PARIS – The telecommunications segment of World Satellite Business Week held here from September 14-17 was primarily a celebration of all that satellites do today and a forecast of all that they will do tomorrow.
Connected air, rail, sea and car travel promise to open vast new markets for satellite broadband.
The explosive growth of terrestrial mobile broadband will overwhelm current networks, giving satellites an important role in transmitting signals from rural areas to telecommunications networks.
The price of television sets capable of ultra-high definition is plummeting, and the first channels are appearing, giving hope of a double broadcast of the major networks as they switch from one to the other, filling the satellite transponders just as transponders were filled in the transition from standard definition to digital broadcasts.
Every discussion was fairly punctuated by optimism – except one.
Towards the end of the financial part of the conference, during a session on television distribution at which half of the scheduled speakers did not show up, two major media distribution companies begged to disagree with the prevailing good mood.
Bill Tillson, executive chairman of Atlanta-based Encompass Digital Media, and David Crawford, managing director of satellite and media at London-based Arqiva, both heavy users of satellite bandwidth, said the TV landscape is changing a lot. faster than even they predicted as little as a year ago, and the news is not good for satellite broadcasting.
The broadcasting of television signals is the only commercial activity by satellite whose long-term profitability has been demonstrated. But this is the industry where, at least from London and the United States, the future does not look bright.
Not surprisingly, the threat is non-linear television and over-the-top (OTT) consumer-demand programming.
“A year ago, I thought it was a 10-year horizon, that it would still be a very stable, even declining, 10-year business,” Tillson said of satellite TV. “I have changed my perspective over the past year.”
In a data point unlikely to be repeated by a satellite fleet operator, Tillson said that 70% of all North American leases of C-band satellite transponders feeding television to cable headends and consumers must be renewed between 2015 and 2022.
Most of them date back to the early 2000s, when broadcasters leased satellite capacity for 15 years or more over the life of the spacecraft. It’s contracts like this that allow satellite fleet operators to spend $250 million or more on a single satellite at least three years before it starts generating revenue.
“The best information I have for the renewal of these transponders is that [broadcast networks] will take less than 50% of previous capacity – and in most cases for up to 10 years,” Tillson said. “It’s a dramatic effect.”
Tillson said a few years ago he negotiated an 18-year satellite capacity lease when there were 16,000 wired headends in North America needed to serve the entire consumer market.
“Today you can access over 90% of the total market with around 350 headends,” he said. “You can reach the entire market with 1,600 headends.”
Arqiva’s Crawford said he agreed with Tillson’s assessment “on all key points. The conversations we have with our customers are mostly about the different forms of OTT. Satellites are taken for granted and considered quite mature.
“The price has to change,” Crawford said. “It has to go down because it has a lot more competition – fiber, terrestrial broadband and increasingly mobile technologies with LTE coming. And when 5G comes in 5-10 years it will be another drastic change.
“We could have a situation like we had with the submarine cable 10-15 years ago, with massive overcapacity that led to price cuts.”
As second-tier channels attract fewer viewers, larger networks will be less likely to carry them, meaning larger satellite customers will need less capacity, Tillson said.
Ferdinand Kayser, chief commercial officer of Luxembourg’s SES satellite fleet operator, sought to put the headwinds of growth into context during a Sept. 14 briefing with journalists and a Sept. 10 presentation at the IBC press conference in Amsterdam.
Even in the United States, where OTT is more developed than any other major market, households watched linear TV for an average of 296 minutes per day in 2014. The average per day has fallen over the past two years, but not a lot.
Non-linear TV according to SES figures, based on Eurodata TV results, totaled 26 minutes in 2014 per US household.