Digital Radio

[Mark Shneyder <mshbc@bu.edu>]

WASHINGTON, April 2 (Reuter) - Two Washington-area firms  
bid a total of $173 million at a government auction Wednesday 
for the rights to provide a new breed of radio service that 
can be heard coast-to-coast and offers CD-quality reception. 

American Mobile Radio Corp., a unit of American Mobile  
Satellite Corp. of Reston, Va., placed a winning bid of $89.9 
million at a Federal Communications Commission sale 
for one of two licenses to offer digital audio radio. 

Washington-based CD Radio Inc. put down a top bid of $83.3  
million for the other license in a long-delayed -- and 
controversial -- auction limited to four companies. 

Digital radio, expected to be up and running by the latter  
half of 1999, will be beamed via satellite nationwide and will 
allow listeners to tune in anywhere in the country. It will be 
subscription-based and will offer listeners anywhere from 25 
to 50 stations of music, news and other specialised programmes. 

The small satellite antenna need to tune in the broadcasts  
could be installed in cars, trucks and homes. People who drive 
a lot -- or who live in remote areas with few existing radio 
channels -- are considered prime candidates for the new 
service. 

``We believe this is a better way to listen to radio,'' said  
CD Radio Chairman David Margolese. ``What we have is the birth 
of the future of radio.'' 

CD radio expects to begin its service in the second half  
of 1999, offering 50 channels of programming. Most channels 
will be commercial-free and offer music. 

Margolese said non-music channels could carry ads. Such  
programming could include all-news, talk and sports formats. 
He said the cost of the service will probably be $10 or less a 
month, depending on consumer demand. 

To get the service, Margolese said it would cost about  
$150 to add a chip to a new radio with a digital band. 

Lon Levin, vice president at American Mobile Satellite and  
head of the company's radio unit, said his company expects to 
offer 25 to 35 channels of news, sports and music. He expects 
the service to be operational in at least three years. 

The auction occurred only after the FCC settled a  
long-running dispute among its commissioners in early March by 
limiting the auction to the four companies that had applied by 
the end of 1992 to offer digital radio. 

Two commissioners -- Chairman Reed Hundt and Susan Ness --  
favoured opening the sale to any bidder. But in the end, the 
two agreed reluctantly to limit the auction so that the launch 
of digital radio would not be delayed further. 

Hundt warned that closing the auction could cost taxpayers  
``millions of dollars'' in lost revenues because more bidders 
could have generated higher prices. 

Broadcasters worry that the new service will sap existing  
radio stations of listeners and ad revenues. 

``That weakens a station's ability to do local news,  
sports, weather, traffic and public service,'' said a spokesman 
for the National Association of Broadcasters. 

CD Radio's stock surged on news of its auction victory,  
climbing $5.25 to $12.625 in early afternoon Nasdaq trading. 
American Mobile Satellite's stock was up 69 cents to $11.50, 
also on Nasdaq. 

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