It's no longer enough for satellite companies to simply supply space and time. These days, changing economic conditions and new competition mean they have to offer services as well.
Increasingly, satellite owners—PanAmSat, Intelsat and Loral Skynet—find themselves moving beyond simple distribution. That means, in turn, that traditional satellite service providers—BT Broadcast Services, Globecast, and Ascent Media—must expand their range of services.
The upshot? Greater price pressures and more services. And that usually means better deals and more options for users, such as stations and networks.
“Using our traditional model of sitting back and hoping a channel elects to use us concerned us,” says Jon Romm, Intelsat president, media and entertainment division. “We want to get closer to the end user and provide more services than just lease capacity.”
But even as Intelsat and others want to go it alone sometimes, they recognize the need to deal more closely with the service providers. “The satellite operators had a really good time dancing by themselves, but it's not as much fun as finding a partner or two to dance with,” says Globecast Senior Vice President Mary Frost. “It's not unlike when the networks pool news resources to maximize efficiency and productivity.”
So while the telecommunication satellites circle the globe thousands of miles above the Earth, their owners look for new ways to increase their uses. New distribution methods, evolving compression technologies and increased satellite capacity have everyone jockeying for market advantage.
They have reason to be aggressive: “Satellite operators enjoy some of the nicest margins in the industry,” says Mike Antonovich, PanAmSat senior vice president, global sales. “In order to help fill the bandwidth, we've reached down into the managed-services area.”
BT North America General Manager Bill McNamara concurs. “Satellite operators don't just sell space anymore,” he says. “People are coming to us for services that are going up the value chain. They still want the core capacity of satellite and fiber distribution, but they're also beginning to ask us to handle the media assets” all the way to playout, the point the content reaches the viewer.
BT doesn't own a single satellite but offers a full slate of services, from satellite-newsgathering vehicles to traditional satellite and terrestrial distribution.
Its newest revenue generator—which BT calls Mediahive—is an A-to-Z solution that will make a difference to provider and user alike. It gathers in the content and commercials, encodes them onto computer servers, and stores the content at a central facility. Then it sends the content over a variety of distribution platforms including the Internet, cable and satellite.
Globecast is working on a similar service, especially with international broadcasters, which want help with such functions as ad insertion and playout in different time zones. “They ask us to help them out because they don't understand the different markets and we have a presence in other countries,” says Frost. “They very much need us to supply those services.” And Globecast is as good as its name. It has beamed images from Afghanistan to waiting news networks and, during last week's election, was the link that provided video to networks in China, Russia, Argentina, Poland and Canada, among many others.
Globecast is also working with PanAmSat and Scientific-Atlanta to provide end-to-end HD-distribution services. Scientific-Atlanta provides the encoding technology, Globecast readies the content for distribution, and PanAmSat provides the satellite and terrestrial connectivity.
The deal is part of PanAmSat's expanded service on its Galaxy 13 satellite. A new product called HD Neighborhood allows cable operators to find HD content all in one place on one bird. Antonovich wants to expand his 'hood: “We're trying to support distribution of HD events like boxing or wrestling. We know the cable headends are already looking to Galaxy 13 for the HD content, and this leverages our strength in distribution of HD cable.”
Globecast supplies a teleport and a range of expertise and resources for assisting production management and content aggregation that a satellite operator would not like to invest in or build. Says Frost, “The customers benefit because they get a lower price, a greater range of services, and the ability to do things like HD that would otherwise be too expensive if broadcasters had to do everything themselves.”
The relationship between PanAmSat and companies like Globecast and BT demonstrate the complexities of the market. “[Globecast and BT] are my supplier, customer and competitor, depending on the day and the hour,” says Antonovich. “But as this market congeals a bit and we get more consolidation, they're more of a partner.” That means taking more-careful steps to differentiate their offerings and not invade each other's turf.
For companies like Globecast and BT, the goal is to maintain solid relationships with as many satellite and terrestrial-fiber companies as possible. Frost notes a project that Globecast did with Intelsat to help create a 120-channel neighborhood of international programming: “We've become partners, vendors and occasionally competitors,” she says, echoing Antonovich.
Despite new services, simple connectivity is still the satellite companies' core business and probably always will be. “Satellite provides instant infrastructure everywhere,” says McNamara. “You don't have to dig up the street or worry about the last mile of local access.”
Increasingly, however, those satellite services are being complemented with terrestrial fiber or other terrestrial services to create “hybrid networks.” And the satellite operators are the ones tapping into terrestrial connectivity.
“In the old days, we insulted [fiber], then we ignored it, and then we embraced it,” says Antonovich. “But now, it's part of our network, and we own or lease 22,000 route miles of video fiber, connecting roughly 30 cities around the world.”
PanAmSat wants to be its customers' first choice even when satellite isn't the best distribution method. In the New York-London corridor, for example, it's more economical to use fiber than to use satellite for sending content across the pond, and more reliable, too. “Fiber is tough to beat on a point-to-point basis,” Antonovich says.
Globecast, Frost says, has access to fiber running three-fourths of the way around the world, and plans call for it to circle the globe. But even with that global reach, “last-mile connectivity” is an issue, she says: “Good luck if you're in a market that isn't in the top 100 and you're looking to use fiber” to get content around the nation.
Loral Skynet Vice President of Strategic Marketing John Kirchner says his company has more experience with hybrid networks than the competition has. He points to its ability to reach nearly 100 countries via terrestrial fiber as an important market advantage.
“Terrestrial is point-to-point and really will never be able to compete with satellite on the broadcast side of the business,” he says. “But in the middle are clients who have a need for some satellite broadcasting but also point-to-point requirements. So today you don't really see clients using one or the other.” (Loral itself filed for Chapter 11 bankruptcy protection in July 2003 but, by selling off three satellites, has settled its debt and expects to emerge from that cloud by January.)
Work that BT is doing for E! Entertainment and Hallmark typifies the hybrid network. E!'s domestic feed is distributed from Los Angeles via satellite, and a fiber feed sends the content to the UK, where it is then sent out over satellite. Hallmark uses fiber to reach both London and Hong Kong. In all three instances, the networks receive a “confidence feed” back, ensuring that the signal was received properly.
“One of the great things about those examples, is the networks don't need to build a new playout center in London or Singapore,” McNamara says. “They can do everything centrally from Denver, Los Angeles or New York, and the confidence feed is something they really like.”
Improving fiber connectivity isn't the only technological development waiting to happen. Digital compression technologies, for example, continue to evolve. Digital satellite services have been based on the MPEG-2 standard, the ubiquitous compression standard for TV, but satellite operators are taking a close look at next-generation compression, such as MPEG-4 and Microsoft's Windows Media 9 (WM9).
Each offers much greater efficiency and allows three or four standard-definition video channels to be packed into space normally occupied by one. That means potentially more transponder space for more channels and, particularly, HDTV content.
Globecast's Frost expects next-generation compression to be a factor in the market sometime in 2006. Compression chips won't be available until next year, and she figures it will take another year to get them into the marketplace.
That timing could be important because the number of cable networks sending out a separate HD channel is expected to mushroom by at least 20 networks by the end of next year. So MPEG-4 or WM9—or just more satellites—will be important.
Intelsat's Romm, however, isn't so sure that next-generation compression will be an immediate hit. Some broadcast networks, he notes, still transmit analog signals because it is cost-prohibitive to replace existing receiver gear at the stations.
And even if they do make the switch, he adds, it may not open up much new bandwidth. “When the move was made from analog to digital, everyone expected a lot of bandwidth to become available, but not a lot did,” he says. “Plus, the programmers really aren't sure about what the new technologies will mean, and they don't know what the benefits will be.”
One benefit is known: “MPEG-4 paves the way for HD,” says Kirchner, who says Loral will be taking a close look at MPEG-4 and also at Internet Protocol (IP) distribution. When content is delivered via the latter method, it's first packaged using IP so it can be transmitted as files. “The brilliance of IP is, it allows you to distribute anything,” he says. “Video, data and voice services can all be delivered.”
Jon Douglas, marketing director for IDirect Technologies, is involved in helping Loral distribute content using IP. “Satellite's use of IP is right now where land-line services were 10 years ago,” he says. “Broadcasters have already realized the benefits of an IP network on the land-line side, and they're starting to demand that they can reach remote locations without using limited terrestrial landlines.”
The IP-gear manufacturer packs the equipment necessary for IP reception in one unit, with prices starting from $1,500. The latest version, the iDirect Series 7000 satellite router, has speeds of 18 Mbps downstream and 4.2 Mbps upstream.
“There is no restriction on location, and it has complete mobility,” he says. An advantage of IP-over-satellite is that multiple stations or facilities can share the same satellite bandwidth as opposed to setting each up with dedicated land-line connectivity.
Says Douglas, “This is definitely not your father's IP-over-satellite.”
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