Communications Services, NEC

SIC 4899

Companies in this industry

Industry report:

This category covers establishments primarily engaged in furnishing communications services not elsewhere classified. Examples of such services include radar station operation, radio broadcasting operated by taxicab companies, satellite earth stations, satellite or missile tracking stations operated on a contract basis, and tracking missiles by telemetry and photography on a contract basis. Establishments primarily engaged in providing online information services on a contract or fee basis are classified in SIC 7375: Information Retrieval Services.

Industry Snapshot

Because of an increased interest in communications technologies and information transmission, satellite systems drove growth and commanded high visibility in the miscellaneous communications services industry at the end of the first decade of the 2000s and in the early 2010s. Difficult economic times and a weak telecommunications market had a negative impact on the industry at the end of the first decade of the 2000s, although demand for satellite-related technology had begun to increase again by the early 2010s. Continued expansion depended on increased demand for services to small mobile satellite terminals and telephones, the need for more television relay services, expansion of the Internet, and the growth of direct television broadcasting via high-powered satellites. By the early years of the twenty-first century, many weather, communications, and remote-sensing satellites were in operation, along with a number of multiple-satellite systems. The global satellite services sector's revenues were in excess of $168.1 billion in 2010.

Organization and Structure

Commercial space launches, satellite communications goods and services, and satellite remote sensing were the major segments of this industry and provided the bulk of its revenue in the early twenty-first century. Voice and data communications, mobile services, vehicle tracking and navigation, and broadband data transmission for the Internet were growing segments. Beginning with its inception in the 1960s, this industry was the realm of government agencies, the military, and international consortia. In the first decade of the 2000s, however, new technologies and increased privatization resulted in new applications for satellite services and earth stations.

Communications Satellites.
Communications satellites allow the exchange of live television programs and news and sports events, such as the Olympics, between nations and continents. Linking earth stations located in more than 50 countries carried international telephone services. Communications satellites transmit signals via microwaves, which are very short radio waves sent from or received by bowl-shaped reflectors or from antennas. Earth-based (terrestrial) systems send out extremely high frequency signals from transmitters to repeater stations and back to receivers. The waves form narrow beams, which travel in straight lines. For this reason, receivers had to be located within line of sight of one another and usually placed on towers. Transoceanic microwave systems became feasible with the advent of satellite technology.

Satellite systems work in much the same way as terrestrial systems, except that the signals are relayed from an earth station to an orbiting satellite. The equipment aboard the satellite receives these signals, amplifies them, and rebroadcasts them to another earth station. Satellites are better suited for long-haul, single-to-multipoint transmissions than are terrestrial systems, because they are not susceptible to being blocked by geographical obstructions. Satellites also are preferable for reaching regions where the cost of laying cable would be prohibitive. Their large bandwidth accommodates a variety of video and data transmissions. Compared to terrestrial systems, satellite systems have the disadvantages of echo, less signal security, and a slight transmission delay, which varies according to the altitude of the satellite.

As a transmission technology, communications satellites also competed with fiber-optic cables because both systems transmitted data. Over time, the cost of transmitting information via satellite became almost as low as the cost of transmitting via land. Each type of technology had its advantages. In fact, a study done by COMSAT Corp. showed that cable and satellite technologies complemented one another in many respects.

The satellites considered to be the most competitive alternatives to cable in the first decade of the 2000s were Ku-band, beam-hopping, multi-beam satellites. These conserved energy by allowing simultaneous switching among beams. Other cable competitors were C-band, fixed multi-beam satellites that used a series of beams but did not permit rapid switching between them. The beam-hopping, multi-beam system cost an estimated 27 percent less than cable, whereas the fixed multi-beam was estimated to cost nearly half as much as cable.

The part of a communications satellite that is "for sale" is the transponder, which broadcasts signals. Transponders are transmitter/receiver devices. Early satellites had single transponders, but by the 1990s some satellites had as many as a dozen or more (leased full-time or occasionally). The cost of leasing varied, depending on variables such as the time of day, frequency, power, duration of lease contract, orbital position, and type of satellite. In the early 2000s, the rate for domestic analog C-band channels ranged from $200 to $600 an hour, or $55,000 to $230,000 a month. Leasing a higher frequency, Ku-band transponder ranged between $250 to $800 per hour, or $150,000 to $210,000 per month.

Fixed and Mobile Services.
Fixed satellite services (FSS), which included fixed broadcasting, data transmission, and telephone service, accounted for about 85 percent of all U.S. satellite service revenues in the late 2000s. An estimated 65 percent of these revenues were generated by video transmissions for news feed services, cable TV networks, and national broadcast networks. The advantages of communications satellites made their services attractive for "narrowcasting" applications for educational or corporate programming. Private business television (BTV) was a rapidly growing area of information transmitted via private networks with very small aperture terminals (VSATs). Users grew to rely on these systems for intracorporate data, video, and telephone communications. Retail companies used VSATs for credit card authorization and remote inventory control, and the travel industry relied on VSAT services for its reservation systems.

