The President's Plan to Destroy Sirius XM

President Obama is out to destroy Sirius XM Radio (Nasdaq: SIRI  ) .

He won't say that, of course. He very likely doesn't know that he has such machinations. Rather, he has a plan to increase broadband Internet access, at a cost of $7.2 billion, according to the text of the $787 billion stimulus plan.

That, Fool, is seriously bad news for Sirius XM. Here's why.

Gloomy tidings for Sirius XM
First, let's talk about the stimulus plan. The bill has set aside $7.2 billion to expand broadband Internet access nationally, but to rural areas especially. Among those expected to benefit are local carriers who operate in more remote areas of the country, including CenturyTel, Windstream (NYSE: WIN  ) , and Frontier Communications.

What's missing from the media coverage of this expansion is any discussion of the broader mandate and what it might mean. "As a country, we have ensured that every American has access to telephone service and electricity, regardless of economic status, and I will do likewise for broadband Internet access," candidate Obama said.

Think of the implications of that logic. Rural connectivity is tough to achieve under any circumstances -- ask Congress why it pushed back the deadline for converting to digital TV -- but it's nearly impossible to achieve via typical wireline technology. Obama must expect the bulk of the $7.2 billion to be spent on wireless connectivity, perhaps including emerging innovations such as WiMAX and its in-development peer, Long-Term Evolution (LTE).

And that stinks for Sirius XM. Surely content is a key advantage of Sirius XM, but so is its omnipresent service. Go anywhere and your programming, broadcast from space, goes with you. What happens when WiMAX and LTE make such connectivity irrelevant? When great programming is available anywhere you have a connection to the Web?

That day is coming. WiMAX and LTE are what you might call fourth-generation, or 4G, networks. Definitions for "4G" vary, but to me, it's a convergent network that uses the Internet to deliver voice, data, and streamed media at very high speeds, wirelessly.

Thus, 4G could describe both WiMAX and LTE. And both technologies will leverage at least a portion of the infrastructure we've already built nationally for wireless telephony. Sprint Nextel (NYSE: S  ) is working on retrofitting its cell towers with equipment supplied by its WiMAX partner, Clearwire (Nasdaq: CLWR  ) . Baltimore has the service today, which BusinessWeek tech columnist Steve Wildstrom tested late last year.

His conclusion? "While someone else drove me around Baltimore's Fells Point neighborhood, I was able to watch Hulu.com's broadcast-quality video with no freezes or pauses to wait for data," Wildstrom wrote. Talk about impressive.

More bad news
Clearwire also has backing from Google (Nasdaq: GOOG  ) and Intel (Nasdaq: INTC  ) , both of which stand to profit if WiMAX takes hold before AT&T (NYSE: T  ) and its peers can make carrier-friendly LTE a viable alternative.

The rub? There's no shortage of consumers for these stimulus funds. Everyone's hungry, and deep-pocketed investors want to see a national rollout of wireless broadband as soon as possible. They want what the president wants.

Now consider Sirius XM. The carrying cost of its property and equipment -- the bulk of which is tied up in space junk -- was $1.38 billion before $573 million in accumulated depreciation as of the end of 2007. (The company has yet to file a 10-K annual report for 2008.)

Today, investors value Sirius XM at roughly $450 million. Assuming that's due to its deals with Howard Stern and other premium content providers, Sirius XM's satellites, once worthy of taking on billions in debt, are now worth less than zero.

And why not? Obama is spending billions to make sure that we won't need them.

Intel and Sprint Nextel are Motley Fool Inside Value picks. Google is a Rule Breakers recommendation. Windstream is an Income Investor pick. Try any of these Foolish services free for 30 days. There's no obligation to subscribe.

Tim had stock and options positions in Google at the time of publication. The Fool owns shares of and has covered calls on Intel. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy is out to destroy Wall Street's idea of disclosure.


Read/Post Comments (41) | Recommend This Article (22)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 04, 2009, at 2:11 PM, XMFBabs wrote:

    OK, maybe I am COMPLETELY out in left field here, but I am going on two assumptions:

    1) The majority of Sirius/XM users listen in their vehicles.

    2) The only radio options in a vehicle are satellite radio and terrestrial radio.

    Sooooo ... how will better Internet access affect Sirius/XM's customer base. Am I missing something here?

  • Report this Comment On March 04, 2009, at 2:18 PM, TMFMileHigh wrote:

    >>>Sooooo ... how will better Internet access affect Sirius/XM's customer base. Am I missing something here?

    No, you're not missing anything. The point is that wireless broadband is being built out like the cell network we use daily. Once it's in place, wireless broadband could be as pervasive as your cellular service. Will you really need a satellite then?

