Cover Story: Consolidation and Convergence Among Uplinkers
By Robert N. Wold
Their spirit continues, but many of the venerable teleports, uplinkers and switching providers, most of them less than two decades old, have been acquired and changed by a handful of new giants. The forces of consolidation and convergence are upon us.
In the business strategies for some of the new behemoths, Internet-centric seems to be in the driver’s seat and sister fiber is in the passenger seat. From the back seat, providing advice, old uncle television and aunt satellite do not wish to be forgotten.
Also Not Forgotten
Uplinkers Micronet, WIT, Watson of San Francisco, USEI and the Dallas-Fort Worth Teleport have new brand names. All of them first became units of ATC Teleports, but last September, the subsidiary of American Tower Corp. became, simply, Verestar.
Group W Network Services, Ascent Network Services, Atlantic Satellite, Waterfront Communications and Triumph Communications are a group undergoing a branding change by new owner Liberty Livewire, a unit of Liberty Media.
And the names UpSouth, Teleport Denver, National Gateway and Vyvx Los Angeles are not yet entirely out of use, but their owner, Williams Communications, wants them to have the Williams brand.
A Remarkable Story
American Tower (ATC) was born in 1995, a subsidiary of American Radio Systems, which owned broadcasting stations. ATC’s management recognized the dire needs of wireless communications companies for antenna sites, and the company went all out to acquire the best tower sites, erect antennas and rent antenna space to multiple broadcaster and wireless tenants.
An early acquisition target in 1997 was Micronet Inc., a large antenna site company, which also operated teleports and antenna sites at Glenwood/Vernon in northern New Jersey and at Cedar Hill near Dallas. The latter facility also had a terrestrial microwave network linking the big cities of Texas.
ATC’s scouts, who were interested primarily in the existing towers and tower sites, had less interest in the satellite antennas until they learned their virtues. ATC’s Anne Alter, director of investor relations, recalls, “The company quickly recognized the teleport operations as an infrastructure business poised to benefit from the growth in voice, data, and Internet traffic, and complementary to the wireless and broadcast infrastructure business pursued through its tower rental and services segments.” She added, “Since then, Verestar (ATC) has broadened its service offerings to encompass complete communications transport solutions.”
Verestar units today have more than 170 satellite antennas.
In 1997, ATC agreed to pay $70.25 million for Micronet, including its two teleports.
Next, in May 1998, ATC paid $30.5 million to acquire the well-known Washington International Teleport from Minneapolis-based Midcontinent Media.
In 1999, for an undisclosed transaction cost, ATC then acquired a second facility in the Dallas market, at Irving, known as the Dallas-Fort Worth Teleport. Next in 1999 came Watson Communications Systems of San Francisco, which owned 21 valuable Bay Area towers plus a teleport with 16 satellite antennas. The Watson acquisition was priced at $73 million, which included $18 million for the teleport.
For $100 million, at the end of 1999, ATC acquired ICG Satellite Services including its subsidiary, Maritime Telecommunications Network (MTN). The package included 13 antennas at the New York teleport in Holmdel, NJ, and 17 antennas at MTN’s site in Miramar, FL. MTN provides communications services to major cruise ship, oil and gas industries.
During 2000, five acquisitions were related to ATC’s teleport empire. First was General Telecom of New York, Miami and Los Angeles, a provider of international voice switching and exchange services for $30 million. Then came $60 million to acquire U.S. Electrodynamics (USEI), which operated 52 domestic and international satellite antennas at Brewster WA, Whitinsville, MA, and Kingman, AZ.
In October, days after the name change from ATC Teleports to Verestar, the company acquired the satellite business assets of Swisscom, a major telecommunications operator in Europe that had decided to discontinue satellite communications services. Verestar’s acquisition included 11 satellite antennas in Switzerland plus leased fiber links connecting New York and London.
Also acquired in October was Publicom Corp., a communications solutions provider to carriers and corporations throughout Latin America and the Caribbean region, for $31.4 million. Then Interpacket Networks, also a provider of Internet-related services for international Internet Service Providers (ISPs), was acquired for $63.5 million in December.
To date, the parent ATC has invested more than $4 billion to acquire communications sites, service businesses and “satellite and fiber network access” related businesses. Of this total, acquisitions for the ATC Teleports/Verestar subsidiary have cost more than a half billion dollars.
In the period from 1996 through 2000, the parent company’s operating revenues increased from $2.9 million to $735.3 million. During 1Q2001, Verestar’s revenues were $64.7 million, or 25 percent of ATC’s total. Data and voice services produced 85 percent of Verestar’s 1Q2001 revenues.
