Fleet Operators Deny Satellite Capacity Price Gouging

by

LONDON — Satellite fleet operators defended themselves against allegations of price gouging in parts of Africa and South Asia, where the cost of satellite capacity has skyrocketed.

A biennial survey of operators of satellite communications networks by the Comsys telecommunications consultancy found resentment of satellite operator practices in areas where supply was tightest, according to Simon Bull of Comsys.

Bull cautioned that not all satellite operators were viewed the same way. Some, he said, appear ready to strike long-term partnerships with stable customers even if that means not fetching the highest price per megahertz of capacity. Others, he said, have been guilty of short-term thinking.

Olivier Millies-Lacroix, commercial director of Eutelsat, said Eutelsat is in the Middle East and Africa for the long haul.

“I certainly deny that we have been operating like banks in the way we represent ourselves to customers in Africa,” Millies-Lacroix told Comsys’ VSAT 2009 conference here Sept. 16, responding to an allegation made earlier at the conference. “We want to grow a successful business for ourselves and for our end customers. I’ve never had any feedback from customers suggesting otherwise.”

Millies-Lacroix suggested that some of the complaints are due to the fact that satellite bandwidth has been in short supply in Africa.

“It is true that in recent months, African telecommunications users have not had all the capacity they need,” Millies-Lacroix said. “When we introduce W2A, it will be a big increase in our capacity to serve Africa in both C- and Ku-band and for some areas will represent a doubling of our capacity.”

Eutelsat’s W2A satellite entered service in May at 10 degrees and has a broad C- and Ku-band coverage area including a 10-transponder C-band beam over Africa.

Dianne VanBeber, vice president of investor relations at satellite-fleet operator Intelsat, agreed with Millies-Lacroix that the current shortage of capacity in Africa may explain telecommunications operators’ frustration. “For many years, prices in certain regions were not at levels that supported reinvestment in that region, and lower supply resulted,” VanBeber said Sept. 21. “The recent strong demand in certain regions has resulted in price improvements that now do support increased investment. Other operators see pricing that supports a good business model, and increased supply will follow. Building long-term customer relationships with customers is always our objective. On that front we have been very successful — our backlog growth reflects long-term strategic commitments from customers in our operating regions, of which Africa is a key component.”

VanBeber said that Intelsat may be the focus of some of the rancor only because, alone among the principal satellite-fleet operators, it has had at least some capacity available for sale over Africa.

Millies-Lacroix and VanBeber differed on whether the cost to place a megahertz of capacity into orbit — over Africa or anywhere else — has increased or decreased in recent years.

Eutelsat calculates that it required 20,000 euros ($29,000 at today’s exchange rates) per megahertz per year in capital investment in the mid-1990s to place a telecommunications satellite such as Eutelsat’s Hot Bird 2 into orbit.

By contrast, Eutelsat’s large W7 satellite scheduled for launch in November will cost Eutelsat around 4,000 euros per megahertz per year.

VanBeber agreed that satellites today are more powerful and carry more capacity, but “satellite manufacturing and launch costs have increased, not declined, in the past several years … Improvements in the ground segment are where efficiencies have been especially pronounced.”