By “favorite,” I mean “least favorite,” the way the Millennial generation calls something “bad” when they really mean “good.” My favorite recession ran from 1989 to 1991. Fairly mild in most of the United States, it was devastating in the New York metropolitan area where I live. It was…well, it was sufficiently interesting that I don’t really want to talk about it after all.
What I do what to talk about is the telecom recession in the last year of the 20th Century and first years of the 21st. That was another doozy. The dot-coms became dot-bombs, global fiber carriers went bust, Wall Street fell apart (again), and TV advertising went into a tailspin as the economy contracted. The drop in television revenue resulted in lower spending on satellite transmission. Between that, the plummeting price of fiber transmission, and the collapse of their hot new Internet customers, the satellite communications business was in a lot of pain for a few years.
That recession is fresh in my mind as we confront this year’s credit crisis, which has already driven Germany into recession (through no fault of its own) and may well do the same for most of Europe and the United States. The first three quarters of 2008 have been pretty strong for the business of customized communications by satellite and fiber. But when we are finished counting the money from the Beijing Olympics and the race for the US Presidency, we will find out whether the chickens are really coming home to roost.
A few facts give me hope that the impact of this recession will be mild. WTA recently surveyed teleport operators about their businesses, market priorities and competitive concerns. One set of numbers caught my eye. When asked to indicate where their revenue came from, teleport operators told us that, on average, 31% came from TV/radio contribution and distribution, 23% from managed network services for enterprise, government and carriers, 13% from mobile telephone backhaul, and 8% from non-broadcast content contribution. That’s almost 70% of revenue coming from sectors outside broadcasting. In past recessions, the industry’s dependence on the cyclical TV business meant that when broadcast sneezed, satellite caught a cold. That remains true of some companies in the business today but, in general, we’re better diversified than we were in 1999. There are also growth factors in the video market that were not present at the end of the last decade. Asked to look into the future two years, the operators were asked which applications would be most important to their businesses. HDTV distribution was #1, with 76% calling it very important or important. IPTV and Internet TV were #2, with 71% ranking it high.
In 1999, the threat of terrorism had not yet sparked enormous spending by government on security and force projection. We will probably see that wind down over the next decade but it remains a stabilizing force in the near term.
And finally, though globalization causes people in the industrialized nations such fear, uncertainty and doubt, it will continue to benefit our business. It seems unlikely that the Asian Tigers will run out of steam in the next few years, or that fast-moving nations like Brazil will turn back to policies that undermine their economic strength. Mobile telephony looks set to continue its skyrocketing growth in Africa. Satellite carriers can have a tough time making money in developing nations due to competition from national carriers and many governments’ heavy regulatory hand. But a geographically diverse portfolio of business is another support for the health of the market.
So, call me Pollyanna. Call me Dr. Pangloss in Candide, for whom everything was perfect in this best of all possible worlds. While you’re at it, call me a taxi. But this recession doesn’t feel like it’s going to be one of my favorites.
At least not yet.
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Robert Bell is Executive Director of the World Teleport Association, which represents the world’s most innovative teleport operators, carriers and technology providers in 20 nations. He can be reached at rbell@worldteleport.org
