WORLDWIDE SATELLITE MAGAZINE January 2004

Years of Transition in theSatellite Industry

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January 2004

CONTENTS TABLE OF

Click on the title to godirectly to the story

COVER STORY- The Year in Review

12/ 2003-2004: Yearsof Transition in the

Satellite Industry

24/ A Fresh Approach toEvaluating and Purchasinga Communications SatelliteSystem

By Harold E. McDonnell

18/ The View fromAsia

3 / Note from the Editor

4 / Calendar of Events

5/ Featured Event: ISCe 2004

10/ Industry News

19/ Executives’ Spotlight: Key Industry Players

Share their Views on 2003 and 2004

10/ Advertisers’ Index

REGULAR

iDirect President andCEO, John M. Kealeyexamines the prospectsof the two-wayenterprise broadbandservices market.

15/The View fromEurope: A Look Back at2003 (and 1993)

FEATURES

Characterizing 2003-2004 as “Years ofTransition” for theindustry, Bruce Elbertsays there a lots to beoptimistic about.

Chris Forrester looks at2003 and goes downmemory lane to 1993 andreflect on how theindustry has grown inEurope despite toughtimes.

29/ The Batlle forthe OilfieldCustomer

.

DEPARTMENTS

33/Are We Listening?

By John M. Kealey

VIEWPOINT

By Bruce Elbert By Chris Forrester

JANUARY 2004

By Stuart P. Browne

Our Asia-Pacificeditor gives thehighlights of theyear for the Asianmarket.

Industry veteran HaroldMcDonnell shows how toevaluate and purchase asatcom system byaccounting for the “TotalCost of Ownership.”

There is opportunity inthe lucrative oil and gasmarket for satellite-basedservices andapplications.

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Satnews Publishers is theleading provider of informationon the worldwide satelliteindustry. Fore more informa-tion, go to www.satnews.com.

Published monthly bySatnews Publishers800 Siesta Way,Sonoma, CA 95476 USAPhone (707) 939-9306Fax (707) 939-9235E-mail: design@satnews.comWebsite: www.satmagazine.com

Baden WoodfordAfrica

Advertising Sales:Jill Durfee(jill@satmagazine.com)

Joyce Schneider(joyce@satnews.com)

Copyright © 2004Satnews PublishersAll rights reserved.

EDITORIAL

Silvano PaynePublisher

Virgil LabradorManaging Editorand Editor, The Americas

Chris ForresterEditor, Europe, Middle Eastand Africa

Stuart P. BrowneEditor, Asia-Pacific

Contributing Writers:

John Puetz, Bruce ElbertDan Freyer, Howard GreenfieldThe Americas

Peter Marshall, Roger StanyardEurope

NOTE FROM THE EDITOR

“Transition Years”

We’ve got a very good issue for you to start theyear off. We surveyed key industry executives(pages 19-23) representing every segment of thesatellite industry and the consensus seems to bethat 2003 was not as bad as 2002 and that 2004will definitely be better.

Our resident analyst of the satellite industry, BruceElbert sums up in the lead feature the key events of 2003 andwhat will be the driving forces in 2004. He characterizes theseyears as “transition years” for the industry. We also have theview from Europe and Asia-Pacific from our respective regionaleditors, Chris Forrester and Stuart Browne.

Indeed, the year started off on a good note. Europe launched itsfirst two HDTV channels on New Year’s Day. Leading up to theNew Year, we had two major successful satellite launches ofAMOS 2 and EXPRESS AM. And of course the big story wasthe approval of the News Corp. merger with the U.S. largestDTH operator, DirecTV.

So as the views of the executives interviewed for this issue wouldreflect, it looks like it’s going to be a good year.

For us at SatMagazine, this is now our tenth issue and we are nowgoing on our second year of publication. We like to thank all ofour readers and supporters who have help us get this far and weappreciate your continued patronage and support.

However, as we all know, there is still a long road ahead. A newyear is just another new begining. We’d like to be there with youto help chart the course for the long journey.

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CALENDAR OF EVENTS

January 11-14 Honolulu, Hawaii PTC 2004

Tel: +1-808-941-3789 ext. 120 Fax: +1-808-944.4874E-mail: dolores@ptc.org Web: www.ptc.org

January 18-20 Las Vegas, NV NATPE

Tel: +1-310-453-4440 Fax: +1-310-453-5258E-mail: khwang@natpe.org Web: www.natpe.org

JANUARY 2004

Mark Your Calendar for ISCe 2004:

June 1-3,2004 Long Beach, CA, USA (Note new dates) ISCe is the premierannual conference and expo highlighting dual-use satellite-based services,applications and innovative technologies for the commercial, civil and military sectors.Key program highlights for ISCe 2004 include: Satellite Users Forum, Defenseand Security Forum, Global Navigation Forum, Satellite Communications Forum,Satellite Entertainment/DBS Forum, U.S.-Asia Satellite Business Roundtable, GPS educationalseminars and the Space Career Program. For more information, please visit www.isce.com or contactGina Lerma of Hannover Fairs USA, Inc. at (310) 410-9191 or glerma@hfusa.com.

FEBRUARY 2004

February 10-13 Moscow, Russia Cable, Satellite, TV & Radio Broadcasting, Broadband (CSTB)Project Manager - Anastasia Kasatkina Exhibition manager - Victoria Senukhinaphone. +7-95 7377479 fax +1-95 1455133 E-mail: anastasia@midexpo.ruWeb: http://www.cstb.ru

February 17-19 Johannesberg, South Afirica Satcom Africa 2004Alwyn Peacock, Telemarketing ManagerTel: +27 11 463 2802 Fax: +27 11 463 6000E-mail: alwyn.peacock@terrapinn.co.za

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FEATURED EVENT

ISCe 2004: Truly an Industry ShowLong Beach, California June 1-3, 2004

Now going on its third year,ISCe 2004 in Long Beach

California is a must-attend eventthat features leading industryexecutives and decision makers in athree-day conference and expofrom June 1-3, 2004. Organized byHannover Fairs, USA, one of theleading event organizers in theworld, ISCe has carved a niche asthe premier annual conference andexpo highlighting dual-usesatellite-based services,applications and innovativetechnologies for the commercial,civil and military sectors.

Truly an industry show, thesponsors and supportingorganizations of ISCe consist of theleading organizations in thebusiness including: SatelliteIndustry Association, Asia - PacificSatellite Communications Council,The Boeing Company, CaliforniaSpace Authority, Global VSATForum, European Satellite OperatorsAssociation, Lockheed MartinCommercial Space Systems, StellarSolutions, SES Americom, MobileSatellite Users Association, WorldTeleport Association and theSociety of Satellite ProfessionalsInternational, among others.

“The quality of ISCe as both atradeshow and a conferenceprogram stems directly from thequality of the organizations that wework with to develop the strategicdirection of the show,” said ArtParedes, Vice President and General

Manager of West Coast Operationsfor Hannover Fairs USA, Inc. “Theguidance we receive from oursupporting organizations andsponsors helps us integrate themost relevant industry trends andtopics into the show floor andconference content.”

“We are pleased to continue therelationships we have establishedover the last few years with some ofthe elite organizations in thesatellite and aerospace industriesfor ISCe 2004,” added Paredes. “Ourfocus this year has been on creatingadditional value for ISCeparticipants by assembling both theend-users and satellite serviceproviders.”

Indeed, there are numeroussponsorship opportunities at ISCethat will maximize your company’svisibility and brand. ISCe provides

the ideal venue to target keydecision-makers from the globalsatellite & communicationsindustry.

“The caliber of the attendees atISCe makes the show a veryimportant venue for establishingbrand recognition among high-levelexecutives both in the satelliteindustry and in end-usingindustries,” said Joachim Schafer,President of Hannover Fairs USA,Inc. “Our variety of sponsorshipopportunities allows our clients toposition themselves to segmentedtarget groups, as well as to all of theISCe attendees.”

For more information onsponsorship or registration, visitwww.isce.com or contact GinaLerma of Hannover Fairs USA, Inc.at (310) 410-9191 orglerma@hfusa.com.

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FEATURED EVENT

Organizations involvedwith ISCe 2004:

Organizer

Hannover Fairs USA, Inc.

HannoverFairsUSA,Inc.

(HFUSA) is the U.S. subsidiary ofHannover, Germany’s DeutscheMesse AG. Established in 1985 inPrinceton, New Jersey, HannoverFairs USA organizes tradeshows,conferences, group exhibits andmarketing programs at eventsthroughout the world. For moreinformation, please visit www.hf-usa.com.

Co-Host

Satellite Industry Association

The SatelliteIndustryAssociation (SIA)is a U.S.-basedtrade association

representing the leading U.S. andinternational satellite serviceproviders, manufacturers, launchservices companies and groundequipment suppliers throughoutthe world. The SIA is the unifiedvoice of the commercial satelliteindustry on policy, regulatory, andlegislative issues affecting thesatellite community. The SIArepresents the common interestsof its members to domestic andinternational government officials,the press, the public, and otherindustries.

Supporting Organizations

Asia-Pacific SatelliteCommunications Council (APSCC)

APSCC is a non-profit internationalregional organizationwhich aims topromote satellitecommunications and

broadcasting in the Asia-Pacificregion through regional cooperationamong members of APSCC for thesocial, cultural and economicprosperity of the region. To achievethese objectives, ongoing effortsare being made to exchange viewsand ideas on policies, technologies,systems, and services, which havethe potential to benefit the region,to accelerate the introduction of

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services via satellite and to developand broaden the national andregional satellite communicationand broadcasting services of Asia-Pacific countries. APSCC is alsoactive in the formulation ofrecommendations on technicalstandards within the region and theworld.

The Carmel Group

The Carmel Group is aworld-renownedconsulting and marketresearch firm, offeringclients around the worldthe best intelligence andstrategic guidance,allowing each to

enhance its position andprofitability within its industrysegment (or within new industrysegments). Our expertise includescable, satellite, telephony, set-topboxes, programming, digital videorecorders, video-on-demand,broadband, videogames and otheradvanced media,telecommunications and computerservices. Located in Carmel-by-the-Sea, CA, The Carmel Group alsoorganizes and hosts premiereannual telecommunications eventsand publishes in-depth databooks,white papers and monthlynewsletters.

