Made In Canada
By Katie McConnell
The Canadian satellite industry has changed a great deal over the years. Gone are the days of large prime contractors funded by government projects. Today, the Canadian satellite sector comprises a group of companies known for their entrepreneurial drive, commercial acumen and technical innovation. Geography and politics continue to play a large role in Canadian companies’ success, however, most notably in the form of export-driven businesses and Canada’s reputation of neutrality.
A Unique Background
According to John Keating, president of Com Dev Space, the constant drive by the Canadian government for equitable connectivity among its widely dispersed population has given the satellite industry in this region a significant boost. Keating also points out that Canada’s lack of a strong military budget quickly forced its space companies into the commercial sector, and eventually overseas.
Com Dev is a veteran player in the Canadian satellite industry, having been founded in 1974. Com Dev specializes in components and subsystems for satellite communications, as well as space instrumentation and remote imaging. Today, approximately 80 percent of Com Dev’s revenues are derived from international business, Keating says.
He also points out that Canada enjoys a unique dual participation in both U.S. and European space industries, as Canada’s space agency enjoys a close relationship with NASA and is also a member of the European Space Agency. Keating does note that in terms of government financial support, Canadian industry has less to work with than its European and U.S. peers. “NASA’s budget and the U.S. DoD’s space budget are bigger by a factor of 100 than Canada’s total spending on space technology and development,” he says.
Keating does acknowledge that Canada’s neutral stance in world politics has helped in securing some overseas business in areas such as China. He also explains, however, that the Canadian satellite industry treads a fine line in balancing overseas opportunities with maintaining good relations with the United States by respecting its export control concerns. “If push comes to shove, what the United States needs is more important than what China needs,” Keating explains.
Amplix President and CEO Fadhel Ghannouchi says, “Right now, the market for our product is worldwide. We are selling to clients as far away as Australia, Europe, South Africa, the Middle East–wherever there are satellite service providers, uplink stations and a need for high-power amplifiers.” Basically, Amplix’s intelligent linearizers remove the distortion that appears as power increases. Amplix is a private company that was incorporated in February of 1998 and started operations in September 1998. The company operates in the area of satcom and wireless electronics, serving mostly the base station side of the business.
Today, Ghannouchi believes the opportunity for Canadian-based satellite companies is growing larger and larger because of access to world markets. “Five years ago, the focus [for selling satellite services] was on Canada and North America,” he says. “Now we can do business with anyone around the world because of the access we have available. We have the Internet, e-mail, and can walk with a cell phone 24 hours a day. The borders of just five years ago don’t exist anymore.”
Technology, however, is not the only element contributing to Amplix’s global market strategy. The fact the company is Canadian serves as a real plus. Because Canada has been in the exporting business for longer than most telecom leaders, its reputation of working well with others precedes the sales pitch.
But, all is not sunshine and rainbows. The Canadian taxes are hurting Canadian business, says Ghannouchi. “It’s easy to get new recruits from the many universities in Canada, but its hard to keep them,” he says. “The tax level for engineers is very high compared to the United States, so many [migrate south].” The tax level for personal income is so high in Canada that he says even the hockey players don’t want to play in Canada anymore.
To some extent, however, the horrendous personal tax issue is counter-balanced by tax initiatives to promote more Canadian-based companies in the satellite sector. For every Canadian dollar spent in research and development, the company receives 60 percent back from the government as a tax credit. “This is very good for us,” Ghannouchi says.
Dr. Gerald S. Bush, president of the space and technology group for EMS technologies, agrees with Ghannouchi that “the R&D environment is very favorable in Canada because of our tax credit structure. The compensation is favorable to Canada because of the exchange rate and market demand.” Bush says the Canadian government is most concerned that “we are good for Canada in terms of creating a future that is bright and strong in Canada, and they are prepared to help us do that.”
EMS is a provider of wireless and satellite communications solutions, with a growing emphasis on broadband applications. EMS focuses its unique range of technologies on the needs of broadband and mobile-information users. The company is headquartered in Atlanta, employs 1,500 people worldwide and has major manufacturing facilities in Atlanta, Ottawa and Montreal. The bulk of its satellite business is in Canada, and Bush believes this is an advantage to the company.
