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Satellite Firms Benefit As Users Gobble Up More Bandwidth

By | May 1, 2008

      Rapid advances in wireless communications and display technologies are transforming how, when and where people receive and consume information, and these changes are creating booming demand for bandwidth that promises to benefit the satellite industry.

      Consumers are snapping up high-definition (HD) televisions as prices for these devices fall and screen sizes increase, and programmers are creating more channels that operate in HD. Meanwhile, voice-centric cell phones are giving way to video-enabled devices that feed the public’s appetite for entertainment and news on the go. “Both trends are going on at once,” says Maury Mechanick, a veteran satellite executive and attorney with the international law firm of White & Case LLP, and this adds up to an information-rich environment that plays well to the strengths of satellite companies across the board, he says.
      Moreover, consumer demand for advanced mobile and home-based communications services is rising at a rate that many in the telecommunications industry might not have anticipated, says Edward Berger, vice president of business development at Intelsat in Washington. He recently traveled to Singapore and was surprised to see riders on the high-tech city’s subway watching movies on handheld devices. “I was skeptical, but this is happening and it’s happening now,” he says. “People’s lifestyles require anytime, anywhere video … and with the low cost of equipment and adoption of the small screen, demand is exploding. Obviously this is very attractive to a leading operator such as ourselves.”
      Satellite firms have pointed to HDTV for years as a potential growth driver, and now that hope is becoming reality, says Nick Thompson, managing director of Arqiva Satellite Media Solutions. Arqiva, of Hampshire, England, provides infrastructure for broadcasters and other communications companies. With more HD sets in the hands of consumers, Arqiva expects the number of HD channels broadcast to rise around the globe, helping boost demand for satellite capacity and ground systems to handle the large amounts of data needed to carry the high-quality pictures and sound, Thompson says. “HDTV is here and now. We see this as a very exciting development.”
      Even as satellite companies rejoice as the pipelines they operate carry ever-increasing amounts of programming to consumers, engineers are looking for ways to lower the cost of these transmissions. Koby Zontag, CEO of RRSat Global Communications Network Ltd., of Shikmim, Israel, says some programmers have been unable to afford the cost of distributing HD material, so they have delayed introduction of these services, but lower prices could significantly increase demand for HD transmission services. “We’re starting to see some growth, but not as much as we had expected,” Zontag says. “Some channels cannot afford the bandwidth. … If we lower the amount of bandwidth needed, I believe it will help growth.”
      Mike Cook, senior vice president of sales and marketing for Hughes Network Systems’ North American division, agrees that more HD programming likely will appear if broadcasters can transmit it to consumers for more efficiently. Hughes, of Germantown, Md., is working on techniques to squeeze the larger HD transmissions into less space, which would likely drive down the price of satellite and terrestrial links to carry programming to viewers. “Technology is advancing in such a way that we’re able to deliver HD [programming] much more cost effectively,” says Cook. New compression techniques mean Hughes can now transmit HD signals for a fifth of the costs seen three or four years ago, he says.
      These developments, combined with the rapid spread of receivers capable of handling HD signals, are expected to spur more programming suppliers to offer material in HD, which in turn could cause the HD phenomenon to spread. For example, Hughes is seeing interest from customers that want to use HD technology for in-house TV networks used to reach employees and customers, Cook says. “We’re seeing a striking desire to use high-definition programming even for internal applications,” he says. “The technology is coming together to stimulate this demand.”
      HD or not, television channels are proliferating as the cost of creating programming declines and options to distribute it, such as the Internet, increase. “It’s very easy to create your own TV channel now,” says Zontag, who notes that “there are niche channels in Asian ethnic communities that [in the past] wouldn’t even think of having channels.” These channels are attracting interest from people in other parts of the world who have ties with the communities where the programming originates. “The world is a much smaller village, and all these channels want to be on the Internet so they can reach people wherever they happen to be,” Zontag says.

