The Right Kind of Competition in Satellite Services
by Robert Bell
New York City, March 2, 2012-There are those still working today who can remember where there was no competition in the satellite business, when it was completely dominated by treaty organizations or state-owned companies beholden to national governments and bound by monopoly regulations. There are still wide swathes of the planet where monopoly conditions rule but the international market now contains a multitude of companies large and small, operating in space and on the ground, who compete fiercely for government, media, telecommunications, maritime and other business.
Competition is not a simple thing. In most markets, the lines separating customer, vendor and competitor are less clear than one might expect. Satellite communications are no exception. Teleport operators and satellite operators are natural partners, both in the business of opening new markets and taking risks on new capacity. They offer the customer complementary strengths on the ground and in the sky.
Most important, they need each other. No satellite operator can afford to have ground segment in all the places it needs, equipped with state-of-the-art equipment and interconnected with the globe’s major fiber routes. No satellite operator can specialize in all the complex value-added services and systems integration required by the different customer groups that satellite serves. And no satellite operator can deploy skilled sales, technical and operations professionals to sell and service business around the world.
For teleport operators, satellite capacity is the essential service. While they all interconnect terrestrially via fiber, microwave and even broadband wireless, 100% of teleport operators are customers for satellite capacity. It is also their biggest single expense. In a research for the World Teleport Association’s (WTA) 2011 Top Operator Rankings, we asked respondents to share in confidence information on gross revenues and annual spending on satellite capacity. Respondents spent an average of 47% of revenue on satellite capacity, from a low of 14% of revenues to a high of 79%.
For all of the ties binding them together, however, satellite and teleport operators often have competing interests and engage in direct competition for value-added services. The long-term health of the relationship depends on being flexible and staying mindful of the need for cooperation as well as competition.
That is why, in March, WTA will publish its second annual Satellite Operator Benchmarks report. In January and February, we conducted interviews with over 80 teleport executives around the world and received 170 ratings of the commercial and operational practices of the major satellite operators who serve them. We are doing this to inform teleport operators about how their peers view the major satellite operators and to provide objective feedback to those operators from an important customer group. By objectively tracking, rating and comparing performance, as experienced by a major buyer segment, we are trying to keep this vital relationship healthy and strong, and drive self-improvement across the industry.
Benchmarkslooks at everything from the quality of sales staff to customer communications, pricing consistency and the degree and fairness of competition with teleport operators for value-added business. We look at operational availability, the handling of interference and of outages, both planned and unplanned. If it affects the business success of a teleport operator, we ask about it and share the results with our readers.
When the first edition of Benchmarkswas published last year, we were pleased and grateful to have the satellite operators take the results seriously and spending time with us to dig deeper and understand the implications. This year’s research shows some of the result: measurable improvement in commercial practices that received criticism twelve months ago. That is precisely the kind of outcome we are seeking.
Competition between teleport operators and satellite operators for the same business remains an issue. Satellite operators are vendors to teleports. But when they choose to compete directly for the same business, their control of the orbital asset gives them the power to offer prices no teleport operator can match. Whether that closes the deal is a different matter, but it is a powerful advantage.
There is no single right answer to competitive policy. Competition is far too complex a thing for that. But if Satellite Operator Benchmarkscontributes to better understanding of the issues across the industry, we will have done the job we set out to do.
Satellite Operator Benchmarks 2011 and 2012 are available free to members of the World Teleport Association and for sale to non-members at www.worldteleport.org.
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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
