Ciel Wins Slot From Canadian Giant
Amid an industry-wide consolidation trend, room still exists for startup ventures that can match good ideas with sound management, financing and regulatory support. Those ingredients all are in place at Ciel, a fledgling Canadian satellite operator that is maneuvering to become the first domestic competitor to Telesat Canada during the country’s 35-year history of providing commercial satellite services.
Ciel is controlled by Canadian companies Barrett Corp., Borealis Infrastructure Corp., and Smyth Satellite Holdings, while a minority stake in the start-up venture is held by Princeton, N.J.-based SES Americom. Borealis is an Ontario Municipal Employees Retirement System (OMERS) corporation that manages pension fund assets valued at $34 billion.
Kevin Smyth, a former executive with SES Americom and the would-be CEO of Ciel, put together the proposal that won the approval of Canadian regulators to give the company the broadcast satellite services (BSS) orbital slot at 129 degrees W, beating a competing application from Telesat Canada to use the same position.
Both submissions proposed delivering satellite capacity to the North American market and both had merit, said Richard Hiebert, manager of satellite authorization policy at Industry Canada, the country’s regulatory body that authorizes the use of radio spectrum. However, the Ciel application was chosen based on criteria such as the submission of a substantive plan, timely deployment of facilities and the ability to meet Canadian needs, he explained.
Industry Canada is working with Ciel to help ensure the company complies with all regulatory requirements and conditions of licensing for Canadian satellite operators, including Canadian ownership and control requirements. Once Ciel has demonstrated compliance, a radio license will be issued, authorizing Ciel to operate its satellite in the slot, Hiebert said. The 129 degrees W position covers all of the U.S. market but elevation considerations in parts of northeastern New England may make those areas difficult to fully serve from that orbital location.
Ciel – named after the French word for sky and heaven — is committed to covering all regions of Canada, making bandwidth available to potential users and working closely with both customers and Industry Canada, Smyth told Satellite News Senior Editor and Senior Analyst Paul Dykewicz. The company plans to offer wholesale satellite capacity to broadcasters, direct-to-home programmers, VSAT (very small aperture terminals) and enterprise networks, and educational and distance-learning networks as well as cultural and community organizations seeking broadband connections.
Smyth is no novice to start-up satellite operations. He was a driving force behind the launch of SES Americom’s service called Americom2Home that now provides direct-to-home satellite broadcast capacity in the U.S. market. Ciel’s management team also includes Gerry Wall, vice president of government affairs, who brings more than a decade as a consultant in regulatory affairs for the telecommunications and media industry sector. Scott Gibson, general counsel, is a former Can Com and Star Choice executive.
The Interim Plan
Ciel’s business plan calls for a phased approach that would place an existing in-orbit satellite in the 129 degrees W orbital slot to meet International Telecommunication Union (ITU) requirements that it be brought into service by Aug. 25, 2005.
“We have commitments for an interim satellite,” said Smyth, who declined to indicate whether the Ku-band spacecraft would be provided by the company’s part owner SES or another satellite services provider. If that required milestone is not met, both Ciel and Canada would lose the right to use the slot. Typical costs for building and launching a satellite is in the order of $235 million. Smyth expressed confidence in his company’s ability to fully finance its business plan through its ownership group.
No submissions were received for a second orbital position at 138 degrees West, and this position will remain available for assignment in accordance with Industry Canada’s policies. Ciel has indicated an interest in additional satellite positions and spectrum. The government generally responds to such interest using a competitive process, and government officials will recommend a course of action in the near future. Ciel may be able to try gaining approval to provide Ka-band services at 118.7 degrees W, as well as C- and Ku-band services at 109.2 W. Both orbital slots have been requested for use by Canada through the ITU, and they are available to be licensed through the government.
“We are open to receiving applications and issuing licensing to other potential Canadian operators,” Hiebert said. Canada was a protected market until 2000, when the government changed the law to allow a competitor to Telesat Canada.