Kay Sears, a former Comsat executive who is Verestar’s vice president of global accounts, commented on the importance of Internet traffic. She said, “Globally, we have about five gigabits of Internet traffic coming through our ‘teleports’ right now, more than most ISPs in the world. It’s hard to believe that any teleport owner is unable to realize that teleports are uniquely positioned to take advantage of this kind of opportunity. Five gigs is a significant amount of traffic.”
With the name change from ATC Teleports to Verestar, incidentally, the company is discontinuing references to “teleports,” which are now called SNAPS, an acronym for Satellite Network Access Points, of which Verestar proudly has 11. Technical, or Television Operations Centers (TOCs), are now Network Operations Centers (NOCs). Knocks and snaps have already become the buzz words in Verestar’s growing global lexicon.
Liberty For All
Another group of familiar industry names now belongs to Liberty Livewire Corp. of Santa Monica, CA, a unit of the entertainment-oriented, fiber-oriented, Internet-oriented, Denver-based Liberty Media Group headed by John Malone and Robert Bennett.
The group’s temporary nom de plume, “the Livewire Broadcasting and Distribution Group,” had not been finalized at our press time. In any event, Livewire will be playing in the same sandboxes with Liberty Media and its vast investments in video programming, communications and technology in the United States, Europe, South America and Asia.
As described above, familiar company names that will likely diminish or disappear include Video Services Corp. (VSC) and two of its units, Atlantic Satellite Communications and Waterfront Communications; Triumph Communications Group; Group W Network Services; and Ascent Network Services.
Liberty Livewire was hatched in late 1999 when Liberty Media plunged into the motion picture and television post-production arena by acquiring the assets of Burbank’s Four Media Company and London’s Todd A-O Corp. From this base in post-production assets, Liberty’s next targets included electronic distribution providers.
In July 2000, the first two deals were cut.
Liberty acquired VSC of Northvale, NJ, in a $125 million transaction that included Atlantic, a New York teleport, and Waterfront, a New York switching center. VSC’s annual revenues of about $100 million came from engineering, production and distribution services.
Next came the acquisition of entrepreneur Paul Dujardin’s unique fiber-reselling enterprise, Triumph Communications Group, based in New York and London. Before his fiber years, Dujardin was a veteran in satellite-service reselling. This transaction was worth $29.4 million.
On February 1, 2001, the Viacom-owned Group W Network Services unit was acquired by Liberty in a transaction valued at $112 million. It includes the highly regarded teleport assets at Stamford, CT, and Minneapolis, plus Group W’s Asia Broadcasting Center in Singapore.
Group W had its origins in Westinghouse’s Group W Productions. Its history dates back to services provided to the syndicated Mike Douglas Show, which was produced at KDKA-TV Pittsburgh and distributed nationwide, pre-satellite, on videotape.
Ascent Network Services of Palm Bay, FL, a division of the Ascent Entertainment Group, was originally known as Comsat Video Enterprises and engaged in projects ranging from the Holiday Inn Network–featuring satellite delivery of motion pictures to motel rooms–to investments in Denver professional sports. Comsat Video evolved from a 1984 Comsat contract with NBC to engineer and construct the nationwide Ku-band earth station network that still interconnects NBC with its affiliates via satellite.
Musical Chairs, Indeed
Yet another four teleports with familiar names changed ownership only five years ago.
Although still known by many of today’s customers by their original names, they’re officially identified as “Williams Communications’ Vyvx Los Angeles Teleport” and so forth.
The four satellite teleport hubs of Williams Vyvx, which integrate satellite and fiber networks, are in Atlanta, Denver, New York and Los Angeles. All four teleports were acquired in 1996 from Denver-based ICG Communications, for an undisclosed amount. Teleport Denver, which ICG had launched in 1987, became Vyvx Teleport Denver. (ICG also sold its Satellite Services unit to ATC Teleports, as described above.)
The Vyvx Los Angeles Teleport is remembered as an industry grandfather, first known in 1975 as Western Union’s Steele Valley earth station farm, located at nearby Perris, CA.
In the New York area, National Gateway at Carteret, NJ–founded in 1983–became Vyvx Teleport New York.
In Atlanta, Williams acquired UpSouth, a corporation founded in 1983 by Bob Doty. His son, Bob Doty, Jr., continues to carry the flag in Atlanta and is Williams’ supervising director for all four of its teleports.
Vyvx “UpSouth” recently won a Loral Skynet Gold Level award for performing 4,653 error-free accesses during the year 2000. A second award, from the World Teleport Association (WTA), also honored Doty together with Laura Kenny, president of Williams Vyvx Services, and Wes Hanemayer, vice president, as the WTA’s “2001 Teleport Executives of the Year.”
Tulsa-headquartered Williams Communications completed building in 2000 what it refers to as the Williams Network, “the largest, most advanced, next-generation fiber-optic broadband network in the United States.” The 33,000 plus mile network connects 125 cities and various international gateways.
