Satellite Operators: Sky's the Limit

Hi-def and IPTV emerge as key drivers

Fixed-satellite operators were in a good mood last week in New York, despite a rough past few years. Fiber-optic networks have stolen a large share of satellite's television traffic, compression technology has allowed more feeds to be squeezed into smaller chunks of spectrum, and private-equity firms have caused major consolidation. But satellite operators say a boom in video business is giving revenue a big boost.

Several operators were in Manhattan to pitch Wall Street at the inaugural ISCe Satellite Investment Symposium at law firm Jones Day's offices, while others attended the fifth annual SATCON conference at the Jacob Javits Center.

One of the appeals of satellite operators is consistent cash flow from long-term lease contracts with broadcast networks. And while video represents less than half the traffic for most major operators, which also handle voice and data traffic, those contracts remain robust. “Video is really what drives the FSS [fixed-satellite service] industry,” says Gerry Nagler, executive director of marketing strategy for Loral Skynet. “It's those long-term relationships that help drive valuations.”

While fiber has made major inroads in the television “backhaul” business (which involves taking a feed from a live event back to the network before it's distributed to affiliates), broadcasters say satellite's point-to-multipoint distribution scheme is still the most efficient way to distribute their signals to hundreds of affiliates and thousands of cable headends. “For the distribution side, it's hard to beat satellite,” says Michael Huitt, director of new technologies for ABC News.

ABC, for one, occupies eight C-band transponders, which are used for program distribution, and five Ku-band transponders, used for news operations, on Intelsat. CBS has 10 C-band transponders spread across two Intelsat birds and Ku-band capacity with both Intelsat and SES Americom. Neither network sees its satellite requirements shrinking in the near term.

Huitt says the network's appetite for Ku-band capacity is growing. Stations that relied on microwave links for remote feeds are turning to satellite as the FCC claims more and more microwave spectrum. ABC has begun adding satellite capability to news trucks for maximum flexibility. WLS Chicago, for example, now has six hybrid satellite/microwave trucks, one satellite-only truck and only four microwave-only units.

High-definition television, with its large bandwith, has been a boon for satellite operators because most major broadcast and cable networks transmit separate HD and SD feeds of the same content. Some of those SD feeds will go away when analog broadcasts cease in February 2009, and most networks will transition to a single HD feed where possible. But Huitt says even the biggest ABC affiliates will still likely require an SD feed right up to the analog deadline.

Bob Ross, VP of East Coast operations for CBS, doesn't expect that the network will be using any less capacity; he notes that King World's distribution of HD syndicated content just began this fall. For their part, satellite operators say the new traffic from HD programmers will more than make up for SD feeds that get eliminated.

Satellite operators are also seeing fresh demand driven by Internet Protocol Television and mobile video services. Eutelsat gained 400 TV channels last year and expects to fill eight to 12 transponders with HD programming by 2009. And both SES Americom and Intelsat have launched program-aggregation services aimed at small telcos launching IPTV.

While MPEG-4 compression is expected to dramatically reduce the bandwidth required for video feeds, operators believe that the volume of new HD content and IPTV programming services will outweigh the losses. Says Nagler, “The bandwidth requirement will go up faster than advanced compression techniques can keep up with it.”



At DirecTV The Sky's the Limit

He invented Fox Sports. Revived Fox Television. And now he's in charge of beefing up Rupert's satellite unit. Cable folks have a tech advantage, but this guy makes them nervous