From: "Marvin Kaye" <marv@lancaironline.net>
Subject: Re: [LML] Re: Weather avoidance frustration
To: lml
Date: Tue, 02 May 2006 22:36:14 -0400
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Posted for MikeEasley@aol.com:

  I think that link will only work for subscribers.  Here's the  article.  I
  hope Aviation Consumer excuses my copyright violation!
  
  Mike Easley
  
  Lost in Space: Snags for WSI, XM
  WSI weatherlink buyers will have to switch  to Sirius Radio (and buy a new
  box) while XM’s financials aren’t  encouraging.

  WSI will end its datalink service provided by the twin beam Mobile 
 Satellite
  Ventures system, above. Its new Sirius-based system will be  compatible with
  existing displays.When  cockpit datalinked weather exploded into the 
aviation
  market barely four years  ago with too much hardware and too many companies,
  we predicted a nasty  shakeout. But even we didn’t expect this. Just as the
  market matures into what  appeared to be two stable, competitive players—the
XM
  Radio-based WxWorx and  WSI’s Inflight service—neither service appears to be
  as rock-solid as we  thought. Two developments within days of each other may
  affect both services in  ways that will clearly infuriate some customers and
  worry others.
  WSI announced in February that it will switch satellite providers from a
  third-party commercial company called Mobile Satellite Ventures to Sirius
  Satellite Radio, XM’s rival in the space-based broadcasting business. Given
XM’s
  success and the reliability of the service, WSI’s switchover makes sense.
  But the nasty surprise is that owners who bought WSI’s AV100 and AV200
  satellite receivers for between $3500 and $5000 will soon have an obsolete
box
  occupying the avionics bay.
  Those receivers won’t work with the Sirius signal and will have to be
  replaced, probably by next year.
  Meanwhile, the financials at XM Radio look rocky, making some buyers who’ve
  bought into that technology understandably nervous. A week before the WSI
  announcement, Pierce J. Roberts Jr., a key XM director, left the company,
  declaring that XM is headed for a financial crisis if it doesn’t make major
  changes.
  Given the piddly size of the aviation data market, an owner who bought the 
XM
  service for weatherlink can be forgiven for wondering if that service will
  be  tossed overboard to stanch XM’s cash hemorrhaging. We’re told that this
isn
  ’t  likely but frankly, we wouldn’t expect to hear anything else.
  WSI
  Although we’ve heard a few complaints about satellite coverage  gaps in WSI’
  s service, owners have praised the service for its robustness and
  sophisticated radar and text products. WSI has suffered for not having as
many  display
  options as does XM, but it still appeared to be a comer.
  Evidently, however, the satellite service WSI picked to deliver its 
 service—
  Mobile Satellite Ventures—isn’t up to the task. The WSI architecture  uses a
  single satellite capable of forming “spot beams” for data delivery. WSI’s
  service depends on a pair of beams to deliver coverage in the U.S. and
Canada.
  However, some users have encountered service gaps in the U.S., which WSI’s
  Paul Devlin acknowledges. He told us the problem is in the receiver 
software,
  
  which holds onto one beam too aggressively without sensing and picking up 
the
  
  second beam. As a result, users experience slow or no data service.
  Isn’t there a technical fix for this? When we contacted WSI in February,
  Devlin declined to provide details, explaining that more information would 
be
  
  available in a few weeks. Meanwhile, WSI is devoting its resources to
developing
  a new datalink receiver for use with Sirius Satellite Radio system, a
  clean-sheet box that will be about the same size as the current WSI
technology  but
  will require a new antenna and wiring harness. The antenna, said Devlin,
  will be the same size and have the same hole pattern and the current antenna
for
  the AV100 and AV200 receivers.
  The hardware is expected to be available by the end of 2006 or early 2007.
  Devlin said WSI would announce shortly when its current satellite service
  through MSV will end, but we believe it will be in 2007.
  WSI says it will try to make the switchover to Sirius from the MSV service 
 “
  as appealing as possible” and plans to offer a discount price of $1500 for
the
  Sirius receiver. No prices have been set for new Sirius-capable receivers
  from  WSI. If we owned a WSI receiver, we would be on the phone to the
company
  to  negotiate the fairest accommodation possible. Our sense is that WSI 
wants
  to do  right by its customers.
  XM Woes
  When XM’s Roberts departed the board, he bluntly said that  given the
company’
  s current strategy, “there is, in my view, a significant  chance of a crisis
  on the horizon.” XM has hit the capital markets heavily to  fund brisk 
growth
  in subscribers, but it continues to lose money.

