The satellite industry has so far proved immune from the economic downturn, with a boom in demand for capacity for permanent services. Other lines of business including occasional use and broadband access are also seeing growth. Stuart Thomson reports.

The fortunes of media industry players in the current economic crisis vary hugely. While advertising-based commercial broadcasters continue to suffer from the downturn, pay-TV remains relatively prosperous. And the main infrastructure providers for European pay-TV – the satellite operators – are prospering as never before.

Satellite operators are in a fortunate position. Compared with the glut in capacity in the skies over Europe a few years ago, transponder space is now in short supply, and operators are rushing to build new satellites to launch into space to meet the demand. To some extent this has meant that operators can now rely to a greater extent on their core infrastructure business of doing long-term space segment deals with broadcasters. There may therefore be less need to tap into the occasional use market or to invest in ‘value added services’ such as corporate data and residential broadband access.

Occasional use

Despite this – and despite the growth in fibre capacity over the last few years – there remains a strong market for occasional services. Forward-looking operators and service providers also want to develop new satellite services such as broadband – even if investment is required and margins relatively low.

Satellite operators themselves, as well as service providers including GlobeCast and Arqiva and major teleport operators across Europe, continue to invest in the OU market. Kurt Riegelman, senior vice-president, global sales at satellite operator Intelsat, says that his company has reinforced its commitment to video services in general and OU service in particular since its merger with PanAmSat. “We are extremely committed to the OU market.

Since the merger we have upgraded our booking system, which sets the standard for booking. Our customers can now schedule online or still work through our global scheduling centre, which has been expanded,” says Riegelman. Intelsat has also invested in more dedicated capacity for OU around the globe, including repositioning a spot-beam to bring Ku-band capacity on Intelsat 905 at 25° West over Europe. “The other thing we have done is increase the terrestrial infrastructure between our teleports and points-of-presence,” says Riegelman, pointing to Intelsat’s investment in fibre connections to its European teleport at Fuchsstadt in Germany.  

Luxembourg-based SES has also reorganised its OU activities in the wake of a merger – in this case between the former SES Americom and SES New Skies divisions. The company now has a single global OU team in place based in The Hague and Princeton. The company is in the process of installing a new booking system from ScheduALL that will be completed by about October.

“We expect constant demand for high quality global OU services throughout 2009.  And our customers will benefit from having one-stop booking and billing services and online access to expanded inventory across the globe,” says Samantha McCloskey, vice-president, occasional use and special events. “And that capability will only grow as we launch additional satellites.”

McCloskey says SES’s scale and stability encourages OU customers to use its services. “We’re securing full sports seasons and packages, which gives our occasional customers the confidence they must have to commit to long-term distribution agreements” she says.
Nordic satellite operator Telenor Satellite Broadcasting (TSBc) has also continued to invest in OU, recently signing a contract with SES Sirius for the provision of satellite capacity in the Nordic region. The three-year agreement will provide TSBc with 36MHz of capacity on Sirius 4 at 5° East. TSBc said the additional capacity will be used for dedicated occasional use broadcasts within the Nordic and Baltic regions, complementing its existing OU capacity on Intelsat 10-02 at 1° West. TSBc will hold full control of the contracted capacity and offer line-ups and other ground-based occasional facilities from its Nitteda teleport.

“There is still good, strong demand for occasional use,” says Emma Harris, divisional director for OU at TSBc. In fact, she says, the lack of capacity overall is leading broadcasters to be more flexible. “Capacity is still in short supply in Europe. Our customers are increasingly willing to use any satellite irrespective of its orbit.” Despite the economic downturn, she says, the overall shortage of supply has meant that space segment prices have remained high. The capacity crunch has also meant that operators are looking to advanced compression technologies to save space, she says. For non-live events, broadcasters and content providers  are also looking at technologies such as FTTP file transfer, using the internet to send news reports back to the broadcast centre, for example. “That hasn’t really eaten into our news and sports business in Europe [where] people expect live news and good quality,” she says. Major OU events to come include the Confederations Cup in South Africa in June and the South African general election, for which Telenor has leased capacity on Telstar 12.

