Thursday, April 27, 2006

FCC Investigates XM

April 27, 2006

XM satellite Radio informed investors today of a letter that they received from the Federal Communications Commission (FCC) regarding "emissions" from the SKYFI2 satellite radio receiver.

In an 8k filed with the SEC XM stated the following:

In the ordinary course of business, we become aware from time to time of claims, potential claims or investigations, or may become party to legal proceedings arising out of various matters, such as contract matters, employment related matters, issues relating to our repeater network, product liability issues, copyright, patent, trademark or other intellectual property matters and other federal regulatory matters.

On April 25, 2006, we received a letter from the Federal Communications Commission stating that its Office of Engineering and Technology Laboratory has tested the Delphi XM SKYFi2 radio and has determined that its transmitter is not in compliance with the applicable emission limits. The letter seeks information from us regarding the testing, emissions and other matters relating to this radio. We are conducting an internal review, and anticipate responding to the letter shortly and cooperating fully.

Also on April 25, 2006, we received a letter from the Federal Trade Commission stating that they are conducting an inquiry into whether our activities are in compliance with various acts, including the FTC Act, the Telemarketing Sales Rule, the Truth in Lending Act and the CAN-SPAM Act. This letter requests information about a variety of our marketing activities, including free trial periods, rebates, telemarketing activities, billing and customer complaints. We are conducting an internal review of these matters, and anticipate responding to the letter shortly and cooperating fully with this investigation.

XM believes that it is too early in the process to determine the significance, if any, of these matters to our business, consolidated results of operations or financial position.

It is our understanding that this type of inquiry from the FCC is not uncommon. The FCC sometimes conducts test that have results that do not match the data provided by the testing company when the units receive their initial FCC approval. Should the FCC's test prove that a device does not meet standards, a recall is still rather unlikely. Penalties and fines seem to be the "norm" with regards to this type of issue rather than a mass recall.

As XM stated in their 8k, they will respond to the FCC inquiry accordingly, and they intend to comply with all regulations.

Many may be wondering if this issue will spill over into other units, or to Sirius. This may or may not happen. Only the FCC knows this answer.

the link to this write up is http://tinyurl.com/oc6rd

4/27/2006 09:58:00 PM

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