      Beyond TV

      Another area that shows particular promise for satellite- and ground-based telecommunications providers involves digital signage, says Cook. Flat-panel displays with constantly changing messages are showing up in droves in public spaces worldwide — from subways and gas stations to airports, shopping malls and even restrooms — and these displays need access to data-transmission facilities to stay up to date. “If you go out five to 10 years, there are going to be screens everywhere,” Cook says.
      Digital systems are particularly attractive because of their flexibility. They allow the transmission of essential information alongside ads and can be updated and reconfigured instantly. Advertisers have caught on to the advantages digital technology offers and are embracing it as a means of reaching consumers who have grown accustomed to interacting with high-tech devices, says Thompson. Marketers can be expected to become even more interested in creating and maintaining networks of screens as old-fashioned paper-based ads gradually diminish in popularity, “Sticking sheets on walls is basically disappearing,” says Thompson.
      Another reason digital signage shows so much promise is that programmers and advertisers are eager to find new ways to reach people at a time when consumers are being bombarded with more information sources than ever before, says Gary Hatch, CEO of ATCi Inc., a ground-systems supplier in Chandler, Ariz. The constant stream of messages can lead to information overload, and this poses a challenge for anybody who wants to connect with consumers. “It’s hard to capture eyeballs” when people have so much to choose from, he says.
      As companies grow more dependent on broadband connections to distribute television programming, advertising and other information, they are also in need of robust back-up systems, says Cook. Whereas a sluggish dial-up modem may have been sufficient to kick in when a relatively slow ground- or satellite-based line failed in the past, today’s data-rich applications demand speedy secondary links to be at the ready in case something goes wrong with a primary connection, he says. “They need something more effective and resilient,” Cook says. This is good news for satellite operators, which can easily step in when a terrestrial connection fails. Today’s more robust satellite systems are even better than their predecessors at providing the kind of fast back-up connections customers need.
      Satellite companies that serve people on the move and in remote areas are benefiting from the trend toward distributing more information and entertainment in an ever-growing number of places. While many mobile satellite services firms in the 1990s had what proved to be unrealistic marketplace expectations, the sector today is taking advantage of an environment where portable information devices are becoming ubiquitous. Consumers accustomed to video on their cell phones and information screens seemingly at every turn are going to want access to those services when they leave populated areas, board airplanes or take a cruise, Berger says. “Consumers want [service] anytime, anywhere, and whatever it takes, the companies will be there.”
      In addition, military units and public safety agencies are becoming more dependent on satellite technology to accomplish their missions during disasters, Cook says. Technological advances mean satellites can efficiently and reliably deliver broadband signals to fast-moving vehicles on rough terrain or airplanes crossing the ocean, making mobile satellite services particularly valuable in today’s communications environment, he says.
      Even in the most advanced countries, satellite systems are often the only modes of telecommunications left standing after major disasters, such as hurricanes, says Mechanick. After Hurricane Katrina devastated New Orleans and other parts of the U.S. Gulf Coast in 2005, the loss of terrestrial communications systems left rescue crews limited to satellite systems to stay in touch and coordinate relief operations, he says.
      Another development that stands to benefit the satellite industry during the next few years involves ongoing efforts to integrate transmission systems in orbit with those on the ground. Telecommunications regulators and satellite companies have worked together to develop protocols to allow satellite frequencies to travel over terrestrial transmitters. Mobile satellite systems with so-called ancillary terrestrial components, or ATC, are now in development.
      Cook also points out that satellite companies are helping create opportunity in parts of the world that have not traditionally had the most up-to-date telecommunications facilities. These developing economies, he says, are using many of the advanced technologies that are showing up in the marketplace to power innovation and help their people live better lives. “It is foolish to think that because an economy is still developing there is not the ability or desire to buy sophisticated applications,” Cook says. “They’re effectively leapfrogging. … They want the latest [technology] to continue to empower the economy to grow.”

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