Mobile satellite services (MSS) were a more recently developed services market. Market growth depended in part on the success of newer technologies based on clusters of microsatellites in low orbits, as opposed to traditional technologies based on very large, high-cost satellites in geostationary orbits. Satellites in lower orbits are less expensive to build and launch, but more of them are required to cover the same areas as a larger satellite in geosynchronous orbit. Satellites in low earth orbit are referred to as LEO systems.

Land mobile satellite services (LMSS), which include applications like navigational services, cellular telephone services, and digital radio, were the fastest-growing MSS application in the United States and abroad. About 80 percent of mobile satellite service revenue came from LMSS applications in first half of the first decade of the 2000s, such as location and messaging services for trucks, while aviation and shipping made up the balance of the mobile market.

Remote Sensing.
Remote sensing is the gathering and storage of information around the earth's surface, such as weather patterns, via optical and infrared cameras, radar, or other sensing equipment in an orbiting spacecraft. Uses for remote sensing satellite data included agricultural forecasts, shipping, fishing, oil and mineral prospecting, cartography, forestry, and pollution surveys.

Background and Development

Between 1958 and 1963, the United States launched several experimental communications satellites, including Score, Echo, Telstar, Relay, and Syncom. Built by American Telephone and Telegraph Co. (AT&T), Telstar was launched on July 10, 1962. Telstar was powered by solar cells and chargeable batteries, and it demonstrated international satellite communications capabilities by transmitting U.S. speeches and television transmissions to Europe. In December 1962, NASA launched its communications satellite, Relay, for communication experiments. On July 26, 1963, Hughes Aircraft Co.'s Syncom II, the first synchronous communication satellite, was launched by NASA. Hughes' Syncom III, launched the following August, relayed the first sustained trans-Pacific television broadcast during the 1964 Olympics.

Many satellites have been launched for military use. The largest satellite ever built (1,600 pounds, as opposed to less than 200 for most satellites) was launched in 1969 and was designed for use by the U.S. Army, Navy, and Air Force in communicating with mobile field units, aircraft, and ships. The first commercial satellite, Early Bird, was launched in April 1965. Commercial activity in this sector heated up in the 1980s following new federal policies to privatize space activities. The technology used in commercial satellites, such as satellite launch vehicles and guidance systems, was originally developed for military purposes.

In 1962 the U.S. Communications Satellite Act provided that the sole right of U.S. ownership of satellites for international communications would rest with a single private corporation, the Communications Satellite Corp. (Comsat), which was incorporated in 1963. This move prompted European common carriers to band together into a consortium. In 1964 the International Telecommunications Satellite Consortium (Intelsat), an international corporation for the construction, launching, ownership, and operation of communication satellites, was established. Intelsat was an international not-for-profit consortium of 143 countries whose members contributed capital in proportion to their use of the system and received a return on their investment. All users paid Intelsat utilization charges, which varied depending on the type, amount, and duration of the service used. The Intelsat system provided four major services to users in more than 180 nations: public switched telephone services, private line network (business) services, broadcasting (video and audio) services, and domestic and regional services. The Intelsat system was accessed by thousands of earth stations, ranging in size from 50 centimeters to 30 meters. In 2001 Intelsat became a private company and in 2005 was sold to a group of acquisitions companies. When PamAmSat joined the firms' roster, it became the world's largest provider of fixed satellite services. As of 2011, the Intelsat system, based in Washington, D.C., and Luxembourg, operated 52 satellites and represented the world's largest fleet of commercial satellites.

A new generation of satellites was launched in the early 1990s to replace aging satellites with higher powered, higher capacity models, many with combinations of both C-band and Ku-band capacity. The life of a satellite is determined by its altitude and how much fuel it has to power the onboard rockets that keep it in its orbital pattern. This fuel usually runs out after about a decade of operation. The new satellites contained twice as many transponders as their predecessors and had the digital compression technology to expand their capacity by squeezing several channels of video per transponder. An example of the new breed of high-capacity satellites was AT&T's Telstar 401, which began operation in January 1994. Telstar 401 had 24 C-band transponders and 24 Ku-band transponders.

Demand remained high for small, low-cost satellites, called lightsats and microsats. Lightsats weighed less than 1,000 pounds and microsats less than 250 pounds. These smaller models were increasingly the models of choice for new communications systems. In 1994 Hughes Communications Inc. began its direct-to-home satellite service, DirecTV, which incorporated the United States' first high-powered direct broadcast satellite. DirecTV delivered more than 150 channels of programming to homes using 18-inch dishes and receivers. Similar services were launched by RCA Corp. and other companies.