    I agree that this service isn't coming soon -- but it would have taken a lot longer to create without $7.2 billion in Federal help.

    FWIW and Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On March 04, 2009, at 2:22 PM, IdahoAve wrote:

    internet radio guys, yes internet radio in your car

    I listen to the Adam Carolla Podcast every day on the way into work.

    Be assured XM radio is Effed.

    Id short it if I weren't such a coward

  • Report this Comment On March 04, 2009, at 2:34 PM, ORIGINALMAN2000 wrote:

    This theory has holes in it. In order to have coast to coast coverage of WIMAX and LTE technologies will require major investment in Cell towers in remote areas

    Sirius has satellites in the air and are broadcasting TV stream current under the "back seat TV offering.

  • Report this Comment On March 04, 2009, at 2:44 PM, masteruniverse wrote:

    and by when do you think this is practically going to happen? by the time when Sirius XM would have already been profitable (a lots of may be.. there). but many years to go, SiriusXM has enough time.. Technically all they need is one profitable quarter and from there is journey upward... Their business is into streaming..and i believe, streaming through AIR and WIMAX should not be too different..matter of few years before they'll grab that technology and take it other level...all these..assuming they survived the monetary mess they are into now...

  • Report this Comment On March 04, 2009, at 2:59 PM, rango85639 wrote:

    Its the content. To pay for the content you need the subscriptions to pay the cost. If you want MLB or NFL or NBA or NASCAR you have to pay for it. Based on your thoughts all these sports would have put ESPN out of business. Easy access on the web. Wrong. Same for music if you play it you have to pay for it. Finally the one competitive situation that SIRI can compete with is a goverment program. We will all be dead by the time the goverment get its done.

  • Report this Comment On March 04, 2009, at 3:06 PM, Skysclear wrote:

    Beyers..!!..?

    Do you think that readers are so naive, or ignorant as

    to NOT KNOW.. Your Blog is Conjecture?

    That NOT One thing you wrote about from the viewpoint of the administration is REAL?

    It is a TWIST.. a simple turn of what was brought to public advice,, NOT Actual Turn of EVENTUAL FACT!!

    ....

    In the future, learn how to report. May i suggest, "Who, What, Where, When..and WHY!'..

    Beyond that, you are not Qualified!

  • Report this Comment On March 04, 2009, at 3:08 PM, mediaconsultant wrote:

    I don't see how this should impact the market value of SIRI at this time. Sirius/XM is a subscription service whose value is in the content provided. Just because there is another distribution channel available does not mean that people will no longer subscribe. It's like saying that people will stop watching TV because they can go to the movies. At some point SIRI will start to use WiFi as a distribution channel which will change their model a little, but it's still about the content. I can only surmise that this article is an attempt to undermine the stock at it's current value which is pretty disgusting.

  • Report this Comment On March 04, 2009, at 3:10 PM, alancwray wrote:

    Here we go again.....I have been in and out of these stocks since '02, and have heard all of this crap before "HD Radio will spell the end of Sirius and XM"... Blah Blah Blah. The only thing that will kill the company is it's management. Content and range is king and until you can get all of this without having to be in an area that has it, they're fine. And by then the video capability of the Co. will be it's main driver........

  • Report this Comment On March 04, 2009, at 3:14 PM, buzzltyr wrote:

    lets see, a family with three drivers all getting unlimited text phones is about 200 per month, or we could get sirius with premium content for $13.

    Newsflash WIFI is not free, it is a very expensive network to build and maintain, much more than satellites. WIFI antennae sites pay rent, every month, all of them, that is why they do not give you phones with unlimited data for $13 per month

  • Report this Comment On March 04, 2009, at 3:14 PM, sassali wrote:

    Only an Idiot would right a freak show story like that. Get real Brother Tim.

  • Report this Comment On March 04, 2009, at 3:25 PM, buzzltyr wrote:

    wouldn't it be nice if one day Motley Fool decided to write an article about sirius and actually took 15 minutes to talk to the car industry people, to get real opinions instead of just making up tall tales. Google FORD, they should not be hard to find. There are local dealers and Ford execs who must know why they keep upping the installtion rates of satellite radio.

  • Report this Comment On March 04, 2009, at 3:34 PM, SophiaLloyd wrote:

    RIDICULOUS story. Terrestrial broadband in a car would meet interference all the time--it cannot stream content to a moving vehicle, unless you're willing to have your audio cutting out all the time. Only with a satellite in the sky can you assure a reasonably uninterrupted data stream because contact can be kept with the data source, the satellite. The exception to this is, of course, when going through a tunnel. Gosh, the efforts to trash Sirius are really getting bold now--"The President's Plan to Destroy Sirius/XM." Wow, it's really getting comic.

