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NAICS: 33-4220 Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing, 33-4419 Electronics Components, not elsewhere classified
SIC: 3663 Radio & TV Communications Equipment, 3676 Electronic Components, not elsewhere classified
NAICS-Based Product Codes: 33-42201, 33-42202, 33-4220W, 33-44191, 33-44194, 33-44197, 33-4419A, 33-4419E, 33-4419W
Satellite communications systems are based on antenna-to-antenna transmissions. The transmission may be a radio or television program, an Internet feed, or some other kind of telecommunication. Three elements are involved in satellite communication: (1) A sender on earth uses an antenna to send a message to the antenna mounted on the satellite, (2) the satellite’s transponder (from transmitter-responder) amplifies the message by giving it power and broadcasts it back to earth, (3) the receiver’s own antenna captures the broadcast, translates it, and sends it to another audio, video, or recording device. At all three points additional equipment is present to encode or to decode the message, to transform it from one kind of energy into another, and to boost its energy potential.
The Medium and the Message
The medium of satellite communication is electromagnetic energy, the precise definition of which has challenged humanity. It is called energy and energy is defined as force. Benjamin Franklin has aptly called it a mysterious fluid. When electromagnetic energy moves through a wire or cable it is referred to it as a current. When it propagates through the atmosphere or the vacuum of space it is called radiation or a wave. Wireless communications rely on radiation in the broader sense. All electromagnetic energy, including visible light, has a wave form. Waves have a frequency, meaning the number of wave-peaks that pass a point in space in a single second. Frequency is measured in units of Hertz. An expression like 1 MHz means 1 million Hertz or 1 million wave peaks passing a point every second. Waves also have an amplitude, meaning a standard height or depth as measured from the center of the wave front. Unless modified by intervention, the frequency and the amplitude of a wave remain unchanged. If changed, the portion of the wave that has been manipulated retains the new shape indefinitely. All radiation moves at a uniform speed, the speed of light, and always in a straight line.
Having dealt with the medium, let us next turn to the message. The two are similar, yet different. An analogy will make this clear. The ancient Incas kept records using strings. They tied knots in the string to record a message. The carrier of the communication was string. The message itself was embedded in the string itself by knots tied in various sequences and at various distances. We use precisely the same method to communicate, but we use electrical current or waves as the string and slight changes made to them, so-called modulations, to imprint the message. The concept of modulation is familiar to anyone who has ever heard of AM or FM radio channels. AM stands for amplitude modulation, FM for frequency modulation. In FM transmission we “knot the string” by causing small variations in the frequency, crowding the waves closer or pushing them apart. Once made, these changes persist. In AM transmissions we make the waves taller or deeper, shorter or shallower by changing their amplitude. The receiving instrument, the radio or the TV, is set to recognize the frequency or amplitude of the message as it should normally be and interprets variations to the normal pattern to reproduce the imprinted message, be that sound, image, or digital communication.
Antennas act as senders, receivers, transmitters, and transformers of the medium and whatever is imprinted on it. When an antenna sends a message from a television studio, it first gets the message in the form of a current. It starts transforming the current into a wave, and then broadcasts the wave to another antenna. If the receiver is an antenna on a satellite, it will take the program and broadcast it again with amplification. It needs energy to do so, which it gets from solar panels, a vital component of all satellites. A receiving antenna on the ground—that of the customer using the satellite TV service, for example—will capture the signal in its dish, transform the wave into a current, and send the current by wire to the device on top of the user’s TV set—the set-top box as the industry calls it.
The customer’s dish is made of metal designed to reflect the waves streaming in from the satellite at precise angles so that they all hit the antenna’s transducer or focus. The transducer faces the center of the dish and makes the conversion from wave to current. The set-top box performs additional manipulations. The arriving signal is always encrypted to prevent non-subscribers from stealing the transmission. It must be decoded and transformed so that it is suitable for display on the user’s television set.
For all of this to work with precision, broadcasters exploit the fundamental characteristics of the electromagnetic spectrum. That spectrum is divided into waves by frequency extending from gamma-rays to X-rays to ultraviolet to visible light to infrared to microwave to radio and finally to so-called long-waves. Satellite communications make use of bands within the microwave range of the spectrum; these bands have names of their own. Most direct broadcast satellites transmit waves in the K-bands. The K is derived from the German word kurz, meaning short. The K band is in the range of 18 to 26 GHz (giga or billion). Ku, the band most used by commercial communications satellites, stands for under K and is 12 to 18 GHz, Ka stands for above K and is 26 to 40 GHz. The higher the frequency, the smaller the receiving antenna dish can be. Most receiver dishes are 31 inches in diameter. Users are licensed by the Federal Communications Commission (FCC) to use specific frequencies for broadcasting. All of the equipment for sending, transmitting, and receiving is calibrated to handle these, and only these, frequencies. Thus order is maintained and programs do not interfere with one another.
