Teleport Operators Find Ways to Trim Costs
Teleports often are characterized as the ground-based infrastructure of a satellite network, but the term means different things to different people. There is a surprising amount of diversification in the field, and the term teleport covers a wide range of facilities and business models, making it challenging to pin down exact the costs ratios of doing business. In a 2007 study, the World Teleport Association (WTA) details a fractional teleport industry with many different forms of ownership, including: telephone companies, commercial operators, DTH and cable companies, satellite operators, and system integrators, and the business dynamic is different for each business. For instance, a teleport operator providing data services to thousands of maritime vessels has a completely different business model than a DTH provider broadcasting content to millions of subscribers. But while business models vary significantly, there are a few costs which are common to most teleport operators.
Independent teleport operators have been the heart of the industry since the early 1980s. Teleport operators historically have been entrepreneurs, have focused on a geographic region and, initially, were focused primarily on the media and entertainment industries. Over time, corporate entities have been built up, acquiring teleports on different continents and operating them as an integrated service offering, often with interconnecting fiber networks. In its 2004 Teleport Benchmarks study, the WTA surveyed the marketplace about factors such as revenues, technology assets in place and employment. The data was compiled in 2004 and provides good metrics for the comparison of different teleport operators. The report breaks down the operators into classifications: small, midsize, and large and found that small teleports, on average, operate 20 satellite antennas, employ 14 people, and generate $5 million in revenue per year. Midsize operators enjoyed annual revenues between $29 million and 30 million and operated 28 antenna. Employees per teleport were not available for this market segment. Large teleport operators on average had revenues of $33.4 million, operated 87 satellite antennas and employed 57 people. While there is considerable overlap, it is rare to find two teleports offering the exact menu of services.
Video Driven Teleports
TIBA (Teleport International Buenos Aires), based in Argentina, is privately held with annual revenues between $30 million and 40 million. Founded in 1992 as a teleport serving broadcasters, TIBA expanded into data services for a period before returning to its roots over the last five years and concentrating on broadcasters. From their two facilities in Buenos Aires, TIBA support 30 customers, including Disney, Fox, ESPN and Turner, broadcasting 120 television channels and leasing about 550 MHZ of satellite capacity. More than half of TIBA’s revenues are generated by value-added services, such as playout, and the company employs 180 people, with 140 in engineering and operations.
The cost of satellite capacity is the number one cost driver for TIBA, accounting for 48 percent of revenues. Personnel and the cost of operations was the next highest cost coming in at 10 percent of revenue. Maintenance contracts totaled 2 percent of annual revenues, and energy costs were around 1.5 percent of revenue. “Our facility used to be owned by the former PTT and it sits on the national fiber ring,” says Dan Zonnenschein, vice president, business development. “We have four different fiber carriers to choose from. Although 20 percent of the channels we broadcast are received on fiber, it isn’t a significant cost of doing business.”
Arqiva Satellite & Media operates an integrated teleport and fiber distribution network. The company’s 125 uplinks can bring nearly 50 different satellites into play. The company, with U.S. operations based in Washington, D.C., provides data services to the U.S. government and enterprise clients, but the majority of its revenues come from video services, broadcasting more than 400 television channels across Europe, the Middle East, Africa, Asia and the Americas. “Teleports are an enabling infrastructure for communicating via satellite. Of course, the cost of satellite bandwidth is always going to be there and is often the largest cost on a recurring end-to-end delivered service,” says Jon Kirchner, executive vice president and general manager for the Americas. “That said, the largest teleport-specific variables are staffing, the cost of the infrastructure, maintenance, and energy/HVAC,” he says.
RRsat Global Communications Network, based in Omer, Israel, operates satellite facilities on multiple continents, all interconnected with a fiber-optic network. While RRsat, the WTA’s 2009 Independent Teleport Operator of the Year, provides some data services, about 90 percent of the company’s revenues come from video-related services. RRSat uplinks more than 500 television and radio channels, supporting a significant number of the world’s leading broadcast networks with transmission services or value added services, such as playout. The company operates 160 antennas, with 35 percent to 40 percent of them being uplinks. RRsat communicates with 35-plus different satellites, providing clients flexibility in both coverage and costs. Lior Rival, vice president, sales and marketing, also says satellite capacity is the company’s largest single cost, noting that equipment and human resources were other significant costs.
