Like most of the U.S. economy, the forecast for the fixed-satellite market is looking good: steady growth ahead over the next two years. At least those are the findings of the "2000 North American Transponder Survey," released this May by New York City-based Salomon Smith Barney.
According to the report, by 2001, the number of transponders in operation over North America will total 1,766, up from 1,170 transponders on 36 satellites today. What is driving that growth is increased demand for satellites, as well as the need to replace obsolete satellites with new and better technology.
Today, Greenwich, Conn.-based PanAmSat Corp., and Princeton, N.J.-based GE Americom control 80% of the North American satellite market, while two other companies, Loral Skynet, based in Bedminster, N.J., and Telesat Canada, based in Gloucester, Ontario, account for the bulk of the remaining 20%. Since the beginning of last year, more than 10 new satellites have been launched, according to the survey, adding more than 430 transponders, while three satellites with 86 transponders have been either retired or re-designated as backups.
On a global basis, PanAmSat, soon-to-be privatized Intelsat, Loral, GE Americom and France-based Eutelsat-the five largest satellite operators-control approximately 106 of the world's 224 satellites and account for roughly 2,689 transponders out of a global supply of more than 5,700 transponders, according to the report. Each satellite represents a total capacity of approximately 2 Gb/s, based on 48 transponders at 45 Mb/s per transponder.
With the launch of PanAmSat's Galaxy XI late last year, the door is now open for a new generation of satellites with far more than 48 transponders. Galaxy XI is the first of the new HS-702 series satellites, and it carries 64 transponders. Another HS-702, Telesat Canada's Anik F1, will be launched in the next two months, and it will be equipped with 84 transponders. By virtue of the pending completion of its acquisition of Hughes Space and Communications Co., Boeing will become the supplier of HS-702s in the future.
PanAmSat has no further North American satellite launches scheduled for this year, according to David Berman, who is leaving his position as PanAmSat's senior vice president for the North American region on Aug. 1. In mid July, Galaxy XI was sliding into its permanent orbital slot at 91 degrees west, where it replaces Galaxy VII.
"The North American market looks terrific, thanks to a combination of strong projected growth and the upcoming changes in a new generation of spacecraft," Berman says.
PanAmSat now has a trio of satellites occupying its primary cable neighborhood, where, Berman says, C-band utilization already exceeds 90%. Galaxy XR is at 123 degrees west; Galaxy V is at 125 degrees, where it is completely booked up and scheduled for replacement in 2005; and Galaxy IX is at 127 degrees. Berman describes this arrangement as packing a powerful punch with multiple-feed cable programmers in particular as they plan their next moves in distribution architecture.
"What everyone is preparing for is the generational change in the years 2003 to 2006, and, as a result, things are up for grabs at the moment," Berman says. "We see net gains for our side. Our degree of market penetration to date, and our placement of three spacecraft in a span of just 4 degrees is quite rare in the orbital arc."
GE Americom is adding three more Lockheed Martin-built satellites in the North American market this year, GE-7, GE-8 and GE-6.
"There is a higher demand for Ku-band capacity at the moment, and less Ku-band inventory is available," says John Nelsen, GE Americom's vice president for global market development, because Ku-band allows for the transmission of higher-frequency traffic to less expensive receive sites. "We do not see this trend shifting."
Nelsen notes that GE Americom has been quite successful creating cable neighborhoods with both its C3 and C4 satellites-scheduled for replacement in 2003 and 2004-as well as with GE-1 and GE-4. While the new "open skies" policy in the U.S., which was initiated on March 1 as part of the World Trade Organization agreement, opens the U.S. market to foreign competitors such as Telesat Canada, Eutelsat and Satmex, the limited availability of orbital slots will not allow for any sort of space-based gold rush.
"The U.S. fixed-satellite-services market, in particular, is a very mature market. Some new entrants may appear here in an effort to extend their network operations, but their presence will be very limited," Nelsen adds.