  Despite XM concerns, Garmin’s XM-based GDL69, above, remains the  leading
  choice for weatherlink. Owners report excellent  performance.Although  XM’s
  revenue increased in 2005, the company lost $270 million during the
  October-December period, up substantially from the $190 million it lost
during  the same
  period a year earlier. The insider squabble appears to be subscriber  growth
  versus profitability. Pierce favored less borrowing and growth and more 
 cost
  control to turn the company black sooner. Either way, XM’s CEO, Hugh 
 Panero,
said
  the company would reach profitability by the end of 2006, with 9  million
  subscribers.
  If there’s good news for aviation datalink subscribers, it’s this: A year
  ago, XM’s revenue from datalink services was trivial but has been steadily
  increasing. Although XM has only about 19,000 data subscribers, it earned
  low-cost revenue from them in 2005 and the datalink market is expected to
  continue
  growing. Moreover, while XM has to spend about $141 in marketing costs  to
  bring on a single entertainment subscriber, data subscribers are profitable
  from
  day one, because other companies bear the marketing costs.
  “We’re beginning to be noticed at the board level,” says WxWorx’s Mick
  Gosdin. “They recognize the data side is an untapped market. It’s basically 
a
  
  freebie for them. It’s something they hadn’t really thought of until we came
  
  along.”
  Gosdin says he understands buyer concern about XM’s survival but he explains
  
  that datalink continues to be such a strong, low-cost growth market—both in
  aviation and marine—that XM will increasingly rely on it for revenue. In
other
  words, although the volume is low, the profitability is high enough that
  datalink seems unlikely to be tossed aside to make room for more profitable
  bandwidth use.
  Recommendations
  Given the number of recent instances of avionics  buyers having been left
  high and dry with dead-end technology, we’re not quite  so sanguine about
XM’s
  prospects. Its survival may depend less on subscribers  and more on how
  friendly the capital markets are toward funding its continued  rapid growth
until it
  turns the corner.
  In our view, datalink is such a lucrative market for XM that it will survive
  
  but the larger issue is whether XM itself will prevail. It’s unrealistic to
  assume there’s no chance that it will go belly up, just as other high-tech,
  high-risk ventures have. For now, we wouldn’t delay or advise against buying
  
  XM-based weather datalink, but buyers should know there are unknown risks in
  
  doing so. Our guess is that XM will survive but that’s just our guess.
  WSI, unfortunately, faces more difficult circumstances. The company is fully
  
  aware that it has to dig itself out of a deep hole. Ideally, it should buy
  back  all of the AV100 and AV200 receivers on a pro-rata basis, but that’s
not
  likely  to happen because it will result in an untenable business plan 
which,
  
  ultimately, serves neither WSI nor its customers.
  We’re sure that many owners won’t be pleased with WSI’s offer of a drop-in
  replacement for Sirius reception for $1500. In any case, WSI isn’t currently
a 
  new purchase option and the company will have to do some careful fence
  mending  to keep the subscribers it does have aboard and interested in
converting
  to the  Sirius Radio option. And don’t forget, Sirius is also losing money
and
  has fewer  subscribers than XM. Its recent deal to sign Howard Stern
  notwithstanding,  Sirius’ profitability is far from assured.
  Other options? Two come to mind: Honeywell/Bendix/King’s Wingman service and
  
  the developing FAA-sponsored ADS-B system. As we reported in the August 2004
  
  issue, the Wingman system is fully built out but works reliably only at mid-
  and  high-altitude and can seldom be used on the ground before departure.
For a report on the ADS-B system, see the August 2005 issue. This technology
  has promise and although the hardware is available and the FAA insists it’s
  the  shape of the future, the agency hasn’t funded the ground network and
it’s
  not  known when that will happen, making it the iffiest of all the choices.
For now, XM still appears to be the most cost-effective, reliable choice in
  datalink. But know this: Neither of the satellite-based options are without
  risk  for purchasers.