As an independent provider of C-band and Ku-band satellite space segment, The SpaceConnection serves as "sort of a tripwire" for the satellite industry, says president and CEO Mike Antonovich. The company’s main focus is selling satellite space segment and offering a full array of transmission services through a network of strategic partners. This position as a broker reseller of space segment from most of the globe’s largest satellite fleets leaves it uniquely positioned to read the shifts in the business. "You might consider us as ‘canaries in the satellite coal mine,’ one of the first to know when the markets are moving," Antonovich says. "We’re closer to the street than most of the carriers are, as we deal directly with emerging opportunities and with tier 2- and tier 3-type clients. We find many smaller companies and new niche opportunities before the operators do."

Antonovich has nearly 30 years of satellite industry sales, marketing and operations experience, working for nearly two decades with PanAmSat before joining The SpaceConnection. He spoke with Via Satellite Editor Jason Bates about the future of The SpaceConnection and the transponder market as a whole.

VIA SATELLITE: What is the state of the occasional use business?

ANTONOVICH: All of the carriers have relationships with the major broadcasters, and those broadcasters have insisted that the carriers maintain an occasional use inventory to support live news, sports and breaking events. The commitment to the satellite industry has been pretty strong from the broadcasting community. Technologies have changed, but fundamentally, it has been a robust business for The SpaceConnection. For more than 20 years we’ve provisioned the itinerant use of satellite capacity for customers, essentially "making it up on volume." We start virtually every day losing money, but on balance and over a long period of time, the capacity we have for occasional use has been profitable.

VIA SATELLITE: What drives your business growth today?

ANTONOVICH: There are a couple of interesting trends. The live contribution of sports and news material is moving quickly towards high-definition television. The most efficient way to do that is using the new MPEG-4 standard, moving away from MPEG-2. Coupled with the latest generation modulation equipment, broadcasters are squeezing a great deal more signal into the same or smaller bandwidth. Of course, there is still a great deal of news and sports done at MPEG-2 because it’s deployed, available and robust, but as we see news organizations move towards high definition, they will need the bandwidth and cost savings of going to MPEG-4.

We are also starting to see more deployment of automated on-demand type of systems. This trend has been coming for about six years, but there have been fits and starts in getting the technologies right and getting the cost models right. Over the next 18 months, we see a lot of drivers for automated access, auto acquisition antennas and automated booking systems. The promise has been there for a while, but we are starting to see meaningful movement in this area. Everyone from local TV stations to government and disaster and emergency response providers are looking to save time, money and manpower in gaining access to satellite bandwidth. They want to be more efficient, more economical. A lot of the mechanical steps involved in ordering, accessing, provisioning and using bandwidth need to be squeezed out to make the system more efficient.

VIA SATELLITE: Are the larger carriers trying to become more active in your domain?

ANTONOVICH: That’s not where the trend is. The big carriers really enjoy large, predictable customers. They can’t predict what 400 smaller customers will do. They would rather manage what five very large customers would do. We deal with customers they, quite frankly, are well not suited to deal with.

Increasingly, there are fewer clients who have enough in-house demand to justify fulltime leases. Many of the broadcasters are reducing the amount of occasional use inventory on their own books and are relying more on The SpaceConnection and others to provide that. We have a very large group of customers that make us their first call. One of our advantages is our knowledge of our customers and our level of personal commitment to them is different than what they receive from the large monolithic carriers. Of course, there are also any number of customers that come to us only for price due to our volume commitments. In some markets, like Africa and the Middle East, we’re the last call for folks because everyone is looking for inventory and there is a true scarcity. We’re a source for customers in that part of the world due to our more informal sources of bandwidth. We really do know lots of people in lots of places, and there is still a value in that knowledge and intelligence, and that’s one of our strengths.

VIA SATELLITE: Are you moving toward providing more than just bandwidth?

ANTONOVICH: I think we will get to more of a "solution sale" rather than just a bandwidth sale. It’s unclear whose capital it will be, because everyone operates differently. Local stations tend to have a capital budget for satellite newsgathering gear and they like to spend it on hardware and then buy the bandwidth separately, but it could be a pooled type of a managed solution. Or the users can be like state and federal governments that want a "soup to nuts" bundled solutions — maintenance, installation and the like. We see the model adapting to the priorities of each market. Broadcasters are more hands on and technical, while enterprise and government users are more hands off.

The trick, of course, is you can’t be all things to all people. You have to know where you add real value. We have a great many partners up and down the value chain who can do some of these things a lot better than we can. It’s a case of marketing the right solution, not necessarily inventing it. The challenge for the satellite industry as a whole is to maintain relevance in the way our customers use satellite.

VIA SATELLITE: What is threatening satellite’s relevance in the market?

ANTONOVICH: One big trend is that everything is going to be mandated as an IP delivery over time. That’s going to drive different kinds of models for how people want to do business over satellite. Today, we still tend to think of satellite and television as a linear process, but increasingly it’s becoming a non-linear, file-based kind of business. The consumer at home doesn’t see it, but when it comes to creating that content and delivering it back to stations and networks, it’s increasingly file based. Eight years ago at the NAB show, there might have been Hewlett-Packard and IBM and a few computer geeks, but they were cloistered away because no one knew quite what to do with them. Today, there is a different conversation about how people are using computing power and IP protocol to do virtually everything. What was a curiosity has now become a necessity. Our systems need to adapt and keep up.