  • Report this Comment On March 04, 2009, at 3:37 PM, TMFMileHigh wrote:

    'Afternoon Fools,

    Thanks for all the comments -- yes, *all* of them -- I do appreciate that you've taken the time to write.

    A very quick follow-up and then I'll let the thread continue. I do not (and did not) suggest that these wireless technologies threaten the existence of Sirius XM as an entity. Rather, I believe that these technologies will ultimately force Sirius XM to release its satellite shackles and get comfortable with being valued as a software and content business.

    Thanks again and Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On March 04, 2009, at 3:39 PM, TMFMileHigh wrote:

    Hello SophiaLloyd,

    >>Terrestrial broadband in a car would meet interference all the time--it cannot stream content to a moving vehicle, unless you're willing to have your audio cutting out all the time.

    Not true. BusinessWeek already proved it by streaming Hulu live via wireless broadband while driving through Clearwire's Baltimore network.

    FYI and FWIW,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On March 04, 2009, at 3:44 PM, buzzltyr wrote:

    Tim, did you ask the wireless people if they have capcity for all the cars on the road to be running radio over their system. The answer is no they don't. Satellite works in a car because there is no other way to deliver such cheap nationwide coverage.

  • Report this Comment On March 04, 2009, at 4:08 PM, wtfdidyousay wrote:

    are you kidding? you obviously ran out of good ideas and decided to write this. have you actually LISTENED to satellite radio?? do you understand the concept of CONTENT? even if the signals could reach as expansively as satellite, they HAVE NO CONTENT....

    try to THINK next time before putting pen to paper.....

    thanks.

  • Report this Comment On March 04, 2009, at 4:48 PM, Cool700 wrote:

    IS MOTLEY FOOL RETARDED? WiFi? LET ME GUESS THERE WILL BE A WiFi CONNECTION ON EVERY BLOCK! HOW FAR CAN THE TRUTH BE STRETCHED?

    WITH WiFi you can only drive a block and lose a connection or even less!!

    With SIRIUS XM you can drive across country listen to the same channel if you desire, never lose a connection while not having to listen to commercials!

    SIRIUS XM's sound quality is better than AM/FM as well.

  • Report this Comment On March 04, 2009, at 4:49 PM, Cool700 wrote:

    I also have to add that SIRIUS XM also can be connected by WiFi so what was the point of your article?????

  • Report this Comment On March 04, 2009, at 4:58 PM, temp2290 wrote:

    From a technical standpoint (electrical engineer here), the idea that satellite radio will be trumped by new technologies anytime soon is extremely farfetched.

    What others have said is very true. There are many things that Sirius/XM has going for it: seemless converage, content, and price. Seemless coverage meaning that you can get it from NYC to the most desolate grassland in Wyoming. Wimax and those technologies simply will not have this kind of coverage; I imagine it will have many dead spots/ less than stellar coverage that could interrupt streaming. Their website says 31 miles of range. Yeah, not gonna cut it in Wyoming unless you have a massive, massive infrastructure overhaul (even more massive than Obamas).

    Secondly, the content. Nothing can beat all those licenses for sports/premier talk radio. You can even make the claim that, above all else, Sirius subscribers want that content more than anything they can find on the internet (I certainly do, you can't find live streaming NBA games legally on the net).

    Thirdly, the price. You really can't beat $13 a month; I pay $40 for broadband internet a month so I'd expect Wimax to be even more expensive.

  • Report this Comment On March 04, 2009, at 5:03 PM, LBwireless wrote:

    I have a life subscription with Sirius/XM and think its a secure deal Here's why concerns of 4G dominance in the Sirius/XM market are unfounded.

    There are vast expanses of the country where even current cell service is not available from carriers, and these areas are traversed by all sorts of roads. One day there may be mobile 4G service to these areas, but that will be many years away, if ever. If you desire Sirius-XM type content today, and you drive beyond those metro areas slated to have WiMax and LTE deployment, then your prospects of service will be nil. Outside of urban areas, fuggedaboutit! The great thing about Sirius/XM service is that I can hop in my car and go anywhere and not worry about whether I am in the correct service area. Just not possible today or in the foreseeable future with terrestrial wireless!

    Furthermore, I don't think you are going to see CLWR or anyone else rushing to replicate the Sirius/XM content network, but there's nothing to prevent Sirius/XM to contract to operate a parallel transport stream for CLWR, etc. if such demand develops. After all, they have the sunk cost. But, where will the bandwidth come from for all this streaming? Nope, don't think Sirius/XM has to worry!

