[Satellite News 12-18-09] In 2009, Telesat focused its efforts on selling capacity aboard new satellites, culminating with a September deal with EchoStar to take the full capacity on  Nimiq 5. Telesat has also won contracts with Bell TV to take capacity on upcoming Nimiq 6.
    The successful sales drive has put the operator in a solid position, with 2009 revenues increasing 15 percent to $554.4 million by the end of the most recent quarter.
    Telesat CEO Dan Goldberg talked to Satellite News about recent developments and the challenges ahead for the operator as it looks to cement its position in North America and build a stronger position internationally.

Goldberg: The principal growth driver for us will be video broadcasting. We have just seen our Nimiq 5 satellite launched. This is a DTH expansion satellite that is fully sold out to EchoStar and will be a significant source of growth for Telesat in 2010 and beyond. Last year, we launched another DTH satellite, Nimiq 4, that is fully sold to Bell TV and which has been a big growth driver for us over the last 12 months. Looking ahead, I still see many opportunities to grow our core DTH business in North America, but we are also focusing on Telesat’s international fleet. We launched Telstar 11N earlier this year and announced the procurement of Telstar 14R, a replacement for T14 but with approximately twice the capacity.

Goldberg: We are finding that our North American customers operating DTH platforms are getting capacity constrained for several reasons. First, Telesat is the leader in the broadcast of HD channels in the FSS sector with well over 200 HD channels carried on our fleet. HD uses a lot of satellite capacity.  Second, and a factor that is sometimes overlooked, there continues to be a proliferation of standard definition channels which is further driving bandwidth demand. Third, you have some regulatory requirements, whether it is local–into-local or must-carry requirements, that are also fuelling demand for satellite capacity.

Goldberg: We don’t need to provide broadcasters with any inducements or incentives to move to MPEG-4. They are so close to their business and are always looking for that breakpoint where it makes sense for them to adopt new technologies. The bandwidth efficiency of MPEG-4 is a great advantage, but there is a huge amount of embedded investment in MPEG-2. Our experience is that when broadcasters roll out HD, that is an opportune time for them to move to MPEG-4. Over time, their entire chain will migrate in that direction.

Goldberg: It is not something that is impacting our business today, but we are always working with customers on new innovations and 3-D would be a good development for our industry given the bandwidth required and good for consumers in terms of an enhanced viewing experience. The multichannel video segment is highly competitive. Satellite DTH providers need to find ways to distinguish themselves, and those in North America have done a good job by offering more HD. Maybe over time they will have to find other ways and look to 3-D. Much will depend on the technology and the public’s acceptance.

Goldberg: I think sectors go through different phases, and I would say M&A activity is probably where it was a couple of years ago. But I suspect you will see more consolidation, just because the underlying rationale for consolidating operators makes so much sense, and there are still a number of operators that are quite small in regions that tend to have too many. Those conditions make consolidation very compelling from a business standpoint. We sold an asset to APT earlier this year, and I expect we will see more consolidation.

Goldberg: That was a very particular situation related to our regulatory status at that orbital location.  We are a Canadian satellite operator, so we were unable to have a license for China. Ultimately, that was difficult for us. It was time to replace Telstar 10, and we had to decide whether to make a significant capital investment in a situation that has a lot of uncertainty. It just became a very difficult thing to do. Given that APT was always our partner, it made sense for them to own that satellite going forward. We continue to have Telstar 18 over Asia. We like the Asian market and like our business on Telstar 18.  If other opportunities come forward that would enable us to grow the business there, we would explore them.

Goldberg: When pay-TV platforms combine it will, over time, have an impact on satellite operators. Pay-TV platforms have hundreds of thousands, if not millions, of subscribers, so you can’t change things overnight. But over time, you would expect pay-TV platforms to look for efficiencies. You have Bell TV and Shaw Direct in Canada. Would they be permitted to combine or does it make strong commercial sense? I am not sure.

Goldberg: Telesat supports having more commercial launch providers in the market. The situation with Boeing and Lockheed is complex, but the facts are that their launch business is more or less sustained by the U.S. government, and in turn, U.S. taxpayers. The U.S. government is working to reduce costs and improve efficiencies in all areas of its operations. This broader government effort would be well served by encouraging Boeing and Lockheed to actively pursue the commercial launch market. This would result in the U.S. government not being the sole source of their launch business and should, over time, reduce launch vehicle costs for the government and reduce the burden on taxpayers. It’s also important to note that the U.S. government is the largest purchaser of commercial satellite capacity. This provides the U.S. government with an additional economic incentive to ensure the industry has access to affordable and reliable launch services.