Global Satellite Communications: Measuring The State Of The Industry

By Nick Mitsis

With new management entering the communications satellite industry, business is centering more on exploiting its current assets and less on introducing new hardware. Once again, Via Satellite takes a closer look at the industry developments that shaped business endeavors in 2004. Allowing the numbers to tell the tale, the research results, along with near-term projections, indicate that the past year remained steady in terms of in-orbit assets, spacecraft manufacturing and launch market share. Today, the industry is focused on which applications will garner greater profits from the assets already in place.

Commercial In-Orbit Activity

No significant shift appeared when it came to tracking the global market share among the major Fixed Satellite Service (FSS) operators in 2004. According to Via Satellite, there were, as of December 31, 2004, 274 geostationary commercial communications satellites in orbit. SES Global continued to dominate this landscape with 38 wholly owned and operated spacecraft in its fleet. The major global FSS operator–SES, Eutelsat, Intelsat, Loral Skynet, New Skies and Panamsat–operated nearly 47 percent of the commercial satellite activity Via Satellite tracked last year.

With many of these players under new private equity management, and with some entering the public market, all eyes will be focused on how the existing assets can be further used. More robust service offerings will surface before further fleet expansion occurs due to overcapacity in key regions. According to Northern Sky Research, there were 1,370 idle C-band transponders out of the 3,570 in orbit in 2004. Likewise, there were 1,200 idle Ku-band transponders out of the 3,750 in orbit. Broadband applications, interactive and live programming, and mobile communications are the applications satellite carriers will be counting on to increase transponder use through the near term.

Commercial Launch Activity

The launch services industry remained steady from 2003 to 2004. According to Via Satellite, 14 communications satellites were launched aboard 13 commercial missions in 2004. We are anticipating the trend to continue in 2005.

International Launch services garnered roughly 69 percent of the launcher market share. Sea Launch lofted three commercial missions in 2004. The company was slated for more missions, but an upper-stage issue that left the Telstar 18 satellite in a lower-than-expected orbit required an investigation that interrupted the company’s manifest. Telstar 18 eventually reached its proper orbit but Sea Launch did not perform another launch in 2004.

At Kourou, French Guiana, European launch service provider Arianespace performed one commercial launch in 2004, down from three launches in 2003. Arianespace’s challenges were due in large part to its effort in getting its Ariane 5 ECA back to flight, which it did this past February.

Japan remained grounded in 2004, but February 2005 turned out to be a significant month for the country’s launcher business, when its H2-A rocket conducted its successful commercial launch.

Even though we are not anticipating a significant change in launch rates in 2005, this year may pose to be an interesting one with all established vehicles back in operation, along with the newest contender, the H2-A.

Commercial Manufacturing Activity

In 2004, Via Satellite counted 12 firm orders for commercial telecommunications satellites booked among the major spacecraft manufacturers.

Calif.-based Space Systems/Loral garnered the most market share with 42 percent of 2004’s activity. Three of the Loral orders–two DirecTV satellites and a Panamsat spacecraft- -were signed with non-refundable advance payment clauses, solidifying them in the company’s order book. Likewise, the Intelsat contract also featured an advance payment as part of the terms of the sale of Loral’s North Atlantic satellite fleet.

Some orders for Lockheed Martin Commercial Space Systems are not represented in this market share breakdown. Cablevision’s Rainbow DBS planned five Ka-band satellites for high- definition television service in the United States, but in December, Cablevision Systems told the U.S. Securities and Exchange Commission that it was canceling its planned spinoff and stock offering for its Rainbow DBS business. In April of this year, Cablevision formally shut down the direct-to-home satellite television service.

In 2005, we foresee between 10 and 12 orders to be inked. All eyes are focused on regional satellite service providers, particularly in the Asia-Pacific region, for new spacecraft orders. This number, however, may be less than expected given the lackluster momentum among the replenishment market both on the regional and global arenas. Also on-tap for spacecraft procurements will be Echostar and XM Satellite Radio. In late May, it was reported that XM had tapped Space Systems/Loral to build its new spacecraft. Likewise, the influx of private equity ownership will, in the near term, approach the satellite manufacturing arena with conservative aspirations as these fiscally-minded managers first focus on building a business with the existing assets of their respective companies before fleet expansion is examined or executed.

2005 And The Road Ahead

So how is the near-term business for the global communications satellite industry shaping up?

In regard to the major operators, manufacturers and launch service providers, no significant growth is projected for the next couple of years. Where the industry will witness growth will be centered on broadcasting and broadband applications.

Recently, Wildblue Communications announced plans to roll out its high-speed Internet service. This broadband service to rural America will offer homes and small businesses Internet connectivity. The company is targeting a national rural market that includes 25 million to 30 million homes and small businesses.

Hughes Network Systems LLC, Wildblue’s competitor for satellite broadband solutions, announced that its total subscriber base has reached more than 250,000 customers, achieving double-digit growth from its fourth quarter in 2004. Needless to say, there is some significant activity among the satellite-enabled broadband market and the near-term projections continue to indicate growth among this segment.

In the arena of broadcasting, high-definition television (HDTV) continues to be one of the topics of conversation among the satellite industry. It is widely accepted that HDTV will overtake existing digital channels to become the next standard.

But this standard has been slow to materialize. From few broadcasters providing high-definition content to the cost of HDTV sets, all parameters have contributed to the slow adoption of high definition. But the winds of change have begun to blow. According to Northern Sky Research, the cost of HDTV sets has tumbled by more than 75 percent throughout last year in certain regions and the availability of high-definition programming is beginning to increase.

If these broadband and broadcasting trends continue at a robust rate, there could be increased demand for satellite transponders and new, innovative services for the global satellite community.

Nick Mitsis is Editor of Via Satellite magazine. He also sits on the board of SSPI’s Mid-Atlantic chapter.

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