VIA SATELLITE: With the growing demand for bandwidth, are you finding it harder to secure transponder space to sell?

ANTONOVICH: We source in three ways. We make long-term transponder lease commitments, typically back-to-back with our end users. We also source capacity under long-term minimum-volume "run of fleet" commitments for our occasional use business. We source some capacity from customers and clients who have unsold or unused capacity and just need our help to market it. So every day, we are in the buy, sell and broker end of the business. And every market is different. North America is awash in C-band capacity, Ku-band is modestly tight, while Africa/Middle East inventory of any kind, even inclined orbit capacity, is in very short supply.

VIA SATELLITE: How far in advance are your customers having to secure space?

ANTONOVICH: For a third of our business, we love the "need-it-right-now" requirements. That’s how our occasional use business operates. Virtually everything is booked within three days of air except for long-form sports. We thrive on that. For people making long-term, fulltime commitments, the transaction cycle can be days, weeks or months. We do live in the here and now, and those are markets where we spend a lot of time with our customers and deliver real value.

VIA SATELLITE: What regions represent your biggest demand?

ANTONOVICH: The Middle East and Africa are white hot with capacity incredibly scarce, and it takes creativity in order to find any — knowing who is sitting on bandwidth they haven’t consumed yet and on what terms they might part with it. Some holders have long term plans, but they will be willing to lease it out on a short-term basis. It’s a question of knowing what questions to ask. That’s one of our advantages. We have 30 years of experience in negotiating contracts and leases. We understand the terms and conditions we can achieve for our clients with the carriers that others may not.

VIA SATELLITE: What are the hot spectrum bands?

ANTONOVICH: In North America, Ku-band is still a strong market. C-band is soft at the moment. There are not a lot of new channel launches for new program distribution due to congestion at the cable headend. There has been a lot of conversion of standard definition to high definition already. With more than 170 HD channels already on C-band satellite, roughly 20 percent all the C-band sold in North America has already converted to high-definition television. Most programmers used existing inventory to make this transition, so there has not been significant demand for new C-band sales. But Ku-band is still being driven by consumer broadband and enterprise networking.

VIA SATELLITE: Given your market perspective, do you see any weakness in demand in the near future?

ANTONOVICH: 2009 looks to be a challenging year for a number of industries. Ad spending is down about 20 percent for broadcasters so far this year, and that will ripple through the rest of the food chain. Long-form sports and program distribution, those dollars are assured. They may be having a hard time, but not many programmers will be going out of business. Expect to see belt-tightening in satellite newsgathering. A lot of that business is captive to events but breaking news is breaking news. They will cover it, but they will try to be more frugal with how they cover it.

I think the $64,000 question is what will happen in the consumer broadband market. Will it soften with the economy, or will it begin a complete migration over to Ka-band? More than 100 Ku-band transponders are at play here.

VIA SATELLITE: Do you expect to see an impact on your business due to the overall economy?

ANTONOVICH: Whenever there is crisis, there is a "crisis resolution opportunity." We see a contracting market right now with a lot of customers unsure about their bandwidth needs and not taking long term leases directly from carriers. We see this as an opportunity where we can and should increase our market share. As people become less confident about their own business, they still need to get jobs done, and we see that as an opportunity for us. It comes down to managing your business, and in these uncertain times, it’s better to have a provider who can meet your needs on terms you like. By being more of a "bandwidth boutique," offering capacity from a lot of different carriers, we think there are places we provide a better and more diversified service than even the larger carriers can. After all, they only sell what they have on the shelf. We source from everybody in the market. They tend to be more rigid and less responsive to customers; we simply can’t afford to do that. We have to be more flexible and dynamic to grow.

VIA SATELLITE: Will you follow your acquisition of 5DTV with more moves to consolidate the occasional use market?

ANTONOVICH: We do see ourselves as a consolidator in this industry. The acquisition of 5DTV, Canada’s oldest and largest reseller, was very good for us and the company’s new Canadian customer set. We think everybody is happier after the transaction, as it brings scale and continuity to the marketplace. 5DTV was good but not growing. We offer a broader range of services and satellites in Canada. It was a fantastic acquisition, and we would love to find more like it.

We see opportunities for growth in other countries and regions. Our commitments for occasional use capacity are global. We enjoy very good rates across the global fleets we do business with, but we haven’t leveraged that to the degree I would like. We want to grow our presence in the international markets and expand the traditional market set from broadcast into the enterprise and government sectors, where we see natural growth for civilian and military requirements for short notice bandwidth. We’re built for it already. If we can handle commitments on five-minutes’ notice from broadcasters, we should be handle three-to-seven day commitments for government projects.

VIA SATELLITE: Do you plan to move into the government business?

ANTONOVICH: We have very good informal relationships with all three companies in the DSTS-G contract. There are no announced deals, but we try to source bandwidth for all of them. There are challenges, but we look for what we do in occasional use as a way of smoothing out the business for some of those opportunities out there. The challenge is that none of the traditional government suppliers have the scale of occasional use business to justify what the government might need for short notice/short term occasional-use type of bandwidth, but we do. So it’s just about creating a channel to support that kind of activity with the DSTS-G contractors and other providers. That’s where the conversations are now. It would be a natural extension of our business and a great help to theirs.