In addition to Williams’ marketing focus on fiber traffic, its Vyvx Services unit is busy managing “broadband media” traffic that includes TV program backhauls plus a digital distribution system for electronic delivery of TV commercials to local broadcasters nationwide.
At Williams Communications, fiber and satellite are brother and sister. In 2000, total revenues exceeded $839 million, of which approximately 80 percent was credited to Williams Network and approximately 20 percent to Vyvx Broadband Media.
According to Doty, 62 percent of Williams Vyvx teleport revenue now comes from Internet and other data traffic, and 38 percent from video. A year ago, he said, the split was closer to 50-50. The largest portion of Internet traffic is transported by satellite to the Pacific Rim.
Friends From Europe
During the past decade-plus, the U.S. teleport community has greeted arrivals in North America from two of Europe’s privatized telecommunications giants, British Telecom (BT) and France Telecom (FT).
BT’s North American Broadcast Services (BTBS) has its home and main control center at 20th and M Streets in Washington, DC, where a rooftop cluster of Ku-band antennas processes domestic and international traffic. Fiber connects DC with New York as well as London and Paris via New York’s Waterfront Switch.
BTBS is prepared to bring traffic from, or take traffic to, anywhere. Globally they have either owned or allied points-of-presence (POP) teleports in 17 worldwide locations. Satellites–and on many routes, fiber–connect the United States and Canada with Europe, Asia, Africa, the Middle East and South America.
The company’s architectural and technological jewel is its new Los Angeles Media Center, a state-of-the-art digital teleport in a striking new building at strategically located Marina del Rey.
Jon Romm, general manager of BTBS North America, says that traffic remains primarily of a television type, with Internet traffic being less than five percent. This year, however, he’s hoping to build Internet’s share up to 30 percent.
Globecast describes itself as “the global broadcasting and orbital IP (Internet Protocol) service arm of France Telecom,” which is listed on the New York and Paris stock exchanges. It’s a worldwide business with 27 owned POP teleports. Globecast’s hardware fleet consists of 42 mobile and flyaway satellite antennas. In Europe, the fleet recently added what may be the world’s first mobile IP satellite transmission truck.
Globecast America (GCA) is headquartered at the Miami international teleport site once owned by Hero Productions. Its other U.S. teleport facilities, control centers and offices are in New York, Los Angeles, Salt Lake City and Washington, DC, mostly at sites acquired in 1997 from Keystone Communications. Keystone had earlier assembled the assets of resellers Bonneville Satellite, Wold Communications, Hughes TV Network and IDB Communications.
All four of these ancestor companies were extremely active in the domestic backhauling of sports and special event TV. Today, backhaul revenues remain extremely important to GCA.
During 1999, GCA invested $50 million in facility expansions and upgrades. Robert Behar, the president and chief executive of GCA, who was honored as WTA’s Year 2000 Teleport Executive of the Year, was asked about his company’s progress in the IP segment. “A year ago,” he said, “we were 80 percent TV and 20 percent IP. This year the split has reduced to 90/10 due to the closing of so many dot.com companies.”
He added, “The traffic revenues from broadcasting and cable remain both basic and big for us. I don’t believe for one second that broadcast and cable will become less important.” He’s looking forward to the 2002 Olympic games next winter in Salt Lake City, where GCA expects to provide services to numerous U.S. and international broadcasters.
Norlight’s Teleport Chicago, located in adjoining Skokie, is an operating division of Norlight Telecommunications Inc. (NTI), which is in turn a subsidiary of Journal Communications Inc. (JCI). The original Journal Co. became known as JCI in 1987 but its ancestral roots date to the founding of the Milwaukee Daily Journal 119 years ago. For the past 64 years, the company has been employee-owned.
Known since 1995 as the Journal Sentinel, Milwaukee’s newspaper has remained extremely popular and influential in the state of Wisconsin. The company has also operated broadcasting stations since 1927; today, JCI’s Broadcast Group owns TV stations in Milwaukee and three other markets, as well as 36 radio stations in eight markets.
Satellite industry veterans will recall Midwestern Relay Co. (MRC), which was owned jointly by the Journal Co. and American Microwave and Communications Inc. In 1972, MRC began terrestrial microwave transmissions of radio and TV programming from Chicago through Wisconsin to Minnesota, displacing the business of competitor AT&T Long Lines much like Western Telecommunications was seizing AT&T’s TV business from Omaha west to Denver and Salt Lake City.
Journal took control of MRC in 1975 and Teleport Chicago was built in 1983. Upon acquisition of Norlight Fiber in 1991, the subsidiary’s name changed to Norlight Telecommunications. Its prescient melding of fiber, satellite and microwave assets has built one of the largest telecom networks in the Midwest.
Dave Pritchard, NTI’s director of satellite and video services, says that video revenue remains substantial and level but it is difficult to increase year after year. He lamented, “There’s only so many Oprahs in Chicago.”
