Although worries persist about a potential market downturn in the satellite industry, a panel of executives at SATELLITE 2009 see a handful of opportunities — digital media and IPTV, mobility, emergency preparedness, and developing economies — as sure bets, even in a tenuous financial climate.

These four hot markets share a common bond — demonstrating continued significant growth in broadband services, and in reality, broadband should be considered as the fifth hot market segment, the executives say. Mike Cook, senior vice president, Hughes Network Systems, notes that the growth curve for satellite broadband services continues to increase, and satellite broadband services have been recognized in the $7.2 billion stimulus plan. Edward Berger, vice president, business development at Intelsat, says other areas, such as the maritime market and military applications, continue to show large gains in demand for broadband services. Giuseppe Aridon, vice president business development, Telespazio, points toward the popularity of IP and its worldwide adoption as a leading factor in the demand for broadband satellite services, and Serge Van Herck, CEO of Newtec cites a study by Cisco which found that traffic on the Internet is doubling every two years. That type of demand would in turn drive the appetite for broadband services, he says.

Driving Forces

"2009 is a tough year," says Glenn Katz, president and COO of Spacenet. "Advertising is one of the first things that companies cut back on. Many digital media networks are advertising driven. Things are tough right now but they are going to make a comeback. When you consider that there are 300,000 business roof tops across the United States equipped with satellite antennas, digital media is a natural overlay. We see it as a greenfield opportunity."

The high speeds that fixed satellite services (FSS) operators can deliver will lead to tremendous growth in government sales, says Berger. As evidence of market size he points to a study which estimates that unmanned aerial vehicles (UAV) will consume $62 billion of bandwidth and services throughout a 10-year period.

Cook notes that various government departments have been using increasing amounts of satellite capacity to move surveillance video from point to point. He could not provide any specifics of these programs, but says: "Satellite technology allows you to bring back video signals from anywhere. We see continued growth in this market." Katz and Aridon agree that mobility, while a niche market, is an important one that covers areas such as maritime, aeronautical and broadband-on-the-move services for the military.

"The window for satellite is constantly moving with peaks and valleys, much like a landscape," says Andrea Maléter, technical director at Futron Corp. "As markets open and take off, there are expectations that terrestrial competitors will eventually move in. If there is enough demand, terrestrial carriers — including new wireless systems — will put in the infrastructure needed to compete, thus the market for satellite services waxes and wanes in different places at different times. But clearly there are pockets of continuing opportunity, in areas where it will never be realistic to deploy terrestrial infrastructure…. In the current United States discussion over stimulus funding for broadband access, people tend to forget that broadband is available to everyone right now via satellite. Systems such as WildBlue and Spaceway are in orbit now and the challenge is just to get user terminals activated. These are beyond "shovel-ready" projects; they are plug and play projects."

The maritime market should be a strong market in the coming years. "The biggest growth in the mobility market is in the maritime industry," says Maléter. "Shipping companies are looking for options beyond L-band. There is large amount of growth in Ku-band maritime systems going on right now…. Cruise ships served as the leading edge of the maritime market. Now shipping companies are using broadband connectivity to extend business applications to vessels. They are also using Internet connectivity to help retain crews. Crew members on the high seas can use the Internet to stay in contact with friends and family through e-mail. This is similar to the way in which the [U.S. Department of Defense] has long been using Internet connectivity for the welfare and morale of troops. Satellite service providers have done a good job capturing a large number of blue water vessels. A new generation of smaller, less expensive stabilized VSAT terminals will allow green water and brown water vessels to install mobility solutions."

Slower Markets Gaining Traction

All the executives agreed that emergency preparedness offered exciting growth opportunities. "Terrestrial networks are not immune to disruption. This was clearly evident in the aftermath of Hurricane Katrina when all of the terrestrial and wireless networks were submerged," says Cook. "The terrestrial carriers had tremendous numbers of backup circuits but the hurricane showed everyone that path diversity isn’t enough. Our client’s networks need to be fully functional during a disruption — either man-made or natural. "The only robust solution for backing up a terrestrial network is a satellite network," he says, adding that some of Hughes’ clients are using high-definition (HD) video cameras to see what the aftermath of a disaster looks like and to see the body language of those involved.

"Regardless of the type of disaster, or the extent of damage to the terrestrial infrastructure, critical first responder applications will be supported, including Land Mobile Radio or connectivity to the public communications grid," Katz says. "During the 99.999 percent of the time these emergency networks are not active, the anchor institutions will have full use of the capacity and will only experience slower data speeds in the unlikely event of an emergency, he says.

