Multimedia Matters: Highlights Of 2002–Few And Far Between

By | December 1, 2002 | Via Satellite

by Theresa Foley

The satellite industry is finally ready to close the books on what may be the worst year in a decade or more. With an oversupply of capacity and an underwhelming number of new orders in 2002, coming up with a list of “highlights” in the multimedia arena is a challenge. On the positive side, satellites have a good opportunity to contribute to homeland defense, industry streamlining will eliminate weaker players and the noise level that has dragged the satellite industry down since the collapse of some of the big LEO ventures a few years ago is mute.

Broadband and multimedia satellite projects are fewer in number than at the year’s start, but there were too many of them anyway. So, in this regard, the slim-down is a good thing.

Satellite cheerleaders can no longer bedazzle outsiders with Powerpoint charts showing limitless growth ahead. Demand for FSS transponders is down, and capacity in use has declined to between 60 and 70 percent of what’s in orbit, according to Telastra. Despite the glut, another 60 satellites with 1,500 more transponders are under construction for launch in the next three years. The silver lining behind those gloomy numbers is that FSS operators are still making high margins and their prices for capacity are falling. They might not like it, but overcapacity plus lower prices can result in a burst of creativity that produces new applications. As a result, more good things could occur in a few years. In particular, national security and defense applications may be poised to take up the slack.

For years, we have watched a confusing broadband race. This year, little or no progress was made by major satellite broadband projects and Ka-band seems a distant prospect, despite the apparent survival of Hughes’ Spaceway project. Spaceway is still active and pursuing the enterprise user, while Loral Skynet plans to enter the market, launching from its Cyberstar customer base. Hybrid networks of fiber and satellite capacity working together have finally won acceptance from larger customers, and more large multinational companies are using satellite VSATs combined with cheap fiber to connect their wide area networks.

Intelsat launched a broadband service over Latin America mid-year and will expand this product to other regions in 2003. The satellite operator is providing a turnkey system to regional operators who sell the service to end users, hoping to establish a new application as the company awaits better timing for its initial stock offering.

Roger Rusch, a veteran satellite broadband analyst who heads Telastra, says Charlie Ergen’s plans for broadband are worth watching, as he may still acquire pieces of Hughes and Panamsat, but that he doesn’t appear to be truly interested in developing broadband by satellite transmission. Rusch has long been a skeptic but he continues to hold out hope, saying, “There is a small broadband satellite business if it is properly executed.”

The satellite industry still does not know how to size its desire to serve up bandwidth with the buyers’ appetite to consume it. The small group of current satellite broadband users has proven to be bandwidth hogs, according to data from this year’s usage. Rusch’s interpretation is that satellite systems will have trouble if they promise customers unlimited access.

Another big reversal in 2002 came in growth trends for international use of bandwidth for IP communications of the type that serves the global Internet. This use had been doubling every year on trans-continental fiber systems. In 2002 however, it slowed to a growth of less than 40 percent and in some places even shrank, according to Telegeography, a Washington, DC-based consultancy. Growth in Europe and Asia stalled most noticeably, as companies went bankrupt and networks shut down.

Players in the Far East are re-examining the rush to satellite broadband, as some of the early attempts to provide consumer broadband failed to attract many customers. Satellite attorney Peter Nesgos sees benefits from a necessary change of course. “Operators might decide to focus the business case on emphasizing underserved areas versus going head-to-head with cable, or exploiting different applications such as digital cinema, e-learning, voice-over-IP and multimedia conferencing,” he says.

Despite the troubles, some promising projects are persevering. Besides Spaceway, Shin Sat’s IPstar satellite, which would bring innovative technology to a region that is underserved by terrestrial wireline infrastructure, presses on, Nesgos notes. And other smaller startups are hanging in there, such as little Newsat, which is trying to carve a niche in third world markets with no fiber by selling lower-priced capacity on an end-of-life satellite, according to its Chairman, Markus Pedriks, a London finance executive who now oversees the company.

As 2002 draws to a close, it has become clear that patience and perseverance will be key ingredients to building the satellite multimedia market for the next few years.

Theresa Foley is Via Satellite’s Senior Contributing Editor

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