That’s A Wrap: SATELLITE 2001 Achieves Stellar Success

by Kelly Holder

The satellite industry traveled a difficult road during 2000 and into the first half of the new millennium. Through all the whisperings of mergers and consolidations, the loud grumblings of Wall Street and skittish investors, and the overall questioning tone of the technology sector, the industry has managed to keep its hands on the wheel, and its eyes on the road.

This year marked the 20th Anniversary of Via Satellite’s international exhibition and conference. Attracting more than 6,200 attendees and 225 exhibitors, spread out over 50,000 sq. feet, SATELLITE 2001 was the biggest and best to date.

With panels ranging from increasing profits to manufacturing the perfect bird to building a successful satellite Internet business, conference attendees were treated to four days of interactive sessions, networking receptions and day-long seminars, where many, if not all of their questions were answered.

During the course of those four days many of the same themes surfaced: increased competition from terrestrial operators; the battle for market share; lack of investors; the push for consolidation; and regulatory hurdles. Here are just some of the highlights.

Global Industry Leaders Speak

The opening general session traditionally marks the start of the SATELLITE 2001 conference. And did this one ever start off with a bang! The $5 billion acquisition of GE Americom by SES Astra was announced to a crowd of close to 1,000 making it the hot topic of conversation during the entire conference. This combination of SES and GE into SES Global will create the world’s premiere satellite broadband services provider and generate $1.3 billion in annual revenues, said Romain Bausch, director general of SES Astra.

R. Douglas Kahn, president and CEO of Panamsat Corp., said the merger between GE Americom and SES Astra is “evidence” that the consolidation that had been expected to take place in the industry now is occurring. “They’ll also come to understand that larger isn’t always better in every regard,” Kahn said. Cultural differences and the challenge of operating a global organization with major operations in different continents will be challenges for the combined company to overcome, he added.

Partnerships and alliances will be driven by the need to provide total solutions to customers, said Connie Kullman, Intelsat’s director general and CEO. “Customers want solutions, not the need to deal with various people,” Kullman said.

Other top executives suggested that their organizations may be involved in deals of their own within the next year and that the industry’s investment in new applications will be slowed to match the tepid demand from customers.

New applications, including Internet-related services and streaming media, will continue to be rolled out but less slowly than previously expected due to weaker than anticipated market demand, several panelists said.

Challenges for the satellite industry in offering new services include learning to interface with terrestrial networks in “a seamless manner,” Kullman said. That task will involve more effectively managing software to distribute content in the right way, he added.

John Mattingly, president and general manager of satellite services at Lockheed Martin Global Telecommunications, said the satellite industry needs to expand into new services carefully while it tries to rebuild its credibility with Wall Street. “To me, earning back the respect of Wall Street is the key to fulfilling the future promise of the industry,” Mattingly said.

Tough Times In A Tough Market

The world’s top launch vehicle service providers are struggling to succeed financially in an ultra-competitive market. Keys to success, according to the officials, are reliability, dual launch options, a proven track record, and schedule assurance. Even if a launch services company demonstrates these traits, however, profit margins remain thin as the four major rocket lines compete for business. Despite the difficult environment, each of the companies is investing in new rockets and/or related services that will allow spacecraft operators to lift increasingly heavy payloads into orbit.

“There is no doubt that this is a commodity market,” said Wilbur Trafton, president and general manager of the Sea Launch Co. The launch vehicle sector, he added, is the most competitive part of the satellite industry.

“When you have oversupply,” he continued, “you reduce costs or margins. This has happened over the last few years and will continue over the next few.”

Arianespace’s Senior Vice President, Philippe Berterottiere, said although the satellite market is in a period of recovery, with far more satellites ordered last year than in the previous year, technical problems and financial difficulties remain. As a result, he said, there is a slow start for new satellite applications.

The one issue on which all the executives agreed was the need for continuing reliability. “Our number one priority is reliability,” underscored Trafton, “or we won’t be in the business for very long.”

The Battle For Broadband Supremacy

The telecommunications world is bracing itself for a battle for market share in the broadband services sector. The battle will be fought between the satellite service providers and their terrestrial counterparts, both on the wireless and wireline side.

According to Michael Cook, vice president and general manager at Hughes Spaceway, by 2004, there will be 70 million homes that will have access to the Internet and only 35 million will have broadband access. Additionally, 30 million to 40 million homes won’t have any access to terrestrial broadband services in that time. But that will not stop content providers from creating the high bandwidth applications that users will be demanding in the future.

What is driving the need for new and better broadband delivery systems is a variety of high bandwidth applications, such as video-on-demand, live streaming video and distance learning.

“We are in a phase of development in the market where the availability of bandwidth is key,” said Cook.

“The race is on to fill the bandwidth need. Those companies that own their own networks can cost-effectively deliver next generation broadband services will win the race,” said Cook.

And when it comes to the race, satellites stand a good chance at winning.

But a warning came from Jean-Francois Gambart, Alcatel’s vice president of marketing and business development. If the terrestrial carriers are allowed to continue grabbing spectrum–notably for 3G wireless and other broadband applications–then the satellite industry’s future will be “at risk” from overpowering competition.

In the end, there will most likely be room for a variety of broadband players, be it terrestrial fiber, mobile and fixed wireless and satellite.

“Satellite and terrestrial will co-exist and both will succeed,” said Cook. “But [the satellite guys] are going to give the terrestrial guys a run for the money.”

Satellite Executive Of The Year Luncheon

The luncheon ceremony honoring Eutelsat Director General Giuliano Berretta as Via Satellite’s Satellite Executive of the Year 2000 mixed humor with straight talk about perils the industry faces in the roll out of broadband opportunities and value-added services that go beyond traditional broadcasting. Despite the potential pitfalls, Berretta offered an optimistic view of what the industry could accomplish in meeting the communications needs of the future.

A savvy assessment of the market for interactive, two-way services and a growing alliance between satellites and computers will help to speed the industry’s growth, Berretta said. Berretta also echoed comments that he offered last year advising attendees that the enemy is “outside” the industry. “We should not be like gladiators fighting each other for nothing,” Berretta said. That view is supported by an emerging trend of consolidation within the industry and a need to team up to gain regulatory relief, he added.

The United States is one of the worst offenders in imposing regulatory rules that delay and sometimes prevent satellite-related exports, Berretta said. Restrictive U.S. policies on technology transfers to friendly nations “damage” the American satellite industry, he added.

On the consolidation front, Berretta suggested that Eutelsat would look for a merger partner during the next year, following the announced purchase of GE by rival SES Astra. Berretta joked that 1999 Satellite Executive of the Year and GE Americom CEO John Connelly was setting an example by winning the award as the industry’s top executive and then finding a “marriage” partner. “Maybe with the bouquet that John is throwing to me, I might get married by next year,” Berretta said. In addition, Berretta amused the attendees at the luncheon by saying he fulfilled his boyhood dream of achieving success in the cinema and space industries by receiving the Satellite Executive of the Year award, which he described as the industry’s “Oscar.”

Looking Ahead To Next Year

SATELLITE 2001 offered insights into the direction the industry is headed. It was a source of information, an opportunity to network and a chance to catch up. Whether it was a manufacturer, a subcontractor, a service provider, a fleet operator or an end user, one theme emerged from all of them: The commercial communications satellite business will continue to grow and innovate. The leaders and dreamers in this business will keep bringing space technology back to Earth in ways that benefit people and businesses. Will all of these systems make it to market? Probably not. But that will give all of us lots to talk about next year at SATELLITE 2002, March 6-8 in Washington, DC.

Kelly Holder is Via Satellite’s managing editor.