Joan Byrnes, vice president of sales and marketing at Loral Skynet, notes that, with the recent addition of four satellites to its fleet, Loral Skynet is going though, "a bit of a surge lately." She reports that the supply of Ku-band capacity is tight today and prices are now $150,000 to $200,000 per month. Prices are beginning to creep back up after having softened two years ago. Bear in mind that these prices are ballpark dollar amounts subject to variation based on neighborhood and status, among other factors. C-band pricing remains relatively stable.
"The anchor-tenant model has dominated the broadcast syndication and cable programming distribution markets, although it has not quite taken hold in the Internet and data markets. However, as cable modems proliferate, this model cannot be overlooked as more multimedia content begins flowing via satellite to cable headends," Brynes says. The only way that the anchor-tenant model could work for the Internet would be if there were a dominant Internet-content service, but it's too early to tell whether a dominant service will emerge.
Neighborhoods are not that important to broadcasters as they distribute programming via satellite to their affiliates, according to Ron Gnidziejko, NBC's director of distribution technologies. NBC's strategy with respect to the supply and demand side of satellite capacity has been to lean heavily in the direction of accessing satellites in inclined orbit, which are offered by satellite operators at much less expensive rates.
A satellite flies in an inclined orbit when its operator allows it, in the final phases of its lifetime, to drift in a very predictable fashion, rather than remaining locked in place in a fixed orbital location. Less fuel is required to do so.
"The cost differentials are significant when you compare an inclined-orbit option vs. a satellite on station. The cost of the additional ground-segment requirement pays for itself in a relatively short span of time," says Gnidziejko, who adds that this approach is an uncertain arrangement upon which satellite launches and launch delays exert enormous influence. Satellite operators are generally given FCC authority for six-month periods to fly satellites in inclined orbit.
Not only has Telesat Canada presold its entire 32-transponder Ku-band payload on the new Anik F1 satellite to Star Choice, a Canadian DTH (direct-to-home) service, but the Ku-band payload on Anik F2, which is scheduled to go up in 2002, is already completely sold as well. Telesat sees a huge opportunity in both North and South America for Anik F1's C-band capacity.
"The satellites are larger today, more complex, and the satellite manufacturers are constructing them 35% faster," says Bob Zitter, senior vice president of technology operations at HBO Time Warner Entertainment (TWE) in New York City. "We have been meeting with all of our potential satellite suppliers to make sure that the reliability we have enjoyed thus far continues, and the satellite industry has been quite responsive with respect to our concerns."
Zitter says that the pricing for the next generation of satellites remains relatively uncertain for the capacity that programmers will require for the next generation. Regardless, timing is critical.
"If you are buying at a time when a satellite operator wants you, then you have leverage. We have gotten good deals, and we had to accept some bad deals when our timing was not ideal," Zitter explains.
Broadcasters are not shy when it comes to using satellite capacity.
"We use all three mainstream satellite service providers, and they are very competitive, which is good for us," says Andrew G. Setos, Fox Television's senior vice president for broadcast operations and engineering in Los Angeles. "There is a good balance between supply and demand. It is neither a buyer's market nor a seller's market."
Setos says that Fox has an enormous appetite for North American satellite capacity, with approximately 24 transponders in constant use. Whenever capacity is lost or gained in very big chunks, it makes it quite difficult for everyone involved. "I am always negotiating. Satellites have finite lives," says Setos.
Dick Tauber, CNN's vice president for satellites and circuits in Atlanta, notes that C-band and Ku-band prices continue to rise. "That channel for distribution, or backhaul, is half the price it used to be but is half a transponder, too. It is great for new players who could not afford the cost of entering the analog market in the past."
He adds that CNN continues to find ways to achieve greater cost-savings by tapping into new digital technology. For example, CNN backhauls out of London, which at one time was via single channel per carrier (SCPC), are now sent via multiple channel per carrier (MCPC).
"We now put them through as MCPC using a Divicom encoder, a Tandberg mutliplexer and a Raydyne modulator. This allows us to add one 8- Mb/s channel to the feed," Tauber says. "Multipoint distribution comes down to reaching the biggest audience in the most economical fashion possible. Satellite is still the best way to go."