Global VSAT Forum

The GlobalVSAT Forumis anassociationof keycompanies

involved in the business ofdelivering advanced digital fixedsatellite systems and services to

consumers, and commercial andgovernment enterprises worldwide.The Forum is independent and non-profit and has a global remit. It isalso non-partisan - any companiesor organizations with an interest inthe VSAT industry are encouragedto join.

The Mobile Satellite UsersAssociation (MSUA)

The Mobile SatelliteUsers Association(MSUA) was

established in 1992 as a non-profitassociation to promote the interestsof users of mobile satellitecommunications worldwide. Itfosters effective communicationamong Mobile Satellite Services(MSS) users, suppliers ofequipment and services, operatorsof the satellite systems, and thevarious governmental entities thatmay affect the future of theindustry. Membership is not limitedto USA entities, and is open toorganizations worldwide engaged inany of these activities.

Navtech Seminars & GPS Supply

Navtech Seminarshas beenprovidingtechnical coursesand advancedGPS training since1984. We offermore than 20

courses on professional GPS, DGPSand related topics. Navtech GPSSupply offers an extensive selectionof books, software, and equipmentfor GPS users of all types. We haveGPS/GIS systems for professionalusers, DGPS systems, board-levelreceivers, and the industry’s mostpopular hand held GPS receivers.

Society of Satellite ProfessionalsInternational

The Society ofSatelliteProfessionals is anonprofit member-benefit societythat serves

satellite professionals throughouttheir careers. Specifically, thismeans:

• Promoting the development of and access to — high-quality, satellite-related education on the post-secondary an continuing (adult) levels.

• Helping satellite professionals to advance their careers by creating opportunities for them to do business with each other and learn from each other.

• Honoring extraordinary achievement by satellite professionals and the companies they work for.

• Stimulating the growth of the industry by communicating its accomplishments to the financial markets, policy makers and both business customers and consumers.

World Teleport Association

World TeleportAssociation (WTA)is a nonprofit tradeassociationrepresenting thekey commercialplayers in

broadband. WTA’s members in 20nations includes teleports, satelliteand terrestrial carriers, technology

FEATURED EVENT

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providers, engineering firms,investment houses and consultants.Through our special interestproject, the Intelligent CommunityForum, WTA also attracts propertydevelopers and governments asmembers. Developers of intelligentbuildings turn to WTA for expertisein using broadband to buildproperty value. Governments on thelocal, regional and national levelseek to use broadband for economicdevelopment.

Sponsors

SES AMERICOM

Thelargestsupplierof

satellite services in the U.S., SESAMERICOM, Inc. is recognized as apioneer of global satellitecommunications services.Established in 1973 with its firstsatellite circuit for the U.S. ArmedForces, the company currentlyoperates a fleet of 16 spacecraft inorbital positions providing servicethroughout the Americas, acrossEurope, over the Atlantic andPacific oceans, and throughoutAsia. As a member of the SESGLOBAL family, AMERICOM isable to provide end-to-endtelecommunications solutions toany region in the world. SESAMERICOM’s key customersinclude ABC Radio Networks,AT&T Alascom, AOL Time Warner,Deutsche Welle, Discovery,EchoStar, Fox, TV Guide/Gemstar,Gannett, HBO, Hughes NetworkSystems, NBC, The New YorkTimes, NHK, PaxNet, PBS, TELEGreenland, TV Europa, Verestar,Viacom and, through AMERICOMGovernment Services, variousagencies of the U.S. government.

California Space Authority

Governed by a statewideboard of directors, theCalifornia SpaceAuthority is a nonprofitcorporation representing

the diverse sectors of the spacestakeholder community: commercial,civil, and military. As the CaliforniaSpace Authority, CSA serves as thepolicy advisor to the Secretary ofthe California Technology, Tradeand Commerce Agency on all space-related matters and represents theState of California on space issuesto the international community, tothe federal government, otherstates, and to local and regionalgovernment entities.

The Boeing Company

TheBoeingCompany,with

headquarters in Chicago, is theleading aerospace company in theworld and the United States’ leadingexporter. The company has anextensive global reach, includingcustomers in 145 countries,employees in more than 70countries and operations in 38 U.S.states as well as Canada andAustralia.

Lockheed Martin CommercialSpace Systems

Lockheed MartinCommercialSpace Systems’(LMCSS) mission

is to provide the best overall valuefor their customers’ investments insatellite communications and

support services. From the launchof the firstcommunications payload in 1958,Lockheed Martin has earned areputation for delivering highlyreliable and cost-effective solutionsin the commercial and military spacemarkets.

In recent years, factors such asreliability and quality have becomeas important to operators as price.Equally important is the stability ofthe satellite provider. LMCSS isbacked by the strength andcommitment of its parent companyLockheed Martin Corporation, a $30billion global enterprise leading inthe research, design, engineering,development, manufacture andintegration of systems, productsand services.

A recent Frost & Sullivan studyranked the A2100 first amongmanufacturers for the fewestinsurance claims, while the Frost &Sullivan 2003 Satellite MarketProduct of the Year Awardreinforced Lockheed Martin’sleadership role in the industry.

With an extensive heritage ofmission success and the solidbacking of the Lockheed MartinCorporation, LMCSS is staunchlypoised to successfully compete in a21st Century global marketplace.

Stellar Solutions, Inc.

Stellar Solutions,Inc. is anengineering

services business providingtechnical expertise and problem-solving skills to significant nationaland international aerospaceprograms. The Company has

FEATURED EVENT

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FEATURED EVENT

SPONSORSHIP/ REGISTRATION

To get more information on sponsorship opportunities or toregister, visit www.isce.com or contact Gina Lerma of HannoverFairs USA, Inc. at (310) 410-9191 or glerma@hfusa.com.

distinguished itself by satisfyingcustomers’ critical needs on diverseprojects, including defense-relatedintelligence projects, internationaltelecommunications satellites,commercial imagery satellites andNASA’s earth science and planetarymissions.

Stellar Solutions areas of expertiseinclude systems engineering,systems integration, missionoperations and engineering,program management and strategicplanning. Customers and projects

include NRO, CIA, NSA, NIMA,DoD, NASA, Commercial Systems(communications, direct broadcast,satellite radio and remote sensing)and Launch Systems. TheCompany is listed as one of thefastest-growing and largest women-owned businesses in NorthernCalifornia. Fortune Small Businessmagazine recently recognized

Company founder Celeste Ford asone of six “Best Bosses” in thecountry. And Company spin-offQuakeFinder, LLC recently builtand launched a scientific researchsatellite designed to identify andmonitor earthquake-related signalsfrom space.

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INDUSTRY NEWS

ADVERTISER’S INDEX

Comtech EF Data 30www.comtechefdata.com

ISCe 2004 6www.isce.com

Kavera Software 28www.kavera.com

MITEQ 32www.miteq.com

PanAmSat 9www.panamsat.com

Paradise Datacom 11www.paradisedata.com

SES GLOBAL 14www.ses-global.com

(Click on the page no. to go directly to the ad; click on the url address to go to website)

Verestar Files for Bankruptcy Protection

Verestar, Inc. has filed a voluntary petition for Chapter11 relief in the United States Bankruptcy Court of theSouthern District of New York last December 22.In a statement, Verestar said it chose to file Chapter 11 asa result of an unprofitable acquisition in 2000 and itsassociated long-term space commitments, along with thefinancial impact of customer bankruptcies due to theoverall decline in the telecommunications industry.

In September 2003, SkyTerra Communications Inc.announced a definitive agreement to acquire a majorityinterest in Verestar. SkyTerra terminated that agreementprior to the filing , but is engaged in negotiations withVerestar to acquire the Company’s business, subject todefinitive documentation and bankruptcy courtapproval. “We remain excited about the future prospectsof Verestar and its core business of providing data, voiceand video solutions to government, enterprise andbroadcast customers,” stated Jeff Leddy, Chief Executive

Officer and President of SkyTerra.

AMOS 2 Launch

Successful

Starsem and Arianespacesuccessfully orbited the Israelicommunications satellite Amos 2from the Baikonur Cosmodrome inKazakhstan. The launcher lifted offas scheduled at 2:30 a.m. local timeon December 28 (i.e. 21:30 UTC onSaturday December 27, 10:30 p.m.Paris time on December 27).

To comply with Israel AircraftIndustries’ (IAI) requirements,Arianespace and Starsem haddecided, in agreement with Israelioperator, Spacecom Ltd., that theAmos 2 spacecraft launch, initiallyplanned by an Ariane 5, would beperformed by a Soyuz launchvehicle. This decision reflects the

policy set up by Arianespace and Starsem to meetcustomers’ needs, providing enhanced flexibility basedon a family of launch vehicles.

The launch was also the 12th carried out by Starsem,which is responsible for international marketing of theSoyuz launcher, as well as for its operation. Starsem’sshareholders are Arianespace, EADS, the RussianAviation and Space Agency and the Samara SpaceCenter.

In 1996, Arianespace launched the first Israelicommunications satellite, Amos 1. Co-located withAmos 1, at 4 degrees West over the Gulf of Guinea,Amos 2 will provide additional high-power transmissioncapacity for Europe, the Middle East and the East Coastof the United States. The satellite was designed andbuilt by MBT Space Division of IAI. Weighing 1,374 kgat liftoff and equipped with 14 transponders.

Amos 2 will be operated by Spacecom Ltd.

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INDUSTRY NEWS

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NetworkAdvantage CommissionsSatellite Bandwidth-on-Demand Systemfor Pakistan’s Cyber.NetNetworkAdvantage™ Corporation in conjunction withLinkSat America, who acted as the prime contractor, havecommissioned an automatic circuit restoration systemover satellite for Cyber.Net in Pakistan. Cyber.Net,Pakistan’s largest Internet Service Provider, choseNetworkAdvantage’s satellite bandwidth-on-demandsystem to provide rapid automatic restoration of circuitsbetween the major cities of Karachi, Lahore andIslamabad in the event of landline transmission failure.The NetworkAdvantage™ system allows Cyber.Net toshare a ‘pool’ of bandwidth for ‘on-demand’ use byseveral backbone circuits, thereby saving satellitebandwidth costs. Cyber.Net, backed by the Lakson Groupof Companies, are rolling out a full suite of telecomsservices throughout Pakistan.

