Faster, Better, Cheaper HD

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In recent years, the increase
in high-definition content has opened up new opportunities, as well as a myriad
of challenges, for the teleport industry. In this transcript of an interview
with HD Update contributor George
Winslow, World Teleport Association executive director Robert Bell talked about
the changing teleport business and how its working to find better, faster and
cheaper ways to deliver HD content.

MCN: What are you
focusing on as an association?

Robert Bell: The
World Teleport Association exists as an advocate for the commercial teleport
sector that got its origins back in cowboy days of 1970s, when you could borrow
some money, put up an earth station, carry the distant baseball game for
someone and make a profit. That has evolved into a much more complex business
in which the commodity business of just carrying a signal really isn't something
that anyone can make money on anymore.

Robert Bell

So, the teleport industry has responded by becoming really
innovative in terms of the services they bundle together and provide as a
solution to a customer. Rather than being generalists, most of the teleport
operators that are successful today are specialists in a niche, be it
broadcast, be it delivering internet to Africa, and on
and on. The list gets longer every year.

The industry has also become very diverse in terms of the
technology it uses. At one point, it was all satellite; now you find that
almost any new solution that is being brought into the market has some
satellite, some fiber and maybe wireless for last-mile service.

Not surprisingly, the key issues we focus on as an
association are the key issues that concern our members. We do a lot of
research on issues like the relationship between teleport operators and
satellite carriers. Where the satellite carriers own and operate their own
teleports you have the inevitable potential for conflict. Last year, we did a study
on that and we will be carrying that forward. According to our research about 25%
of the world's transponder revenue flows through the accounts of teleport
operators and we want to make sure that the market treats them appropriately.

MCN: How large is the
teleport industry?

RB: One of reasons
we do a lot of research is that the industry is mostly made up of privately
held companies. There is not a lot of good data out there and that makes it a tougher
business for everyone to operate in.

We're in the process of refreshing this data, but our latest
research found that in 2007 there were just over 1,000 commercial teleports and
about another 800 broadcaster-owned teleports around the planet.

It remains a very fragmented, very entrepreneurial business,
where you have a handful of big players like Arqiva and GlobeCast and then a
tremendous number of much-smaller operators with specialized knowledge and
niche businesses that are running pretty entrepreneurial operations.

MCN: How much revenue
do these operators produce?

RB: Our best
estimate is that in 2007, the total revenue running through the business was
about $15 billion. Of that, about $10 billion is generated from the services
that teleport [operators offer.] The balance is the resale of capacity on other
people's networks.

MCN: How fast do you
think the industry has been growing since then given that we've had some tough
economic times?

RB: Anecdotally,
it has been a great few years and has been pretty expansionary for everyone
[since 2007]. The recession is now putting a bit of damper on it. But like the whole
satellite business, so much of the business is done in relatively long term
contracts. If you nail down some business and it is there for three years or
so.

What I'm told by operators is that it has gotten a lot harder
to sell the next new thing because -- not surprisingly -- everyone in the
broadcast space is going to wait and see what happens with their business.

But the core business has held up very well. That is an important
point for the people in the broadcast business to understand because they
depend on these suppliers.

MCN: How fast see
operators adopting MPEG-4 and DVB-S2 so they have more capacity for HD content?

RB: I wish I had
some hard numbers on it because it is a great question. Anecdotally, two years ago
it was very rare. You might find people interested in DVB-S2 as part of a long
range technology refresh.

In the last six to nine months, though, every project I hear
about has been doing DVB-S2 and MPEG-4. I think you're going to see it in
pretty much every new channel or any new expansion of HD that is happening. At
the same time, there will be a lot of retrofitting, which is always expensive
and difficult, but I think the cost savings are now there.

MCN: The national broadcast networks, the
cable-news channels and many of the larger local stations are now doing high-definition
studio productions of their newscasts. But a lot of the material coming in from
the field is still standard definition. Do you see that changing soon?

RB: It is a big
subject of discussion that reminds me of digital cinema. Digital cinema is
rolling out slower than expected because studio owners have this theory that
theater owners should pay for the theaters. The problem is that the studios are
the ones who are saving all money because they don't have to make new prints
and the theater owners keep saying, "Yeah but how do I get paid back on this
amount I'm spending to go digital?"

In this case, the discussion is basically, "Yes, we'd be
happy to equip our trucks to handle HD. But who is going to pay for the
upgrade?"

I think it is really going to be a matter of when the
broadcast industry says "I have to have it. I can't go on upconverting SD from
the field."

[On the other hand], CNN has equipped all their reporters
with laptops and little handheld cameras. They've basically turned them into
their own little satellite news gathering operations that can record and edit
and send it back over a broadband or some other pipe. So, I don't know if we
know our own minds about how valuable it is to have HD out of the field.

MCN: What are some of
the biggest challenges facing industry in 2010?

RB: I think it is
really to maintain the pace of innovation at a time when there is tremendous
turmoil and challenges.

In general, the business model for broadcast networks
changing. They are not sure which direction they are going.

Fiber keeps on spreading. While teleports are heavy users of
fiber, nonetheless, the business opportunities can be crimped so some extent
the more places that are fibered by a major carriers.

And then the pace of technology change is crazy. The
operators face the same kind of innovation challenge that is facing a lot of
technology businesses. The rate at which you have to keep reinventing yourself
just keeps speeding up and it takes a lot of talent and capital and vision to adapt.

One of the things that I think is interesting is that the
operators are more deeply penetrating whatever niches they serve and they have
less and less in common.

In terms of HD, we are in the middle of a study of teleport
customers in media and entertainment space. They've been stressing that their
major issue, their biggest challenges is that they have to constantly renew their
networks to provide a better answers to our customers needs. They have new
demands related to HD, file transfer capability and increasing cost pressure.

Faced with that, they've been saying to us that "we have to
deliver more things, we have to deliver new things, and we have to make it cost
less."

That is the kind of cost curve that the information
technology industry has become master at managing. The information products
that you and I use get cheaper every year. You wonder how the heck do you run a
business like that and yet they do. They run one of the most successful sectors
in the business world.

I can see that the teleport business is going to go that
way too. It's not like we have a choice but as long as we do it faster, better,
cheaper, we will be extremely successful.

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