For the satellite industry to survive and thrive, it must lower transmission costs. This was the unequivocal message delivered by Via Satellite magazine’s Satellite Executive of the Year 2004 winner John Kealey. He made his remarks at a luncheon held in his honor during the SATELLITE 2005 conference and exhibition. Via Satellite is a sister publication to Satellite News.
“Satellite transport is too expensive for many consumers,” said Kealey; president and CEO of iDirect Technologies. By bringing transmission costs down, satellites could start to eat into the global telecom market, which currently is dominated by terrestrial carriers.
“Worldwide, the terrestrial transmission industry earned $1.3 trillion in 2004,” he told award luncheon guests. “I thought the world ‘trillion’ was only used when people were discussing the federal budget deficit.” In contrast, global satellite transport earns about $2 billion annually. “That is less than two-tenths of one percent of what the terrestrial transport sector makes,” Kealey said. This means that the global terrestrial carriers earn “by 2:30 p.m. on January 1” what the global satellite industry earns in an entire year.
The good news is that the satellite industry’s market share is so small, that “We could generate 20 percent growth throughout the next 10 years and still have less than one percent of the market” without catching the notice of the terrestrial transmission giant, he said. Should the size of the total global transmission market grow by five percent a year -a number Kealey said is actually below projections- the satellite industry could stay under the one percent share mark while enjoying 20 percent growth for the next 20 years.
At first glance, John Kealey’s ideas sound daring. However, a look at his track record to date–a record that won him the Satellite Executive of the Year Award–adds real credibility to his notions. Under his stewardship, iDirect Technologies has shaken off its financially troubled past to become a profitable designer, developer, and provider of bi-directional satellite-based broadband access solutions. In addition, Kealey not only brought iDirect to profitability in 2003, but the company tripled its annual revenues while doing so. iDirect’s revenues then doubled in 2004 and the future looks equally bright.
The key is for everyone to cooperate in educating potential clients, he said, and then to engage in competition once the market has been realized. Kealey also declared that “we must invest as an industry” in new technologies and products to thrive in the years ahead. It was a declaration that implicitly challenged private equity-owned Fixed Satellite Services (FSS) companies to stop prizing dividends above research and development, and to start putting money into growing their business. After all, he warned, business is akin to a living organism: If it does not find ways to keep growing, it will eventually die.
Before Kealey was given his award, Boeing Satellite Systems International President David Ryan foreshadowed the winner’s sense of vision. “What we do as an industry changes the world,” Ryan told the assembled guests. As for the satellite industry’s own health? Despite the doom and gloom so prevalent in satellite circles, the industry posted “a solid record in 2004,” he said. “We are heading out of the downturn.”
After noting how DBS and digital radio are bringing satellite-delivered services to millions of users, Ryan discussed reconfigurable satellites. He made his case by noting how the first two Spaceway satellites had been re-tasked from broadband to video, in order to support DirecTV’s expansion plans. Had these satellites been simple “bent pipe” systems, such reconfiguration would have been extremely difficult, if not impossible. This is why satellite purchasers–including the private equity-owned FSS carriers–should be willing to pay more to buy “flexible” satellites in order to protect their investments, Ryan advised. “Having a flexible payload means being able to change your capacity and coverage to any new location once the satellite has been launched.”
The optimism and vision expressed by Ryan and Kealey were a breath of fresh air for many delegates. In the wake of the private equity FSS acquisitions in recent months, they have been hearing talk about the new “rationality” that is sweeping the industry; rationality being synonymous with cost-cutting, sacrificing long-term development for short-term profits, and loading newly-acquired companies with debt in order to put more money into investors’ pockets. In contrast, both Ryan and Kealey eschewed bean-counting mantras, focusing instead on the far-seeing and entrepreneurial instincts that characterize the satellite industry’s heritage and achievements.
—James Careless