“The NetworkAdvantage™ bandwidth-on-demandsystem has been integrated with our networkmanagement system to provide rapid and seamlessrestoration of our critical national backbone circuits”says M. Javed Wadood, Cyber.Net General Manager. “Inaddition to extending protection of our landline links toother cities, Cyber.Net are planning to offer a value-added flexible bandwidth satellite service to enterprisesand organizations within Pakistan and neighbouring

territories based on the NetworkAdvantage™ platform.“

“With NetworkAdvantage™, satellite service providerscan offer tailored packages tuned to customers changingneeds, bandwidth as needed, when needed and where

needed.”

Marc Nadon, Vice President of Sales for LinkSat America,saw an ideal fit for the Network Advantage solutionduring the early stages of Cyber.Net’s network needsevaluation. “The Network Advantage BOD systemappealed to us because of its unique, highly integratednetwork manager. It became clear to us during ourevaluation of the various solutions available that thishighly flexible platform represented the best fit for ourclient’s needs.”

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COVER STORY-The Year in Review

2003-2004: Years of Transition for theCommunications Satellite Industry

By Bruce ElbertPresident,Application Technology Strategy, Inc.

In the first year of publication, SatMagazine hasprovided a glimpse into how 2003 grew in terms of

new services and applications. The dislocations andimbalances were still being wrung out amongst satelliteservice providers and manufacturers. At the same time,we’ve witnessed how the Free World responds to theglobal threat of terror. Satellite communications has hada pretty good year – revenues are up in several sectorsand there is a new feeling ofoptimism among providers andusers alike. Let’s take a look atthe year that was, and the yearthat’s just around the corner.

In 2003 – the year that was

From a retrospective point ofview, 2003 was a year intransition. We saw the USeconomy pick up and hit anattractive growth rate. Theeconomies in Japan and WesternEurope also showed improvement as the world got backto business and financial flows worked their magic.We’ve seen changes along many dimensions – Intelsatpurchased the US satellite assets of Loral, which nowappears to be coming out of its bankruptcy problemsand selling new spacecraft to several customers.Overall, the satellite communications industry hadn’treturned to the high growth rate of the late 1990s, butsolid engineering once again showed how satellitetechnology could gain a foothold in this improvingeconomic outlook. The following are examples:

Connexion by BoeingSM demonstrates true broadbandInternet to the skies – the team at CBB has put thepieces together to make broadband Ku band service

available to commercial jetliners. The technologiesneeded to do this, such as phased array receive andtransmit antennas and spread spectrum transmission,may have been off-the-shelf, but overcoming all of thetechnical, operational, regulatory and market hurdles isnevertheless something to recognize.

Thuraya reaches 100,000 users - the first handheldservice to do so for telephone communications. Thoseof us who worked on this concept in the early dayshave to be impressed with how the folks at Thurayamade GEO mobile satellite into an effective business.Availability of Thuraya services in the Middle East is asolid factor in rebuilding infrastructure because without

“... Satellite communicationshas had a pretty good year –revenues are up in severalsectors and there is a newfeeling of optimism amongproviders and users alike...”

good communications, everythingelse is a challenge.

XM hits the golden 1 million subs– 100 radio channels to cars isindeed a business. Sirius SatelliteRadio is likewise climbing towardsthis benchmark. The neat, littleSKYFI radio is a tremendoussuccess, helping XM SatelliteRadio exceed its targets.

Horizons 1 reaches station at 127 west – technical,regulatory and business challenges didn’t keepPanAmSat and JSAT International from getting theirnew Ku-band satellite into operation and ready forbusiness.

News Corp closes the DIRECTV merger - and Hughesgets a permanent home. This has been a story of thePerils of Pauline but subscribers of the largest DTHsystem in the world can look to a future of even greaterprogramming options and innovation. And finally,

“We got ‘em!” - and satellites played a vital role ingetting on top of the story still unfolding in a liberated-Iraq. More satellite services are in the offing in Iraq and

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COVER STORY

Afghanistan, countries which see the promise ofdemocracy and a better life for citizens.

In 2004 - to come

According to Forbes Magazine and Fox News Network,2004 could yield the best economy in 50 years. Possiblythe War on Terror has provided the environment for astrong economy – witness the current 6 to 8% growthrate with low inflation and interest rates. These thingsare never permanent and can go the other direction,particularly if there is another attack like September 11th.On the other hand, a strong economy is a self fulfillingprophecy in its ability to impact many industries andmany people, in the US and throughout the world.Discussed below is a breakdown of technologies andapplications which stand to grow as a result of theirmaturity and the demand fostered by a growingeconomy.

The CDN finally takes root – digital media is the waveof the future in many commercial businesses andsatellites provide their unique multicast benefit. Thisarea was touted as one of huge growth back in the late1990s, but the scheme never found its way out of apaper bag. Now, companies in North America andWestern Europe are experimenting with electronicalternatives to posters, billboards, signage, and papermaterials. We’re all familiar with digital displays inairport terminals, but the CDN allows companies todisplay and communicate almost instantaneously andon a uniform and controlled basis. Expect this to pop upin movie theatres, grocery and department stores, cardealerships, and the like. It will begin to impactequipment sales and the use of teleport and satellitecapacity in coming months.

HDTV - and big screens are a hit! The more-expensiveTVs based on plasma and LCD displays were bigsellers during Christmas. The TV and cable networkscurrently provide or will shortly provide significantprogramming in one of two HDTV formats – 1080i or720p. Consumers will ramp up their purchases of theappropriate receivers and cable and satellite TVcompanies will offer more options. The degree ofadoption remains to be seen, but satellite operators areno doubt going to see some up-tick in demand.

Ka band goes prime time – well, maybe. EchoStar andLoral put the EchoStar 9/Telstar 13 satellite into

One of the most promising new applications of newsatelite techonologies is Connexion By Boeing’s Inflight broadband Internet. (photo courtesy of Boeing)

operation with Ka band capabilities, This, along withcomparable SES-Astra birds in Europe could well find abeneficial niche in the return channel business. And2004 is announced by Hughes Network Systems as theInflight year of launch of Spaceway in North America.In addition, Telesat Canada intends to launch its firstKa band payload in 2004 aboard a Boeing 702. Ka bandhas its technical challenges, but it has bandwidth andmulti-beam capabilities unmatched by the morepopulated bands below.

More satellites address the War on Terror – newsatellites enter service, providing capacity in criticallyneeded places. The ground-based technologies arebecoming more portable and mobile, which will helpconnect our forces from some of the remotest territorywhere critical operations are on-going. Much of thisgoes on below the radar, which of course is a goodthing.

Connexion by Boeing enters the Asia Pacific Region –JAL and others have committed to using CBB in theAsia region, allowing Boeing to proceed with its globalrollout. Satellite and teleport operators around the worldare benefiting from Boeing’s vision of broadbandservices to previously underserved users who needconnectivity regardless of their physical location.Similarly, Inmarsat – itself the subject of acquisition bynew investors - will continue to expand the BroadbandGlobal Area Network, now running on Thuraya but

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COVER STORY

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communications is beyond a doubt. Innovation andinvestment continue apace and a new generation ofprofessionals is at work. One can only be optimisticabout our New Year.

Bruce Elbert has over 30years of experience in satel-lite communications and isthe President of ApplicationTechnology Strategy, Inc.,which assists satellite operators, network providersand users in the public and private sectors. He is anauthor and educator in these fields, having producedseven titles and conducted technical and businesstraining around the world. During 25 years withHughes Electronics, he directed major technicalprojects and led business activities in the U.S. andoverseas.He is the author of The Satellite Communica-tion Applications Handbook, second edition (ArtechHouse, 2004). Web site: www.applicationstrategy.comEmail: bruce@applicationstrategy.com

The SES GLOBAL companies brings high-speedcommunications solutions to millions of homes and officesworldwide. The SES GLOBAL family consists of the world’spremier satellite operators, each a leader in its respectivemarket: SES AMERICOM in the U.S. and SES ASTRA inEurope, as well as the partner companies AsiaSat in Asia,Star One and Nahuelsat in Latin America, and SIRIUS inEurope. This network provides satellite communicationsacross the globe, with the unequalled depth of service andaudience that only regional market leaders can provide.

Worldwide and worldclass.

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COVER STORY-The Year in ReviewThe View from Europe:A Look Back at 2003 (and 1993)

By Chris ForresterSatMagazine Editor forEurope, Middle Eastand Africa

PoliticianHarold

Wilson oncesaid a week inpolitics is along time, andit is the same inthe satelliteindustry.Barely a weekpasses withoutsome notablechange in themix ofoperators,satellites inspace or –thankgoodness -fresh businessopportunities.This past fewweeks there has been considerableattention on two of Europe’s majorplayers, SES and Eutelsat, helpedby the impending sale of Telenor’ssatellites.

Eutelsat’s CEO, Giuliano Berretta,like our other industry leaders, isnothing if not passionate about hiscompany. Indeed, in many respectsthe industry is massively fortunateto have more than its fair share ofsenior folk who share a passion, alove affair even, with this crazy,

wonderful, exciting business. Abusiness which collectively holdsits breath when $250m-worth ofrocket and its cargo are lofted intospace, and only breathes againwhen all is well. A business which

from early 1993, and it made amarvellous trip down memory lane.The issue spoke of Eutelsat lookingat “co-locating a third satellite at 13deg East” around 1995 andspeculated that Eutelsat was

“actively planning toput the infrastructure inplace for the digitalera…” The old issuedescribed the 13 degEast position asEutelsat’s cable TV“hot bird” position, andcannot help but wonderwhatever happened tothat phrase! Theplanned satellite,initially ordered asEutelsat 2F6 with 16transponders, waslaunched by Ariane onMarch 28 as Hotbird 1.