Satellites are used to transmit electronic signals with minimum interference across wide geographic regions. Electromagnetic waves pass through most solids with little loss, but massive geological structures (hills, mountains) interfere with waves. Before satellites made things easier, signals had to be transmitted by microwave relay-towers. The cost of such specialized electronic highways limited their reach into many areas. Located high above the earth, satellites overcame this problem by transmitting broadcasts from on high into all corners of the country by line of sight.
Satellites are placed in geosynchronous orbits 26,300 miles above the earth. No matter the time of day or night, the satellite remains in the same spot above the earth. To reach all areas of the United States with effective transmissions, multiple satellites must be deployed. Satellites receive their transmissions from the ground by a range of frequencies known as the up-link frequencies. They use transponders to change the frequencies they receive to another set of frequencies for the transmission down, known as down-link frequencies. In this manner interference between the two streams of data is avoided. Satellites and their launch, in combination, represent a very large and risky capital expenditure for participants in this industry, ranging in cost from around $100 to $300 million for communications satellites.
Sputnik, the first ever satellite launched by Russia marks the beginning of this technology. Sputnik rose into space in 1957. The first use of a satellite for broadcasting was RCA Corporation’s Satcom 1. It was launched in 1975 to serve the nation’s three television networks. Satcom 1 broadcast programs to television stations across the country; these, in turn, sent analog signals to their users. Satcom 1 came with 24 transponders. Others in the series followed. Cable companies began to lease transponders for their own use. These early satellites broadcast in the C-band of the spectrum (4-8 GHz). At that frequency very large and expensive satellite dishes had to be used. To be sure, the signal was intended for television and cable stations. Nevertheless an industry selling such satellites to the general public rapidly developed. Its customers bought the equipment and received the programming for free. This situation continued until the passage of the 1984 Cable Act. It enabled program producers to encrypt the signals reaching their stations in order to deny the public access to free multi-channel programming. The modern industry developed from that point forward by introducing paid satellite television, known as the Direct Broadcast Satellite (DBS) industry. The leading company in the first decade of the twenty-first century, DirecTV, was launched in 1994. Dishes shrank in size as the Ku-band displaced the C-band, although a subset of subscribers still use the large dishes.
Although users of communications services reaching them by satellite are unaware of the technology, data compression by high-speed computers is a fundamental technique for exploiting to the maximum the limited resources, in terms of frequencies licensed for use and transponders that can be carried on a single satellite. Data compression enables participants in the business to deliver hundreds of channels of data.
The technology relies on a standard known as MPEG, for Moving Pictures Experts Group. MPEG is a working group of the International Electrotechnical Commission and the International Organization for Stands (IECI/ISO). The present standard in use is the second version developed called MPEG-2. The technology may be described by saying that only those portions of a television image are sent that change from one fraction of a second to the next. The computer engaged in compression analyzes images at very short time intervals and compares the last image to the next. It notes changes that have taken place and then transmits only those changes with appropriate additional information indicating where particular pixels must be updated. To picture this we might imagine a sunny scene with a wide sky, a lawn, no wind, no changes in light. A small girl in the foreground is holding a doll. Only the movements of her fingers and possibly the blinks of her eye will be transmitted, not the unchanging lawn or the vast sky. Receiving equipment at the other end is designed to translate this coded flow and to conform the receiver’s screen by updating it appropriately. Compression rates of 80 to 50 percent are possible, thus substantially increasing transmission capacity.
Based on data developed by the European research organization Invesat-Wiki, which is partially funded by the European Union, satellite manufacturing revenues of U.S. satellite producers in 2004 were $3.9 billion, representing 38 percent of world production. The values are assigned to the year of launch rather than to the year in which contracts were executed. A two-year lag between the two events is common. In addition to hardware manufacture, the launch industry earned $1.4 billion in 2004, 50 percent of world revenues, for lifting the satellites into space. Invesat did not provide data on other industry components for the United States specifically, but its estimates for the world market may be used to approximate the U.S. share as shown in Figure 185.
|Activity||World Revenue ($ billions)||Percent||Implied U.S. Revenue ($ billions)|
|Ground Equipment Manufacturing||23.3||24.0||9.0|
The implied U.S. revenue numbers are supported closely by revenue data from the two major corporations that, together, supply all satellite-based television programming services to customers in the United States. Their combined revenues in 2006 were $24.6 billion.
