*Pages 1--21 from Satellite Presentation public.PDF* Optimizing Opportunities Optimizing Opportunities A Satellite Report A Satellite Report Presented by Presented by Donald Donald Abelson Abelson, Chief, International Bureau , Chief, International Bureau September 9, 2004 September 9, 2004 1 2 Overview Overview 1. Overall, the satellite industry continues to show growth and provide critical services. 2. The industry faces a number of challenges that vary from service to service. 3. The industry is analyzing the market and taking action to better serve shareholders and customers. 4. The FCC continues to modernize to foster future innovation. 2 3 Worldwide Industry Revenue Worldwide Industry Revenue 1996 1996- -2003 2003 Source: SIA, 2004 38 49.1 55 60.4 73.7 78.6 91 86.8 1996 1997 1998 1999 2000 2001 2002 2003 US$ billions Source: SIA 2004 Source: SIA 2004 3 4 Covering The Globe Covering The Globe • •408 Commercial 408 Commercial Satellites Operating Satellites Operating Worldwide Worldwide • •58% U. S. 58% U. S.- -Licensed Licensed (approx.) (approx.) • •59% Serving U. S. 59% Serving U. S. Consumers Consumers (approx.) (approx.) 4 5 Satellite Industry: Four Major Components Satellite Satellite Manufacturing Manufacturing Satellite Satellite Services Services Launch Launch Ground Ground Equipment Equipment Manufacturing Manufacturing •Providers of •Voice •Video •Data •Gateways •Control Stations •Earth Terminals •VSATs •DBS Dishes •Handheld Phones •Launch Services •Manufacturing of Launch Vehicles, Subsystems & Components •Satellites for MSS, FSS and BSS Systems •Subsystems •Components 5 6 $3 $10 $22 $56 satellite services ground equip. mftg satellite mftg launch industry Source: SIA, 2004 Global Revenue by Industry Sector Global Revenue by Industry Sector 2003, US$ billions 2003, US$ billions +12% -13.5% -19% 4% 6 7 Satellite TV and Radio Satellite TV and Radio (BSS Direct to the (BSS Direct to the American Consumer) American Consumer) 7 8 U. S. DBS and DARS Subscriber Growth U. S. DBS and DARS Subscriber Growth Subscribers in millions, 1999 Subscribers in millions, 1999- -2004 2004 10.08 12.99 16.07 18.24 20.36 0.14 0.80 2.58 0.00 5.00 10.00 15.00 20.00 25.00 99 00 01 02 03 04 DBS Subscribers (millions) 0.0 0.5 1.0 1.5 2.0 2.5 3.0 DARS Subscribers (millions) DBS Subscribers DARS Subscribers Source: Company News Releases; FCC Source: Company News Releases; FCC 2004 Video Competition Report 2004 Video Competition Report 8 9 Mobile Satellite Services Mobile Satellite Services (MSS) (MSS) 9 10 Mobile Satellite Phone Use is Growing Mobile Satellite Phone Use is Growing Global Mobile Satellite Service Subscribers (Voice) Source: TelAstra, 2004 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 10 11 Fixed Satellite Services Fixed Satellite Services (FSS) (FSS) The “Silent Partner” The “Silent Partner” 11 12 Challenge to Service Providers: Global Challenge to Service Providers: Global Bandwidth Supply and Demand Bandwidth Supply and Demand CAGR: compound annual growth rate 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 1995 1996 1997 1998 1999 2000 2001 2002 2003 Year 36 MHz Transponder Equivalents Voice Data Video Supply Source: Futron Corporation, 2004 12 13 FSS: Core Customers FSS: Core Customers •Broadcast •Internet •Cable 13 14 Satellite Internet, 0.7% HDTV, 0.3% Other, 0.7% Satellite Feeds, 12.6% Unused, 29.6% Analog TV, 24.4% Digital TV, 31.7% Relative Use of Transponder Capacity Relative Use of Transponder Capacity United States 2004 United States 2004 Source: Roger Rusch, TelAstra, 2004 – For FCC Use Only 14 15 Government as a Commercial Satellite Customer Government as a Commercial Satellite Customer Ø Homeland Security Ø National Defense Ø Public Safety Ø Emergency Services Data Communication • Public safety (police dispatch) • Communications during disasters for First Responders and Others • Information dissemination – Media – Public Data Collection • Monitoring Events – Geological – Meteorological – Human Instigated – Area Restoration 15 15 16 Satellites and Rural Services Satellites and Rural Services Opportunities exist for satellite companies to serve specialized needs of rural and remote communities • Voice • Data/ Internet • Video • Imaging 16 17 Optimizing Opportunities: Optimizing Opportunities: Industry Observations Industry Observations • Fewer But Stronger Competitors • New Investment Paradigm • Efficient Fleet Management • Revised Business Plans/ Approach – Letting customer demand and requirements drive how spectrum is used 17 18 The Role of the FCC The Role of the FCC – Policies that Facilitate Innovation and Agility in Satellite Operations •Fleet management •First- Come, First Served Policy – Fast, Efficient Licensing •Satellite Licensing Reform – Strong Global Representation •WRC – 2003; 2007 – Regional Outreach 18 19 Licensing Disposal Speed in Days Licensing Disposal Speed in Days For All GSO For All GSO- -like Applications Subject to like Applications Subject to Licensing Procedures (8/ 03 Licensing Procedures (8/ 03- -6/ 04) 6/ 04) Source: FCC 92 180 1311 Average Licensing Speed Prior to August 2003 (1990- 2004) Expected Speed After August 2003 Implementation of New Licensing Procedures Actual Average Licensing Speed After August 2003 19 20 20 21 Sources for the 2004 Satellite Report Sources for the 2004 Satellite Report • Futron Corporation, Bethesda, Maryland. “How Many Satellites are Enough? A Forecast of Demand for Satellites, 2004- 2012.” February 16, 2004. • Federal Communications Commision. Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming. January 28, 2004. • Roger Rusch, President, TelAstra, Palos Verdes, California. “Satellite Statistics: Is Recovery a Mirage?” Presentation at Satellite 2004, Washington, D. C., March 3, 2004. • Edward Morgan, President, Communications Center, Clarksbury, Maryland. “Satellite Supply and Demand.” Presentation at Satellite 2004, Washington, D. C. March 3, 2004. • Satellite Industry Association. “State of the Satellite Industry Report.” June 2, 2004. • Sirius Satellite Radio. Quarterly News Releases on Financial and Operating Results. www. sirius. com • XM Satellite Radio. News Releases on Quarterly Results. www. xmradio. com. 21