But even then Eutelsatwas Europe’s Number 2 operator.The1993 issue stated: “the third birdcarrying digitally compressed TVchannels could dramaticallyincrease channel capacity there andprovide serious competition toSES’s now dominant 19.2 deg Eastslot….” Astra was then building its1D and 1E craft which were slatedfor launch in 1994 and 1995. Theissue speculated on whichtelevision operator would want toswap out the huge number ofanalogue IRDs then installed. Thecomments were justified. Digitalreceivers were as rare as hen’steeth, and at that time DirecTV was

has grown spectacularly, helped bysome equally brave analoguepioneers who kept their couragewhen some early business planfailures would have sent weakermen scurrying back to the safety ofthe trenches.

2003 has been just such a year.Indeed, the past 10 years have beennever less than interesting.Recently I stumbled upon an oldissue of Interspace [Edited bySatMagazine’s Roger Stanyard]

Sky’s early days, including a younger Rupert Murdoch andSES ASTRA’s Dr. Pierre Meyrat.

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contemplating costs of around $700for its early digital IRDs.

Most interestingly, the issue talkedabout Eutelsat “selling capacitydirect to broadcasters”, somethingthat must have been trulyrevolutionary to its then DirectorGeneral Jean Grenier (who took overfrom Eutelsat’s ‘founding fatherAndrea Caruso, who retired in1989). Commercial director GiulianoBerretta inherited Grenier’s DirectorGeneral responsibilities on Jan 1,1999, and then took Eutelsat into itsprivatised phase. Eutelsat today,although committed to becomingmore directly involved in the directnegotiation sales chainwith broadcasters,continues to worklargely throughwholesalers and capacityresellers. Another signof the times (back in1993) was the prospectof Eutelsat opening a‘second DTH platform’for the important UK market, andaway from Astra for potentialbroadcasters looking to by-pass theSky platform. This much-talkedabout plan was never to come intobeing, although there wasconsiderable support from somebroadcasters, not least TurnerBroadcasting.

Also topical in 1993 was HDTV.Indeed, it might be said that despiteall the progress made inbroadcasting since 1993, how littletopics have changed! Although theHDTV feature (by leading Europeanindustry commentator Jean-LucRenaud) was referring to the thenembryonic “Grand Alliance” ofassorted US technologies that ledover time to the transmission model

used in the US today. Renaudperceptively talked about themorass of standards that the ‘GrandAlliance’ was supposed to cure. Hiscomment about the various testmodels that had the industryarguing whether a 720 lineprogressive or 1050 interlacedsystem would provide betterimages, is almost tragic in that muchthe same arguments are still beingmade ten years later!

One report from 1993 was, however,almost spot on and it concerned UKmultichannel forecasts from MorganStanley and its then senior mediaanalyst Rebecca Winnington-

roads past 14.6m homes. By March1993 the industry had signed up440,000 paying customers and usingthis benchmark Morgan Stanleyforecast that by now (end 2003) theindustry would grow massively to“more than 50%” connections and6.78m CATV homes. If only! In 1993Interspace predicted that cablewould have to achieve a better than50% take-up for it to recover itsmassive build costs. No mention atthe time of the ‘triple play’ thatwould eventually help cable out ofits financial mess, but one canforgive Morgan Stanley forenthusing about cable’s TV andtelephony offering and even

allowing for theirforecast that 75% ofcable’s residentialcustomers would signup for telephony (and40% of businesses). By2003.

Winnington-Ingrammissed that one

completely, but she wassignificantly more accurate inlooking at DTH (and SMATV)viewing homes. Indeed, her CrystalBall must have been especially clearfor she stated that by the end of2003 the UK would have 7.635mDTH subs. The 1993 issue talkedabout how cable’s limited 40+channel (analogue) offering couldpossibly compete with Astra’supcoming ‘Death Star’ and itsdiversity of choice. Given thatsatellite choice then meant a mix ofmostly English or German-languagefare, we can only wonder at today’sstate of play with hundreds ofchannels on offer in most Europeancountries and thousands availableover Europe as a whole.

“...The 1993 issue talked about how cable’slimited 40+ channel (analogue) offering couldpossibly compete with Astra’s upcoming‘Death Star’ and its diversity of choice...”

Ingram. Her report is an objectlesson in thorough research. Shedescribed the UK’s then cableindustry as “All wired up and readyto go…”, and in 192 pages talkedabout how investment fromAmerica’s RBOCs community had“fundamentally” changed the UKtelco scene. The report listed theplayers, and the line-up makes afascinating trip down memory lane:Nynex, Telewest, General Cable,Southwestern Bell, Videotron, JonesCable, Comcast, Insight, CUC andDiamond Cable. From giant Nynexand its 2.8m franchise homes (19.6%market share), down to tinyDiamond Cable and 3.5% marketshare (514,000 franchise homes) thecable operators had dug up the

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Eutelsat is frequently mentioned inthe 1993 issue. Besides the topicsalready covered, it had just held ajoint EU/Eutelsat seminar inMoscow attended by more than 400delegates, while the notorious pornchannel RedHotTV was transmittingon Eutelsat-II F1 and managing toupset ultra-sensitive British eyes (ithad been banned in the UK)although grey market imports of itsSAVE smart cards were helpingmake small fortunes for dealers. Onesatellite magazine was still carryingadverts for the porn channelalthough with printed lines on thepage only slightly obscuring thecontact points for obtaining theprohibited smart cards, in order toget around the law.

Today pornography is a fast-growing business with every digitaloperator supplying a handful ofchannels. Indeed, one UK service(Xtreme) in December started an“interactive element” to their pornchannel. Before the mind completelyboggles with what this might mean,let me stress that it meant viewerscould order their night’s fun usingthe increasingly ubiquitous redbutton. This, says the fascinatinglynamed channel boss Amanda Kiss,saves viewers the possibleembarrassment of speaking to ahuman operator over the phone.Kiss says viewers will shortly beable to order adult toys via the red-button and to vote on which moviethey want to see during the late-evening hours. Whatever next!Evidently Playboy UK is looking at

introducing a similar range ofservices early next year.

This past year has shown quiteremarkable European growth in thenumber of such channels, and inits near-relative, the text andphone-based channels, thatusually have scantily clad ladieson screen encouraging expensivetext messages to be sent. Onesupposes that a business modelthat works – especially in a 500-channel environment – is itselfpraiseworthy even if the content isless than squeaky-clean.

On reflection, 2003 has shownitself to be another year perhapsbest forgotten by the industry.However, by general consensus2003 has been better than 2002,and we have to be hopeful that2004 will see further progress in theindustry’s key indicators:profitability, of course; satelliteorders and hence some movementin launch activity; fill rates, andhope-amongst-hope, some upwardmovement in the vexed area oftransponder rentals.

Finally, it’s is always worth a trawlthrough the shorter stories in anyback-issue if only to note ‘where arethey now?’ One industry face, JonMiller, had just been promoted toMD at Nickelodeon, then about tolaunch in the UK (and James Bakeras director of programmes). Bothhave done well, with Miller nowrunning Time Warner’s giant AOLdivision. Baker is programming bossat BSkyB. But as a precursor totoday’s fascinating digital picture,Interspace reported on ‘Europe’sfirst digital service’, being twochannels then broadcasting onIntelsat K reported as being fromNBC and Spelling Entertainment.The channels were to be distributedto Spain and covered Spanish-language Canal de Noticias andCanal Hollywood. Whateverhappened to those brave pioneers?

And to the future New Year of 2004.Without doubt every Europeansatellite operator would like to seesome platform or other pick up theHD ball and start running with a nicechunky 10 or 20 channel packagethat soaks up a ton of unusedbandwidth. Well, we can all dream.But it’s probably not likely in 2004,although the green HD shoots fromthe AlfaCam-backed Euro1080project is to be undoubtedlywelcomed and we will be tuning inenthusiastically.

“...Without doubt every European satellite operatorwould like to see some platform or other pick up theHD ball and start running with a nice chunky 10 or 20channel package...”

London-based Chris Forrester, a well-knownbroadcasting journalist is the Editor for Europe,Middle East and Africa for SATMAGAZINE. Hereports on all aspects of the industry with specialemphasis on content, the business of television andemerging technologies. He has a unique knowledgeof the Middle East broadcasting scene, havinginterviewed at length the operational heads of eachof the main channels and pay-TV platforms.He can be reached at chrisforrester@compuserve.com

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COVER STORY-The Year in Review

The View from Asia-Pacific

2003, the year of the Ram in theChinese zodiac, is now history.

In the Asia-Pacific region, satellitecommunications continued to playan important role throughout 2003providing a fundamental platformfor both regional and domesticbroadcast and telecommunicationnetworks. During the year,communication satellites: Optus C1Chinasat 20, Insat 3a, Insat 3E andAsiaSat 4 were launchedsuccessfully providing additionalnew capacity in region with aseemly endless appetite for spacesegment. While new satellites werelaunched, satellite operators in theregion appear to have extensiveinventories of unused C and Ku-band transponder capacity, withsome operators offering substantialdiscounts at prices well below$3,000 per mHz.

Perhaps the most notable event of2003 in the Asia-Pacific region wasthe spectacular launch of China’sfirst manned space capsule inOctober. China now becomes onlythe third nation to accomplishmanned space travel. Not to be outdone, the Indian Space ResearchOrganization is now vetting plansfor a launch to the moon. Indeed,space has become an import focalpoint for countries in the region. InNovember, a China based Asia-Pacific Space CooperationOrganization (APSCO) wasproposed to promote the use of

space resources and spaceapplications in the Asia-Pacificregion. The goal according toChina’s Peoples Daily “Thecountries involved withestablishing APSCO intend to makeuse of space technology forenvironmental protection, disasterreduction, resource exploration,construction, telecommunicationand distance education.” Fourteencountries and the UN Economic andSocial Council have been involvedin forming APSCO. APSCO will beBeijing based.

