Satellite DARS Auction to Commence

On April 1, the FCC will commence the auction of two licenses to provide Digital Audio Radio Service ("DARS") via satellite. Each of the two licenses will enable the licensee to provide nationwide radio programming with compact disc quality sound over 12.5 MHz of spectrum in the 2320-2345 MHz band. Four applicants (Satellite CD Radio Inc., American Mobile Radio Corp., Digital Satellite Broadcasting Corp. and Primosphere) will be eligible to bid for the licenses. No applicant will be permitted to own more than one of the two licenses.

According to the FCC, the 12.5 MHz of spectrum to be granted to each licensee will permit them to provide 19 to 44 channels of CD quality sound. Because licensees will be permitted to use the bandwidth necessary for one CD quality channel to provide several channels of less than CD quality programming, DARS providers may be able to provide significantly more channels. CD Radio, for example, has said that it will deliver up to 50 channels.

DARS applicants estimate that service is not likely to commence for three to six years. The successful bidders for DARS licenses will be required by the FCC to begin construction of their satellites within one year of licensing, launch their first satellite within four years, and begin operating their entire system within six years.

In its Report and Order adopted March 3, 1997, the FCC gave considerable flexibility to DARS providers. Some of the key DARS licensing points adopted by the FCC are:

  • DARS service may be advertiser supported, subscription, or both. (Primosphere currently is the only bidder that has publicly stated that it intends to offer an advertising-supported service.)
  • DARS providers will not be subject to public interest programming requirements, except that they must comply with the same substantive political broadcasting provisions as terrestrial broadcasters.
  • DARS receivers need not be capable of receiving terrestrial radio signals.

The FCC also requested comment on its proposal to permit DARS systems to use terrestrial repeaters as service area "gap fillers," but to prohibit DARS licensees from using such repeaters to transmit locally-originated programming.

The FCC adopted the licensing and auction rules for DARS over the objections of some terrestrial broadcasters who claimed that DARS would threaten the viability of local radio broadcast service. While acknowledging some threat to the local service provided by terrestrial radio broadcasters, the FCC nevertheless found that any harm to broadcasters was outweighed by the public interest benefits of DARS. In reaching this conclusion, the FCC cited its belief that the overall penetration rate of DARS receivers in radio listening environments may not exceed 4% by 2005, that existing radio broadcasters will lose audience share slowly as DARS service becomes established, and that, as a probable subscription service, DARS is unlikely to compete with terrestrial radio for advertisers. The FCC acknowledged, however, the uncertainty of predicting the impact of DARS on terrestrial radio, and committed to continue to monitor the impact of DARS, so that further action can be taken if necessary to protect terrestrial radio service. The FCC also committed to support efforts to study standards that would enable terrestrial radio to provide digital service, and to act expeditiously to enable terrestrial broadcasters to convert to digital service once a viable system has been designed.