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Twenty Years Years Of Via Satellite: How The Commercial Satellite Industry Recaptured Public Attention

By , | December 1, 2006

      While the 1957 launch of Sputnik 1 inspired fear and trepidation in the West about satellites, the 1962 launch of AT&T’s Telstar 1 inspired boundless optimism about the potential for the Space Age to improve the daily life of the average American and to connect the entire globe. The commercial satellite industry did indeed change the world, but most developments in its early years were invisible to the average person.

      Throughout the past two decades, the prominence of the satellite industry in the public’s eye has increased as the industry has developed a wide range of consumer-oriented services. As Via Satellite magazine celebrates 20 years of publication, we review the business and regulatory changes that have placed the satellite industry in its rightful role as the most exciting industry on (and off) the planet.

      Satellite communications began as a public-private partnership, not as a government monopoly. The Eisenhower administration directed NASA to cooperate with AT&T in the development of the Telstar system, hoping to encourage the development of competing private satellite carriers. NASA helped develop the underlying technology, and AT&T provided the financing, hopeful that satellites could replace ocean cables, providing international long-distance service at a fraction of the cost, and making transatlantic television transmissions possible. Telstar’s transatlantic TV broadcasts in July 1962 created a public sensation, but the Kennedy administration feared the extension of AT&T’s telephone monopoly, and saw international satellite communications as an instrument of foreign policy and global social reform.

      Fixed Satellite Services

      Congress passed the Communications Satellite Act of 1962, creating the U.S. satellite monopoly Comsat. Two years later, the United States and 10 other countries formed Intelsat, an intergovernmental consortium with Comsat as the manager and U.S. signatory. Through Intelsat, Comsat commenced the use of the geostationary orbit and developed basic Fixed Satellite Services (FSS), such as international long distance and TV distribution.

      Under President Nixon’s Open Skies policy, the U.S. Federal Communications Commission (FCC) began allowing domestic satellite operations in the United States in 1970. Companies such as RCA Americom soon began backhauling programming to local U.S. cable systems, giving rise to what would become Ted Turner’s TBS Superstation and opening the floodgates of new cable content. The mid-1970s saw the birth of Mobile Satellite Services (MSS) for maritime users. Comsat launched Marisat, the first commercial MSS system, in 1976. Inmarsat, the intergovernmental consortium formed in 1979, used leased capacity on the Marisat satellites prior to launching its first satellite in 1990.

      Satellite communications were not as high-profile with the public when Via Satellite debuted in 1986, but the next two decades would see the evolution of a highly competitive industry that spawned a host of new consumer-oriented services.

      After intense lobbying by Panamsat Corp. and others, the Reagan administration decided in 1984 that alternative international satellite systems were “required in the national interest.” This determination allowed the FCC in 1985 to adopt its Separate Satellite System Policy, under which the agency licensed a number of private international FSS operators. Panamsat launched its first satellite in 1988, initially providing service to Latin America before gradually expanding its fleet, services and reach.

      FCC regulation, however, constrained separate systems such as Panamsat and the domestic satellite operators from fully competing. Separate systems generally could not provide domestic U.S. service, and domestic satellite operators were greatly constrained in the extent to which they could provide international service. All of this changed in 1996, when the FCC issued its Domestic Satellite Consolidation Order (Disco) 1, allowing all U.S.-licensed spacecraft to serve all areas within their geographic coverage. In its 1997, Disco 2 decision, the FCC took the next step and generally opened the U.S. market to the provision of service by “foreign” spacecraft. Now even more avenues were available for providing new and innovative services to U.S. consumers. 

      In 2000, the Open-Market Reorganization for the Betterment of International Telecommunications (ORBIT) Act mandated the full privatization of both Intelsat and Inmarsat. Both entities were privatized, and consistent with a trend that has pervaded the industry since the dotcom bust. Private-equity firms took major stakes in each company, and the privatized Intelsat acquired archrival Panamsat in 2005.

      Direct-To-Home Services

      The satellite-TV industry was born when consumers began using large C-band antennas to receive cable programming that was being backhauled on domestic satellite systems. By the mid-1980s, programmers began to scramble their signals and charge for access. After several attempts to develop direct broadcast service (DBS) satellite systems failed to get off the ground (including Comsat’s), the cable industry’s Primestar partnership began service in 1991 using smaller Ku-band antennas. Primestar’s business ultimately fell victim to competition from DirecTV, which launched in 1994 and soon acquired it. DirecTV might never have launched had it not partnered with Hubbard’s United States Satellite Broadcasting DBS business to share a single spacecraft between two DBS competitors. By the end of 1998, just four years after DirecTV launched and two years after Echostar launched, those two DBS operators had more than 10 million subscribers; today that number is nearing 30 million.