  • Report this Comment On March 04, 2009, at 5:18 PM, billis77 wrote:

    After this article, I have officially read them all. I had to honestly stop laughing in order to write this...guys, we have reached the end of the internet, and the president is going to kill satellite radio that 19 million people enjoy everyday.

    Have we forgotten that pilots ALSO use Sirius in the air? Good luck at 40k feet getting what this guy is talking about.

    Space "junk"? This officially made me realize that he just wants to doom this stock by grabbing at every little thread. Hey, I'll take that space "junk" in a heart beat over flipping towers.

  • Report this Comment On March 04, 2009, at 6:13 PM, ibEddy wrote:

    Talk, talk, too much talk is this you Hamlet? So Bill to you really think that there is magic in the satellite beam? If Mel replaced your XM satellite radio with a XM Wi-Fi radio, you could tell? Moreover, I guess you also think that Mel doesn’t have a Wi-Fi radio on paper or even ready to ship?

    Ed

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  • Report this Comment On March 04, 2009, at 6:15 PM, JTMotlagh wrote:

    Satellite is the best way to send a signal anywhere

    that's why all Millitary, Executives , and ect. have one somewhere. this artical is B.S. and the way the economy is going it really makes me mad that this fool is scaring the investor .

    Why don't you write an artical on how the obama is flushing Capitalism down the toilet and making us all socialist and Satellite radio will be the only non-corrupted form of comunication

  • Report this Comment On March 04, 2009, at 6:16 PM, neogn8 wrote:

    Obviously this writer is a Republican and not a big fan of President Obama! He must not like SiriusXm as well. How could someone write such an outlandish story with no backbone proof that by making the internet more accessible would spell doom to SiriusXm. Does he not know that Sirius can service other industries rather than music. They are in talk with the same government that "supposedly" out to "destroy" them on delivering some form of new technology. So please, stop the propaganda and report something with validity.

  • Report this Comment On March 04, 2009, at 6:19 PM, buzzltyr wrote:

    One more imprtant thing we want to point out. New cars are bought by people over 35. People over 35 like to push a button and get a result, we do not want to fiddle with searches to find a station. Turn on the radio and it works in 2 seconds, change the channel with a push of a buttonm, is there any internet station that can do that.

  • Report this Comment On March 04, 2009, at 9:19 PM, alittlebozo wrote:

    John Malone,wild blue,dtv and siri Keep an eye on Malone he is up to something.He will make you $

  • Report this Comment On March 05, 2009, at 1:30 AM, Langer67 wrote:

    It's about the content stupid!! Not the method of delivery!! How about the FREE Apple IPOD Application Sirius has waiting to break into the market. Broad Band is just another method of delivery.

  • Report this Comment On March 05, 2009, at 2:54 AM, jgarant wrote:

    Clearly, you guys do not like Sirius XM right now. The tone of your article is oh so negative. I do remember prior merger days that you were much more optimistic about their offerings and your report of them. You are entitled to your fickle opinion about this. To have perspective, Sirius was revolutionary with satellite radio when it first pioneered it. But, with the delay of the merger by the FCC, like 18 months unexpected indebtedness and the pommeling of the entire stock market, the company has had some major turmoil. I, for one, still believe in this company. Once the automobile industry turns around and the company's debt is paid off either by Liberty or whoever, things should be smooth sailing at SiriusXM.

  • Report this Comment On March 05, 2009, at 4:16 AM, siriowner wrote:

    I really appreciated Mr Beyers's comment regarding Siri will be out of the Business by Obama, I am wonder did you get chance to check Obama's SUV, whether he has Siri device installed. People just simply like this whenever they can afford it they will installed it.

  • Report this Comment On March 05, 2009, at 5:47 AM, McNabRanch wrote:

    I was introduced to sat-rad by friends from Canada on a trip down Baja....they love it up there, and I have it now...gonna build towers in Canada and Baja? too?....besides, I don't dig music that cuts in and out.....kinda ruins it dontcha think?

  • Report this Comment On March 05, 2009, at 2:08 PM, johntheadams wrote:

    I think that universal broadband availability would be a great thing, and I shed not a tear for XM/Sirius nor its shareholders as progress must not be hindered by concern for corporate dinosaurs.

    Anyway, XM/Sirius stinks a mile a minute anyway. I was a subscriber for two months and then canceled service because the content was mediocre. The music sucks, and is aimed primarily at greying white folks who still get turned on by forty-year-old music and so-called "comedy." As for Howard Stern, I wouldn't pay a dime to listen to him as he's a nausiating creep who appeals to the worst of sick American culture. He doesn't pack two pistols for no reason.