Harris says Telenor focuses on what it does best – providing capacity and customer service around that. However, the operator can also provide alternative transport links through its international fibre network. “We work with our clients to help them find the best capacity solutions at the best price,” she says. She adds that while 2009 is unlikely to compare with Olympic Games or World Cup years for sports, the ad hoc market continues to provide good business for service providers, boosted to some extent by the move towards HD services.
The rise of HD is also highlighted by Intelsat’s Riegelman as a major source of growth in demand for capacity. “Live HD is a driver – whereas previously broadcasters were using it as a differentiator, now it’s a standard,” he says. One concomitant of this is a move to MPEG-4 for live events in order to save bandwidth. “While the main business is still MPEG-2, we are seeing MPEG-4 encoders becoming more cost-efficient and offering better quality,” says Riegelman.

SES’s McCloskey agrees that HD is boosting demand. “HD is having a significant positive impact on our OU business – everything from SNG to special events and sports are moving to HD,” she says. And there is more to come. “We’re already involved in advanced HD initiatives and projects, including 3D HD and out of home theatre broadcasts – such as our delivery of the Met Opera season in HD to theatres.”

Satellite operators provide service direct to broadcasters as well as to service providers such as GlobeCast and Arqiva. While some operators have built their own teleports and have moved to “add value” to their OU offerings, others are wary of moving too far from their core role as infrastructure providers. “Our partner teleport strategy is a great example of how we team with leading ground facilities and access points and the communities that are home to these great assets,” says McCloskey.  “We team with these facilities instead of building our own and competing with our customers. We’re not in business to compete with our customers, we’re in business to serve our customers with innovative and creative solutions.”

Service providers continue to prosper by adding value in the form of infrastructure and equipment support on the ground at event sites, as well as responsiveness and flexibility. GlobeCast’s head of OU, Graham Smith, says his company is preparing for next year’s World Cup in South Africa, among other events. “It suits us a lot because we are having to spend a lot time preparing for it,” he says.

PBLSat, created from the OU department of the former BT Broadcast Services division in the UK, also sees a rosy future for OU. “As broadcasters become more competitive and access to key live content becomes an important part of TV schedules, the result is an increasingly buoyant OU market,” says Nic Thorley, director, PBLSat. “Naturally, clients have become increasingly keen to ensure a reduction in their overall production budgets. Therefore as with many companies involved in broadcasting, we are clearly aware of the wider economic downturn. Fortunately, the satellite element of many productions, whilst critical, is usually much smaller than that of the production or crew costs. Our experience  is that our revenue line is holding up.”

This year PBLSat will be covering all the Formula One circuits for key European clients, and for the European events will be using its own leased capacity on Eutelsat W1, W2 and AB1. “PBLSat is in a fortunate position as we have a large number of volume commitment contracts with key customers,” says Thorley. “We find that our customers benefit from committing to volume agreements as it allows them to manage their budgets more efficiently; in addition, the customer can pre book their requirements on our capacity up to 12 months in advance.”

Thorley says that PBLSat can differentiate its offer in a number of ways. “Having one of the largest portfolios of European ad hoc capacity is a key differentiator for PBLSat. We can provide more space at popular times than many of our competitors,” he says.

Another significant player is Slovenian teleport operator STN, which has recently opened a new facility near Ljubljana. The teleport, one of central Europe’s largest, with views of satellites between 45° West and 90° East, will deliver a range of permanent and occasional use services to a range of clients.

The company is also expanding its presence the OU market in a significant way following the acquisition of local SNG specialist DVB Pro. STN, which can deliver OU services via capacity on Sirius and Eutelsat W1, has also taken capacity on Eutelsat’s Atlantic Bird 4A at 7° West, making it the only European teleport operator with direct access to the satellite. Atlantic Bird 4A has good coverage of the Middle East and North Africa.

“We have ambitions to go heavily into OU,” says Mitja Lovsin, sales and marketing director. “We are going to start offering HD outside broadcasting as well. We are looking at the possibility of HD coverage” (DVB Pro currently supports events in SD only). STN currently has a dedicated OU sales force of four.

Shortage of capacity

Shortage of capacity over Africa is likely to present a major challenge for OU providers as well in the near future as they prepare for the World Cup next year.

