Bell: ‘We Are A Bigger Industry Than Even We Imagined’
[10-12-07 – Satellite News] Throughout the last three years, the global teleport sector has posted revenue growth of 17 percent, while the number of teleports operated by commercial and broadcast companies has increased 22 percent to nearly 1,800.
While the growth has been significant, there has been little change in where teleports are based, with 66 percent still in industrialized nations, according to "Sizing the Teleport Market 2007, a study of the global market released Oct. 9 by the World Teleport Association (WTA). This is the organization’s second study of the global teleport market, which debuted in 2004.
The United States remains the leader with its 425 teleports accounting for 24 percent of the world’s teleports. The United Kingdom stands second with 59 teleports, or just 3 percent of the market.
The greatest growth was in the Middle East, which now has 55 commercial teleports, up from 35 in 2004. Europe posted the slowest growth with less than a 5 percent gain in the number of teleports.
Robert Bell, the WTA’s executive director, discussed the findings and changes in the global teleport market with Satellite News.
Satellite News: What were the major surprises in the study?
Bell: The relative sizes of the commercial and broadcast markets for teleports was one surprise. Globally, commercial providers operate 57 percent of the world’s teleports, account for $3 billion in annual capital spending and employ about 73 percent of the teleport labor force. Broadcasters, by contrast, operate 43 percent of the world’s teleport and account for only about $875 million in capital spending and employ only 27 percent of the ground segment work force.
It is surprising to WTA that the technology and vendor industry tends to target broadcasters for sale of everything from earths stations and RF equipment to network management and content management systems. Perhaps they undervalue the power of the commercial teleport market. The media and entertainment industry still buys a lot of earth stations and RF equipment for receive-only sites think of the tens of thousands of cable head-ends around the world – but when it comes to significant facilities involved in program origination, the teleports appear to be a hot spot.
Another surprise was the fact that, despite the common wisdom that emerging markets will provide most of the world’s telecommunications growth, there was no change in the proportion of teleports in industrialized and developing nations between 2007 and 2004. Why have developing nations not become the growth leaders for teleport facilities? Unlike mobile telephony or Internet access, teleports provide services to mature markets that demand custom solutions. These markets take time to develop. Historically, teleports also flourish in markets where telecoms have been liberalized, and developing markets tend to lag in the effective liberalization of monopoly regulatory systems. As technologies like mobile telephony and Internet become more firmly embedded in developing nations, they will create demand for the services and expertise that teleport operators provide.
Satellite News: You said the number of teleports was much higher than anticipated. What does this say about the state of the satellite industry?
Bell: We are a bigger industry than even we imagined. Our survey cites a 22 percent growth in the number of commercial teleports, 17 percent growth in their transmission service revenues and 19 percent growth in their capital spending. Over the last three years that represents strong performance from an innovative sector in a healthy market. To quote from the report, "This growth in infrastructure reflects healthy market conditions since the last survey was published in 2004. At that time, the telecom sector was in the early stages of recovery from the devastating telecom recession. The teleport sector was at the bottom of the cycle, and the growth from 2004 to 2007 reflects in part a climb up from a low point in its history. The 2004-07 period was also notable for as some regions experienced the strongest growth where there was an excess of difficult events, from terrorism to invasion and military conflict to unprecedented natural disasters. These created a sustained demand for video, voice and data via satellite, which in turn created opportunities that entrepreneurs and multinationals have been quick to seize.”
As to the future, with the global roll-out of HDTV in progress, the 2008 Olympics in Beijing and the explosion of rich media content on the Web, in hybrid Web television markets and even in mobile, the future looks bright.
Satellite News: What do these findings mean for broadcasters?
Bell: Over time I would expect broadcasters to operate fewer and fewer facilities and to outsource more and more of their program origination and distribution. Comparing the U.S. to other markets, we find that broadcasters operate only 25 percent of teleports, whereas in most of the world, the balance is about 50-50. There are many factors at work, but one of them is the simple fact that competitive commercial teleports got their start in the U.S. earlier than anywhere, with the exception of the U.K. The greater maturity of the industry has meant that more of the broadcast workload has been transferred to them. Traditional TV is a business under severe challenge from other sources of entertainment and information, as others will soon learn, and it would be surprising if broadcasters did not find it increasingly difficult to justify operating their own dedicated teleports over the long term.
Satellite News: Where are the growth hotspots for the next few years?
Bell: Israel saw a 255 percent increase in the total revenue of commercial teleports. Whatever the number of teleports between 2004 and now, it clearly suggest strong growth. The past three years have seen the emergence of significant players in the region, including RRSat. Israel is a nation with a good economy and standard of living, which as we know, sits in the midst of a region that has generated a tremendous amount of global news. It is no surprise that entrepreneurs have been quick to seize the opportunity. Our business is really driven by the need for images, data and communication. So teleports rise and prosper in parallel.
In each nation that experience fast growth, the story is the same: positive local factors that have been seized on by enterprising companies. Our global study has not pinpointed the reason in every case. However, according to the Intelligent Community Forum, which studies the impact of broadband and communications infrastructure on economic growth, Internet usage rose by 495 percent in the Middle East over a recent period. This type of demand and appetite will impact our industry.