Coping With Increased Competition
Making life tougher for established companies such as PSSI and Pacsat is the influx of new, low-cost competitors in the SNG market. "It seems that everyone is getting into the SNG business these days," adds Nelles. "For instance, a lot of experienced SNG technicians have bought trucks and struck out on their own."
"I'm all for competition, but it is really tough on the big guys when the smaller ones come in and undercut us on price," he adds. "I can appreciate that they need to make their mortgage payments, but it hurts. Our main defense is that we'll be here for the long haul for our customers, which many of these small operators won't."
"Price-cutting in the SNG industry is getting to the point where we're losing money on some jobs," says Maalouf. "I mean you have to be able to pay to equip and maintain your trucks, pay your operators, and cover fuel and airtime costs. Despite this, the rates we are able to charge are dropping. Once I could charge $2,500 a day to provide a single satellite path; now clients expect to pay $1,400 to $1,500 for three."
Dealing With Rising Costs
Of all the costs SNG operators have to deal with, fuel is one of the most alarming. It takes a lot of gas to move SNG trucks from job to job. Every time the price of oil goes up--as it has steadily for the past few years--the shock at the gas pump comes out of the SNG industry's dwindling profits.
"We may be in the SNG business, but half the time I feel like I'm running a trucking company," says Nelles. "Actually, I am. We have 19 trucks scattered around the country, driving from job to job. The logistics of managing these resources--especially out West, where there's a lot of driving between destinations--can be a real nightmare. Unfortunately, rising fuel prices are making things a lot worse."
If this weren't enough, new state taxes are hitting SNG operators. These are being driven by federal budget cuts. As Washington cuts back its transfers to state governments, regional legislators are making up the shortfall by demanding more money from the industry. "We are now being taxed on gross revenues by several states for operating in their territory," says Nelles. "The only way to get this money back is to pass the taxes onto our clients. However, that's not really a smart move in today's competitive marketplace."
On top of digital equipment, fuel and taxes, SNG operators also have to pay their technicians. Unfortunately, these are the people who take the frontline flack from demanding clients who want more service for less money, and who want what they want right now. "We have instances where the technician has become so fed up with the abuse, that they've locked up the truck in the middle of a job and walked away," says Maalouf. Barring some change in how broadcasters treat their SNG contractors--Maalouf himself suggests some sort of session at the National Association of Broadcasters (NAB) convention "to work out rules of behavior for both sides"--larger paychecks will be the only way to keep many disillusioned SNG technicians at their posts.
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