An offshoot of direct-to-home satellite communications was the use of DSS technology to facilitate computer communications. Competing directly with the telephone companies and the new cable modems announced by the cable industry, the satellite industry, which was led by DirecTV, began offering high-speed satellite links to the Internet. DirecTV's direct broadcast satellite (DBS) system, when combined with a personal computer, allowed consumers to receive digital video programming and a variety of new entertainment, multimedia, and interactive data services on their PCs. The key advantage of the system was its speed. At up to 30 megabytes per second (mbps), the new DirectPC system allowed users to download information and files more than a thousand times faster than standard modem connections.

At the end of the 1990s, satellite-based communication was poised for great expansion. In 1996 there were 54 commercial satellites in orbit around the earth, but by 1999 the number had more than tripled to 175. Hundreds more were on the horizon. Most of these were elements of systems or constellations of multiple satellites, ranging from a few GEO satellites to hundreds in low earth orbit (LEO). These systems targeted four different applications: voice, broadband data transmission, messaging, and geodesy and navigation.

The first of these new systems to actually get into service was Iridium, a network of 66 satellites for mobile telephone service. It began voice and pager service in 1998 but filed for bankruptcy protection in August 1999. It had problems supplying its handsets, which also were very expensive compared to a regular mobile phone, and its per-minute charges were high. These factors, combined with other marketing and support failures, resulted in much slower growth in the number of subscribers than was expected, and the company was unable to meet some of its debt payments.

ICO Global Communications, another voice-oriented satellite venture, also filed for bankruptcy protection in August 1999, in part because the problems with Iridium made it difficult to attract the investors it needed to proceed. ICO stands for Intermediate Circular Orbit, another name for medium earth orbit (MEO). ICO began as a spin-off from Inmarsat, which had offered an expensive mobile voice service and used technology already proven in service. Globalstar, the second voice-oriented system to begin service, suffered a major setback when it lost 12 satellites in a failed launch in September 1998. Nevertheless, it began limited "friendly user" service in October 1999. The full system was designed to use 48 satellites and cover the world between 68 degrees north and south latitudes, but its initial service coverage was much smaller. The company launched a GEO satellite in 2008.

The satellite industry experienced exponential growth in the 2000s. The most ambitious and well publicized broadband scheme early in the decade was Teledesic, which dubbed itself "the Internet in the Sky." Its initial backers were Bill Gates, CEO of Microsoft, and Craig McCaw, highly successful pioneer of cellular telephone service. It planned to use 288 LEO satellites to provide Internet access anywhere in the world, beginning service in 2004, although Teledesic ended up scrapping the project in 2002, and McCaw and other investors set their financial sights on ICO Global Communications. Systems that had planned to compete in this market included SkyBridge, which was to be an 80-satellite LEO constellation backed by Alcatel, the Paris-based telecommunications equipment manufacturer, and Spaceway, a constellation of GEO satellites backed by Hughes Electronics, the leading U.S. satellite builder and operator. Hughes also filed for a MEO constellation of 20 satellites and another GEO system of 14 satellites with the Federal Communications Commission (FCC).

A number of satellite ventures designed to forward messages in the form of short non-voice transmissions were also launched. Although much less glamorous than global mobile telephone or broadband Internet access, these systems had immediate real-world applications. Orbcomm had 35 of its satellites in orbit by 1999, out of a proposed 48, and by 2007 it operated 29 of these satellites in six orbital planes, providing worldwide coverage. The Orbcomm system was designed to enable businesses to track remote assets such as trailers, heavy equipment, gas storage tanks, and wells and pipelines and maintain communications with remote workers anywhere on the globe.

Satellite-based navigation systems were well established by the end of the 1990s, but additional constellations were planned. The Global Positioning System (GPS), funded and operated by the U.S Department of Defense, was a system of 24 active satellites that enabled users to determine their position using satellite radio signals. Civilian users could use the Standard Positioning Service (SPS) without charge or restriction. Glonass was a similar Russian system in use. GNSS-2 created a navigation system independent of foreign military control.

In September 1999, the first commercial remote imaging satellite was launched. It was designed to take black-and-white and full-color photographs of any place on earth. Journalists looked forward to using its images, which were of much higher resolution than what was previously available. New remote sensing satellite systems were planned, including Skymed-Cosmos, focused on the Mediterranean basin, and Tsinghua, designed for disaster monitoring. Remote sensing using single satellites already was well developed by the end of the 1990s.

The communications services industry faced challenges in the middle of the first decade of the 2000s, partly due to a downturn in the telecommunications sector. Ambitious telecommunications infrastructure build-outs during the prosperous 1990s were not met with anticipated demand. This led to overcapacity, high levels of debt, and, ultimately, drastic cutbacks in capital spending for service providers. By 2007 a number of providers had declared bankruptcy or were in poor financial shape.

