Fleet Operators Competing with Bandwidth Retailers

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Communications infrastructure and services provider Arqiva of Britain notes a trend in which it and companies like it are “banging into the satellite operators competitively as the operators move from wholesaling to retailing” of satellite bandwidth, Arqiva Managing Director Steve Holebrook said.

Arqiva remains a major customer for the satellite operators. Of its $1.3 billion in revenue, $400 million is from satellite capacity, through which the company transmits some 600 broadcast channels, Holebrook said.

“Satellite vertical integration is challenging,” Holebrook said of some satellite fleet operators’ growing appetite to move down the food chain to providing services to end customers. “For a satellite operator to address all markets will require significant investment in ground facilities and operational staff. They should find a way of working with service providers, and concentrate on satellite space segment.”

As satellite fleet operator SES has demonstrated, investing in ground services tends to dilute the 80 percent gross profit margins that satellite fleet owners and investors are used to seeing.

Holebrook said that whatever the satellite operators’ strategy, there will be pressure on small ground service operators that are not large enough to offer extra capacity when needed on short notice, or to provide services during disaster recovery.

“Is satellite distribution a shrinking business?” Holebrook asked. He said it also was unclear whether television broadcasters are going to be outsourcing or insourcing in the coming years.

The pressure on satellite fleet operators’ performance is likely to come in Latin America, Asia and other fast-growing television markets as these markets consolidate into one or two satellite platforms per market. This has already occurred in the mature markets of North America and Western Europe, and is likely to happen in the coming years in the developing regions, Holebrook said.