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I have had a similar issue. I have not been able to stream music from the Sirius app when I dock my iphone into the cradle. For some reason the ipod player on my iphone takes over. I have found that if I start Pandora before I dock the phone, it will continue to stream from Pandora. I can then change my phone from Pandora to Sirius and it plays fine. Pretty weird. No need to remove all your songs from your iphone.
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