DTH Providers Seek Alternate Revenue Streams - Page 3 of 3

Europe

In Europe, Telenor and BSkyB have perhaps the most interesting strategies in terms of expanding beyond traditional subscription pay-TV services. Telenor, which owns the Canal Digital pay-TV platform, also owns broadcast satellites through its subsidiary, Telenor Satellite Broadcasting (TSB). Cato Halsaa, CEO of TSB believes having satellite assets is a major competitive advantage. “We are still one of the few telcos that has a broadcast arm,” he says. “For Telenor, it is becoming more and more obvious that this is a strategic advantage. As content is becoming increasingly important for things like mobile and that is where the link is. There is a strategic link between the mobile and broadcast business. This has grown in importance in the last period. From a satellite perspective, there are numerous opportunities. Firstly, you have services in the Nordic region. There is HD as well as more channels coming from present customers. There is also significant growth in emerging European markets. We are well-placed to serve those as well as provide the associate ground services such as uplinking and fiber networking.”

The broadcast solutions business has generated double-digit revenue growth annually, and TSB expects that to continue. “With the analog/digital conversion, we are confident about future revenue growth,” Halsaa says. “Broadcast is the main driver for that growth. We believe the market positioning we have with 1 degree West and a wide range of end-to-end solutions makes us confident we can continue this growth.”

To capitalize on this Telenor is embarking on an aggressive capital expenditure plan to develop a pair of broadcasting satellites — Thor 5 and Thor 6 — to expand its capacity and also has signed for Intelsat to purchase 10 transponders on Thor 6. “We are replacing Thor 2 and Thor 3 with more transponders on both of the new satellites,” says Halsaa. “We will increase our capacity from 40 to 70 transponders when the satellite replacement program has completed. We have also moved up the replacement of Thor 3 one year in order to have more security and use the replacement satellite, in case we have any launch failures. These investments are expected to continue to deliver growth. With our close corporation with Canal Digital, we have developed 1 degree West into a very strong Nordic position, but now with our corporation with Intelsat, 1 degree West has now become a major player in central Europe.”

BSkyB may not own satellites but still has one of the most intriguing strategies of any satellite pay-TV operator. BSkyB also has acquired a hardware vendor, Amstrad, which BSkyB believes will bring a number of benefits, including an in-house design and development capability, an ability to accelerate the development of new and more innovative products for customers, and greater control over product design and technical specifications. BSkyB also expects to realize a significant reduction in procurement costs within its supply chain as margin generated by Amstrad on the supply of equipment to the Sky Group will be retained within the Sky business.

With multiple devices throughout the home now demanding content, BSkyB also expects the demands for bandwidth in a traditional family home to skyrocket, says Stephen Nuttall, BSkyB’s group director of business development. “You can imagine that a (family) household needs well in excess of 100 Mbps (megabits per second) for video. That will go up. It is a heck of a challenge to deliver that on a one-to-one basis, because the line from the exchange to my house cannot sustain 100 Mbps.”

Combining the strengths of satellite and IP could well be the best way to serve customers going forward. “There is clearly a need for the one-to-one IP pipe, but we think that is best suited for communications needs and also for accessing the long tail of video programming, so not the most popular video content,” he says. “So the Sky model in the future combines local storage in your Sky+ or your PC with satellite delivery for the most popular content and an IP pipe for the more niche content and communications. We think that is a better answer than trying to do everything over IP.”

Bottom Line

What we have seen throughout the last year is traditional DTH operators are looking beyond their base subscription pay-TV business. With average revenues per user from that service maxing out, operators are looking at new ways to generate business. Who would havethought a few years ago, we would see companies like EchoStar and BSkyB make the acquisitions they have and diversify to the extremes they have?

“I don’t see the FSS side as a main investment driver for EchoStar, but I think it is interesting if you look at the IPTV infrastructure and the FSS infrastructure,” says Mitchell. “If you look at Sling Media, what they are really looking to do here is a real ubiquity play. The ability to deliver EchoStar purchased and re-purposed content anywhere. I think if you look at the BSkyB model and the move towards a DBS-IPTV architecture, I think in general the large DTH players are going in that direction.”

The question is we can expect satellite pay-TV operators to look for a more all-encompassing role within the broadcast environment. It is no longer just a case of offering subscription TV services. There are a number of new opportunities for players and already the most innovative satellite pay-TV operators are expanding beyond their roots and looking to integrate their core satellite business with other opportunities. We can expect this trend to continue as satellite tries to retain the hard-earned competitive advantage it has gained in most markets.