Data Driven Teleports
The business dynamics of operating a teleport that delivers data services to enterprise and government customers differs greatly from teleports supporting the needs of broadcasters. As the business model changes, so do the cost drivers. IsoTropic Networks Inc. is a privately held teleport operator based in Lake Geneva, Wisc., which focuses on the delivery of interactive data solutions. Unlike broadcast applications, which are predominantly simplex, data applications run the gamut from Voice over IP to Web browsing to GSM cell phone trunking to videoconferencing. IsoTropic, a Host Network Operator (HNO) that supports Virtual Networks Operators (VNO) that resell service, operates five antennas, ranging in size from 6.1 meters to 9.5 meters and uses Direct and SCPC platforms to deliver data services.
Hank Zbierski, IsoTropic’s director general, says labor makes up roughly 32 percent of costs and satellite capacity comes in a close second at 30 percent. Maintenance costs appeared to be similar to other teleports averaging in the 2-percent range. “Although we don’t do business directly with the end user, we are ultimately responsible for them. We have empathy for our customers’ customer. As such, the cost of labor is our single largest cost. We don’t believe in voice mail. Our clients speak to a technician, and the tech stays on the call until the problem is resolved. This level of service skews our costs, but that level of service is what we are known for,” he says. Zbierski also notes that his energy costs have swelled from less than $1,000 a month to several thousand dollars a month, citing seasonal peak energy bills that come from heating large antennas during Wisconsin winters.
Depending on the business focus of the teleport, cost drivers vary with labor sometimes supplanting satellite capacity as the single largest line item. It is important to note that other costs can vary greatly depending on the location of the teleport. Differences in regulations and controls, as well as taxes, vary by region and country.
An interesting facet that has developed over the last decade is the birth of the virtual teleport. No longer must one own and operate your own facility. Instead, operators can hire a teleport in a distant land to provide the needed services. Renting services on a monthly basis has lowered the barrier of entry for teleport operators into new markets that previously were out of reach. “In the past, you needed to dedicate a million dollar VSAT hub to a single satellite, which made expansion costly. Now you can get an iDirect hub which will support five different IF connections,” says Simon Bull, senior consultant, Comsys. “Hughes has also recently added multiple-IF capability with their HX platform and offer a 2IF capability as a standard product. This flexibility has made it easier for network operators to cover distant regions. If you don’t cover a geographic region yourself, you can easily make arrangements with another teleport in a different country to utilize their uplink,” he says. “This flexibility has led to some interesting discussion going on amongst service providers. Some feel they must own their entire infrastructure, while some believe they should own strategic assets and compliment them with contracted teleport services. There are some operators that wish to own nothing, contracting out their entire operations support to different teleports around the world. The debate ultimately revolves around operational control versus flexibility and the costs behind each strategy.
Cost Cutting Success
With personnel costs ranking either first or second, network automation initiatives were at the top of the list of teleports seeking to cut costs “We have invested somewhere between $1.5 million to $2 million in automation technology and another $2 million to $5 million in tapeless broadcast technologies,” says Daniel Farinella, TIBA’s CTO. “Our new automated systems have yielded a savings of 10 percent in head count.”
Kirchner concurs. “We are constantly looking at automation to see if we can improve efficiencies. Managing services, booking services, trouble shooting, fault isolation. When you consider three shifts per day and two shifts per week to get 7-by-24 coverage, the discussion between headcount versus automation is always in play,” he says. “How can we do things faster? We are always looking to be more efficient. We ask ourselves: Do the automation tools we are evaluating allow us to do more value-added work so we can stay focused on value for our customers?”
“By nature, teleport operators are the ones who make all the different systems work together,” WTA president Robert Bell says. “They are the ones who make all the different systems work together. With the shift to IP, all the machines now speak the same language. This has allowed for huge increases in productivity, helping to drive down major cost factors like space segment and personnel, but networks have increased dramatically in complexity and will continue to do so. This means that higher skilled workers are needed to keep everything running.”
Although teleports operators vary in size, regional focus and business model, the top two cost drivers are space segment and labor costs, followed by infrastructure and real estate. Although the results of the interviews are anecdotal, the cost factors revealed are reasonable and not out of line. Combined, space segment and personnel make up at least 60 percent of ongoing costs of operating a teleport — a good target for anyone looking to drive down costs.
Greg Berlocher has been active in the satellite industry for twenty five years and is the President of Transcendent Global Networks LLC.