Printer Friendly

Second Decade of Satellite Industry Finds Business Is Becoming a Big Customer.

On July 15, 1984, the commercial communications satellite industry entered its second decade of providing message transmission via satellite. Messaging was the first application of this new and fledgling industry. The successful first transmission took place over a satellite with a space-age name called Westar, launched by Western Union.

What did we try to do in the satellite business the last 10 years? Where did we fail? How did we succeed? A decade ago, Western Union had anticipated a ready market for bulk sales of voice-grade supergroups to resellers. That market did not materialize.

But the market that did materialize--video--required great amounts of transponder capacity and helped to create a profitable industry within the first five years.

Video is still a dominant segment of transponder utilization today. Cable television led by HBO, broadcast television led by PBS, major networks and independent television systems and syndicators all discovered the inherent benefits of satellite transmission--multipoint broadcast that is high quality, distance-insensitive and insensitive to terrain.

Other markets migrated to satellite-delivered services. Radio--through national radio networks, state and regional networks and special and occasional radio events--discovered the economic advantages of satellite transmission. The news and publishing industries saw that printing deadlines could be extended through facsimile transmission to regional printing plants via satellite.

Citicorp led the business community in pioneering a corporate network prototype for digital transmission of voice, data and videoconferencing. But business and industry were largely reluctant in the first ten years to use a satellite solution for their end-to-end requirements. That shift is happening now, and it is part of the excitement and the promise of the second decade in satellite communications.

The classic textbook marketing questions are: How big is the market? Who's the competition? What, if anything, is our competitive edge?

How big is the market? Enormous. We estimate conservatively a $50-billion toll-communications market, including interLATA and intraLATA traffic and excluding equipment, hardware and switching. What portion is addressable by satellite? Taking mileage bands and assessing traffic over 1,000 miles gives us an addressable market of over $10 billion, or 20 percent of the total toll-communications market.

What has the satellite industry achieved to date? The primary market--Western Union and its competitors--earned revenues of more than $800 million last year. And, remember that 1984 was the year of the so-called glut.

Revenues, indicative of demand, were obtained from a supply of only 432 transponders (36-MHz equivalent), not the predicted over-500 transponders expected in 1984. What happened? Launch delays. What's happening this year to launches? More delays. If revenues yielded, as our numbers seem to indicate, $2 million per transponder in operation in 1984, what does that portend for 1985 and the years thereafter? This becomes an especially acute question, given processing delays at the FCC and the recent dismissal of three applicants for orbital slots. All of this serves to beg the question--will we have enough capacity? This depends on the market drivers and what they are telling us about the second decade of satellite communications.

What are some other values in a satellite system positioned to compete effectively, and to respond aggressively to the market drivers? Clearly, the market is being driven toward bypass solutions and toward a digital world for integrated voice and data. Companies that can provide an integrated satellite-terrestial network will have the competitive edge with large communications users--business and industry--who are now primed to take advantage of cost-effective private network systems.

Last Miles Will Be as Important as the Long Haul

In a bypass environment, last miles will be as important as the long haul. At Western Union, we're installing optical-fiber cable as fast as we can--for our customers, for ourselves, and to extend the reach of our satellites from customer location to customer location. Our planned Ku-band system will further our bypass capabilities.

A combined satellite-terrestrial wideband network is only part of the picture in a bypass post-divestiture world. How flexible that network is in the eyes of the customer is the added value. To determine the market trends, it is most useful to examine each of the market segments served by the domestic satellite industry and where each is headed.

Common carrier services comprise the largest segment of the telecommunications market. The demand for telephone switched service, private-wire and other public offerings will continue its long-term strong growth, and satellites will continue to capture a significant share of that growth. Optical-fiber cables will serve the main routes between major cities, but satellites will serve those needs characterized by network flexibility, multipoint service, and service to more remote locations as the market continues to grow.

Network television has nearly completed the transition from terrestrial to satellite distribution of programming to network affiliates, started by PBS in 1978. Growth in this area will come from new networks, which will find the barriers to entry lowered by the use of satellite technology. Contribution of programming into the networks by real-time transmission of new, sports and other events will continue a steady growth as the demand for improved coverage and better programs continues.

Cable television lived through the 1983 to 1984 period of disillusion. We now know that the predictions of 1980 were wrong--that cabling of America was not booming and that Americans did not demand a choice of dozens of programs.

Radio program service is a small market, because a radio network uses only a small amount of satellite capacity. However, that market will continue a steady growth as new regional and specialized networks find satellite delivery within their means.

Business communications will be the star performer in the satellite market. Large business organizations are seeking control of their communications and their communications costs. Satellites provide the ultimate bypass and allow a user to establish an integrated flexible network uniquely tailored to customer needs. Now the user can even bypass the bypass carriers if it makes sense to do so.

Demand for Interswitching Will Switch to T1

An important subset of business communications is high-capacity digital service, and the standard offering is the DS-1 or T1, 1.544-Mb/s circuit. As business and industry modernize their telephone networks with today's computer-operated digital PBX technology, the demand for interswitch trunking will shift from VF tie line to T1 circuits, since this connection allows the switches to perform most efficiently and provide the best quality and most flexible service.

Thus, the market trend for our services is a trend of healthy growth.

Deregulation and tariff forbearance will have a decided impact on our market presence. We expect to see many more market offerings and more frequent changes in services and prices. We expect the overall picture to resemble that of the airline industry after deregulation, in which prices vary greatly over different routes without relation to distance. Your travel agent requires a computer to keep up with the changes. We will be constantly reacting to changes in the marketplace, continually striving to capture additional small market segments.
COPYRIGHT 1985 Nelson Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1985 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Author:Knipp, F.; Williams, M.K.
Publication:Communications News
Date:Oct 1, 1985
Previous Article:Digital Termination Systems Handle Varying Volumes of Digital Traffic.
Next Article:Atco Expands On-Line Processing with Satellite and New Mainframe.

Related Articles
Satellites Get the Top Billing.
Cable Television Comes of Age.
Market Perceptions of Satellites and Competition from Fiber Optics.
Business Needs Will Drive Growth of Satellites through Century End.
Data in orbit.
$30bn Three-Way Cable Merger on the Cards in UK.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters