Television broadcasters long have been the 800-pound gorilla in the global teleport business, but in recent years larger portions of the industry’s satellite uplink and downlink infrastructure have been devoted to providing voice, Internet and video communications services to such diverse users as disaster-response teams, oil exploration companies and schools.
Despite the widening customer base, the industry is faced with overcapacity due to advancing technology and high infrastructure costs, industry officials say. Teleport operators are responding to these twin challenges by finding and excelling in specific market niches, according to
Robert Bell, executive director of the World Teleport Association in New York.
“The teleport industry used to be a one-trick pony – it was all about broadcasting,” Bell said in an April 8 telephone interview. “During the startup boom in the 1970s, all you needed was an antenna and the ability to connect. Now it is a very sophisticated business, and teleport operators must have a head for business.”
Bell authored a report released in October 2007 that counted 1,780 teleports around the world, a 22 percent increase over his previous survey in 2004. Revenue
grew 17 percent, to $15 billion, during the same period, Bell said.
Despite a perception that most
teleports are owned by broadcasters,
57 percent belong to independent operators, Bell said, adding that he is trying to get that point across to companies that sell hardware and technology to the industry. “If you ask them what they sell to, they’ll say broadcasters. We wanted to make clear where the opportunities lay,” he said.
Nevertheless, broadcasters still
operate
43 percent of the world’s teleports and employ
27 percent of the associated
labor force, according to the study,
“Sizing the Teleport Market 2007.”
Once
concerned that fiber optic technology would put satellites out of business, the teleport industry has capitalized on the ability to use fiber optics to fill gaps in coverage, eliminating double hopping –
uplinking content to a satellite, downlinking to a teleport, then uplinking again to another satellite before downlinking to the intended market, Bell said.
Ed Deckert, vice president of teleport and Internet services for Crawford Communications
in Atlanta agreed. “We all thought fiber optics would be competitors, but we kind of need each other,” Deckert said.
According to some industry officials, however, advances in digital technology, such as data compression, have reduced the need for teleport capacity worldwide.
Teleports previously needed to be positioned closer to their data source or customer, but the establishment of Internet Protocols and fiber optics connectivity has made it possible for content development to occur farther from teleports
, said Patrick K. Brant, president and chief executive officer of
Lavell Systems Inc. in Reston, Va., which owns teleport operator
SkyPort Global Communications in Houston.
This has prompted a trend toward consolidation
. Lavell Systems, for example, has the backing of a major company in a bid to acquire
at least three, and potentially five, teleports, Brant said. He would not provide details of the transactions until they are completed.
Crawford Communications gained customers in Washington after a local teleport went out of business
, and also has picked up clients in the New York area, Deckert said.
Bell cited Arqiva of Hampshire, England
, as a rapidly growing company that has expanded its reach to both U.S. coasts by acquiring British Telecom’s satellite broadcast service in September 2007. The company has 10 teleports worldwide.
The current
consolidation trend is different from the vertical integration in the industry that took place between 2001 and 2005, Brant said. At the time, teleports were being purchased for pennies on the dollar as the telecommunications recession took its toll, followed by satellite operators buying teleports in an effort to streamline their own networks, Bell said.
That era ended in 2006, when entrepreneurs began buying teleports and returning them to service, Bell said.
Brant attributed the change to teleports’ high infrastructure costs. “I think the prevailing thought is it’s hard to vertically integrate,” he said. “Managed network services are very
intensive; there are costs associated with it. It’s difficult compared to operating a
normal business.”
The equipment costs associated with operating teleports translate into EBITDA – earnings before interest, taxes, depreciation and amortization – margins that are far lower than the 70 percent margins that satellite operators have grown accustomed to, Brant said.
While operators say there is a surplus of teleports, Bell argues that technological advances have spurred higher demand for teleports.
The industry has followed a normal business cycle of expansion to the point of over-expansion, then contraction, and now is on the upswing, he said.
Building and operating teleports is less expensive today than it was 10 years ago because the technology that goes into them is smaller, cheaper and more powerful, Bell said. He cited two other advances that have helped: the establishment of Internet Protocols, which reduced teleport costs by lowering the amount of proprietary equipment that teleports need, and digital compression, which allows more channels to be squeezed into satellite bandwidth.
Operators also anticipate increasing demand for their services. The proliferation of high-definition television (HDTV), personal digital communicators with voice and video, and the popular “triple-play” services of video, voice and data via the Internet provide opportunities for the teleport industry, Brant said.
“Integrators of these services are going to become the leaders of the [satellite communications] industry as a whole,” Brant
said. “The users of commercial satellite communications technology will be everywhere and will cover every aspect of communications – it’s going to touch everybody.”
Crawford Communications, which began as a video production company before
expanding into
satellite services,
is upgrading its teleport facilities to accommodate a growing number of clients who want to transition from part-time high-definition reception to full-time service,
Deckert said.
Geographically, one of the biggest growth areas for teleport operators is the
Middle East, which generated $793 million in revenue in 2007 – a 61 percent increase over 2004 figures compiled by the World Teleport Association. Crawford Communications, for example, has been working with the U.S. Army
at 106 sites in Afghanistan and Iraq to transmit
holiday and other greetings from service members to their families in the United States. Crawford also is working with news organizations in those countries
.
According to the World Teleport Association report, Israel leads financial growth in the
industry with a 255 percent increase in revenue
since 2004.
More than half of the
world’s teleports are located in North America, the study said, but some operators are venturing into
developing nations. For example, Carrier to Carrier of the Netherlands
is working on teleports in Africa, the Middle East and Central Asia,
markets that the company’s general manager, KeesJan Mink, said
can be difficult to navigate.
Carrier to Carrier’s approach is to tap the local labor force, start small and grow niches as the customers define their needs, Mink said.
The challenge for all operators, Bell said, is
not to invest too far ahead of their customers’ demands. “Teleport operators are always worried that they don’t have an antenna pointing to a satellite but have a customer who wants an antenna pointing to that satellite. They have to decide whether to buy it and whether they will get enough other customers”
to justify the investment,
he said.
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