On the ground, VSAT networkscontinued to be developed forgovernment and enterprise as theneed for broadband internet basedcommunications distance educationand back-up to fiber basednetworks was unabated. As the yearended, Galaxy Satellite, the jointventure between Intelsat and TVB(Hong Kong’s largest Chineselanguage television producer andbroadcaster) began its operationsfrom a new teleport and broadcastcenter providing uplinking serviceand distribution via severalregional C and Ku-band satellites.Distance education networks in

many countries in the regioncontinue to be developed withdistance education looking like thehot new vertical market for VSAT.

With the year of the Ram makingway for the year of the Monkey,2004 will see the launch of APstar 5,SuperBird 6, Insat 4a and the longawaited Ipstar 1. Ipstar, which willutilize 87 Ku and 10 Katransponders with onboard beamswitching capability will be the firstof a new generation ofcommunication satellites designedspecifically for broadband IPnetworking from ultra smallterminals (USAT’s). Questionscertainly remain as to the viability ofthis new satellite technology, but ifsuccessful, and with the successfullaunch of other new birds, 2004 isexpected to be a banner year forsatellite communications in theAsia-Pacific region.

Hawaii based - Stu Browne has more than 28 years insatellite communications as a network engineer,planner and developer. He has been involved withVSAT networks since the early 1980’s and hasworked in Alaska, Europe, Africa, the Middle East andacross Asia developing telephony, transactional dataand broadband solutions for telco’s, governmentsand enterprises. He is the Editor-Asia-Pacific ofSatMagazine and is currently the Vice President and Managing Director,Asia-Pacific Region for iDirect Technologies Inc., a US manufacturer ofbroadband VSAT network systems headquartered in Reston, Virgina. Hecan be reached at: sbrowne@idirect.net

Chinalaunchedthis year its firstmannedspacecapsule.

By Stuart P. BrowneSatMagazine Editor forAsia-Pacific

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EXECUTIVE SPOTLIGHT

For our special issue looking back at 2003and looking forward to the opportunities andchallenges in 2004, we asked the views ofkey industry executives on how they saw theyear that was and what’s in store for 2004.Excerpts:

Key Industry Players Share their Views on2003 and 2004

Conny Kullmann, CEO, INTELSAT

The satellite industry, orsatellite communicationsindustry, was not hit ashard as any of the otherbranches oftelecommunications andmedia entertainment.We saw some levelingoff of our revenues andsome slight drops, butnot at all to the samelevels as the cable guysor as when the “bubbleburst” initially.

The continuing industry consolidation impacted theindustry quite a bit and sticks out in my mind. This iscertainly an industry where consolidation and size makesense. If you add a handful of new satellites to yourfleet, it generally means that you don’t have to take ona lot of additional operational expenditures. Also withlarger fleets, you can generally operate the satellitesmore efficiently in terms of your capital expenditures.

I believe that 2004 is a year where the telecom market ingeneral will gain some momentum.

I also think that applications like broadband and DTHwill continue to grow in certain markets creatingexpanded opportunities for satellite operators in certainregions around the world. Intelsat is ready and able to

maximize on the opportunities that exist in themarketplace.

I think a challenge that always exists for operators – nomatter the year – is to stay abreast of the evolvingneeds of our customers and to continue to developflexible solutions that help them bring value to theircustomers.

The overall numbers of operators will continue to bereduced from a strictly economic basis. You’ve alreadyseen that through the moves by SES Astra when theybought American operator GE Americom, and throughthat move became the largest operator in the world.We are just now in the process actually of buying theNorth American business of Loral, where we’re pickingup five of their satellites and six orbital slots. There arereports of a lot of other discussions going on aroundthe industry, and many of the smaller operators are indiscussions to either be acquired by the larger playersor to join strong partnerships with them.

Dr. Karl Classen, CEO,ND SATCOM AG

The departing year 2003 hadmany different challenges. Theeconomic slow-down in theWestern Hemispherecontinued. Our world facedmilitary and political crises,terrorist attacks and the spreadof dangerous diseases. Thishad short term effects on thebusiness we are confident that the upswing of theeconomies in the different regions will have a positiveimpact on our business. We continued our globalizationstrategy, bringing us closer to our valued customersworldwide.

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Looking forward to 2004, we expect the Westerneconomies to turnaround. We expect to see a continuedgrowth in the emerging markets. We are prepared toincrease our customer base globally in the broadcast &media, government & defence and telecom markets.

In 2003 we observed a further consolidation in thesatellite value chain. Due to the world events we alsoobserved an increase in governmental spending inspecific satellite communication solutions. In 2004 wewill see this trend continuing.

EXECUTIVE SPOTLIGHT

Noah Samara, Chairman & CEO of WorldSpace

There were definitely morepositive signs then in theprevious couple years asspecific segments of the satelliteindustry showed promise. Areaswith the most markedimprovement includedgovernment satellitecommunications for militaryapplication, high definitiontelevision and digital satelliteradio.

For satellite radio in particular it has become a story ofgrowth, first seen in the United States with XM (usingWorldSpace’s technology) reaching its one millionsubscriber mark and now on a more global recognition ofservice. This is both on a consumer level and throughgovernment-based initiatives that have given militarytroops from Afghanistan to Iraq access to criticalinformation, news and entertainment such as NPR, CNNand customized music programming.

I expect to see continued momentum in the industry asmore companies re-evaluate their technology, availablebandwidth and market needs to generate targeted andcomplete solutions for the user community. For instance,the success of satellite radio utilizing the WorldSpacetechnology in the U.S. has generated a globalunderstanding that satellite is an ideal service to deliverdigital content via audio. It can also provide morecomprehensive broadband access by allowing digitalcontent found on the Web to be cached and pushed to

specific countries and locations without telephoneconnectivity.

Additional opportunities include providing services ona more regional basis so the information is incrediblytargeted and meets specific needs. By localizingcontent, there is greater value and therefore increasedrevenue generation opportunities.

Due to the war in Iraq, a couple changes of note in thesatellite industry were government’s reliance on satellitefor a greater multitude of communications purposes andthe increased understanding globally of the value ofsatellite in areas of limited telecommunicationsinfrastructure.

One specific change was with consumers, carmanufacturers and after-market/home audiomanufacturers clearly recognizing that digital satelliteradio is an untapped market with great promise. I expectmore partnerships to evolve as the industry’sperception of the satellite market increases and therevenue potential becomes more apparent.

Mark Dankberg, Chairman and CEO ,VIASAT

We found 2003 to be a better,stronger year than 2002 forViaSat. We saw revived andrenewed interest in satellitebroadband, especially. A few ofthe most significant eventswere:

� New $150+ millioninvestment round in WildBlueCommunications.

� Intelsat decision to launch DTH satellitebroadband service using the DOCSIS®

platform was the first major migration of thatplatform beyond WildBlue – consequentlyraising the awareness of satellite DOCSISamong many ISPs, DTH providers, and satelliteoperators.

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� Very successful trials for the Connexion byBoeingSM service on both Lufthansa andBritish Airways. The successful trials werefollowed by significant commitments forservice by several international carriers.

� Consensus acceptance of the critical role ofsatellite communications in the war in Iraq hasreinforced the value of broadband satellitenetworking to the military – increasing thepotential for defense/commercial cross overtechnologies and services.

� The sustained growth of terrestrial broadbandservices (DSL and cable modems), in the US &abroad, has conclusively shown there isdemand for broadband at reasonable prices –without emergence of a single “killer app.” Theimplication for satellite is that broadbandservice is really a technical/economic issue –not a question of market demand. That is, thebasic question has changed from “If we buildit, will they come?” to one of “What technicalsolution do we need in space and on theground that will deliver an equivalent gradeof service to terrestrial for a comparableprice?” Clearly there is market demand forservice providers that can meet that challenge.

ViaSat has played important roles in almost all theseevents. We see that the impact on the industry is agrowing acceptance that broadband is real, it wasn’tjust an artifact of the bubble, and that it’s going to playan increasing role in the future of VSAT networking. Webelieve this acceptance, combined with other macrofactors in the VSAT and DTH market, have created agrowing sense of a “changing of the guard” in theVSAT industry for the first time in over a decade.

We see 2004 to be a continuation of 2003. We think avery important factor will be indicators of commercialsuccess for some of the pioneering broadband servicessuch as Connexion by Boeing, WildBlueCommunications, and the Intelsat/Orbit Data SystemsDTH broadband service. We also think that during 2003the satellite communications industry needs to continueto make progress in positioning VSAT for IP-basedbroadband services among enterprise users. Whilethere has certainly been a lot of progress here, itappears that while VSAT is recognized as a “safe”

solution for POS or other transaction networks, manyCIOs still aren’t quite there when it comes to IPbroadband services. We think there’s opportunity toadvance that cause in 2004.

We think 2003 will reveal meaningful changes in relativeVSAT network hardware market share among theleading providers. We see that trend continuing in 2004.

We also foresee (maybe starting in 2004) that the dialogfor satellite broadband will change away from questionssuch as “Is Ka-band needed? Are spot beamsneeded?” towards issues like “How specifically do weuse Ka-band and spot beams to achieve the price/performance ratios needed to attract subscribers andearn the economics that terrestrial providers do?” Wethink that will mark an end to the “Woe is me - satellitecan’t compete” phase and a start to a new phase of“Here are the economic performance metrics we’regoing to achieve, and continuously improve, tocompete for this proven and very significant consumerand enterprise business.”

EXECUTIVE SPOTLIGHT

Gary Hatch, Founder and CEO, AntennaTechnology Communications Inc. (ATCi)

Reflecting on the first half 2003,we could feel it coming, thesecond half we could actuallysee the industry changing. As aresult of the global events of thepast year, there is an increasedawareness of the challengesfacing the military andgovernment areas in particular...and because of the need and overall effectiveness ofsatellite communications, there has been greater interestby these sectors to improve their communicationinfrastructures.. via satellite.

We are optimistic about 2004 being strong, developingand growing, especially in the government, military andcommercial areas. Companies are interested inpurchasing satellite communication products basedupon the value it brings to their business.

Although improving, continued constraints in thecapital markets forced satellite-related companies to

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refocus and center efforts on providing customers moreprofitable products, services and improved solutions-based business models as we move into 2004. It isimportant to build upon existing point-to-multipointtechnologies, which will ultimately help our marketsleverage equipment investments, streamline operationsand boost our customers overall profitabilitysignificantly.

