Sirius, XM Struggle to Appease FCC

Sirius disclosed Thursday that it had been the target of an FCC inquiry regarding the FM transmitters in some of its radios. Based on an internal review, the second largest satellite radio provider has pulled several radios from store shelves. XM announced a similar inquiry in April.

The company first received notice from the FCC on June 20, according to an SEC filing. After completion of an internal investigation, the company responded to the letter on July 12 with preliminary results. Sirius did not specify which radios were not in compliance.

The internal review also determined that unnamed Sirius personnel requested that the radios still be manufactured even though they were not within FCC emission limits. The company said it was taking steps to prevent this from happening again, including the adoption of a plan that would ensure compliance with FCC standards before public release.

While Sirius' internal review is complete, the company disclosed that the FCC's review was still ongoing. Sirius will consult with the FCC to obtain new authorizations, although it did say that the agency was reviewing its own procedures for testing.

"If the FCC were to change its test parameters, our new products may be found to be non-compliant, requiring us to make further changes in our products and possibly delaying the availability of these products to consumers," it wrote in the filing.

In related news, XM Satellite Radio disclosed in a SEC filing Wednesday that it recently received notice that modified designs of its radios that were affected by the FCC order had been dismissed. Since the designs were dismissed and not denied, the company will have a chance to modify them and resubmit, the company said.

XM said it was working quickly to limit interruptions to supplies of XM radios, which has been blamed for the company's poor showing in subscriber additions in the past quarter. The company recently had to lower its yearly subscriber guidance as a result.

However, XM said it wasn't clear how the company would be affected this time. "We can provide no assurances at this time that our actions will be deemed sufficient by the FCC, or that this matter will not have a material impact on our consolidated results of operations or financial position," it said.

Stocks of both companies were down as a result Thursday; Sirius down 1.2 percent to $4.08, and XM down five percent to $11.88 in mid-day trading.