World satellite revenues grew in the period from 1997 to 2004 at an annual rate of 16.3 percent, from $21.1 to $60.9 billion. During the same period subscribers to satellite TV services in the United States advanced at the much greater rate of 40 percent per year. That rate is based on data relating to subscribers available from the two companies participating in the industry. Subscriber growth from 2004 to 2006 was a more modest 11.5 percent a year, still high. In 2006 total subscribers numbered 29 million as shown in Figure 186.
Government projects accounted for the bulk of payloads launched in 2004 (72%) and for most of the satellite equipment manufactured (82%). Direct Broadcast Satellite systems (DBS) accounted for the bulk (81%) of services revenues. Similarly most ground equipment was associated with satellite television.
The DirecTV Group, Inc.
In the U.S. DBS market, DirecTV, headquartered in El Segundo, California, was the leading company based on total subscribers. The company, formerly known as Hughes Electronics Corporation, launched the industry in its current form in 1994. Hughes renamed itself DirecTV in 2004. News Corporation, which owns Fox Entertainment Group, Inc., holds 38 percent of DirecTV’s stock, thus a controlling interest. News Corporation acquired its stake in 2006. DirecTV operates both in the United States (16 million subscribers) and in Latin America (4.1 million subscribers). The company’s revenues in 2006 were $14.8 billion, of which $13.7 billion were associated with its U.S. operations. DirecTV’s operations are supported by ten satellites of which it owns nine outright and leases one. Three satellites are under construction, and two are to be launched in 2008. Eight of the company’s satellites operate on the Ku-band, two on the Ka-band. DirecTV’s video and audio transmissions are digital, providing very high quality. Programming is delivered over more than 1,700 channels of which 185 are basic entertainment packages and other groupings are optional services like music, sports, and the Internet.
EchoStar Communications Corporation
With 2006 sales of $9.8 billion and 13 million subscribers, this company is the second ranking participant in the DBS market. EchoStar began in 1995 and is headquartered in Englewood, Colorado. The company operates the DISH network, DISH being its primary brand name. Fourteen satellites, of which EchoStar owns eleven and leases three, support the DISH network. All of these satellites operate in the Ku-band, but EchoStar is exploring the use the Ka-band in the future for high-definition transmissions. The company offers more than 2,500 video and audio channels.
XM Satellite Radio Inc.
This company, based in Washington, D.C., is the leading company in satellite radio with a subscriber base of 7.7 million in 2007, offering 170 digital channels, and operating four satellites made by Boeing. XM also distributes its programming through DirecTV. XM had sales in 2006 of $933 million. In February 2007, the company entered into an agreement with second-ranked Sirius Satellite Radio Inc. to merge the two companies. Sirius had 6 million subscribers in 2006, operated 130 channels, and had sales of $637 million. The company operated three satellites produced by Space Systems/Loral. These two companies are the only FCC licensees for satellite radio service in the United States.
Boeing Satellite Systems, Inc. (BSS)
The world’s leading producer of communications satellites had nearly 30 percent of the world market in 2005. BSS is an element of The Boeing Company, a $61.5 billion enterprise in 2006. Of Boeing’s total revenue stream, $11.98 billion were assigned to network and space systems. The next three key producers of satellites, according to Aviation Week & Space Technology, as quoted in Market Share Reporter were Lockheed Martin with an 11.8 percent market share in 2005, the French firm EADS Astrium with 7.2 percent, and Mitsubishi Electric with 7 percent market share.
MATERIALS & SUPPLY CHAIN LOGISTICS
From a logistical point of view satellite communications are unique in that its components are stationed in space. Participants in the industry must compete for frequency bands under the control of the Federal Communications Commission (FCC). Deployment of systems also falls under the regulatory control of the International Telecommunications Union (ITU), which oversees and coordinates placement of devices in global regional systems. The United States is part of ITU’s Region 2. Licenses granted by the FCC are for 10-year periods during which revocation is a possibility and tight regulations relating to technical and financial performance must be met.
