The concept of “coopertition,” or cooperative competition, long has been an element of many different industrial sectors and certainly is not a trend unknown in the satellite industry. While Northern Sky Research (NSR) long has predicted an increase in partnerships and cooperative deals between fixed satellite service (FSS) operators as an alternative to outright consolidation in the industry, a recent string of deals in Asia underscores this trend.??
One of the interesting issues driving increased cooperation, as pointed out during the Asia session recently moderated by NSR at Satellite 2012 (for more Satellite 2012 coverage, click here), is that the simple physics of frequency allocation is driving operators to reach deals together. The crowding of the frequency bands in much of the orbital arc, especially in the Ku-band, has made it difficult for any single operator to develop a new “clean” slot. This is especially true of small- to mid-sized as well as new FSS operators that might not have the “storehouse” of orbital filings that older and larger FSS operators typically have.??
Another issue is that small- to mid-sized operators would like to enjoy some of the benefits that come from the economies of scale enjoyed by larger operators. These types of cooperative agreements will aid the bottom line for the small- to mid-sized operators without the conundrum of how to grow large enough to benefit from deals normally reserved for the top four biggest operators.??
Finally, the typical new satellite business case often is comprised of three key elements: access to a slot/frequencies, availability of a satellite (or financing for one), and a relationship with a key client (or clients). In the increasingly competitive satellite industry, it is becoming more and more challenging to pull together these three elements in a timely manner, thereby opening up avenues for growth for individual operators.
Again, coopertition can benefit two partners in a deal where combined they are able to bring together all three elements and, thereby, successfully launch a new satellite. Whereas, individually, they may have lacked one or more of the critical pieces of the business plan, joining in cooperation to launch a new satellite allows growth for both, even if it means they compete in other areas.
The Bottom Line?
Every FSS operator seeks to grow its business, and key to that is increasing its supply of commercialized satellite capacity. In the past, that meant launching more and larger satellites both to meet expanding demand for satellite services, and to nurture the emergence of new markets and applications. However, the severe crowding of the GEO orbital arc combined with the political/financial hurdles that the industry faces that block consolidation implies that the best opportunities these days for expansion are often through partnerships, especially for the small- to mid-sized operators.
While Asia certainly has led the way in the last 12 months, partnerships are by no means limited to this region with other examples existing in the Middle East, Eastern Europe and elsewhere. NSR fully expects the number of alliances and deals will accelerate in the coming years to form a regular feature of the industry.
“Coopertition” will become an ever more dominant element of the FSS sector, and those who best succeeding at artfully merging the elements of “cooperation” and “competition” likely will become the industry leaders of tomorrow.
— Patrick French, Northern Sky Research