  • Report this Comment On March 05, 2009, at 2:09 PM, johntheadams wrote:

    I think that universal broadband availability would be a great thing, and I shed not a tear for XM/Sirius nor its shareholders as progress must not be hindered by concern for corporate dinosaurs.

    XM/Sirius stinks a mile a minute anyway. I was a subscriber for two months and then canceled service because the content was mediocre. The music sucks, and is aimed primarily at greying white folks who still get turned on by forty-year-old music and so-called "comedy." As for Howard Stern, I wouldn't pay a dime to listen to him as he's a nausiating creep who appeals to the worst of sick American culture. He doesn't pack two pistols for no reason.

  • Report this Comment On March 05, 2009, at 11:28 PM, splatt53 wrote:

    I must say I love reading Sirius news. I love the people complaining about this foolish website and all of there wild conspiracy theories about why it is needlessly beating down this stock. But with a headline like this you have to wonder. Notice the damage control story out today. I do not believe Sirius is a penny stock. However if they don’t make it easier for people to hear there product they are going to miss the boat. Where is Starplayr for the iphone? If it’s not out after the 11th Sirius is going, going, gone.

  • Report this Comment On March 06, 2009, at 2:05 PM, commish76 wrote:

    Sirius XM was destroyed long before Obama came into office.

    This article will show all the details why.

    http://thegrenade.wordpress.com/2009/02/05/why-satellite-rad...

  • Report this Comment On March 06, 2009, at 4:09 PM, scottparks wrote:

    A big advantage that Sirius/XM and terrestrial radio have is how they distribute the content. You don't have to be connected to a "network", they send a signal direct to you. It does not matter if there are 5 or millions, everyone receives the same signal with no loss.

    Election Day was a perfect example - anyone watching the coverage on broadcast TV was able to do so in full HD, yet CNN.com had to put people into a "queue" to handle the load on the Internet.

    I've listened to online stations, but one day I was trying to hear a story on NPR - the station kept re-buffering. As it turns out, I had to replace my router. Another time the host station was overloaded and yet another, my ISP was having trouble.

    I can carry my Sirius/XM unit walking the dog, in the house, in the office or anywhere I want and get a full Sirius/XM signal. I don't have to worry about drop-outs, too many connections on the host, my wireless router or the dreaded letter from my ISP telling me I used too much bandwidth this month.

    While I do believe the technology will eventually be there, right now it's not. Radio, including Sirius/XM is still the most efficient way to reach listeners.

    Remember - it was ham radio and broadcast radio that was used during Katrina, not Twitter.

  • Report this Comment On March 11, 2009, at 12:32 AM, drewsands wrote:

    3g networks cost 80 dollars plus. 4g networks in place will be in the most populated rural areas. travel between these roads will have nothing. I was in VT sking and had no 3g for most of my trip. XM worked great !!!!.

    In Europe they charge by bandwidth usage and I mean all of Europe. This is coming to the US real soon and has started.

    Fools don't like SIRI and for what reason I don't know. Why write articles on penny stocks? Isn't there anything better? I guess they need content. Good or bad. Content on XM is all GREAT. Disagree?

  • Report this Comment On March 11, 2009, at 12:41 AM, TDUBFISH313 wrote:

    I can get XM on my new car for free for a year. I couldn't care less. .'ve never listened to it and wouldn't pay for it. I'm just old school at 45.

  • Report this Comment On March 11, 2009, at 12:51 AM, drewsands wrote:

    You paid for it trust me. make sure to cancel it. 1.5% do and 10% plus get added.

  • Report this Comment On March 11, 2009, at 1:02 AM, drewsands wrote:

    So my 2 questions to fools is why don't you have common sense? and why do you waste time on penny stocks? If you need good content listen to XM because yours stinks. You should get out sometimes. This is so simple we all had a very good laugh and now call you true fools. Your name is perfect and not in a good way.

    This is almost as funny as when xerox sold Bill gates a program that had a window and a cusor that could open and close that window. Xerox said what are we going to do with WINDOWS? (30 years ago).

    Obama has nothing to do with XM. A matter of fact Obama has XM in his cadillac. I bet you it will not expire to.

  • Report this Comment On March 12, 2009, at 4:00 PM, temp2290 wrote:

    drewsands,

    Where do you see internet usage in the US being charged by bandwidth? I know people think that Europe is so progressive and all, but they are still in the dark ages when it comes to internet infrastructure. I guarantee that you will not see this in the US, our technology is only getting better.

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