“In the late Nineties, many countries removed the monopoly status of their national satellite operators,” Hiebert said. “More competition means better prices for major users of satellite capacity to lower the cost of services.”
The longer-term plan is for Ciel to begin providing services to the Canadian market with a new satellite that the company would arrange to build, launch and put into commercial service by 2009. An existing in-orbit satellite that would be moved into the slot by Aug. 25, 2005, would be able to serve the U.S. market but Ciel would need approval from the Federal Communications Commission (FCC) to pursue such an operation.
“We expect to work very hard to earn future licenses from Industry Canada and develop an array of services,” Smyth said. “If we secure additional spectrum, beyond 129 degrees, we will develop a fleet of satellites that will allow us to tap emerging trends in the marketplace.”
One such trend is growing Canadian interest in broadband, Smyth said. “In addition to our Canadian market focus, we will be looking at export opportunities,” Smyth confirmed. “There has been a trend toward Canadian satellite operators providing services in the U.S. [market], and that means we could have customers on both sides of the border. A Canada- first approach is the law of the land in Canada and we will respect and adhere to this policy in all our business activities.”
Procurement Process
Darlene Freeman, vice president of global sourcing at Luxembourg-based SES Global [SES], said a key in the “technical excellence” of the SES fleet is that the in-house engineers work closely with their business-side colleagues to buy high quality spacecraft that meet customer requirements.
“In addition to upcoming activity for Ciel, SES is very active in the industry with Requests For Proposal (RFPs) for Sirius IV and AMC-17 already issued, with RFPs for additional replacement spacecraft planned for the fourth quarter of this year,” Freeman said.”Supporting launch-vehicle RFPs are planned for mid-year 2005. This amount of activity within one time period provides an excellent opportunity to leverage our combined buying power to the increase the value proposition for the SES family.”
Ciel’s satellite control facilities will likely be based in or near Ottawa, Smyth said. In arranging for satellite uplink services, Ciel plans to respond to customer requirements to determine the best location for such facilities. Options include building its own facilities or using those of a third party, including those belonging to rival Telesat Canada.
(Richard Hiebert, Industry Canada, 613/998-4333; Darlene Freeman, SES Global, 011 352 710 725 554; Tim Logue, Coudert Brothers, 202/736-1816; Kevin Smyth, Ciel, 416/848- 1456)
Competing With A One-Time Monopoly
“The satellite industry has not seen very many new projects in the last four years, but Ciel seems to have put together a very good combination of experience, funding and regulatory backing,” said Tim Logue, a telecommunications consultant in the Washington office of the Coudert Brothers law firm. “It appears that just as some other segments of the satellite market are consolidating along the lines one would expect of a mature market, new ideas and new growth is coming at the heart of the business — video. It’s very encouraging.” Canadian broadcasters have gone on record with Industry Canada to support the creation of a competitive marketplace in the country.
“We believe that Ciel directly addresses this need and we are optimistic about our opportunities in the Canadian market,” said Ciel’s Kevin Smyth said. “We will try to work with customers to earn their trust and to improve their business by being the best supplier of satellite capacity. Understanding customer requirements and building them into our satellites would enhance our value. We will offer what broadcasters and other customers in Canada need.” The goal will be to add value through the expertise of Ciel’s management. Discussions already have taken place with Canadian broadcasters about using Ciel’s satellite services.
“We hope to develop a fleet of satellites,” Smyth said. “We expect to work very hard to earn future licenses from Industry Canada and develop an array of services. We will try to work with customers to earn their trust and to improve their business by being the best supplier of satellite capacity. We would look to tap emerging trends in the marketplace.”
One such trend is growing interest in broadband. Other services would include providing in-orbit capacity for cable TV and telecommunications. “Our dream scenario is to lease our capacity to reputable, solid customers, such as cable operators and DTH services providers,” Smyth added.
The challenge of breaking into the Canadian satellite operating marketplace that has been the exclusive domain of Telesat Canada for the past 35 years is “not going to be easy,” Smyth said. However, demand clearly exists for more capacity.