The satellite industry is inherently global, he notes, and “Canada is a country that has been historically strong through exports. We understand how important exports are and are externally focused.”
Thus, Bush notes that with the satellite division based in Canada, he has an edge over many of his competitors. For instance, he says, “if we are trying to sell in Asia we are generally well received because Canada has a non-political presence there. We are also comfortable in Europe and have an advantage as we have a lot of staff that are bilingual.”
This provides an edge, he says, when selling to companies abroad. According to Bush, while the United States is clearly one of the leaders in the telecom industry, it does not have the same history as Canada with working with other countries, since the United States built its telecom reputation through outfitting the military. Canada, on the other hand, is focused on ROW (rest-of-world) contracts and has a history of being a telecommunications leader. That is not to say however, that the company hides its U.S. affiliation, or the fact that it is headquartered in Atlanta. “We have always had an extremely close relationship with NASA and ESA; [the satellite division’s] proximity to the United States is an advantage; and our technology is on par with the United States,” he adds.
High Tech Exporting
International Datacasting (IDC) is yet another satellite leader that calls Canada home. The company provides advanced systems and services for the broadband satellite distribution of digital data in a variety of point-to-multipoint applications. With an existing base in 35 countries worldwide, IDC is a leader in delivering IP-based satellite datacasting solutions. Applications for IDC’s products include high-speed Internet-via-satellite networks, corporate Intranets, distance education networks, radio networks, business radio networks, weather networks, financial information and paging networks. IDC is headquartered in Ottawa, has a U.S. sales office in Atlanta and markets internationally through an established network of partners and distributors.
“We are the typical Canadian high tech company,” says Barry Grant, a sales manager for Canada. “The vast majority of what we do is export–85 percent given that there are only 30 million Canadians.” In addition to having a history of being an export country, Grant says that Canada also boasts of being a technology innovator in the satellite industry. “One of the positives of being a Canadian country is that we were the first to launch a domestic commercial satellite [Anik 1 in 1972].”
However, with the world getting a lot smaller due to technology, Grant believes that being a Canadian-based company matters less and less to potential clients. It’s the quality of product that will get the clients to sign the orders, he says. Today, IDC is promoting its Superflex, a broadband satellite datacasting product. The device allows satellite users to distribute any type of digital data via satellite at high speed.
Since its inception in 1978, Norsat has called Canada home. The company designs and engineers products for use in the satellite wireless communications and cable television industries.
President and CEO Robert Booker says Norsat grew its business providing satellite-based television to the Arctic, “which is an obvious need for Canada. Since then, we have been involved with the design and deployment of satellite infrastructure products.”
In response to a major shift in the role of satellites in global communications, especially in providing universal access to the broadband Internet, the company has used its technology and engineering strength to aggressively pursue a role in the development and marketing of the next generation of satellite ground station components. In 1999, Norsat was named a preferred supplier of the outdoor unit (ODU) for Europe’s Astra-Net project, an innovative satellite network that will provide subscribers with two-way access to the broadband Internet.
As other broadband programs are announced, Norsat expects to leverage its technology, global distribution and existing customer base into similar opportunities. Norsat is also actively expanding its strategic relationships with companies throughout the satellite products and services value chain.
Not surprisingly, Booker believes that Canada’s history of being export-oriented has contributed to Norsat’s worldwide reputation in the telecommunications marketplace, noting, “We are very well in tune to the needs for support and technical supplies of our non-Canadian customers.” He adds that Norsat has many customers in the People’s Republic of China, and that is due in part because of the trade-support capability his company provides.
As to growth opportunities, Booker believes that the Canadian satellite business will follow the growth pattern of the satellite business as a whole. He expects, as many do, that growth will be strongest in the data broadcasting arena. However, Booker believes that the industry as a whole will be slowed down if standards are not opened. He says, “Open standards will promote the growth of the business, increase the volume, allow consumers to have a choice, and that will lower the cost of the system.” He warns, “If we stay proprietary, this business will remain a niche.”