To watch TV, read an email on your phone or download a video to your computer, you likely use satellite services. But most people don’t know how satellites work, how the satellite business operates or how explosive growth in demand for bandwidth may affect what we pay for communications.
Carmen Gonzalez-Sanfeliu, vice president for Latin America and the Caribbean for Intelsat, demystified all that at WorldCity’s CEO Club on March 5, prompting a lively discussion into how modern communications is revolutionizing everything, from banking to real estate to even management.
“New technology flattens organizations,” breaking up hierarchies as it speeds the flow of information for all, said Jim Fendell, president of package delivery firm Aeropost International.
Gonzalez-Sanfeliu explained that a satellite is essentially a sophisticated box with flaps. It is shot into the sky inside a rocket, flaps folded in. When it pops into orbit, its flaps extend, sometimes as long as a 10-story building. It works like a flashlight in the sky, shining a beam to earth, and links with other flashlights in the sky to send photos and other data to users, from governments to broadcasters.
Most satellites are launched near the equator, because the distance to earth is closest. Fixed satellites generally orbit at 23,000 miles high, moving at the same speed as earth to keep their beam fixed on one area. Fixed satellites generally cost about $350 million to build and launch and work for about 15 years. When their productive life ends, they’re pushed into space as debris, Gonzalez-Sanfeliu said.
The satellites connect with a growing network of undersea fiber-optic cable, teleports, cell towers and other technology to provide communications worldwide. The scale of operations is daunting. Intelsat alone runs more than 50 satellites, and serves 1,800 customers including media, phone and Internet firms. It posts nearly $3 billion in revenues yearly, with about 14 percent of sales in Latin America, she said.
But capacity on satellites and other infrastructure is running out, as demand for services surges. By some estimates, demand for bandwidth on cell phones will increase 50-fold this decade, as more consumers use phones for email, video and other computer-like functions. Even with new compression techniques, new applications and more TV channels will eat up more space on satellites and other links, said Eduardo Ruiz, executive vice president and general manager for A&E Ole Networks.
“High definition TV is coming this year to cell phones,” said Olivier Puech, vice president of Nokia Latin America. “And we like it,” added Ken Roberts, president and CEO of WorldCity.
Rising demand already is pushing up prices for satellite services. Yet operators still need lots more cash to add significant capacity. One concern: The big money and profits are going nowadays to companies that devise new ways to use the information highways — such as Apple with its I-phone apps — rather than the businesses that build and operate the highways themselves, said Gonzalez-Sanfeliu.
Firms like Apple and Google are “really taking advantage of the model where you are not charged for consumption,” she said. In the future, consumers could be charged on their I-phone and other multi-media devices based on how much bandwidth they use, just as cable TV subscribers pay different rates for a basic package and premium channels or cell phone users for minutes used, she added.
As consumers tap the new offerings, companies also are shifting how they operate. More firms now use digital strategies for marketing, using Facebook, Twitter and other social media and adding more video, surveys and interactive features to online campaigns, said Al Quintana, senior vice president of public relations firm Axis-Weber Shandwick.
Even demand for office space is changing. More companies seek buildings equipped for the latest technologies. And some want smaller spaces, as more employees work by computer from home or offsite, said Richard Schuchts, executive vice president of real estate giant Jones Lang Lasalle.
More powerful mobile devices also open up new business opportunities in rural areas and less developed countries. Cell phones now provide mobile banking for small farmers in India. And they’re increasingly used for financial transactions in Latin America, a region that now boasts more mobile phone lines than fixed lines, said Diane Sanchez, president and CEO of Telefonica USA.
Still, snags remain. Joao Claudio Guetter, president for Electrolux Major Appliances in Latin America and the Caribbean, said his U.S. Blackberry won’t work in Japan or South Korea, the result of different telecom protocols, or the means by which phones access networks. Coordination among countries and global standards present challenges.
“The regulators,” said Ruben Rotulo, president of Robles Advisors, “are not up to date with the technology.”
The CEO Club is one of six event series that WorldCity hosts. With nine roundtable discussion meetings per year, it is sponsored by Telefonica, the University of Miami School of Business and Diaz Reus, the international law firm. The next WorldCity CEO Club is scheduled for Friday, April 9.