      The commercial success of DirecTV and Echostar was hastened by three crucial pieces of legislation. In 1988, the Satellite Home Viewer Act established the legal mechanism to deliver network and superstation broadcast signals to viewers in “white areas” where the public does not receive free primary services. The 1992 Cable Act effectively guaranteed DirecTV and Echostar the right to contract for the cable programming that their potential customers demanded, and the 1999 Satellite Home Viewer Improvement Act finally allowed consumers to receive local broadcast signals via their DBS providers.

      Mobile Satellite Services

      Although Inmarsat enjoyed great success as a provider of MSS, chiefly to commercial and governmental users, other early efforts to facilitate MSS did not fare as well. American Mobile Satellite Consortium, now known as Mobile Satellite Ventures, was created in 1988. The race in the MSS industry was fully engaged a few years later, with five entities pursuing big LEO (low-Earth orbit) MSS systems that promised global coverage and cellular-like services, and nine companies pursuing next-generation MSS systems at 2 gigahertz. Unfortunately, Iridium misjudged the market, and by the time it began service in 1998, the terrestrial cellular infrastructure had been built out to the point that Iridium’s multibillion dollar network could not compete as intended. Both Iridium and Globalstar were reborn through bankruptcy, with Iridium landing a contract with the U.S. Department of Defense that kept the system from being deorbited. Those bankruptcies dampened enthusiasm for this corner of the MSS sector, especially for use of non-geostionary satellites, and most of the 2-gigahertz licensees lost or gave up their licenses.

      In the meantime, a number of positive developments occurred. ICO, Mobile Satellite Ventures and others urged the FCC to authorize the deployment of an ancillary terrestrial component (ATC) that would permit the reuse of satellite frequencies to provide hybrid satellite/terrestrial offerings. Over the heated objections of terrestrial wireless companies, the FCC adopted rules that allow MSS operators to provide ATC in their satellite spectrum. Mobile Satellite Ventures and Globalstar hold ATC authority today, and others are expected to seek and receive similar authority soon. In the intervening years, Inmarsat gained access to the United States and launched two next-generation spacecraft that today offer half-megabit MSS service to notebook-sized terminals.

      The Next Generation

      Fortunately, the LEO system failures of the late 1990s did not put a damper on investment in other parts of the satellite industry. Satellite digital-audio radio service proved once again the potential for providing highly competitive satellite services to the mass market. In 1997, CD Radio, now Sirius Satellite Radio, and American Mobile Radio, now XM Satellite Radio, each paid more than $80 million for a license to provide satellite radio service in the United States. Satellite radio made its debut in 2001, and now both companies have impressive track records of subscriber growth. Some analysts now predict 44 million satellite radio subscribers in the United States by 2010.

      The FSS industry has not stood idly by, either. The VSAT business, which started as a means of connecting far-flung business locations, evolved into a modestly successful way to provide satellite broadband to consumer and mobile users. In 1996, Hughes launched its Direcway broadband VSAT service, and Gilat’s Starband followed in 2000. Both of these services used the Ku-band capacity available on existing FSS spacecraft, but the Ku-band did not provide the bandwidth or support the small antennas needed to provide satellite-delivered broadband to mobile users.

      NASA’s Advanced Communications Technology Satellite (ACTS) program may not get enough credit for its role in preserving the broadband capabilities of the Ka-band for satellite communications. The ACTS satellite was launched in 1993 as a taxpayer-funded way to explore the development of high-risk satellite communications technology. At that time, the FCC was poised to reallocate most of the Ka-band for terrestrial services. Fortunately, the FCC decided to retain access to a full 1500 megahertz of Ka-band spectrum for satellite broadband and has licensed a number of companies to bring the promise of Ka-band to the American public.

      The first generation of Ka-band satellite systems were both ahead of their time, and ultimately victims of the dotcom bust. Systems such as Teledesic, which envisioned a constellation of hundreds of satellites, did not develop beyond the early stages, and the first two Spaceway satellites were redeployed in 2005 to allow DirecTV to provide high-definition DBS. Also in 2005, demonstrating the success of the FCC’s Disco 2 policy in increasing consumer choices, Wildblue became the first entity to offer Ka-band broadband service to U.S. consumers using capacity leased on Telesat Canada’s Anik-F2 satellite. The full promise of the Ka-band remains to be realized, with Wildblue and Hughes expecting to launch dedicated Ka-band broadband satellites soon, and other companies in the wings.

      Today, commercial satellites continue to serve critical roles for both corporate and government users. They also are used more than ever to deliver service to the mass market — providing video programming and broadband to the home, digital radio programming to the home and car, and an array of new mobile voice and data services. The relevance to the public of remote sensing satellites such as those of Geoeye and Digitalglobe has increased tremendously along with the explosive popularity of Web sites like Google Earth and Mapquest that use satellite images. In addition, the ability of the satellite industry to rise to the occasion and provide reliable communications in the face of disasters like Hurricane Katrina has dramatically demonstrated the vital role of commercial satellites in the modern world.

      Thus, as we celebrate the 20th anniversary of Via Satellite’s first issue, we commend the satellite industry for producing the innovation, and regulators for providing the legal framework, that together have allowed satellites to recapture the public imagination.

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