FCC Compliance and Approval
July 20, 2006
There seems to be a lot of discussion relative to exactly what FCC compliance is, and how the system works.
In the simplest terms, the FCC outlines specific parameters for devices. Think of it as a recipe. A manufacturer can follow the recipe and produce an FCC compliant device. That device now has to go through a certification process where the FCC verifies that the device is indeed FCC compliant.
An FCC compliant radio can be manufactured, but not have FCC approval. The absence of approval does not mean that the device is not compliant. It only means that the device is not yet approved by the FCC, and deemed to be compliant..
For example……
If the FCC were to govern the manufacture of pencils and they established that the guidelines were as follows:
Must be constructed of wood.
Must have a red eraser on one end.
Must have graphite in the center.
Must have a label identifying it as a pencil.
You or I could each make such a device, and as long as we followed these guidelines, we would both have identical FCC compliant pencils. However, neither of us would have FCC approved pencils. If you went to the FCC and obtained certification that your pencil was indeed FCC compliant, then you would have an FCC compliant AND an FCC approved pencil. My pencil would not be FCC approved. The functions of our pencils are identical, and in fact they perform in the exact way that the FCC guidelines had outlined.
Back to satellite radio….
Sirius and XM were both found to have hardware that did not meet the FCC’s compliance standards. Both companies made the required changes and are now able to produce, and have produced FCC compliant devices. They now await FCC approval.
The wrench in the works appears to be that the FCC is not so sure whether their guidelines are what they want them to be. Thus we now have two satellite radio companies waiting to get the final answer. Both have what they feel are compliant units. Both have done their testing. Both are confident that they are meeting the rules. Both are now waiting for an answer.
For investors this means gauging the impact of this issue:
-Does the SDARS company have a healthy supply of product already in the system and available for sale?
-Does the SDARS company have a supply of compliant units that can still be shipped and sold?
-Are the timelines for new hardware being pushed up?
-What is the status of the OEM channel, and the installation rate there?
-How healthy is consumer demand for each SDARS service?
-How long can each SDARS company go without the status quo without a material impact?
Expect the respective CEO’s to be fielding such questions at the quarterly calls.
7/20/2006 03:56:00 PM
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