Summary
Satellite radio is (and always has been) a car-based service. Auto manufacturers can rely on satellite radio to be there for many years to come (due to the long-lived satellite assets) and so don't risk obsolescence, which has been a big problem for navigation systems. In comparison terrestrial wireless technologies change too rapidly for auto manufacturers to commit to a single standard (viz OnStar's problems) and so probably aren't a realistic substitute except as a user-provided device (like iPods).
Analysis
The main threats to satellite radio comes from:
a) a lack of willingness to pay (i.e. free to air radio and iPods)
b) alternative user-provided wireless devices (in the same way that portable sat-nav devices have massively outsold OEM versions)
Free to air alternatives including iPods have already impacted the market to the extent that only about 50% of new car purchasers subscribe after the free trial period. Long term this could decline to 40%, as sat radio is included in lower end vehicles, but that will still enable growth to 30M-40M subscribers. One new threat comes from a migration to personal wireless handsets which can receive broadcast audio/video (e.g. MediaFLO). However, these services are video-oriented and are unlikely to provide a sufficient range of audio content. Further down the line, individually streamed content could become more widespread, allowing wireless users to listen to internet radio. However, with limited capacity on most 3G wireless networks, operators will tend to discourage this mode of usage (preferring broadcast alternatives) and it will be a big challenge to provide sufficient QoS. Even though higher capacity 4G networks such as Clearwire may have enough capacity for streaming media, they will have a hard time providing sufficient coverage of highways outside the major cities. It will also be hard for new players to secure sufficiently attractive content to compete with the critical mass which satellite radio has already established, so most content will likely be niche channels with a hard time attracting a mass audience.
Its therefore important not to write off satellite radio too soon. It may not be the transformational service originally anticipated and will definitely fall far short of the 80M-100M subscribers projected by optimists a few years ago. However, it will be around for many years to come and will continue to be a key part of the audio equipment available in most vehicles.