EXECUTIVE SPOTLIGHT

David Helfgott, President & CEO,AMERICOM Government Services

In the United States GovernmentSatellite Communications servicessector, AGS saw a continued levelof activity and cooperationbetween the Department ofDefense (and related agencies)and commercial SATCOM serviceproviders, for applications andusers both domestic and abroad.

Although the Department ofHomeland Security (DHS) has yet

to release many major procurements, AGS did note agreat increase in planning and coordination withindustry in the latter-half of 2003 and we anticipateincreased activity going forward.

We anticipate more of the same, especially in emergingDHS requirements for commercial SATCOM servicesand increasing DOD requirements globally. Specifically,the DOD’s network-centric warfare strategy and themilitary’s ever-increasing requirements for broadband/satellite bandwidth are key to this demand. Thisfundamental strategy places broadband connectivity atthe nexus of communications, applications, andsystems… all interconnected and designed to supportthe warfighter.

The SATCOM services industry (including AGS) notedthe GAO Report on DOD Commercial SATCOMProcurement Practices, which came out this December.The gist of the report, that DOD can and shouldmodernize its procurement activities to reflect bestcommercial practices, was welcome news for an industrylooking to work closer and more efficiently with bothprocurement and user groups within DOD.

Rick Masoni, Executive Vice President,Lockheed Martin Commercial Space Systems

2003 was a marked improvementover 2002, which was the worstyear in recent history. Firm ordersfor 16 or 17 satellites represented afour fold increase in activity.Clearly, the impending purchase ofHughes Electronics by NewsCorpis the most significant event,creating a media giant with bothsatellite content and delivery capability. It will raise thestakes in the direct-to-consumer market. The purchaseby Intelsat of Loral’s North American Skynet assets,and the forced bankruptcy of Loral stemming from thattransaction, has an impact on both the operator andmanufacturer side of the business.

2004 looks very much like 2003 to us. We see roughlythe same number of new satellites ordered, drivenprimarily by the replacement market, but with sometraction in new services such as internet local accessand HDTV relay or DBS.

Operator consolidation was evident (theaforementioned Intelsat/Loral deal, SES’s increasedstake in NSAB, for example) and one would expect thattrend to continue. On the manufacturing side, we sawthe European suppliers teaming as partners instead ofcompeting for several opportunities. It remains to beseen whether this is a harbinger of a more formalcollaboration in 2004. It’s interesting to note, on theother hand, that talks of consolidation among USsuppliers was non-existent in 2003, and we wouldexpect the current environment to prevail throughout2004.

Joe Amor, VP and GM, MicrospaceCommunications, Corp.

Upon reflection, there were twokey events in 2003 for the satelliteindustry. There was Loral’sbankruptcy and the process ofthat bankruptcy. Another bigevent was the failure of Telstar 4.That failure was a surprisebecause it affected a satellite that

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was not a Hughes/Boeing design satellite, which haveexperienced problems for the past several years.

Also in 2003, the pending PanAmSat ownershiptransition to News Corp. has impacted the industry onlyslightly because of their lack of movement during theacquisition process. Now that the merger has beenapproved, I am expecting we are going to see that thenew owners will have a true change in PanAmSat in theway that it operates in the coming decade. A lot ofpeople haven’t focused on the PanAmSat aspect of theNews Corp. acquisition, but News Corp is acquiringDirecTV, PanAmSat and Hughes Network Systems. Ithink the News Corp. acquisition of those three satelliteassets will have a profound impact on the satelliteindustry in this decade.

The satellite industry challenge is to determine anddefine its position as part of the worldwidetelecommunications infrastructure.

In the last ten years, telecommunications as a whole hascontinued to evolve and satellite technology hasevolved. But, satellite technology has an advantageabout which we need to continue educating thetelecommunications industry and telecommunicationsbuyers. We need them to know about the inherentadvantages of satellite technology and how ournetworks are part of that whole telecommunicationsfabric. That’s our real challenge.

If we accomplish that, the rest will fall into place.Microspace in particular needs to continue educatingAmerican enterprises about the cost effectiveness ofsatellite telecommunications.

What’s significant is that there’s a huge lack of change.We’ve seen very little in the way of new technologyover the last two years. That’s a result of the verylimited research and development (R&D) andengineering expenditures that we have seen previouslyin high technology fields. In that regard, the satelliteindustry is no different than any other industry.

Compared to 1996-1999, by the time you figured outwhat that widget did, there was a new widget replacingit. The reason there was a lack of innovation in the lastcouple of years and that R&D was so stagnant wasthreefold: there’s a lack of venture capital, it’s a

negative byproduct of the dot-com implosion andthere’s a general desire to avoid risk. All those factorstogether resulted in a lack of new product developmentin the satellite industry.

Tal Meirzon, VP-Marketing, GilatSatelliteNetworks

There are some indicators for abetter 2003 compared to 2002. In2003, there were more requests forlonger term Broadband Internetaccess projects In addition, therehas been an increase in networkexpansions among existing Gilatcustomers, which is an indicatorof market improvement andcustomer confidence.Furthermore, there have been more government initiatedprojects investing in development of ruralcommunications - for both telephony as well as Internetaccess.

The main challenge the VSAT market industry is facing,in my mind, is how to increase the VSAT marketsignificantly by adding value and efficiency whilelimiting the technology price erosion.

(1) Reduce the life cycle cost for VSAT operators vialowering all VSAT service components; lower CPE cost,automated installation, SLA based embedded serviceprovisioning, all embedded products, and multipleservices supported over the same platform for differentmarkets.

(2) Increase the number of additional Applications andSolutions operational over VSAT enabled networks.

(3) Steer to define a more comprehensive and costeffective standard (i.e. Enhanced DVB-RCS) that willprovide the best cost effective satellite networksolution.

2003 is probably a year where the industry is changingits course back from slow down and its poorestperformance in 2002, to stability in 2003 and hopefully arebound in 2004. To achieve this, the number of VSATsdelivered by all vendors to the market should increaseat a level quicker to that of the price erosion.

.

EXECUTIVE SPOTLIGHT

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FEATURESSatellite System Acquisition:A Fresh Approach to Evaluating and Purchasing aCommunications Satellite System

By Harold E. McDonnell

It has been almost half a century since Sputnik firstorbited earth. The progress in satellites, and

particularly Communication Satellites, has been greaterthan the comparable first half century for manned flight.Since the time the first American voice message (aChristmas greeting from then President Eisenhower)was delivered from space, the capability has explodedto pictures, voice and data transmissions that cover theentire planet.

The procurement of these systems has not advanced asrapidly. The process that evolved during the early daysof government procurement has hardly changed. Whileeffective, the procurement system evolved slowly andhas been handed down to succeeding generations oftechnical buyers who naturally concentrated on thescience and engineering of satellite systemprocurement. Little attention was given to the lifetimeoperational and insurance costs.

Buyers of communication satellite systems today mustbalance multiple decisions on the TOTAL COST OFOWNERSHIP (TCO). This evaluation must considernot only the purchase price, but also the significantcosts of operations over the fifteen-year life of thespacecraft, as well as the substantial and increasingcost of insurance.

Conducting An Effective Evaluation

The satellite system buyer must, first and foremost,know what he wants to procure. The evaluation of thetechnical design of the satellite will vary depending onthe company’s market needs and requirements. It is onething to procure a replacement satellite to maintainexisting service. It is entirely different if the intention isto grow the service by providing additional satellitecapabilities.

Under all circumstances the evaluation team must becross-functional and capable of analyzing vendors frommultiple perspectives: business, technical (hardwareand software) financial and ongoing operational. This

cross-functional balance is critical to understandingand clearly defining the requirements and costs of thenew system.

According to Walter Braun, a leading industryconsultant, “The best evaluation teams represent allcritical areas of a satellite operator. Everyone at thetable must have an individual stake in helping to makethe best possible decision. A crucial first step isgenerating a set of tight market-driven requirements,which may involve input and dialogue with thecustomers. Employing engineering professionals whocan analyze technical requirements is not enough.Buyers must also include their technical operations,sales, marketing, finance and other key business unitsin the evaluation process.”

Request for Information (RFI)

It is always worthwhile to generate a formal Request forInformation (RFI). A comprehensive RFI brings a highdegree of rationality and market place reality into theprocurement process. It enables the prime contractortime to study and understand the requirements.Satellite vendors should be encouraged to critique theRFI and suggest additions and modifications. These‘suggestions’ may strive to bias the RFP toward aparticular manufacturer’s capabilities, but thecontribution can be helpful. The buyer’s team that willdraft the RFP must be knowledgeable enough to extractquality information from the sales suggestions. In thepast, the most expensive and time consuming mistakesmade in satellite procurement have been in issuing anRFP with faulty assumptions.

Manufacturers of communication satellites are wellknown and have long and public records ofachievement. The RFI should be issued to selectmanufacturers who, in the judgment of the businessbuyer, have the hardware and software technicalcapability to satisfy requirements while having thefinancial strength and available resources to be appliedto this procurement.

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Developing the RFP

In the process ofdrafting the RFP,every one – sales,marketing, finance,strategy, engineering,software and groundoperations – shouldsign off on everyaspect of the RFP.Once issued, changemust be avoided.Changes made duringthe procurementprocess result in timedelays and skyrocketing costs. Functions within asatellite system are extremely interdependent. A changein one subsystem cascades into others. The trueimpact of this cascading is hard for the manufacturer toaccurately evaluate. Since time is always a criticalcomponent, changes during the manufacturing processforce the prime or sub-contractor senior management tofocus on costs, not technical consequences.

To assure that the quality of the manufacturing processis not compromised, the buyer should insist on accessto subcontractors by the technical staff. According toJim Wehri, president of PSI Group, interest amongsatellite buyers in visiting subcontractors reflects atrend in which prime contractors increasingly areoutsourcing critical activities that can directly impactreliability and schedules. In responding to the RFP, amanufacturer should be permitted to offer options thathe may have elected not to reveal in responding to theRFI, but which may better address the finalspecifications in the RFP.

