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Globecomm Targets New Markets

By | July 31, 2002

      Several satellite operators have recently warned that the short-term outlook for the transponder leasing business remains difficult. A lot of spare capacity is available and new satellites continue to be launched, which adds to the glut of capacity. As a result, prices have dropped between 10 per cent and 30 per cent in some markets, according to sources.

      The problem also affects transponder resellers and companies providing value-added services. Many are looking to develop new services and target new markets. One such company is Globecomm Systems, a Happauge, N.Y.-based provider of end-to-end satellite-based communications solutions.

      Extra capacity and reduced demand, particularly from new satellite broadband ventures are only part of the problem. There are other factors at play, according to Keith Hall, senior director of Network Services Europe at Globecomm.

      “There is a bit of a shift in large portions of satellite capacity due to digitalisation.” Hall said. “A lot of capacity was filled by video services that were big analogue carriers. Due to digital carriers and compression techniques, those same video carriers take up a smaller portion of satellite capacity. That, coupled with new satellites being launched, has led to unused capacity. The people using it may be the same, but they are taking up less space because they are more efficient and there are more satellites up there which creates more capacity,” he added.

      Another factor is increased competition from fibre in certain markets, such as Latin America and Eastern Europe. “Fibre is certainly a factor,” commented Hall. “It has penetrated those markets, but that doesn’t mean that there isn’t a need for satellites. There is more a glut of fibre out there right now. Fibre penetration is not in any way getting to the home, especially in Latin America and Eastern Europe, so satellite has an advantage there. Satellites will be used for media rich content and by-passing the last mile where fibre has problems.”

      To address these market difficulties, Globecomm is shifting its focus from its ISP-based business, which provides Internet backbone connectivity for international ISPs, toward providing content delivery network services to the enterprise market in the United States. “We recently won a contract from Home Depot where we’re providing their business television service for them to 1,400 locations. That is where our focus is moving right now. That’s not to say that we think that the ISP market is dead, it’s just that we think it will take some time for it to catch back up again,” Hall said.

      Globecomm believes there will be a shift in what satellite capacity is used for and that satellites will be used more for content delivery networks and private network groups, particularly in the United States. Globecomm makes its money by providing value-added services rather than connectivity services. “We pride ourselves on providing a high quality service for our customers and valued-added services whether it be voice termination, content delivery, IP solutions or whatever. Using your satellite pipe and filling it with as many applications as you can is where you’re going to reap the benefits,” Hall observed.

      The company managed to sell a significant portion of its leased capacity when it announced a contract with BT Group last week. Globecomm was awarded a 10-year contract valued at approximately $17.3 million from BT’s North American unit to provide bandwidth that will support its video services in Eastern Europe. “We have the capacity that fits their needs for this particular contract,” said Hall. “From our company’s vantage point, this is a significant contract as the utilisation of space segment assets has become difficult in this market and this contract reduces a substantial portion of our inventory of unused satellite capacity. Our high-end goal is to maintain approximately 85 per cent to 90 per cent utilisation. Our leases for satellite capacity are a fixed cost and this contract drops straight onto the bottom line.”

      Globecomm has 300 MHz of leased transponder capacity on several satellites and operates its own teleport on Long Island. It uses Loral Space and Communications’ Telstar 6 for the United States and Telstar 12 for Europe and the Middle East, while using New Skies Satellites’ NSS-703 for the African market and a Satelites Mexicanos’ satellite for Latin America.

      –Gareth Owen

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