During the mid 1980’s the battle between satellite based communications networks and fiber optic telecommunications networks began and the controversy and misunderstandings about the competition between these two telecommunications transport technologies continues to this day.

From the beginning of the satellite communications industry in the 1960’s, throughout the 1970’s and into the mid –1980’s there was a continual debate between the “bell heads” of the wire line phone companies of the world and the satellite technologists regarding the ability of satellite communications companies to meet the needs of the end users.  A great deal of the debate focused on the use of satellite communications as a bypass technology serving the end user customer independent of existing wire line operators or as a long haul transport technology bypassing existing terrestrial systems.  The concept of stranded plant investment and loss of customer control did not sit well with incumbent service providers of that era. 

Satellite technology was embraced in areas or by customers for which there was no effective service delivery network in place.  There was also debate about the ability of satellite networks to interface with legacy terrestrial networks and customer premise equipment and to receive and hand-off a telecommunications service from and to a terrestrial network while meeting overall network performance requirement. 

At the same time satellite communications became the global standard for delivery of every form of broadcast communications that needed to be delivered over a large geographic area.  Television, radio, stock quotes, news wires, video-conferences and other user applications that were broadcast to many users simultaneously became the backbone applications of the satellite industry.

During the period prior to the mid 1980’s it was an analog world of patched together voice networks and a digital service was virtually impossible to obtain if a customer wanted to deploy a private network of any type.  In many areas of the US it was a one-year lead-time to obtain a 56 kbps or 1.544 Mbps circuit between many major cities. The big telcos of the world made small steps of incremental progress with their services while the satellite industry moved ahead at warp speed to develop new service capabilities through advances in satellite design and construction and development of new ground based satellite terminal equipment of all types.  The terrestrial providers moved so slowly and were so unresponsive to the needs of the users of that era that the satellite industry began to gain significant market share in many forms of communication that had previously been provided by solely by terrestrial providers.  In the early 1980’s the satellite industry was extremely confident that it was the future for many forms of telecommunications services.

In the mid-1980’s the telecom world began to change dramatically.  The first long haul digital fiber optic networks were deployed in the US and other parts of the world and first international transoceanic cables began to be deployed.  The combination of widespread digital technology in the network infrastructure and customer premise equipment changed all of the applications and needs of customers. In the years that followed many telecom oriented applications that had originally been provided terrestrially and that had moved to satellite service providers were moved back to the ground via the new fiber optic networks. For example, long distance voice inter-machine trunks and point-to-point video back-haul services from fixed locations, staples of the satellite industry in the 1980’s have moved to fiber optic services in many major markets in developed countries. 

The evolutionary process of balancing satellite and terrestrial user applications has been continuous from the late 1980’s through the 1990’s to the present day.  The major construction programs that have built many international and national long distance fiber optic networks have now slowed down dramatically as projects have been completed and excess capacity created in the systems that were constructed around the world during the period from the mid 1990s through the early years of this decade. 

During period from the mid 1980’s to today there has been a continuing process where the providers of each transport technology work to find their role in the overall market that serves the user community optimally.

I have been asked many times about the competition between satellite and fiber optic based telecom services and the reality is that they don’t really compete directly with one another for a long period of time for a given market segment.  A satellite service is not desirable to most users if the same service (user technical definition, price, quality of service, business terms and conditions) can be acquired from a fiber optic based provider.  This has been proven time after time since the mid 1980’s. 

Many times a satellite operator or service provider has created a service capability and established a market for a service.  Once the fiber optic providers understood the demand was long term they have built a terrestrial network that met the needs of the market.  Once a fiber network is in place it is very difficult for a satellite service provider to retain market share.  If two or more fiber networks are in place to compete for an application there is usually no market share left for a satellite competitor.  The market is “gone” for the satellite service provider.  This “under-build” process forces all satellite service providers to continually update their service portfolio and push forward new service capabilities into the marketplace.  The satellite industry cannot stand pat for any significant period of time.  They must continually redevelop their service portfolio to deliver new capabilities to the marketplace that fiber companies cannot.

The impact on satellite companies is that most operators cannot construct long term (15 year life) satellites and design them to one specific service or group of services.  The “plant” in the sky must be capable of serving a very different set of applications at the end of its life than it did on its first day of service with a couple of major changes in between.  While there may some exceptions to this rule the key to success in the satellite industry is to get maximum power and bandwidth on the satellites per dollar of capital expended, make the bandwidth and power as flexible as reasonably possible from a geographic coverage perspective (subject to specific marketing plan limitations) and make the satellite capable of serving the many generations of ground equipment that will evolve over its life.  To the chagrin of satellite technologists everywhere the motto “keep it simple stupid” is the right answer in the design of the communications repeater aspects of communication satellites because the applications will evolve in ways that are not predicable at the time the satellites are built.

I can only paraphrase what a sophisticated user once said in a meeting that I attended, “It is the ground segment that matters stupid!”  The ultimate key to virtually all aspects of satellite communications is the capability of the ground segment.  The users physically handle and interface their applications to the ground equipment not the satellites.  As the ground segment equipment evolves with new advances in chip design, software and manufacturing techniques, it will be in a continuous process of improving its capability to serve new end user requirements.  Over the past 25 years we have seen major ground equipment product life-cycles average about two years.  It appears that this process of product improvement will continue into the future.

During this period there has been a continuing debate about the ultimate destiny of the satellite communications business and its role in the larger telecommunications industry.  The zeal of some satellite technologists to find a role for satellite communications in every telecommunications market segment and niche has resulted in significant business failures over the years.  At the same time the efforts of the satellite industry to provide new services to customers has pushed the entire telecommunications industry to advance its service capability.  The satellite industry has shown repeatedly that it has the desire to meet new customer requirements of any type at any location on the planet. It is also clear that well managed satellite communications companies with a sound marketing strategies can among the most profitable telecommunications companies in the world from a return on revenue, return on investment or return on equity perspective.

As we look to the future we continue to see the satellite communications business dominated by its wide range of core broadcast services.  This group of services is where fundamental competitive advantage of the industry exists.  As other forms of telecom services expand throughout the world it will become more and more important for satellite companies to enhance the broadcast services they provide.  Streaming Internet and combinations of broadcast and Internet services are likely to be a very large part of the satellite communications business in the years ahead. 

Remote area communications is also a mainstay of the industry and we can expect continued reliance by users outside of mainstream developed areas to continue to desire the best of today’s communications capabilities delivered via satellite.  There are elements of the mobile user market that will never be well served by terrestrial based systems.  This class of users wants a full range of communications services available literally anywhere in the world from a single user terminal.

In the competition between satellite and terrestrial systems for more standard telecom oriented applications, satellite services will win its share if can differentiate its service from the terrestrial providers.  Continuing efforts to make satellite services seamless when interconnected to the global terrestrial network are required since virtually all satellite networks are simply part of a users larger multi-technology network.  The greater the broadcast content within the application, the more opportunities the satellite providers have to compete.  The next generation(s) of satellite ground equipment is the key to the differentiation that is required.

For more than twenty years the battle for customers has been fierce between the satellite services companies and the fiber optic network providers.  We should expect to see this competitive element of the Great Market Battle continue indefinitely into the future.  It will be driven by the ever changing and evolving needs of end users and the desire of all market participants to meet those needs.

Copyright 2002/2007 by TPM