Israel-based SatLink is the prime provider of OU services to news agencies AP and Reuters, and supplies capacity for sports rights holders seeking to reach Asia from Europe, for example. “We are focusing on the areas where we have the most attractive solutions – between Europe and Asia. There is demand for traffic going to Asia and also the other way around,” says CEO David Hochner, who also sees strong growth emerging from the move to HD services, particularly in sports. He says that demand for HD is resulting in an increase in demand for capacity that is sometimes hard to meet: “From our point of view there is a huge shortage of capacity for occasional use to Asia, the Middle East – and Africa for the World Cup – and that’s something we are suffering today,” He also points out that news channels are increasingly looking to an HD-centric future.

To help alleviate the capacity crunch on certain routes, Hochner says SatLink has proposed to a number of customers to supply Earth station equipment to allow them to downlink from alternative satellites. “The problem is that the end user is not always willing to change the ground segment equipment to get OU from a different satellite,” he says.

SatLink provides capacity as well as uplink services if required by its customers, some of whom prefer to book the space segment themselves. The company has its own satellite capacity but also books space from third-parties such as GlobeCast and the operators.
Unlike operators themselves, teleport providers such as SatLink or STN can provide a full end-to-end solution to broadcasters, including SNG trucks and flyaways and camera crews.

Other independent teleport operators are looking to get into the OU market. Berlin-based CET Teleport, hitherto known as a VSAT specialist, is looking to initially target the permanent broadcast services market before launching itself as an OU provider as well. CEO Ken Armstrong says he wants OU services up and running for the World Cup.

Despite the competition prevalent in the space, Armstrong says that reliable providers with in-house expertise can make a good business from OU, but a certain minimum scale is required to ensure that an investment in up-to-date SNG trucks, for example, wins sufficient business to make it worthwhile. CET’s main focus, he says, will be sports, which are easier to plan capacity for than news.

While HDTV has long been seen as the key to driving demand for satellite capacity, Armstrong is not entirely convinced that it will have a transformative impact on the OU business in the near term. “It’s not totally clear which way customers will go as far as HD is concerned,” he says. “The cost of going HD can still be prohibitive.” This makes life difficult for service providers, who have to invest in HD-equipped vehicles without any assurance that they will be fully utilised.

GlobeCast’s Smith broadly agrees, saying that HD coverage of events has been slower to take off than expected a number of years ago and pointing out that a number of high-profile events remain standard-definition only. “It has not taken off anywhere near as much as people expected because production costs are high,” he says. However, the World Cup is expected to be broadcast predominantly in HD. Smith believes that there is a migration to MPEG-4 under way in order to save bandwidth especially for HD feeds. “The World Cup will see a lot more MPEG-4,” he says.

An event like the World Cup in South Africa presents a great opportunity for a company such as GlobeCast to highlight the added value it can bring in terms of technical support for broadcasters that are nervous about the requirements of broadcasting a major global event from a country still facing challenges in terms of the available infrastructure.

Smith says that many broadcasters, especially those from second-tier football nations, may wait to see how well their national team is placed prior to the competition before committing resources, particularly in the current economic climate. That could cause problems given the lack of resources – for example SNG facilities – in South Africa. “There are huge issues surrounding the event,” he says.

Not least of these is the lack of available satellite capacity to take feeds back to Europe from the event (not to mention feeds from the main event sites back to the international broadcast centre in Johannesburg). While fibre is available to take up some of the shortfall in terms of capacity back to Europe, the cost is likely to be very high, he says.

The fact that HD will mean extra bandwidth feeds into the problem of a lack of suitable available capacity. Armstrong also believes that it will be difficult to meet the needs of broadcasters who want to cover the World Cup. “The capacity isn’t there to handle the number of channels that customers have become used to,” he says. “Some routes are worse than others. I don’t see the amount of capacity that’s being demanded [for South Africa] being anywhere near available.”

Opportunity for fibre

That lack of capacity is, however, an issue that OU providers are also facing elsewhere in the world. “There is a lack of capacity in the market,” says Smith. He says there has been a huge reduction in available space segment for OU in the last few years, as demand for DTH services has increased. As a result, prices are going up. This is leading to greater interest in bandwidth-saving technologies including MPEG-4 and DVB-S2, but it is also pushing broadcasters and service providers to use fibre where possible. “There is a huge opportunity for fibre now,” says Smith. “We are expanding our fibre network in Europe and increasing bandwidth and connectivity on it. Fibre is a lot more reliable within Europe.”