Internet-related traffic, he said, is beginning to grow. Already, NTI is handling Internet traffic from its Chicago hub for the powerful new Internet2 network that is in development for major universities worldwide. This particular traffic, he said, is being uplinked to Intelsat’s 801 satellite above the Atlantic Ocean for delivery in Israel.
As to performance, Pritchard is especially pleased that Loral Skynet again selected his team for a Gold honor in its Uplinker of the Year awards. During the year 2000, Teleport Chicago performed 5,612 perfect uplinks, an average of more than 15 per day.
A Name That Hasn’t Changed
For several decades, worldly Atlanta has been a beehive for airline traffic, international trade, Olympics and other forms of sports and entertainment–plus television production and related communications services, to mention just a few categories. As with the air travel industry, Atlanta is uniquely positioned for both international and domestic satellite traffic.
Twenty years ago, Jesse Crawford began a small privately-held post-production facility that expanded into satellite-based services in 1984. Today, in addition to traditional sports and news backhauls, according to senior vice president Jim Schuster, Crawford Communications uplinks from its new 135,000 square foot facility about two dozen around-the- clock TV networks ranging from the Music Country channels for Brazil and Asia to the Travel and Learning Channels for North America.
Internet services, Schuster says, now represent 60 percent of Crawford’s teleport business but only seven percent of its overall satellite services business.
From Down Under
Television New Zealand (TVNZ) is that nation’s dominant local television broadcast network, owning two channels and a 75 percent share of local viewing. The networks are owned by the New Zealand government but are commercial.
If that’s not quaint enough, TVNZ is one of only a few TV broadcasting companies in the world which manages and markets one-stop shopping for third-party satellite transmission services to customers worldwide.
TVNZ Satellite Services leases full-time digital, multi-channel, contribution-feed capacity on two international satellites, New Skies’ 703 bird over the Indian Ocean region (IOR) and Intelsat’s 701 satellite over the Pacific Ocean region (POR).
In addition, TVNZ has allied with Canada’s Teleglobe and its extensive over-land and undersea fiber facilities to form what the two companies call “the world’s largest video transmission network.” The network also promises delivery of Internet-centric content.
Satellite feeds link at TVNZ’s Perth, Australia, teleport. Controls and bookings are managed at the TVNZ teleport at Auckland and at Teleglobe in Montreal. Full-time uplinks access the service from London, Perth, Singapore, Hong Kong, Sydney, Auckland and Vancouver.
With seven digital channels on its POR capacity and five on the IOR capacity, TVNZ Satellite’s General Manager, Sam Fairhall, says, “we and Teleglobe have the combined expertise to originate a video feed out of any region of the world that can then go live-to-air to any number of distribution mediums.”
Many of the satellite industry’s mobile uplinkers began as entrepreneurs, driving their satellite trucks to numerous “shoots” in a single week. Not all of these entrepreneurs found the business profitable because many had engineering skills that exceeded their commercial skills. Kim Vaughn and Craig Landis proved to be exceptions.
They began Los Angeles-based Vision Accomplished in early 1986, just when interference-free Ku-band frequencies first became available in the United States via RCA’s K1 and K2 satellites. Their predecessor mobile uplinkers, from 1980 to 1986, had to depend exclusively on C-band frequencies. The early vintage C-band trucks were also larger and more expensive.
In later years Vaughn and Landis decided to split, with Landis operating Vision Accomplished in Hawaii–where it has been successful–and Vaughn starting up the also-successful Transvision, headquartered in the suburb of Oxnard, northwest of Los Angeles.
For the year 2000, Loral Skynet honored Transvision with its Silver award for uplinking dependability. Transvision now has fixed earth stations in Asia, Brazil and Hawaii, the latter at the Kapolei teleport. Mobile and flyaway rigs are operating from Argentina, Asia, Australia, Brazil and Europe. Major assignments are expected at the 2002 Olympics at Salt Lake City.
Asked about Internet traffic, Vaughn replies, “The basic cross-culture aspect of the Internet itself really intrigues me. I believe the demand for satellite-delivered IP services will grow.”
Consolidation, Convergence And ?
During the past five years, there’s clearly been major changes in the uplinkers’ world.
The changes are more than the integration of two routes called satellite and fiber.
The sheer number of teleports has remained about the same, but new giants like Verestar, Liberty, Williams, BTBS and Globecast have forced consolidation, which has erased some familiar names.
Predictions of convergence–TV with the Internet, the Internet with TV–have influenced business plans, especially for teleport giants who are already buttering their croissants with Internet revenues.
In the midst of all this, a third “c” –compression–has also had a big historical influence on all players. The new digital world has changed the arithmetic.
Where is all of this going to take us?
Can we all just get along?
Robert N. Wold is based in California. His e-mail address is email@example.com