How much would it be worth to you, when you're stuck in Washington's notorious traffic on the way to work, to listen to the radio without obnoxious commercials?
How much would you pay to be able to drive all the way across the country without diddling the dial every 100 miles trying to find the local NPR station?
Or to get gospel music any time the spirit moves you, croon to country in the city or find a nationwide station that plays full-length symphonies?
If $10 a month sound reasonable, you're a potential customer for two companies created at the crossroads of Washington's regulatory and technology communities.
Rivals CD Radio Inc. and XM Satellite Radio are spending about $1 billion each to reinvent radio as a pay-to-listen, sound-from-space medium, broadcasting 100 channels of programming from orbiting transmitters, supplemented by towers on the ground.
CD Radio was founded in Washington, went public in 1994 and last year moved its headquarters to New York. XM Satellite Radio is owned by American Mobile Satellite Corp. of Reston, which has several other satellite and land-based communications ventures and has been a public company since 1993.
The stocks of both companies trade on the Nasdaq Stock Market and have the volatile history typical of high-risk, high-tech companies. CD Radio stock closed Friday at $29.62 1/2 a share. It peaked at $39.87 1/2 last December and is down 8 percent over the past 12 months. American Mobile Satellite shares hit a new high of $20.18 3/4 on June 8 and closed Friday at $17.06 1/4 a share, up 55 percent from a year ago.
Their basic concepts are identical, based on two licenses and bands of frequencies granted by the Federal Communications Commission, but the two companies are using different broadcasting technologies and developing distinctive programming strategies.
"They're fiercely competitive," said analyst William Kidd of C.E. Unterberg, Towbin in New York. Analysts believe that even though they're gambling on the unproven idea that people will pay to listen to the radio, both companies are likely to succeed.
Rather than a head-to-head competition for a market that may not exist, Wall Street sees a business in which "there are only going to be two players," said Michael Alpert, a Washington broadcasting consultant.
Alpert, who got his start in satellites as director of corporate development for Comsat Corp., helped pioneered the concept of broadcasting TV programs to home satellite dishes and now advises clients on creating new communications media, was a founding director of CD Radio but is no longer affiliated with the company.
CD Radio is scheduled to begin commercial broadcasting by the end of next year, XM Satellite a year later, but the competitive positioning quickened this month when both companies passed a critical milestone.
Ford signed on to equip its cars with receivers for CD Radio. General Motors Corp. decided not only to install XM Satellite radios in its cars but also to invest in the company.
The pairings of carmakers and radio services are not permanent, however, because the FCC has decreed that satellite radios must eventually be able to pick up both signals. The car companies aren't saying how much they will charge for satellite radio and the specialized antennas they require. They certainly won't cost as much as a CD player, electronics and media analysts said.
The medium may follow the traditional razor-blade model: sell the razors or radios cheaply -- even give them away -- and make money on the blades or monthly service charges. That's what has been done to make digital satellite TV a success, Alpert said. The dish and receiver sells for less than they cost, subsidized by profits from subscription fees.
The economic models of the satellite TV and radio businesses are the same: Once you get the satellites up there, it costs no more money to serve a million customers than a dozen. Once you cover the fixed cost of building the system, almost all the incremental revenue from each new customer flows to the bottom line.
Neither CD Radio or XM Satellite has issued any profit or revenue projections, but analysts estimate that a $1 billion satellite radio system could generate $2 billion a year in revenue by early in the next century. Not counting any advertising, that would mean 17 million customers paying $120 a year. Americans are buying 15 million new cars and trucks a year. If satellite radios become standard equipment, the "installed base" of equipment could grow rapidly.
The question then will be whether people will pay for the service. That's just one of the 31 "risk factors" for XM Satellite spelled out last week by parent American Mobile Satellite in a filing with the Securities and Exchange Commission. American Mobile plans to sell up to 8 million shares of stock to finance its other ventures, but was required to inform investors of the risks of all the businesses it is involved in.
Earlier this month American Mobile agreed to buy out the partial ownership in XM Satellite of WorldSpace, a European company that plans a satellite radio service for Africa and the Middle East. At the same time XM Satellite got a $250 million investment from GM; DirecTV Inc., the satellite television venture of GM's Hughes Electronics Corp; Clear Channel Communications Inc., the big radio chain; and three investment firms -- Madison Dearborn Partners Inc. of Chicago, Columbia Capital of Alexandria and Telcom Ventures of McLean.
The investment was convertible debt, which is a loan that can be turned into shares of XM Satellite. Analysts predict that at some point American Mobile may spin off XM Satellite as a separate company and conduct an initial public offering to raise additional funds to complete its system. The company won't comment on its future financing plans, except to say that it will need to raise additional funds.
Launching a satellite radio system is costly, even by the standards of today's capital-burning Internet companies. Net companies expect to lose money for several years -- until revenue catches up with start-up costs -- but XM Satellite and CD must lay out the full $1 billion before they generate their first dime of revenue.
XM Satellite plans to use a pair of satellites in geostationary orbit down toward the equator and supplemented by 1,700 towers that will fill in the signal in urban areas and other places where the satellite is blocked by buildings or obstructions. CD Radio will use three moving satellites sweeping above the United States and about 110 towers. Nobody knows yet whether one will produce a better signal and coverage than the other.
CD Radio's marketing pitch is that it will produce 50 channels of music with no commercials. "Commercial-free music, that's what people want," said Ira Bahr, vice president for marketing. "We are reinventing radio, not rebroadcasting it." National Public Radio is one of the partners it has signed up to fill out the rest of the channels.
XM Satellite says variety and quality are more important to listeners than lack of commercials -- though it, too, will offer channels of commercial-free music.
CD Radio will be on the air a year ahead of XM Satellite. "There's an advantage to being first, but also more risk," media maven Alpert said. The pioneer has to create demand for the new product -- demand that will benefit its competitors. "There's an advantage to being second if the first guy screws up."
In satellite television, DirecTV was first and competitors have yet to catch up, Alpert said. But in satellite phones, Iridium World Communications LLC has bungled the start-up so badly that it created an opportunity for GlobalStart, which has yet to go on the air.
XM Satellite is hoping "that CD doesn't do it right," Alpert said. But in the end, he said, it may not matter because the potential for satellite radio is so huge. "I think it will be a very big business. There's an opportunity for both companies to be very successful."
Rivals CD Radio Inc. and XM Satellite Radio are spending about $1 billion each to reinvent radio as a pay-to-listen medium. Each promises up to 100 channels of commercial-free, CD-quality programming from orbiting transmitters, supplemented by towers on the ground. Consumers would pay about $10 a month for the service. Already Ford Motor Co. and General Motors Corp. have agreed to install compatible receivers in their new vehicles. CD Radio will have about a year's headstart on XMSatellite, beginning commercial service by the end of next year, according to the company.
CAPTION: Possible display of satellite radio selection.