed against the "Consumer Coalition for Competition in Satellite Radio" (C3SR) that all but calls the group a pack of liars.

"As the Commission is aware, the Consumer Coalition for Competition in Satellite Radio in actuality is a handful of law students, funded by the National Association of Broadcasters," Sirius/XM's Friday statement warns. Attorneys for the two satellite radio companies call C3SR the "NAB Coalition" throughout their filing and describe the group's charges as "just another salvo in the National Association of Broadcasters' long campaign to prevent the merger of Sirius and XM and forestall the creation of a stronger competitor for terrestrial radio." C3SR's accusations are "replete with misstatements of law and false allegations," XM and Sirius say.

Actually, the two merger candidates don't have any evidence that C3SR is financially backed by the NAB—although it certainly does appear to be funded by some shady, deep pocketed entity that desperately wants the proposed merger to die, die, die. Sirius/XM's "evidence" for the NAB funding charge comes from a February 2007 piece in the Corporate Crime Reporter that demonstrates links to the NAB, but no solid trail to money.

But Friday's Sirius/XM filing responds more fundamentally to the widely-wielded charge that Sirius and XM broke a promise to the FCC, a pledge to build interoperable satellite radio receivers which can access both services. Whether you think this is true or not may boil down to your interpretation of the word "design."

Not another inconvenient truth?

C3SR insists that Sirius and XM blew off "the interoperable receiver requirements in each company's license," as the group put it in a May 27th filing. They deceived the Commission and the public, C3SR charges, and should be "disgorged of their unjust enrichment" to the tune of millions of dollars.

Did Sirius and XM willfully ignore the FCC's interoperability dictates regarding their licenses? True enough, the FCC's 1997 Order authorizing the satellite Digital Audio Radio satellite Service (DARS) declared that all licensees "are required to design a receiver which would accommodate all satellite DARS providers [italics added]." From this language, C3SR extrapolates that the FCC's "clear intent in imposing the condition was to make interoperable receivers commercially available to satellite radio consumers, a fact that the Merger Parties [XM and Sirius] appear to have understood."

But Sirius and XM don't see it that way. They insist that the agency required that they design an interoperable system, but neither went any further. "The NAB Coalition blatantly ignores the inconvenient truth," Sirius and XM write, borrowing a little flourish from our beloved ex-Vice President. "In its implementing rules for the satellite radio service, the FCC required all satellite radio licensees to develop designs for an interoperable radio and to certify that they had done so. Sirius and XM have fully complied with this requirement."

Sirius/XM's lawyers say that the firms have not taken the "ultimate step of bringing interoperable radios to market" because (take a deep breath here) "it would not make economic sense for them to do so, since they ordinarily subsidize the production of their radios and would not be assured of recouping these subsidies for interoperable radios through subscription fees."

In other words, we designed the interoperable radios; we just don't want to manufacture them because that would cost us money.

The flexibility you need to do nothing

Who is right here? Unfortunately, it appears that the legalistic answer is everyone, thanks to the FCC's bumbling original March 3rd, 1997 Order establishing a satellite radio service. When the FCC first issued a Notice of Proposed Rulemaking for DARS, the agency explained (take an even deeper breath)...

"We indicated our concern that licensing diverse satellite DARS systems could increase the cost of manufacturing a receiver that is compatible with all competing satellite DARS technologies and terrestrial formats. We therefore proposed that each applicant demonstrate that its satellite DARS system is capable of remotely tuning its individual mobile, fixed, and/or portable receivers across the allocated bandwidth 2310-2360 MHz. This rule would have been necessary if we were to license more than one band segment to a particular satellite DARS licensee, (whether as an interim assignment or in the event that a license is dismissed and the spectrum is re-divided pro-rata) but in view of our conclusion to license only two satellite DARS systems through competitive bidding, and not to permit interim frequency assignments, such a provision is no longer required. We adopt, however, the principle behind our proposed rule that satellite DARS licensees are required to design a receiver which would accommodate all satellite DARS providers. By promoting receiver inter-operability for satellite DARS, we are encouraging consumer investment in satellite DARS equipment and creating the economies of scale necessary to make satellite DARS receiving equipment affordable. This rule also will promote competition by reducing transaction costs and enhancing consumers' ability to switch between competing DARS providers. We decline to adopt a specific standard for satellite DARS receiver designs, though. This will allow licensees the flexibility to determine the most cost effective way to meet our receiver-interoperability requirements."

I added italics to those two passages. After stumbling through this paragraph about three or four times, you might well ask why, if the FCC declined to require tuning capability across the 2310-2360MHz bandwidth, it still wanted to enhance "consumers' ability to switch between competing DARS providers"? How were consumers supposed to do this without accessing the whole satellite radio bandwidth? And how do you adopt the principle of interoperability without the rule?

It is uncertain (at least to me) whether the FCC's original Order actually requires satellite radio receiver interoperability in practice as well as design. But clearly the agency created language that any competent prevaricator can tune to his or her own purposes. At this point, a year and a half into this proceeding, all productive arguments for and against the proposed merger of XM and Sirius satellite radio have been made. All that is left to do, short of the FCC actually deciding the question, is for adversaries to parse vocabulary.