The long-standing problem is monetizing this service. "Everyone wants service during a disaster but no one wants to pay for it beforehand," Katz says. But Maléter sees a shift coming in that arena. "In the next few years there are wonderful opportunities for companies offering solutions aimed at first responders. Sales of ground equipment will be strong, but while bandwidth requirements for first responders, such as emergency agencies and insurance companies, can be fairly large, these are for discrete, temporary applications, and won’t do that much to drive demand for satellite capacity," she says.

Spacenet is working on developing offerings for state and local governments to dynamically switch satellite capacity across multiple agencies in order to meet unique needs as well as make it less expensive than terrestrial options, Katz says. "A state may have any number of local anchor institutions such as schools, hospitals or libraries in rural areas where broadband is not easily accessible. They may also have a number of first responders who need a continuity-of-operations solution that can work independently, regardless of potential terrestrial disasters. By essentially allowing them to share the same capacity, first responders will have guaranteed broadband access that can support voice, video or data requirements, wherever and whenever they need it, and the state government has what equates to a large pool of broadband access they can dedicate as they deem fit to help connect their most underserved constituents," he says.

Due to the lack of terrestrial infrastructure in many developing countries, these areas also remain a positive market for satellite. The executives specifically identified Africa for its potential. Berger notes that a number of different operators have announced plans for spacecraft serving the region, but the current financial crisis may delay or halt a number of them, he says. On a positive note, Berger points to the successful financing of New Dawn satellite, which will serve the African continent. Intelsat unveiled in December a joint venture with a South African investor group led by Convergence Partners that will finance a new satellite, Intelsat New Dawn, that will be located at 33 degrees East to serve the African continent. The backers of the project were able to secure $250 million in debt financing based on the ability to secure $350 million dollars of long-term contracts. The satellite is scheduled to be operational in early 2011.

Maléter concurred that developing economies will remain a hot market segment for satellite technology throughout the next several years, pointing out that some regions would be more successful than others. "The Middle East and Southeast Asia are expected to enjoy continued growth. Even when you take out all of the military activity, the Middle East shows much promise. Some of this activity will spill over into parts of Africa," she says.

Maléter also notes that HD continued to be a market driver in Africa as well as the Middle East. HD channels are distributed by DTH companies in the United States but elsewhere they are distributed by FSS companies. "HD helps drive interest in markets, which then turns into subscriptions. A growing subscription base then drives capacity." Maléter worked on the African continent for a number of years and her assessment of market opportunities in the region is tempered by first hand knowledge. "The income of a population being served is always the challenge. You need the money to support growth. Some areas will see stronger growth than others." Maléter concluded noting that she was cautiously optimistic that the African continent would become a hot market over the next few years.

The IPTV market segment is an uneven opportunity, says Maleter. "IP Prime shutting down casts serious doubt on IPTV’s future role as a driver of satellite demand. In fact, the move of video distribution to the terrestrial Internet appears likely to pose a threat to satellite video distribution and contribution." Maléter notes the growing bifurcation in the TV relay business. "Reporters in the field can download imagery into their laptops and then send the files over the Internet through any nearby Wi-Fi connection. These initial video feeds are not the same "broadcast quality" that is provided with a traditional SNG (satellite newsgathering) uplink, but since people are used to seeing grainy YouTube images, acceptance of that lower-quality content is growing." On the other side of the equation, there is a big push for more HD, which does require high-quality content and more satellite bandwidth, but since this does not have to be the first imagery during a news event, its transmission can be delayed until a cheaper terrestrial option is available, rather than using the SNG solution.

Conclusion

The executives agree that the industry must continue to innovate in order to successfully compete against terrestrial alternatives in the future. Fortunately the industry has a great track record. The development of Ka-band satellites and new satellites will usher in higher capacities, ultimately driving down the cost per bit. In addition, continuing to drive down the costs of ground equipment will spur new growth. Equipment manufacturers and space segment providers sometimes get into each other’s business but each should concentrate on working together for the betterment of the satellite industry as a whole and to provide a unified front against terrestrial competitors, Katz says.

"The new hot markets in the satellite industry will ultimately come down to the solutions that can leverage the unique inherent benefits of satellite to meet customer needs in a way that no other technology can," Katz says. "Apples to apples, we’re not positioned to compete with terrestrial on speed or cost. However, terrestrial networks face their own obstacles — obstacles we must exploit and capitalize on. Terrestrial can not be set up quickly. They can not broadcast or multicast information. They can not repurpose capacity to another location instantly. And perhaps most significantly, they are susceptible to any number of terrestrial events — hurricanes, man-made disasters, even a backhoe digging in the wrong spot. The greatest opportunities for our industry are solutions that leverage multiple elements of our unique benefit set and do so in a way that overcomes our liabilities."