2003-2004: years of transition in the satellite communications industry

2003-2004: years of transition in the satellite communications industry

As appeared in SatMagazine.com, January 2004

Bruce Elbert

President, Application Technology Strategy, Inc.

In the first year of publication, SatMagazine has provided a glimpse into how 2003 grew in terms of new services and applications. The dislocations and imbalances were still being wrung out amongst satellite service providers and manufacturers. At the same time, we’ve witnessed how the Free World responds to the global threat of terror. Satellite communications has had a pretty good year – revenues are up in several sectors and there is a new feeling of optimism among providers and users alike. Let’s take a look at the year that was, and the year that’s just around the corner.

In 2003 – the year that was

From a retrospective point of view, 2003 was a year in transition. We saw the US economy pick up and hit an attractive growth rate. The economies in Japan and Western Europe also showed improvement as the world got back to business and financial flows worked their magic. We’ve seen changes along many dimensions – Intelsat purchased the US satellite assets of Loral, which now appears to be coming out of its bankruptcy problems and selling new spacecraft to several customers. Overall, the satellite communications industry hadn’t returned to the high growth rate of the late 1990s, but solid engineering once again showed how satellite technology could gain a foothold in this improving economic outlook. The following are examples.

Connexion by Boeing^SM demonstrates true broadband Internet to the skies – the team at CBB has put the pieces together to make broadband Ku band service available to commercial jetliners. The technologies needed to do this, such as phased array receive and transmit antennas and spread spectrum transmission, may have been off-the-shelf, but overcoming all of the technical, operational, regulatory and market hurdles is nevertheless something to recognize.
Thuraya reaches 100,000 users - the first handheld service to do so for telephone communications. Those of us who worked on this concept in the early days have to be impressed with how the folks at Thuraya made GEO mobile satellite into an effective business. Availability of Thuraya services in the Middle East is a solid factor in rebuilding infrastructure because without good communications, everything else is a challenge.
XM hits the golden 1 million subs – 100 radio channels to cars is indeed a business. Sirius Satellite Radio is likewise climbing towards this benchmark. The neat, little SKYFI radio is a tremendous success, helping XM Satellite Radio exceed its targets.
Horizons 1 reaches station at 127 west – technical, regulatory and business challenges didn’t keep PanAmSat and JSAT International from getting their new Ku-band satellite into operation and ready for business.
News Corp closes the DIRECTV merger - and Hughes gets a permanent home. This has been a story of the Perils of Pauline but subscribers of the largest DTH system in the world can look to a future of even greater programming options and innovation.

And finally,

“We got ‘em!” - and satellites played a vital role in getting on top of the story still unfolding in a liberated-Iraq. More satellite services are in the offing in Iraq and Afghanistan, countries which see the promise of democracy and a better life for citizens.

In 2004 - to come

According to Forbes Magazine and Fox News Network, 2004 could yield the best economy in 50 years. Possibly the War on Terror has provided the environment for a strong economy – witness the current 6 to 8% growth rate with low inflation and interest rates. These things are never permanent and can go the other direction, particularly if there is another attack like September 11^th. On the other hand, a strong economy is a self fulfilling prophecy in its ability to impact many industries and many people, in the US and throughout the world. Discussed below is a breakdown of technologies and applications which stand to grow as a result of their maturity and the demand fostered by a growing economy.

The CDN finally takes root – digital media is the wave of the future in many commercial businesses and satellites provide their unique multicast benefit. This area was touted as one of huge growth back in the late 1990s, but the scheme never found its way out of a paper bag. Now, companies in North America and Western Europe are experimenting with electronic alternatives to posters, billboards, signage, and paper materials. We’re all familiar with digital displays in airport terminals, but the CDN allows companies to display and communicate almost instantaneously and on a uniform and controlled basis. Expect this to pop up in movie theatres, grocery and department stores, car dealerships, and the like. It will begin to impact equipment sales and the use of teleport and satellite capacity in coming months.
HDTV - and big screens are a hit! The more-expensive TVs based on plasma and LCD displays were big sellers during Christmas. The TV and cable networks currently provide or will shortly provide significant programming in one of two HDTV formats – 1080i or 720p. Consumers will ramp up their purchases of the appropriate receivers and cable and satellite TV companies will offer more options. The degree of adoption remains to be seen, but satellite operators are no doubt going to see some up-tick in demand.
Ka band goes prime time – well, maybe. EchoStar and Loral put the EchoStar 9/Telstar 13 satellite into operation with Ka band capabilities, This, along with comparable SES-Astra birds in Europe could well find a beneficial niche in the return channel business. And 2004 is announced by Hughes Network Systems as the year of launch of Spaceway in North America. In addition, Telesat Canada intends to launch its first Ka band payload in 2004 aboard a Boeing 702. Ka band has its technical challenges, but it has bandwidth and multi-beam capabilities unmatched by the more populated bands below.
More satellites address the War on Terror – new satellites enter service, providing capacity in critically needed places. The ground-based technologies are becoming more portable and mobile, which will help connect our forces from some of the remotest territory where critical operations are on-going. Much of this goes on below the radar, which of course is a good thing.
Connexion by Boeing enters the Asia Pacific Region – JAL and others have committed to using CBB in the Asia region, allowing Boeing to proceed with its global rollout. Satellite and teleport operators around the world are benefiting from Boeing’s vision of broadband services to previously underserved users who need connectivity regardless of their physical location. Similarly, Inmarsat – itself the subject of acquisition by new investors - will continue to expand the Broadband Global Area Network, now running on Thuraya but scheduled to expand when Inmarsat 4 is launched in 2005.

Frequent readers of this column know that we see the glass as half full rather than half empty. The issues and challenges to our industry continue to arise in the course of doing what we know best. But the fact that the world is a better place because of satellite communications is beyond a doubt. Innovation and investment continue apace and a new generation of professionals is at work. One can only be optimistic about our New Year.