As Sirius (SIRI) - Get Report eyes expensive new expansion plans, some investors have started to see rate hikes as the best way to bring losses under control.

Fans of the New York pay radio shop were told in February that the

tide of red ink could turn by year-end. But that goal seems even more distant now that capital spending is expected to double to $110 million this year, as the company prepares a massive upgrade of its repeater antenna network. The heavy investment is intended to open the way to new services like video and data.

All the spending talk has investors bracing for yet another heated debate over whether satellite radio is a perpetual cash furnace or if it has emerged as a popular consumer service on the verge of profit.

One possible solution being discussed by Sirius executives seems to please investors: raising subscription fees.

Industry watchers expect Sirius and rival

XM

(XMSR)

to impose another increase in monthly radio charges as the two players try to cash in on their popularity and slow their runaway losses.

Apparently, one of the options Sirius is considering is a two-tiered system where users would be charged a premium price for added features, according to a report last week from Bear Stearns analyst Bob Peck.

The higher prices would be an attempt to pass along to users some of the costs for more expensive radios that include multichannel recording features. These radios allow users to record programming or even individual songs. Analysts say Sirius is on the hook for a portion of the royalty payments attached to the additional music recorded by users.

But some observers say a two-tiered subscription plan is unnecessary and a potential nuisance. The preferred solution, say some industry fans, would be an across-the-board rate increase, which would help bring in more cash to fuel expansion efforts and bring the company closer to break-even.

Despite the big spending plans for this year, Sirius representatives say hitting the positive free cash flow target as early as the fourth quarter will not depend on raising rates.

"We have said that raising rates is a possibility," says a Sirius rep. "We don't think we have to do it."

The fact that satellite radio managed to attract 10 million users, if you include

unsold cars at dealerships, proves there is a broad demand for the service. But at this point more than a few industry investors and even some insiders have gotten spending fatigue.

Satellite radio investors have started to get a little tuckered out watching billions of dollars go toward advertising and promotions in an effort to pump up subscriber growth. The spend-to-grow approach is common during a start-up phase. But with satellite radio, some camps have grown impatient waiting for a shift to a more financially conservative strategy.

Washington, D.C., radio peer XM was rocked in February with the abrupt resignation of director Jack Roberts, who grew frustrated over the company's cash-burning growth obsession.

For its part, Sirius has racked up an accumulated loss of $2.7 billion since it started operating in 1990. The company had $762 million in cash as of Dec. 31, and faces $358 million in bills this year for expenses like interest, leases, programming and marketing.

With the launch of a new satellite scheduled for sometime before 2010 and plans for a beefed-up U.S. antenna network to handle TV and other services, Sirius seems headed for another record loss. To avoid a red-ink drenching, the company could postpone expansion or try to pull in more revenue.

Some observers see an obvious answer.

"If they do go down that path," says one investor who is considering taking a stake in Sirius after sitting out for the past year, "they should certainly raise prices."