Fiber Looms as Check on Transponder Prices

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NEW YORK — Two television networks and a large satellite services provider warned satellite operators that fiber continues to nibble at the borders of the satellite market and that bandwidth pricing power should be exercised with restraint.

All said prices for satellite capacity have risen sharply, but they also appeared to believe that the increases are due to the higher cost of building, launching and insuring telecommunications spacecraft. Satellite insurance rates have tumbled in recent years, and both satellite manufacturers and launch service providers say the cost of a megahertz of satellite bandwidth on orbit has not increased materially.

But CBS and MTV officials said they tended to give satellite operators the benefit of the doubt, even if an official with Globecomm Systems, a global satellite services provider, said the large fleet operators have taken advantage of their strength to jack up prices.

Addressing the Satcon conference here Oct. 14, Mike Aloisi, vice president for technology, satellite and affiliate services at MTV, said he is surprised that the European duopoly in which Eutelsat of Paris and SES of Luxembourg all but lock up the biggest direct-to-home television markets has avoided attack by other satellite owners.

The result, he said, is that a Ku-band transponder lease in Europe costs five to eight times what it costs in North America.

“We’re just now starting to see some changes coming in Europe,” Aloisi said. “Satellite operators are sharing capacity on satellites, and creating new [direct-to-home] neighborhoods. But the neighborhoods are often monopolized by the company that, in effect, owns that neighborhood.”

Eutelsat and SES are not alone in Europe. Hispasat in Spain, Telenor in Norway, Turksat in Turkey and others are operating there, often on the periphery of the continent in revenue terms.

MTV leases 22 transponders on a full-time basis and nine other transponders part-time. Given the prevailing prices — $1.2 million to $1.5 million per transponder per year in North America, and $5 million to $10 million per year in Europe, depending on exchange rates and location — MTV is spending at least $50 million a year on satellite capacity.

But there are trends that could reduce demand for satellite capacity from TV networks. Local affiliate stations are using fiber more often, rather than satellite links, to send and receive programming. In another example, cable head-ends that take a satellite television feed and send it on to customers are now more likely to be connected by fiber rather than by satellite.

But the move away from satellite use by cable head-ends and newsgathering operations is happening slowly. Brent Stranathan, vice president for broadcast distribution at the CBS television network, said both will be significant over time. But he said CBS continues to lease 108 megahertz — equivalent to three transponders — on Intelsat satellites for newsgathering. That is only slightly less than a couple of years ago, he said.

Stranathan also said certain CBS operations have not moved toward MPEG-4 data compression, which would reduce the amount of satellite capacity needed, as fast as others. But this too is coming and ultimately could force satellite operators to offer transponders that provide 27 megahertz of bandwidth rather than 36 megahertz, he said.

Hauppauge, N.Y.-based Globecomm, which provides a broad range of satellite services to commercial and government customers worldwide, has noticed transponder price increases of between 5 and 10 percent per year in the past several years, said Paul Scardino, Globecomm’s vice president for sales.

That time period follows a consolidation in the industry in which Luxembourg- and Washington-based Intelsat and Luxembourg-based SES established their positions as the two largest fleet operators. “In that sense, I guess you could say that our worst fears have been realized,” Scardino said of the effects on prices of the strengthened satellite operators.

Stranathan agreed that prices have increased, but said that is mainly because the fleet operators are passing on to their customers the price hikes insisted on by satellite builders and launch service providers.

Aloisi agreed. He said MTV raised no concerns when approached by U.S regulators when Intelsat and SES were pursuing acquisitions, and does not regret that today.

“Pricing has been fair,” Aloisi said. “Every time I buy a megahertz of capacity I am asked to defend the price. We attempt to find out, from independent sources, what a competitive rate would be.”