DBS, Cable HD Needs Keep FSS Operators Busy & Full, They Say

The FSS sector remains saddled with a 60-65% utilization rate globally, according Futron analysts, but the N. American video market is at 90-95% capacity. And it looks as if HD will keep that number high, FSS operators said. Jubilantly praising HD in mid-year calls, FSS executives told analysts HD is already bringing good things. “We're seeing an impact today from HD, and not just from cable offering HD, but also from DTH -- where HD is pushing them beyond their existing frequencies,” PanAmSat COO James Frownfelter told analysts: “We're already seeing this in our revenues, and we expect it to continue.”

Some 661 full-time HD channels will be on air by 2010, according to Northern Sky Research, and of those 419 will be beamed to N. America. FSS already has seen rapid growth in distribution of HD channels to cable headends in the U.S. the past 18-24 months, but DBS will catch up to cable by decade’s end, the report said. In 2004, DBS accounted for 42% of all HD channels; by 2010, that figure should be 48%, Northern Sky said. And, the report said, capacity demand globally for HD transponder space will rise 8-fold in DBS’s Ku-band during that period. FSS operators aren’t complaining. To meet HD and local-to- local needs in an already tight market, DBS operators are turning to FSS for extra space, they said.

Less bullish seers note the short-term impact of MPEG-4 and other advanced compression technologies, but still predict a rise in demand over HD’s long haul. Citing a recent HD market analysis, Futron’s Eileen McGowan said introduction MPEG-4 and kindred technologies actually will shrink the need for satellite capacity short term. “With the introduction of MPEG-4 you'll actually see a decline in the requirement for satellite capacity, which offsets the increased demand for HD,” McGowan said: “Once you've fully implemented the increased compression, and the HD channels start to increase, then you'll see a rise in the demand again.”

“Either way, for pay-TV, competing means providing HD,” said Carmel Group Chmn. Jimmy Schaeffler: “And providing HD means finding more bases for bandwidth. EchoStar has turned to SES. DirecTV has turned to their own satellites and to Canadian satellites. And those key players, I think, are indicative of just about all the major multichannel pay-TV providers who are going to have to compete.” Even with Spaceway 1 and 2 in orbit, for example, DirecTV still will need space from PanAmSat in parts of the arc over the U.S., said Frownfelter in an interview. DirecTV already leases space aboard PanAmSat’s Galaxy 3C at 95 degrees W over the eastern U.S., Frownfelter said.

An EchoStar spokesman said it’s leasing 2 full FSS satellites, SES’s AMC 15 and AMC 16, to meet HD and general capacity needs. FSS satellites differ in design and power output, requiring customers to use a different dish to receive feeds, he said. EchoStar customers whose TV signals come via FSS satellite use an oval-shaped, slightly larger dish the firm calls the “superDISH.” Its antenna is designed to receive signals from 3 orbital locations.

PanAmSat recently signed 2 other deals to boost capacity and address HD, Frownfelter said. Alcatel sold the company its Europe*Star business for $70 million cash, giving PanAmSat one satellite in orbit and 2 valuable slots covering Europe, the Middle East, Africa and parts of Asia and India. The firm also has a joint venture with JSAT for a new satellite over the U.S. Frownfelter said these deals -- a far less capital-intensive way to boost capacity than building and launching a new satellite -- have nothing to do with an influx into FSS of fiscally conservative, bottom-line oriented private equity holders. “Deals like these have been a stated objective of PanAmSat’s for a long time,” he said.

But PanAmSat did launch a new bird, Galaxy 14, over the weekend -- the 2nd of 3 video satellites built by Orbital Sciences. Although designated a back-up satellite, the all C-band spacecraft can deliver digital video programming, HD, VOD and IPTV service throughout the continental U.S., PanAmSat officials said. To be co- located with another at 125 degrees W, Galaxy 14 is moving into PanAmSat’s “cable neighborhood” -- more recently termed its “HD neighborhood.” Galaxy 15, next in the launch queue, is the 2nd of PanAmSat’s “prime cable birds,” and it’s virtually sold out, Frownfelter said: “It’s already full of all of our blue-chip video customers.” - Adrianne Kroepsch