CBS Radio Would Have Teamed Up With Stern on Satellite Radio, Suit Says

The complaint, filed Feb. 28 in N.Y. State Supreme Court, Manhattan, says Stern’s base salary at CBS Radio increased to $58.8 million over the 5-year term of his last contract extension, signed in 2001. Stern also was paid $7.5 million in bonuses over the 5 years, plus additional incentive bonus payments and 849,806 stock options, the complaint says. CBS Radio built Stern a special studio in N.Y., provided him special security there, and paid for a limousine to take him to and from the station, it says.

If CBS Radio had been brought into the discussions of Stern’s move to satellite radio, it would have worked “diligently” with him to fashion an agreement that would have been “beneficial to all parties,” the complaint says. CBS Radio’s disclosure that it would have favored a joint satellite radio project with Stern seems ironic, as terrestrial broadcasters have branded Sirius and XM their top enemies. But the complaint says “multiple-party deals and repurposing of broadcast material are common in the industry… In the satellite radio arena, CBS Radio demonstrated its flexibility and interest in expanding its business opportunities by agreeing with the NFL to allow Sirius to share CBS Radio’s exclusive rights to air certain NFL games. CBS Radio was willing to and interested in participating in a comparable or different arrangement in connection with any move by Stern to satellite radio.”

CBS Radio wasn’t “particularly concerned” that formal contract renewal negotiations hadn’t started 15 months before the expiration date of the shock jock’s agreement because it “reasonably believed Stern would renew,” the complaint says. Unknown to CBS Radio, Stern had begun secret talks with Sirius about developing a satellite radio project “in blatant and intentional disregard” of his contract terms that gave CBS Radio the right of “first opportunity” to discuss such projects, the suit says.

Nothing in the announcements that Stern had signed on with Sirius to host his own radio show at the Dec. 2005 expiration of his CBS Radio contract “indicated that Stern or Buchwald could benefit by receiving accelerated payments for promotional activities Stern might take on the program” while he was still a CBS employee, the complaint says. It says the announcement was timed “without any warning” to coincide with the opening of the Oct. 2004 NAB Radio Show, which the CEO of CBS Radio attended.

Sirius had agreed in Oct. 2004 to award Stern and Buchwald millions of shares of Sirius stock, which Stern could earn on an accelerated basis if Sirius subscriptions increased to certain “target levels,” the complaint says. They included subscribers added Oct. 2004-Dec. 2005, when Stern was under contract to CBS Radio, it says. The deal with Sirius was construed by the parties to mean that Stern would be awarded stock-incentive payments as early as Jan. 1, 2006 -- before his Sirius program began Jan. 9 -- if Sirius’s subscriber levels hit these targets by Dec. 31, 2005. These terms weren’t disclosed in Sirius’s news releases or filings at the SEC, the complaint says.

Stern’s promotional activity on Sirius’s behalf using CBS Radio airtime “was undertaken with the knowledge, support and encouragement of Sirius in order to increase the number of subscribers to Sirius’s satellite radio service as quickly as possible,” the complaint says. It cites the example of a Nov. 2004 noontime rally Stern hosted in N.Y.’s Union Sq., where he distributed Sirius receivers and promoted the service. -- Paul Gluckman .HEADLINE Wireless, Wireline Connected by Technology, Policy, Says Rural Report

The technology needed to maintain wireless networks is still essentially wired, according to a new report funded by the Foundation for Rural Service (FRS) and presented in conjunction with the National Telecom Coop Assn. (NTCA) Fri. The ties between the networks are often overlooked in legislative discussions, according to Jim Thoren, consulting mgr. for GVNW, the firm that assembled the report. In a debate like the one on the universal service fund (USF), said Tom Conry, gen. mgr.-Farmer Mutual Coop Telephone, a misunderstanding of the towers, cable and switches needed to maintain wireless could cost rural providers dearly.

“There is a sense that they're separate networks entirely,” Thoren said. He said this could stem from media coverage of the shift from wireline to wireless. But even if handsets go wireless, he said, and signals go digital, “the underlying network that makes wireless happen has to remain viable.” This includes SS7s, IXCs, LEC-LATA tandems and the local exchange carrier switch -- all wired infrastructure, the report said. “Rural companies must remain vital” for this kind of connectivity to continue.

“The feeling is that there was a lot of misconception that these networks aren’t intertwined,” Conry told Communications Daily. This was the overriding motivation behind publicizing the paper, he said, rather than to push positions in legislative debates. “Whether you're talking about intercarrier compensation, USF, or whatever,” he said, “what you do to one affects the other.” He used the example of a cable modem with wireless capability, noting it “still uses fiber optics.”

The study has implications for USF funding. Conry acknowledged that funding is dependent on how subscribership is measured. If everyone on a local carrier moved to wireless, “you'd have zero customers, but an obligation to maintain the [local] tower” because in a rural area it would be the only signal booster capable of handling line-of-sight and distance problem. That would make funding difficult to obtain, he said, and such a measure would “make it incredibly difficult to reinvest” in future network upgrades, which would put local carriers at a further disadvantage to the majors.

“If you let [wireline] hardware deteriorate, wireless is going to follow,” Conry said.