By the latest count of the World Teleport Association (WTA), there are 1,781 commercial teleport facilities around the world, and new ones are springing up all the time, particularly in developing areas. The operators of these teleports, though harder to count, come in all shapes and sizes: The biggest in terms of revenue are the global satellite operators like SES and Intelsat, but fastest growing tend to be small independents, many of which have carved out specialized market niches.
Part of what the WTA does is try to keep track of these operators and industry trends and provide the data to its members. Robert Bell, who has run the New York-based organization since 1994, has seen the industry evolve from a provider of basic satellite uplink and downlink services to one that offers a full range of complex managed network services, not necessarily involving satellites.
The WTA also works to minimize and discourage so-called channel conflicts that could be damaging to the industry. A typical example is when a large, vertically integrated satellite operator with high profit margins uses its position to wrest business from an independent operator.
More recently, the WTA launched the Green Teleport initiative, an effort to encourage operators to reduce their energy consumption, which can account for $1 million in a company’s annual expenses.
Bell spoke recently with Space News Editor Warren Ferster.
Can you quantify the growth of the teleport industry over the last five or so years?
We came up with $12.8 billion for total commercial revenue in 2004, compared with about $15 billion in 2007. One of the facts of life in the teleport business is some amount of revenue is resale revenue from either satellite or fiber capacity. Basically about two-thirds of their revenue on average comes out of their own services, so in 2007, if they had $15 billion in total revenue, their own services — leaving aside retail — generated about $10 billion. It’s about a 17 percent growth from 2004 to 2007, which is not stellar, but it’s reasonable and sustainable.
What drove the growth?
It’s driven by the factors that were good to the satellite industry in general. Direct-to-home (DTH) television underwent a huge expansion in most places and also there was an increasing diversity of revenue sources. During the early 2000s to 2007 or 2008, you began seeing more and more markets become significant. Whether it’s support of oil and gas and resource extraction or maritime or enterprise applications, the diversity of markets served by the teleport operator community kept growing during that period. So you have good growth in things like some of the core broadcast businesses of DTH — which outside the U.S. is a teleport business; it’s not inside the U.S. for the most part — and then an increasing diversity of revenue sources coming in.
What do you project for the next five years?
I think you’re going to see more of the same. It’s a real open question as to how much impact the current recession is going to have on the business. Because so much of the satellite business is about long-term contracts, the business has done quite well during this recession; you don’t know how many problems are baked in that are going to appear in a couple of years because of decisions made during the recession. But generally speaking, we’re hearing that new projects have been deferred, new projects have been canceled, but the core business has held on pretty well.
What are some other industry trends worth noting?
I’m seeing an increasing effort by teleport operators to drive really deeply into the niches that they do serve and to drive further and further up the value chain. Twenty years ago they turned around signals. Now increasingly they are becoming managers of very complex networks for some customers, and not just satellite networks. There’s a big provider headquartered in the United Kingdom, Arqiva. One of their contracts last year was to run the television network for the London underground, which is an all fiber-based video distribution network for short-form content — advertising and other things — in the subway stations.
A few years ago teleport consolidation was the order of the day. Is that behind us now?
I think we’re a couple of years past it. That was the dot-com meltdown and it was bad. Probably the most dramatic thing that happened was when American Tower, which had bought a string of teleports in the U.S. — seven or eight, including two in the same state — because they didn’t really understand the teleport business, discovered that things were not worth anything like what they paid for them. They ended up selling seven or eight teleports to SES Americom for about $25 million because they were desperate to get out from underneath it. So Americom took those, closed or sold off three or four and produced a set of ground segments that made sense, and they probably never would have done it except that it was such a good deal they couldn’t pass it up. But since then, that capacity has been absorbed and I haven’t heard one story of shutdown or consolidation for I’d say at least two years.
Delivery of Internet backbone services did not turn out to be the growth engine for the satellite industry it was once expected to be. Has there been any growth?
There are certain companies that continue to do quite well delivering Internet backbone services. There’s a company called Carrier to Carrier in the Netherlands — the management are people who grew up in Africa or who have worked in Africa for years — and they have a very good business delivering Internet backbone services to African Internet service providers. Why? Because they know the market, they really understand it. They understand how to get paid; they understand what the actual service requirements are, as opposed to what you might theorize them to be.
Have you gotten any indication that the government side of this business is subsiding at all?
I’m reading the same things you are that say the day is coming when the government will have enough of its own capacity. I can’t personally figure it out — the only thing I know is something that’s grown this fast for this long sooner or later is going to stop. You just have to plan in your business because the government doesn’t have unlimited ability to spend money. They do have an unlimited appetite apparently, but they don’t have an unlimited ability to spend money.
What are the biggest challenges facing the industry?
The biggest challenges are managing the increased technology complexity. The good news about the world going to IP [Internet protocol] and digital is it gets a lot simpler on the outside. But often that means it gets a lot more complex on the inside. And you’ve got legacy gear talking to new gear and just a whole set of things that can go wrong, that can be more complex to put into place, and it’s the teleport operators’ job to figure that out in many cases. So doing that consistently well, making money at it, is one of the challenges they face.
You’ve expressed concern about channel conflicts, but if a large satellite operator can offer a better price to an end customer, is that not a good thing?
In the short term it may be a very good thing, but about 25 percent of transponder leasing revenues go through teleport operators and they do that for a reason. If the carriers want to build teleports in all the places that they currently exist, it’s a pretty expensive proposition. If the carrier community were to make it so difficult for teleports to be in business that there weren’t any, they would find it extremely difficult for their own business.
What can teleport operators do to slash power consumption?
The biggest piece of it has to do with the ways you’re wasting energy. So it’s how your building runs, how your people use electricity. Some people who were talking about doing this initially were talking about going into facilities where people had heaters at their desks in the summer while the air conditioning was running because they were freezing. It’s not sexy. It’s HVAC [heating, ventilation and air conditioning], it’s control room and teleport infrastructure, it’s lighting — all those basic kinds of things. If you address those it gets you a lot of savings pretty quickly.
Are there any energy-cutting measures that are specific to teleport operators?
There are two things. One is, teleports are basically data centers with antennas outside so things are available at the data centers in terms of more cost-efficient servers, server virtualization — just basically cutting down the amount of iron you have sitting in the back room and how much it costs to cool it and to run. The other side is teleports, because they also have a lot of real estate, have interesting opportunities to do their own power generation whether it’s solar or geothermal. They actually have the ability to put solar panels out in their Earth stations in the field. I know of a couple that are doing that as a means to cut back what they buy in terms of power.
What is the role of teleport operators in combating the growing satellite interference problem?
The two primary causes of satellite interference are operator error and equipment malfunction. Probably generally speaking the teleports are at the low end of those causing problems because they tend to nail up a circuit and leave it there. There’s not as much movement compared with a mobile uplink or a VSAT [very small aperture terminal] network, which may be changing if not daily then weekly.