Applications: What’s Hot And What’s Getting Hotter

Picking A Winner Is Not Rocket Science

Successful service providers understand that identifying and meeting demand — and not simply allowing technology alone to be the driver — is what this game is all about. Davidson wants to see a strong management team in place — along with access to capital — and only then is he likely to encourage a business plan to move forward. The target needs to be a large underserved market, “with a significant window of opportunity before terrestrial competition cuts into market,” he says.
Baugh emphasizes localized content and an understanding of local needs, rather than simply trying to apply the same model everywhere is a key to success in the video space. “In the DTH market in Vietnam for instance, although Western content is in high demand, like the Disney Channel for instance, dubbing needs to be incorporated in a service package,” says Baugh. “The government also has a direct hand in choosing and filtering content, so careful packaging of channel line-ups need to be assessed before a DTH package is offered.”
The right combination of technology, timing and execution is crucial. Satellite technology alone is useless without right-priced user equipment, good distribution networks and content, says Maleter. “Content does not just mean audio or video programming. It also refers to all categories of user data requiring distribution such as military intelligence or mandated corporate data backups,” she says. “Knowing what kinds of content will drive user budgets, having the technology to carry that content through the entire customer service chain and delivering good customer service are what propels a winner. Whether a single company chooses to provide all of these elements themselves, or partners with others is not as important as having them all in place before launching a service,” she says.
Steve Hill, vice president of training and business development at the Satellite Broadcasting and Communications Association, points out the more practical, nuts-and-bolts aspect of what needs to happen. “Technology must be easy for the consumer to operate and for the technician to install,” he says. “ In addition, the cost of the equipment must be in line with acquiring and maintaining high value subscribers. Since the value of a subscriber is measured in years, it is imperative that new technology is advanced enough to not require frequent upgrades or service calls.”
What appears to be a compelling unmet need is not enough to open the door for a successful satellite-based offering, says Farrar. In low income countries, for example, simply gaining momentum is a challenge because projected and actual revenues often do not justify equipment subsidies. “Satellite radio is reasonably successful in the [United States] but much harder to justify in Europe and elsewhere because the market based on number of cars, amount of driving commute time and number of drivers speaking a single language is much smaller,” he says. “The key for a consumer service is a large potential market with sufficient disposable income to pay for the service. This is particularly the case when satellite services like DTH and consumer broadband are competing with terrestrial alternatives because the upfront equipment cost involving the dish and decoder will always be more than for terrestrial.”

Knowing What To Avoid Is Critical

As far as Baugh is concerned, “mistaking a new technology for a real market” is to be avoided at all costs.“Too often the satellite industry mistakes the latest technology for a market — the classic problem of a solution looking for a client. The industry needs to be truly careful about investing in areas of real customer demand, not some engineer’s favorite hyped technology solution,” says Baugh, who adds that, “it is so hard to project how a market may change between when a satellite project go ahead is given and when the satellite is finally launched and put into service.”
In addition, in many emerging markets around the globe, Baugh sees adverse regulatory environments which are not as open such that services like DTH that have a high pent-up demand are not realized, and of course, piracy looms as another issue which can devastate projected revenue streams.Artificial internal constraints are to be considered as well. “You see some satellite operators afraid to drop Ku-band capacity prices in Europe to help drive satellite broadband growth because of fear of impact on pricing on video side of the business,” says Baugh.
For Davidson, the satellite entrepreneurs like to lose their bets are those unable to leverage technology to achieve mass market price points, provide the right value proposition versus terrestrial alternatives or have difficulty raising large amounts of capital for projects with multiple years of negative cash flow and significant regulatory and operating risks.
Hill focuses on the costs involved in terms of new subscriber acquisitions and what it takes to properly maintain and sustain a large customer base over time. “If a product is too costly for the consumer, creates increased service calls or churn, then it will quickly be abandoned,” he says.
Picking a winner is not to be confused with gearing up and executing a winning game plan. Satellite may be very hot or not. Success stories abound, but there is a list of unprofitable and short-lived ventures. Doing your homework and doing it in a thorough fashion really does improve your chances for success.