Telenor has also helped its customers with, for example, compression technologies. “We have regular meetings with clients and regular customer contact about what they want from us and what they need – we hope to utilise our IP expertise to help them develop future technologies and new products,” says Harris. She says fibre is not seen as a threat.

“Sometimes it’s more cost-efficient to use fibre. For multi-region long-haul transport fibre seems to be cheaper.” Telenor can also help satellite customers by providing the services of its own teleports in London and Oslo, both of which can provide OU uplink and downlink services.

SatLink’s Hochner points out that short-term leases of fibre capacity are not generally available, and fibre can also be unreliable in certain regions. However, fibre is winning a growing share of OU business. “What has happened in the majority of countries is that the main sports venues have gone over to fibre,” says CET’s Armstrong. CET is connected to Deutsche Telekom’s main fibre backbone network in Germany and also has fibre running into BT Tower in London to give it access the pan-European broadcaster market. “We needed that capacity anyway for permanent services – it’s given us the opportunity to fold in OU services without added investment,” he says.

In Germany, says Armstrong, permanent services are still largely satellite-based, unlike the UK, where point-to-point permanent services have largely migrated to fibre. He also sees a significant opportunity both for point-to-point and DTH services in central and eastern Europe via Eutelsat’s Hotbird position and Eurobird 9 at 9° East.

And permanent services remain a bedrock of most service providers’ business as well as that of operators. Hochner says that SatLink’s business is roughly split 75:25 between permanent and occasional use services, which he says is a desirable balance. While permanent services involve stable and predictable long-term contracts, OU can be equally profitable because it can allow the company to sell capacity that is sitting idle.
A similar point is made by PBLSat’s Thorley: “OU and permanent services are diverse businesses that rarely share the same satellite resources. Therefore, competition for OU services is focused specifically on the competencies within the ad hoc industry,” he says. “We can also use variable costs to our advantage whereas large players who have constant costs regardless of workload cannot maintain the same level of job profitability.”

SatLink’s Hochner nevertheless expects the greatest growth to come from permanent services, particularly from emerging markets including Africa. SatLink has acquired capacity on SES’s Astra 4A satellite at 5° East to launch a new platform for sub-Saharan Africa. SatLink’s multi-channel per carrier platform will support DTH services for Africa with uplinks from Europe and reception via dishes from 90cm in size.

As distribution opportunities expand, so do the number of events that are filmed. While video for the internet does not necessarily always require a dedicated satellite link, satellite can play a role here too. Data-over-satellite specialist Satlynx, which specialises in corporate data networks, has also moved into this space. “We wanted to open up a new market to enable content provider and owners of events to capture at source what was going on in their world,” says Andy Frost, head of marketing at Satlynx. “It was specifically targeted at distribution over the internet…for content owners who do not have cash to invest in SNG infrastructure. We have a much lower cost of entry to that market.” Satlynx’s service uses ViperSat equipment from Comtech to provide a VSAT-type service at a much lower cost to content providers. “We believe it has huge potential – it’s uncharted territory,” says Frost. “We are looking to create a market for people who have content and want to distribute it.”

The growth of new applications can only help boost satellite operators’ core business – the sale of capacity. Operators themselves take different views over how much to provide by way of value-added services. Smaller operators including Israel’s Spacecom have focused on the infrastructure business, though it also tries to add value where it can.

“Our main line of business is the sale of raw capacity but many customers get a lot of benefit if we add something to that,” says Omri Arnon, vice-president business development, Spacecom. He says that Spacecom can help customer with additional requirements such as uplinking, often by arranging discussions with partners. “We sometimes help them build their uplink. We can do joint ventures with other providers to provide a service that is much more than capacity, but we don’t compete with our own customers and do uplinking ourselves,” he says. At the same time, he adds, Spacecom has acquired some in-house expertise in the teleport business that can be used to help its customers achieve their objectives. “We do have some of that expertise at home that we’ve gained over the past four or five years, and some things we do with partners,” he says.

