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In January 2006, one of the most popular radio hosts of the modern era, Howard Stern, moved from free broadcast radio to pay satellite radio. In case you haven’t heard, Stern’s show is a five-hour gabfest featuring comedy bits, tongue-and-cheek interviews with celebrities, porn stars and women who are readily coaxed into taking off their clothes in the studio. Stern’s new boss at SIRIUS Satellite Radio is Mel Karmazin, who was his old boss at Infinity, a company owned by Viacom. SIRIUS will pay the “shock jock” $500 million over five years in the hope that Stern will lure many of his 12 million listeners to pay radio and turn SIRIUS in to a viable competitor after tens of millions of dollars in losses.

But according to Stern the move is not about the money, "It's about ideas," he says. "This is a free-speech issue. I represent everything they can't do on regular radio. Corporate radio, the FCC and the religious right are taking away our free speech and it's time for a change. That's why satellite radio will succeed."

Stern is not the only shock jock moving to satellite. XM, the other satellite radio service, has hired Opie and Anthony, the shock jock duo who were fired by Infinity for broadcasting a couple having sex in a church. In addition to raunchy radio hosts, satellite radio offers a hundred or so commercial-free channels featuring major league sports, a wide range of music and other celebrity hosts such as Bob Edwards (formerly of NPR) and Martha Stewart. "I believe that America deserves a choice in the content that it wants to receive," said Karmazin.

So just what is satellite radio? Why can it air Opie and Stern without risk of being fined by the FCC?

First, for many Americans satellite radio is not delivered to them directly via satellite. It is true that signals are bounced off satellites (SIRIUS has a three-satellite system, XM has a two-satellite system), but “satellite” radio is made possible by local broadcast transmitters, what the FCC calls “repeaters.” According to the National Association of Broadcasters, SIRIUS has 1,150 earth-based broadcast repeaters, and XM has 778. In other words, this is a national system that combines satellite and earth-based transmitters—a system not entirely different than what Infinity or Clear Channel used to broadcast The Howard Stern Show from New York City to Johnnie’s disgruntled parents home in Houston, Texas.

But the FCC does not consider Satellite Digital Audio Radio Service (SDARS) a broadcast service, and so SDARS operators are not subject to broadcast regulations, such as the prohibitions against indecent speech.

Although SDARS systems do utilize localized terrestrial transmitters to amplify their signal and fill gaps in satellite coverage, the authority for use of these terrestrial repeater networks is temporary, and SDARS operators are prohibited from originating programming at their terrestrial repeaters.

The FCC does not mean by this that broadcast licenses are, by contrast, permanent. Nor does the FCC mean that the local XM and SIRIUS transmitters are prohibited from carrying local programming. Indeed, XM and SIRIUS carry local weather and traffic reports in major markets. It’s just that those reports must be made available nationally. So while SIRIUS can boast offering “original programming — not recycled radio,” the FCC rules are designed to discourage SDARS operators from offering local communities local programming, such as an original report on a local town meeting. So while it is true that Stern can utter obscenities on XM, it is not true that the FCC does not regulate speech on satellite radio.

The rationale behind the FCC’s strangely anti-democratic disincentive against local speech is to protect the core revenue base of broadcast radio – local advertising. And local advertising is sold because local broadcast stations target local audiences. But the combination of radio consolidation and competition for local viewers from national services like satellite radio create disincentives for local radio stations to produce local programming to attract local advertisers. Well-produced national satellite-syndicated news, weather and entertainment programs are much cheaper to broadcast than original local programs, such as a local town meeting. And, despite what the broadcast industry calls onerous public interest obligations, the increasing syndication of national programming such as Rush Limbaugh or Air America on local broadcast radio is also fine with the FCC.

As you might have guessed, it didn’t take long for broadcast radio to find the silver lining in this confusion of “deregulation.” In the fall of 2005, the Center for Digital Media Freedom at the Progress and Freedom Foundation offered up for lunch Mark Mays, the President and Chief Executive Officer of Clear Channel Communications, the owner or programmer of roughly 1,200 radio stations nationwide. According to Mays, eight stations in a market are not enough: “free radio is struggling. The cost of competing with new technologies and increased listener choice is staggering, and profits are down. As it did in 1996, free radio again needs Congress to act. Specifically, free radio needs Congress to relax outdated restrictions on our operations.” (PDF)

Mays may get his wish. Apparently while Congress was not looking, the FCC switched from the long-standing goal of promoting vibrant local civic programming to now favor national programming variety controlled by a few owners.

It took the jolt of Hurricane Katrina to wake the FCC up to the fact that satellite radio was not simply a national entertainment appliance. In December of 2005 the FCC issued another speech requirement for satellite radio—XM and SIRIUS now must transmit national-level Emergency Alert System messages on all channels. Transmitting local or regional warnings, however, is not required.

Mark Lloyd is a Senior Fellow at the Center for American Progress

After this article was originally published, we received the following correction:

Though SIRIUS requested from the FCC permission to deploy a large number of "potential" or "possible" repeaters that we might at some point wish to deploy, at present SIRIUS has only installed 139 repeaters.

Jim Collins
Vice President, Corporate Communications
Sirius Satellite Radio

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