One major roadblock for satellite companies during the early years of the first decade of the 2000s was the unexpected growth of terrestrial wireless networks. Once used solely for voice communications, providers began using these networks for data transmission at ever-increasing speeds. Because of cutthroat competition among equipment companies, it became more affordable to roll out scalable wireless networks for data communications, as opposed to launching more expensive satellite networks that had to be rolled out in their entirety, requiring a more substantial investment up front.

The industry faced other challenges as well. In the August 2002 issue of Communications Today, SES Americom CEO Dean Olmstead explained that in-orbit spacecraft defects and high levels of capital investment in complicated systems for which there was not sufficient demand were but two factors contributing to the industry's woes. Olmstead also criticized the industry for "pursuing a business model that no service provider will make a financial commitment to back."

Despite bleak conditions in the early years of the first decade of the 2000s, the Satellite Industry Association (SIA) reported that worldwide,the industry was doing relatively well. Industry revenues climbed 10.5 percent from 2001 to 2006, reaching $106.1 billion, and increased further in 2008 to more than $144 billion, an increase of 19 percent over the previous year. Satellite services continued to represent the lion's share, generating $67.3 billion in revenue, due largely to consumer demand for satellite television.

In 2006 the U.S. share of the worldwide launch industry revenue continued to decline, while the number of U.S. launches increased. In 2006 launch providers in the United States were responsible for 37 percent of the global launch revenue compared to 66 percent in 2003. Fueling this decrease was the retirement in 2005 of the more expensive Titan 4B satellite. However, in 2008 satellite launches by U.S. providers earned $1.1 billion in revenue, an increase of 20 percent over 2007.

While 2006 worldwide satellite manufacturing revenues (including U.S. revenue) rose dramatically from $7.8 billion in 2005 to from $12 billion, U.S. gains were more modest, from $3.2 billion in 2005 to $5 billion. Despite predictions of continued growth, global manufacturing revenues decreased, albeit slightly, in the following years. Revenue slipped to $10.5 billion in 2008.

Current Conditions

By the start of the second decade of the twenty-first century, overall revenues in the satellite industry were growing, but slowly. Although satellite manufacturing and launch revenues declined slightly in 2010, revenue for satellite services grew 9 percent to $101.3 billion, surpassing the $100 billion mark for the first time, according to the Satellite Industry Association (SIA). Worldwide, overall satellite industry revenues rose 5 percent to $168.1 billion. although growth was considered somewhat sluggish in 2010, sales were almost $80 billion more than they had been in 2005, reflecting the enormous expansion of the industry occurring in the early twenty-first century.

The number of operating satellites in 2011 totaled 986, about 365 of which were commercial communications satellites. Satellite television services (DBS and DTH) accounted for 80 percent of commercial satellite revenues. In the United States, 35 million people subscribed to satellite television services, and Americans accounted for 70 percent of the world's satellite broadband revenues. Employment in the industry declined slightly, as many companies downsized during the economic recession at the end of the first decade of the 2000s.

Other figures from the SIA showed that mobile satellite services revenues grew 5 percent to $2.3 billion in 2010 and sales in satellite radio services increased 12 percent to $2.8 billion.

Industry Leaders

One of the industry leaders in the early 2010s was Hughes Network Systems, which was purchased by EchoStar in 2011. Based in Germantown, Maryland, the firm garnered sales of over $1 billion in 2010. At the end of the first decade of the 2000s, it was almost entirely a builder and operator of satellites, and by 2011 had 575,000 subscribers to their satellite broadband Internet service, HughesNet.

Loral Space & Communications Inc. continued to be an industry leader into the early 2010s with its subsidiary Space Systems/Loral (SS/L). The firm also had majority stakes in two other satellite companies, Telesat (Canada) and XTAR (Spain). In 2007 SS/L announced it had been awarded a contract to build SIRIUS FM-6, a high-power satellite that nearly doubled the power of those already in the SIRIUS fleet. As of the early 2010s, SS/L provided satellites to several well-known service providers including DIRECTV, DISH Network, SIRIUS Satellite Radio, XM Satellite Radio, and others. The New York City-based company posted revenue of $1.1 billion in 2010.

In 2010 ORBCOMM Inc. operated a network of 29 low earth orbit (LEO) satellites and "terrestrial gateways" used for messaging between remote workers and to monitor everything from pipelines and storage facilities to construction equipment, trucks, trailers, rail cars, shipping containers, and aircraft. The company filed for bankruptcy in 2000 and came under new ownership in 2001. The ORBCOMM system also provided messaging services via the Internet. In 2010 the company, based in Fort Lee, New Jersey, posted revenues of $36 million.

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