Rather than focus on services, Spacecom is looking to geographical expansion and a continued focus on its core infrastructure business. Arnon says the company will look to build its second position at 17° East (which will be occupied by the operator’s next satellite to launch, Amos 5) to complement its core slot at 4° West. Spacecom also intends to position another  satellite, Amos 4, at a new position with coverage between 60° and 70° East with coverage over Asia and Africa. The 17° East position is also intended to cover the African market and the satellite will be equipped with steerable spotbeams to give it additional flexibility. “Africa is getting into video quite heavily and that’s where the growth will come from,” says Arnon.

Spacecom’s experience in emerging markets highlights the fact that huge untapped markets for satellite services  – whether occasional use or permanent services – still exist, especially in areas where terrestrial infrastructure is lacking. The satellite business has plenty of room for further growth.

Sidebar: Broadband satellite: closing the digital divide

The creation of new markets and the complementary nature of satellite and fibre networks have a resonance beyond the OU market. The use of satellite to deliver corporate data networks is well established, but the use of satellite to deliver services to the residential broadband market has always attracted skepticism. Smaller satellite operators and corporate network specialists have tended to shy away from the residential market. “We provide some variations of services like that on our satellites but mostly we just sell the capacity,” says Omri Arnon, vice-president business development, Spacecom. Telenor focuses mostly on GSM trunking in the data market. The operator also provides service to the maritime sector. Julian Crudge, head of datacomms, Telenor, says it is still too early to say if there is room for mass market satellite-delivered broadband in Europe, pointing to uncertainty over whether satellite can compete with technologies such as WiMAX and mobile networks in areas not covered by terrestrial infrastructure. The situation in the US, where WildBlue has been successful, is somewhat different – it is relatively simple to provide a service using multiple spotbeams over a wide geographic area with a large homogenous population.

Major European operator SES has tackled the residential market cautiously. SES Astra’s ASTRA2Connect enables people in rural areas to get high-speed internet without the need for terrestrial support. It was launched in 2007 and is now available in fourteen countries throughout Europe. SES recently signed a number of new contracts to market ASTRA2Connect across Europe in Spain, the Czech Republic and Slovakia.

The most ambitious broadband plans, however, belong to Eutelsat, which launched its TooWay bidirectional broadband service two years ago. The service is currently available in about 20 markets, initially using Ku-band, but also Ka-band capacity from early last year via capacity on Hotbird 6. The operator plans to step up its operation significantly next year with the launch of the first all Ka-band satellite, KA-SAT. This will enable Eutelsat to deploy multiple spot-beams across Europe, reducing contention problems associated with two-way satellite-delivered broadband.

Jean-François Fremaux, business development director at Eutelsat, says that alternative technologies including WiMAX and UMTS will not be able to fill in the gaps in the terrestrial broadband network adequately. The former suffers from reception problems commonly associated with radio-frequency transmission technologies, while even advanced mobile solutions such as LTE, which will be available between 2012 and 2015, are still expected to be very expensive, he says.

Eutelsat is marketing TooWay through service providers rather than going to the end user itself, but it has established the technical framework. The operator has taken an active role not only in building the technical infrastructure for the service, which uses the teleport facilities of its SkyLogic subsidiary, but in building a brand that can be used to market it  and in specifying the equipment that can be used to receive it. Eutelsat has also built a pan-European network of ground stations to support the service.

The operator has also established a series of standard offers – though service provider partners have varied these according to the needs of particular markets. Typically these have been in the order of €30 for a 2Mbps connection. However, the launch of KA-SAT next year will allow Eutelsat to offer up to 10Mpbs downstream and 2Mbps upstream for the same price. Eutelsat is currently limited by the requirement that it uses limited amounts of capacity at different orbital positions, meaning that it can only support a maximum of about 70,000 customers. “Thanks to KA-SAT and the Ka-band we will be able to service up to two million subscribers,” says Fremaux.

Fremaux admits that the current economic crisis could have an impact on the business plan – especially in central and eastern Europe. “We have had to adjust our commercial policy to each country’s requirements, but even if we need to introduce special prices in some countries, globally the system will still be profitable,” he says.

Currently, Eutelsat is testing the markets in which it offers the service. “We want to make the TooWay brand known in these countries and establish that, even with the limitations of existing satellites, people can get a good quality service from satellite,” says Fremaux.