It is rare for the powerful National Association of Broadcasters (NAB) to lose an important Washington battle. As a result, the NAB’s decision to abruptly drop attempts to convince regulators to stop the two U.S. satellite radio services from offering weather and traffic reports in major markets of the country is a uncommon retreat.

The NAB last week withdrew its “petition for declaratory ruling” that asked the FCC to stop Washington, D.C.-based XM Satellite Radio [XMSR] and New York City-based Sirius Satellite Radio [SIRI] from providing local traffic and weather services. The reversal ended the process started by the NAB’s petition earlier this year and leaves in place the rules and regulations that enable the two national carriers to provide the local weather and traffic services.

Because XM and Sirius compete with terrestrial radio stations in every market, terrestrial broadcasters are worried about the incursion. The broadcasters did not rule out revisiting the issue later, according to its notice of withdrawal with the FCC.

However, broadcasters will need to find another way to compete with satellite radio other than seeking regulatory relief, since the new services fit within current rules, satellite radio representatives said.

Chance Patterson, vice president of corporate affairs at XM, said the NAB’s change of course is a “complete vindication” of his company’s position that it complied with, and continues to comply with, FCC rules. NAB’s action validates that there are no content restrictions on XM.

The Background

The petition, filed by the NAB on April 14, immediately was opposed by XM, the Consumer Electronics Association, the U.S. Department of Transportation, the Satellite Broad- casting and Communications Associ-ation, and 25,000 XM customers. That counterattack claimed it would be unconstitutional to prohibit the two carriers from providing valuable safety information to the public, not to mention modifying the XM license.

The NAB suddenly withdrew the petition because all indications were that the FCC was poised to rule against the association, Patterson said. As a result, the NAB pulled the petition in a last-minute attempt to “save face,” he added.

“The NAB’s claims were baseless. We have and continue to comply with the requirements of our license,” Patterson said.

The NAB recognized that its lobbying push to thwart the satellite radio services offerings of local weather and traffic was fruitless and chose to abandon its efforts, Patterson said. “They knew that they were going to lose,” he added.

However, anyone who thinks that the NAB has abandoned battling the satellite radio operators is mistaken, said Tim Logue, a satellite and telecommunications consultant in the Washington office of the Coudert Brothers law firm.

“I believe what they found out was that they could not effectively make their case to the commissioners after some recent intense lobbying,” Logue said. The NAB’s position of opposing the local services of satellite radio services is unchanged but the trade group will pick a different day to make its case, he suggested.

“Unfortunately for them, they may have to really start bleeding before Congress or the commission feel there is a real threat to ‘local radio’ as delivered by mega-group owners,” Logue said. “By that time, it may be too late. However, the satellite radio providers should not be overconfident, because this issue is too important for the NAB. This latest move is likely only a strategic retreat.”

The petition the NAB filed to dismiss its FCC complaint indicated that the trade group wanted to take additional time to assess new information about the actions of satellite radio services that impinge upon local broadcasting’s traditional domain of local service.

What began with satellite radio offering new services to supplement local broadcasting is becoming a full-fledged movement that would have a “detrimental” impact of local broadcasters’ ability to serve the needs of their listeners, according to the NAB’s explanation about why it opted to withdraw its petition.

Recent events undertaken by XM and Sirius that threaten local broadcasters include using Global Position-ing System (GPS) technology to allow local feeds to be stored in memory chips or on hard disk drives of next-generation receivers, according to the NAB. XM already introduced its first aftermarket navigation system that integrates XM NavTraffic, the NAB added.

Such satellite radio receivers are capable, based either on the geographic position of the receiver or by a listener’s subscriber number, of filtering and placing local content to particular listeners, the NAB claimed.

“NAB withdrew the petition only because we want to update the FCC on additional developments related to this issue,” an NAB spokesman told us. “Given their [satellite radio companies] ongoing financial problems, it is apparent that XM and Sirius realize that their business model is failing as a national service. Thus, we intend to present to both the FCC and Congress a more updated record of the satellite radio industry’s plan to shift to ‘local programming’ initiatives.”

The SBCA defended the rights of XM and Sirius to offer local traffic and weather services by saying that satellite radio is “about offering consumers more choices and enhancing entertainment and information for consumers.

(Chance Patterson, XM Satellite Radio, 202/380-4318; Richard DalBello, SBCA, 703/739-8351; Tim Logue, Coudert Brothers, 202/736-1816; NAB, 202/429-5350)