Evaluation Process

The proposal evaluation process is facilitated andquantified by developing a bidder ‘score card’. Listingall the requisite technical and financial criteria, thescorecard can allow each vendor to be scored by itshistory and performance in these specific areas. Foreach RFP criterion, the team should assign a ‘weight’ ofimportance that will help in adding up each vendor’sscore at evaluation time and minimize subjective

arguments among team members. The more heavily acriterion is weighted, the more important it is for avendor to receive a high score in that particular area.

Total Cost of Ownership (TCO)

In addition to an objective technical evaluation of theRFP, the business buyers must analyze the totalestimated costs for the new system over the expectedlifetime. This analysis is typically referred to as theTotal Cost of Ownership (TCO). It is comprised of threekey areas:

• Satellite and Launch Vehicle Costs• Operational Costs• Insurance Costs

Satellite and Launch Vehicle Costs

The costs for the satellite and launch vehicle are majorand up-front. The satellite should be compatible with avariety of launch vehicles. Particularly because theworldwide launch providers are combining theircapabilities across continents for total missionassurance and on-time schedules. Examples are Proton(Russian) backing up Atlas (USA), and Arianespace(French) securing back up from Sea Launch (USA/Russian) and Mitsubishi Heavy Industries (Japanese).Operators may choose a ‘delivery in orbit’ proposal, orpurchase the satellite and negotiate their own launchand insurance package. Either way, the satellitespecifications, mass and dimensions have a significant

Source: FUTRON 2003

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impact on the choice, price and insurability of theselected launch vehicle. Total mission assurance by thelaunch providers has been shown to have a beneficialeffect on the insurance industry.

The initial purchase price is the largest factor (70 to 80percent) in the TCO a business buyer faces in selectinga satellite platform.

What is not always obvious is the relationship betweenthe initial costs of the satellite relative to its projectedlifetime cost. For example, building in superior marginsfor critical subsystems may result in higher upfrontcosts, but can result in a significantly lower TCO. Otherfactors such as insurance, customer support andlifetime reliability also affect the total system cost.

Major in-orbit anomalies are unpredictable, but byresearching all satellite models, operators can identifythose with records for the fewest and least expensiveanomalies.

Bus anomalies have occurred in the satellites of allmanufacturers. They have been attributed to faultydesign and most frequently to faulty manufacturing ofcomponents. At the time of the evaluation of the

design, the manufacturer’s current performance on thesatellite he is offering should be key in the evaluation.Operators should evaluate the anticipated system costsfrom an overall performance perspective, balancingsubsystem power margins against the expected life ofthe satellite. For instance, if a solar array design startslife with a power margin of 25 to 20 percent, it is lesslikely to have problems fulfilling lifetime performance ifthe spacecraft is built with a power margin of 25 to 30percent. The same concept applies to many

subsystems, such as batteries, radiation resistance, etc.The additional power margin may cost more up front,but can add years to the life of the spacecraft andgenerate additional revenues over mission life.

Operational Costs

Bidders should be evaluated on the operational supportthey provide over the typical 15-year life of aspacecraft. What is the extent of the manufacturer’spost-launch customer services? Are they available 24/7to assist with anomaly analysis and resolution? Doesthe manufacturer charge extra for this support or is itincluded in the price of the spacecraft?

Source: FUTRON 2003

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A study by the Futron Corp., “GEO Commercial SatelliteBus Operations: A Comparative Analysis, 2003”, foundthat ongoing operations and program managementcosts such as staff, hardware and software vary greatlydepending on the satellite. This ‘consumer report’ onthe commercial satellite industry found that the majorcomponents of total operations costs over the life of asatellite are those for staff and the hardware andsoftware for spacecraft monitoring and maneuvering.

According to the Futron study, “Operators report thattheir operations staff spend 20 to 40 percent of theirtime on anomaly-related activities, with the rest spenton routine maneuver planning, development of newprocedures and preparations for new satellites.” Thisfinding suggests that by increasing the onboardautonomy of their satellites, buyers can more efficientlymanage anomalies and reduce annual operating coststhrough lower staffing needs over the life of thesatellite.

The cost of operating a satellite is the aggregate ofmany factors, such as the complexity of components,ease of spacecraft pointing and the effectiveness of on-board autonomy. The complexity of hardware and thesophistication of the software are intrinsically related.Achieving a balance between these elements isessential to providing an “operator friendly” satellite.The Futron Study , illustrates this relationship amongcurrent spacecraft models. The more difficult a satelliteis to keep stable and maneuver, the more likely it is tocause operator errors. The analyses and resolution ofthese errors, as well as hardware anomalies, drive upstaffing demands and consequently, operating costs.

The age of the satellite is another key considerationimpacting costs. While 21st Century technology canachieve satellite lifetimes longer than 15 years, it shouldbe noted that longer lifetime could increase operationalcosts. First, older satellites are less effectivemoneymakers owing to limited bandwidth andtransponders compared to newer models. Secondly, theoperating procedures will be different for the newer,high quality software-controlled satellites nowavailable, thereby increasing an operator’s burden.

Furthermore, customer support by the manufactureralmost two decades after satellite delivery, but certainlybeyond contract life, is not a reasonable expectation.

Insurance Costs

The cost of insurance for in-orbit satellites represents aconsiderable portion of TCO. Insurance costs for thevarious satellite platforms can vary by 10 percent ormore, which can equate to at least $20 million for a $200million satellite and launch vehicle procurement.Other insurance considerations are whether the satelliteis likely to be fully or partially insured or subsystemrisks excluded in their entirety. On some satellitemodels, insurance coverage may exclude a componentthat has a higher likelihood of failure based on anomalyrecords.

The 2003 Frost & Sullivan study on satellite reliabilityfound that “simpler, leaner, more versatile designplatforms have been demonstrated to be more reliable.On-board autonomy further enhances reliability byimproving anomaly resolution.”

The better the track record of a satellite platform andlaunch vehicle, the stronger underwriter interest will bein providing insurance. Increased demand by theunderwriter community leads to competition for thebusiness and, ultimately, more attractive insuranceprices for the operator.

The Frost & Sullivan Study shows a trend towardhigher insurance premiums and an increasing number ofclaims.

Summary – Weighing the Options

With all the technical, pricing and program supportinformation gained from the qualified bidder, theevaluation team can rank each bidder against thespecified criteria. The results will indicate whichvendors have the most comprehensive technical,support and management capabilities to build thesystem, and therefore which ones are qualified to bedown-selected for contract negotiations.

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During negotiations for the final contract, the businessbuyer will be able to measure and assess the teamwork,chemistry and customer commitment of the short-listedbidders. This process will lead to selection of thesatellite manufacturer who offers the best combinationof price and performance.

The purchase of a satellite system is one that shouldlead to a long and mutually rewarding relationshipbetween the owner and the manufacturer. It is critical tofactor in all costs – THE TOTAL COST OFOWNERSHIP – of the system before contract signing.

Harold “Hal”McDonnell retiredfrom HughesElectronics in May2000 after a nearly15 year “second”career that spannedseveral executiveroles in Hughes’commercialoperating companyand at its satellite manufacturing division.Previously, McDonnell held a series ofmanagement and executive posts at The AerospaceCorporation for 26 years. He has been aninternationally known and recognized designer andarchitect of military and commercialcommunications satellites since their inception inthe late 1950s..

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Satellite Service Providers and the Battle forthe Oilfield CustomerHow Application Focused Technologies are Changing the Market

By Alan Gottlieb

For VSAT providers, few marketsare as attractive as the Oil

Industry. Offshore and LandDrilling, Production, Well Logging,Pipeline and other Oil Servicesupport and infrastructureoperations are often located inremote areas far from fiber networksmakingsatellitethe onlyrealisticcommu-nicationsalternative.Unlikeothermarketsthat willultimatelybe servedbyterrestriallinks, thismarketoffers asecurepromise oflong termgrowth forthose VSAT providers dedicatedenough to learn the industry’srequirements. Many such providershave recognized the industry’spotential and are intent on marketentry.

At Gottlieb and Company, we areseeing more and more clientsseeking to expand their knowledge

of the Oil Industry and build amarket position. Long term playerslike Sola, Petrocom, Stratos,Schlumberger, Invsat, RigNet andPolar are finding themselvescompeting against aggressivenewcomers like MTN, Verestar andin some cases, the satellite

operators themselves. Providersvary in what they offer. Petrocomoffers a high-end, turn key servicepackage while other providers onthe satellite side tend to work withthird party service providers. Inaddition to new market entrants,new technologies and customerrequirements are changing theindustry.

Companies who have researchedthe industry have alreadyrecognized that it is a large andcomplex market composed of manysegments, each with its ownrequirements. Offshore and landrigs, Logging, Infrastructure

Construction andSCADA applicationseach have differentrequirements.Understanding userthe user’s needs andapplying the mostappropriatetechnology solution isfundamental tosuccess in themarketplace. Someexamples include therig owner’s desire tooffer their own satelliteservices to their sub-contractors through asingle antenna andmodem, a servicerequiring VLANtagging. In WellLogging, the need to

uplink large amounts of data fromdispersed locations makes a strongcase for the shared bandwidthtechnologies.

Some of the newer technologiesemployed in the Oil Field includeiDirect, DAMA, Inmarsat’s RegionalBGAN and Iridium’s data service,solutions offered to satisfy the

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industry’s demand for greaterbandwidth availability, low costterminals and mobility. iDirectsolutions have become extremelyattractive since they combine bi-directional, shared bandwidth withIP Acceleration and low costterminals. In essence, newtechnology and the varyingdemands of the industry arebringing to a close the age of theuniversal Point-to-Point solution.Here are just a few examples of howthe new technologies can beemployed in selected segments.