Satellite locations are assigned by longitude, lines that run from north to south. The FCC assigns locations by longitude and, with the position, assigns thirty-two frequency channels for use by the satellite’s owner. Satellites typically carry transponders for each channel assigned. The consequence of this system is that satellites are inherently limited to a maximum broadcast transmission, which is one reason that compression technology is used to maximize the available but limited resources on board each satellite.
The risks of the technology are also high. Satellite launches can and do fail and satellites are lost. In the 1967 to 2005 period, of 48 different launch vehicles only 16 (33%) have managed flawless records. Success rates have increased as technology has advanced over this period and future success rates can be expected in the range of 80 to 95 percent.
The unusual locational requirements of satellites and the high risks associated with launching very expensive devices overshadow materials and supply logistics common in more down-to-earth industries.
Central to this industry, dominated as it is by subscription income from users of satellite television and radio, are distribution channels designed to reach the consumer in the home. This task is carried out by retail organizations maintained by the two leading companies in DBS or operating independently on their behalf. The retailers install and maintain satellite dishes and must therefore have technical support crews or, as some do, contract out the installation tasks to others. A certain volume of equipment sales move through specialized communications, audio, and video retailers to supply the subset of the public wishing to enhance its systems with special electronic products such as recording devices or set-top boxes of more sophisticated design, but compatible with those offered by DBS companies. Satellite dishes are also on sale in retail settings for hobbyists, typically used for wireless communications rather than TV reception. Major space satellite equipment and ground installations are purchased under competitive bidding arrangements by institutional buyers.
Key users of satellite communications equipment are agencies of government, institutional systems operators, institutional consumers of services, and the public. NASA and the U.S. Department of Defense are major users of the technology. Television and radio broadcasters are the leading institutional users, among them the DBS companies. VSAT technology is used by many companies for communications services. The acronym stands for very small aperture terminal devices; these are essentially the same dish-antennas used in DBS, but the term predates DBS. VSATs were used in commercial applications before satellite TV was widely deployed. Users are large retailers who use such systems to transmit financial information, for example. VSAT networks typically lease transponder resources from others but deploy receiving/sending dishes of their own. The Postal Service uses a VSAT network. VSAT is also used in Internet signal transmission. Numerically the largest user group is the consumer who subscribes to satellite TV or radio services.
Satellite TV’s largest competitor is cable television. The competition between these two sectors has punctuated the development of DBS throughout its history. Wired communications are adjacent markets to wireless communications and are substantially larger. Satellite TV and radio also compete with analog broadcasting although the latter, in the first decade of the twenty-first century, is receiving its feed by using satellite technology, too.
RESEARCH & DEVELOPMENT
R&D efforts in this industry center on improving the life of satellites, particularly reliable power generation from solar energy. Predicted lifetimes of satellites are approximately twelve years. Typical problems encountered by BDS companies have been loss or degradation of power due to early failure of some of the installed solar devices.
Communications are generally transiting from analog to digital transmission, most sharply visible in the crisp images delivered by high definition (HD) television. This transit is reflected in efforts to upgrade systems for HD transmission, impacting the technology across the board from satellite equipment down to ground-based receivers to the set-top box. The R&D work is neither primarily nor exclusively focused on satellite-based communications but it impacts that sector, influencing R&D expenditures. One important conjunction is that HD transmissions will most likely utilize the Ka-band of transmission. This points at changes in satellite-dish designs and sizes.
Among trends noted by industry observers in the late part of the first decade of the twenty-first century were the continuing growth in subscribers to satellite TV services with the cable sector losing share. This is in part due to the higher quality delivered by DirecTV’s all-digital transmissions. U.S. participation in the satellite communications business had slowed somewhat between 2003 and 2004 because of reduced expenditures by government, but private-sector expenditures were advancing strongly. High definition image transmission is the next wave in television. Satellite-transmitted Internet was also growing in the early 2000s.
TARGET MARKETS & SEGMENTATION
Satellite TV companies continue to target users of cable services and those located beyond the reach of cable systems and still restricted to analog transmissions for news and entertainment. Internet users are another important target for these companies. Satellite radio companies are targeting mobile applications, including the automotive market, seeing it was a very large and profitable future market.
RELATED ASSOCIATIONS & ORGANIZATIONS
Aerospace Industries Association, http://www.aia-aerospace.org
Mobile Satellite Users Association, http://www.msua.org
Satellite Broadcasting and Communications Association, http://www.sbca.com
Satellite Industry Association, http://www.sia.org
Satellite Educators Association, http://www.sated.org
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