Offshore – Demand for GreaterBandwidth

Offshore Drilling Rigs areessentially mini-communities. Atypical rig accommodates onehundred or more individuals,usually for several weeks at a time.Data and voice requirements areextensive for both business andpersonal needs, and reliability andservice of communications links areof critical importance. Demand forBandwidth on Demand isincreasing as transmission of largefiles, VoIP and Videoconferencingapplications is becoming morecommon. Since it is impractical froma cost standpoint to maintainbroadband fixed links for such“bursty” traffic, shared bandwidthsolutions are generating significant

interest, and traditional “turfbattles” between regional andcorporate IT over centralizednetwork control and planning aregradually giving way to theoverwhelming economicadvantages of the newtechnologies. As a result, sellingsuch technologies has definitelybecome easier. While the availabilityof new satellite technologies andthe demand for greater bandwidthare the predominant driving forcesin the business, there is also agrowing demand for new andinnovative services to fit the uniquerequirements of offshoreoperations.

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While provision of pre-paid callingand internet access is in its infancy,the demand for limiting access tothe oil operator’s corporate networkto employees only as well as thecost associated with providingcommunications services to thirdparty contractors is generatinginterest in pre-paid solutions forboth internet and voice carried overparallel networks through commonantennas. Hence the ability to sellcomplete packages of services andto provide innovative, full servicesolutions will become critical tosuccess in this market.

On Shore, Land Rig Operations

With 500 land rigs currently activeoutside of the U.S., there isconsiderable opportunity forsatellite service providers. However,land rig communication has its owndistinct set of requirements. Unlikethe Offshore market, crews aresmaller, usually fifty or less,movement of the rigs is morefrequent and communications traffictends to be limited to 2-4 voicecircuits and e-mails containing dailydrilling statistics, the traditional“morning report.” Typically, therequirements for land rig operations

have been met bynarrow band,VSAT Point-to-Point links.Introduction ofiDirect andInmarsat’sRegional BGANservice will offerthe land rigoperator newopportunities forcost savings andconvenience.

For workover and other short-termdrilling related operations,Inmarsat’s new Regional BGAN is alikely alternative to VSAT. WithRegional BGAN, antenna pointingis vastly simplified. A non-technicalindividual can easily and rapidlydeploy the small, notebook-sizedterminal, point it to the satellite andinitiate communication. While theservice is convenient, currentpricing structures make the servicemost suitable for e-mail andoccasional medium bandwidth datatransmission. Regional BGANcurrently provides bi-directionalservice across Europe, northern tocentral Africa, the Middle East,several CIS countries and east

across India. Theservice will beupgraded to 400 Kbs in2005 and will be offeredglobally in that sametime frame. For land rigoperations wheremobility is limited to afew moves per/yearand bandwidthrequirements aregreater (typically, deepdrilling, exploratorywork), the iDirectplatform is a potentialsolution. Since most

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transmission in this application is“bursty,” many rigs can sharebandwidth thereby elimination theneed for many individual Point-to-Point SCPC links.

Well Logging

Well Logging typically involvestransmission of large amounts ofdata from remote locations tocorporate headquarters or a centralprocessing point. Typically, datatransmission can run in the 6Megabyte per/day per/rig range.When the data from numerous rigsis aggregated in the field, use ofconventional SCPC links to carrysuch large amounts of data can beprohibitive. However, with iDirect,bulk bandwidth can be sharedamong many locations significantlylowering costs. The economics ofthis technology are now beingreviewed by various companieswithin the industry and could makethe transmission of well loggingdata practical on a much largerscale.

SCADA

SCADA data requirements arespread across many segments of

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the industry including pipeline andproduction monitoring. Typically,the most important consideration isterminal cost since datarequirements are usually limited tonarrow band. Iridium’s new dataservice appears to be a likely fit forsuch applications.

In Conclusion

There are numerous marketsegments within the oil industrywhere satellite technology can beapplied effectively. New solutionsthat fit specific applications arecontributing to increased usage. Forthose firms willing to understandthe varying needs of each sectorand apply the appropriate solution,considerable opportunity exists.

Those providers with a broad arrayof innovative solutions and thedetermination to focus on theindustry will find that a long-termrevenue stream can be developedand maintained thereby insulatingthe satellite provider from othermarkets that may be eroded by lowcost, terrestrial fiber.

Alan Gottlieb is CEO and Principal Consultant at Gottlieb and Company, Inc. Hismost recent assignment for Verestar Inc., opening of enterprise markets in Oil andGas, International Construction, Pulp and Paper, Hospitality and Call CenterIndustries, employed an innovative combination of on-site market researchinterviews and specialized sales technique to produce market entry strategies aswell as generate initial sales.

For the second year in a row, Mr. Gottlieb will moderate the Oil Industry Panel atISCe 2004 (June 1-3). Join him for some valuable insights into the newtechnologies and how they are enhancing oil industry communications.He can be reached at agottlieb@gottliebandcompany.com

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Are We Listening?

The start of a new year is alwaysan appropriate time to assess

the recent past while peering intothe future for new opportunities. Nodoubt the past two years haswitnessed a dry spell in the financialmarkets that limited capitalexpenditures, resulting inconsolidation and altered businessplans. But with the benefit ofthis hindsight, it’s good tonow explore ways that satelliteowners and network operatorscan generate incrementallynew revenue from the assetsin place right now. But to dothis accurately we have to askourselves if we are listeningand responding appropriatelyto our customers and themarket.

What’s called for here iscompletely fresh thinking. Fortoo long the satellite businesshas pursued a “build it and they willcome” strategy. This historicallymeant massive upfront capitalinvestment in transponder capacitywith relative assurance that long-lease customers will come. As thepast two years have shown, that’sno longer a sure bet.

So from where will the new revenuecome? We don’t have to look far tosee that the potential $30 billionmarket for two-way enterprise

broadband services is now at hand.Some industry players are investingbillions of dollars on newtechnologies designed to appeal tothe enterprise. But in my estimation,this model is built on the oldassumptions, continuing the “buildit and they will come, sell it as wealways have” mentality. Themethodology of the past will notcarry the industry to the future.

The industry needs to reducedependence upon renting huge

swaths of capacity to the oldstandby customers and becomemuch more flexible in meeting theneeds of this new set of demandingcustomers. The corporatenetworking market consists of theliterally thousands of globally-dispersed enterprises with IP-basednetworks supporting everythingfrom Internet access to virtualprivate networks, e-commerce, andvoice communications. But serving

this set of customers requires a newmindset; it’s no longer aboutlocking up swaths of bandwidth onfixed, dedicated circuits, but ratherthinking like the terrestrialbroadband providers who can offerscalability, reliability, security andcustomer support at a competitiveprice. It requires us to listen closelyto this customer and apply ourtechnology in a way that satelliteoperators and technologyproviders have not typically donein the past. These enterprise

customers will be utilizinghybrid networks to meet theirdemands, requiring blendingtechnologies of both satelliteand terrestrial networks.

Within current cash constraintsand ROI limits, there are indeednew opportunities for growingthe satellite customer base andmeeting the stringentrequirements of enterpriseusers, especially those that aremoving assembly and R&Doperations to lower-costregions where skilled labor

costs might be low, but terrestrialbroadband infrastructure isunavailable or too costly.Fortunately, a new generation ofVSAT equipment now makes itrelatively easy to carry this type oftraffic on existing satelliteinfrastructure — primarily usingtransport capacity that can’t bepractically sold to the broadcastmarket. In addition, it’s nowpossible to deliver the type of

By John M. Kealey,President and CEO, iDirect Technologies

“...What’s called for here iscompletely fresh thinking.For too long the satellitebusiness has pursued a‘build it and they will come’strategy...”

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reliability and performance theenterprise market demands, backedby industry-standard service levelagreements.

If we just listen to what theterrestrial operators are doing, wehave the tools available toeffectively enhance their services,and, especially in greenfieldapplications, to surpass their valueproposition. The new generation ofall-IP VSAT gateway equipment canbe up and running at a fraction ofthe time, cost and energy ascompared with laying out fiber oreven sharing facility costs paid tocommon carriers.

But rather than being landlords whocollect rent on transponder space,our industry must realize that ourbusiness can’t be sustained with afew large tenants. With the rightapproach, we can get far better ROIfrom our current assets byappealing to the enterprise decisionmaker’s gut concerns aboutproductivity gains, security andreliability. The selling propositionmust fundamentally change from along-term capacity lease to onewhere the cost of satellite-based,two-way broadband is judgedwithin the total ROI in a seamlessglobal IP-based private and virtualprivate network.

The good news is that this ispossible without massiveinvestments required in new accessequipment that will only becompatible with an individual set ofsatellites. In fact, there are

commercially available solutionsthat allow an operator or serviceprovider to enable enterprise-classIP networking over existing satelliteinfrastructure, and be ready to carrytraffic in a matter of days, at afraction of the total cost ofownership of alternative SCPCequipment.

This innovation is significant for anumber of reasons. First, it offersan immediate improvement in theutilization of bandwidth, whichallows operators to use the orphanbandwidth that can’t be sold inconventional markets. It’s enabledthrough a number of strategies toincrease bandwidth efficiencyexponentially, including real-timecompression, better carrier spacing,turbo codes, dynamic forward errorcorrection, and others.

In fact, the amount of IP-usablebandwidth on existing satellites isvery close to what the new satellitesare expected to provide in thefuture. Further, bandwidth canactually be shared between different

John M. Kealey, is President and CEO, iDirectTechnologies. He is an experienced senior executive with more than 20 yearsin the information technologies and communications industries. Mostrecently, Mr. Kealey was the founder and former CEO of TenFoldCommunications, a subsidiary of TenFold Corporation. Within one year,Kealey led TenFold Communications from concept to more than $30 million incustomer contracts. He is an advisor and board member of 3Genesis andConnect Capital and holds an M.B.A. from Washington University. He canbe reached at jkealey@idirect-tech.com

enterprise customers, which cansignificantly reduce costs. Inaddition, the operator has theflexibility to spread capacity overdifferent frequencies, and at thehub, to carry traffic over multiplesatellites.

The bottom line is this: the marketfor enterprise broadband serviceswill be one of hybrid networkswhere IP networking over satellitewill play a much needed role. Tobest serve the enterprise customerwe must first listen to the enterprisecustomer and understand what isimportant to them. A lot of thatcustomer feedback is alreadyevident in the products andservices they buy from terrestrialcarriers. Our challenge is to take onan approach of satellite andterrestrial collaboration to provide aseamless blending of products andservices that are simplified, practicaland affordable. SM