|North America 2007
|Satellites – looking to the future
|Edward D. Horowitz
|President & CEO
Edward D. Horowitz is President and CEO of SES Americom, a satellite operator. He is also a member of the Executive Committee of its parent company, SES. Prior to SES, Mr Horowitz founded EdsLink LLC, a venture fund providing strategic financial, operations and technology consulting services to financial services and the cable industry. Mr Horowitz was Executive Vice President for Advanced Development of Citigroup and Founder, Chairman and CEO of e-Citi. In addition he served as a member of the Management and Investment Committees of Citigroup. Formerly, Mr Horowitz was Senior Vice President, Viacom Inc, and a member of the Viacom Executive Committee. Prior to Viacom, Mr Horowitz held senior management positions at Home Box Office, HBO, a subsidiary of Time Warner and was a founder of Suburban Cable. Mr Horowitz also serves on advisory boards and as a Director of a number of companies, including EaglePicher, The Tennis Channel, One Laptop per Child, OLPC, and is a member of the Board of Trustees of the Kenan Institute for Ethics at Duke University, the New York Hall of Science and the March of Dimes. Mr Horowitz holds a BS in Physics from the City College of New York and an MBA from Columbia University.
Today, the satellite industry is doing well, but it will have to adapt itself to new customer expectations. Programming will become completely user dictated, and users will pay only for the channels and content they actually watch. Widespread connectivity is fostering the growth of a global economy. To become truly global, however, the online economy needs to connect a far greater percentage of the worldís people. When it does, it will bring unprecedented development to the worldís developing regions.
I subscribe to Stanford economist Paul Romerís Growth Theory view, that growth occurs whenever people take resources and rearrange them in ways that are more valuable. To know what is ëmore valuableí is a matter of vision. Between 1961 and 1981, the Soviet Union fulfilled Khrushchevís vision to out-produce the US in all traditional sectors. They successfully reproduced a late-19th-Century manufacturing-based industrial economy, while the US was inventing a 21st-century chip, computer and information-based economy. The Soviet vision of the future was over-confident but, more importantly, it was simply – over. My fear is that we might be inclined to use Khrushchevís telescope to envision whatís next for us. Today, the satellite business is producing reliable earnings for our shareholders. However, there are undeniably changes on the horizon dictated, if nothing else, by the changing worlds of our innovative customers, and they expect us to ëget ití – to anticipate their needs. What the future holds is an exciting mystery, but we are better off addressing possibilities while we have a chance to invest in them and to own them – rather than to ignore or possibly be displaced by them. What we know is that the future will be vastly different. Within the next 25 years, science and technology will advance by a factor of 4 to 7x beyond the advancements during the past quarter century. That means that where we stand today on the technology and science scale versus where we will be in the next 25 years – is a moment equivalent to being in the year 1650. Of course, the 25 years from 1650 to 1675 saw dramatic developments. The English started drinking tea, Cromwell dissolved Parliament, the first bank note was issued in Sweden and the worldís population expanded to 500 million, about one-third the size of India today. The year 1650 was 307 years before Sputnik and 315 years before the first satellite, but the world hadnít seen anything yet. We are all familiar with the advances made in the satellite industry through compression. Well, get ready – weíre about to enter ëThe Great Compressioní. We are looking at the equivalent change of the past 315 years on the verge of being compressed into the next two and a half decades. The genie is out of the bottle, and hereís the question weíve got to answer: is the genie working for us or are we working for the genie? The US governmentís business is changing rapidly. Saddam Hussein invaded Kuwait in August, 1990: the US and coalition forces liberated it in January of 1991. During the five and a half months between Husseinís invasion and ours, the American military was caught without the satellite capacity to track and mount the offensive. They scrambled to acquire the needed transponders and didnít have time for emergency appropriations to acquire them. Private citizen Ted Turner stepped in and guaranteed the costs. It was no coincidence that Turnerís CNN had the best and, for a time, the only video from Desert Storm. Between Desert Storm and 9/11, the US military changed. When 9/11 came, the military was ready with a system in place to fund US$78 million dollars worth of contracts to provide the needed satellite and communications services. In the aftermath of 9/11 we learned to leverage what only satellites can provide: advanced mobile communications and high speed Internet access on the move – anywhere in the world, via aircraft, boat, Humvee, or on foot. What the military needs is megaBytes, not megaHertz. The military expects a ground and mobile capacity consistently capable of facial recognition. Increasingly, the US government wants net-centric bundled solutions as well as broadband and it is calling upon us to be creative about it. There is a demand for specific megaByte capacity per soldier and we know that this demand will only grow over time. Remember, in five short years half of the military will be Gen X and Y. These soldiers grew up in a digital world. The military has to grow with them – and so do we. We look over our shoulders for our competitors and canít see some of them because theyíre in front of us. They may not even be in our business. Look for a moment at the world of nano-technology; it was once viewed as science fiction, but today promises to be one of the key enabling technologies of the 21st century. Nano-technology is starting to impact chemistry, biology, applied physics and medicine. We are just beginning to imagine the inevitable applications to the space and satellite world. Many of our major customers are in the commercial media world where things are also changing at a furious pace. YouTube, mp3, file sharing and a host of other technological and social changes are threatening old business models. Our media customers are losing control of their customers who are increasingly less dependent on mass packaged media – what we deliver. User generated and niche media (nano-media) are replacing mass media. When we hear ëuser-generated contentí, we all think of YouTube. YouTube makes no money and never has – except for its original creators who profited handsomely when they sold to Google. Letís be honest. YouTube content is dominated by poor material – and the most frequently viewed material inclines toward quality production and content, but Viacom is now demanding that YouTube remove all of Viacom material and others will surely follow. YouTubeís offerings will, surely, begin to diminish. Then thereís Current TV, Vice President Goreís effort, which is totally user-generated content, but itís still part of the standard ëdishí and cable mass media package. It is user-generated content, but itís still part of the old business model for the system providers. From our point of view, the revolution may have little to do with user-generated content and everything to do with user-dictated content. An Illinois firm called Virtual Digital Cable, VDC, has started delivering cable programming without cable – using only the Internet. No trench digging or coaxial cable or fibre placement, no local franchise or fees. Naturally the legal challenges to VDC are blocks long, but the point is that disruption for our customers, and for the satellite industry, is inevitable. So how do we adapt most effectively and most profitably to the new net-centric content world? One answer is to consider what I call ëMy Geosynchronous Mediaí but someone told me that MGM was taken. So for now letís just call it My TV Station, or MTVS. MTVS is a niche media for one – a nano-niche. It is the creation of a net-centric and net-neutral, trusted third-party content aggregator that runs exactly what you want, when you want it on whatever device you choose. Unlike cable and traditional satellite mass programming where you pay for things you never watch, MTVS gathers exactly and only what one person wants to watch. To support MTVS we would have to be a Relationship Management business, not just a conventional distribution business. To an unavoidable extent, we would be in competition with our current customers. Does that matter? Of course it does, but these are the kinds of questions we need to face now before itís too late to do anything about it. Now letís step further back and look at the reality of current economics of our planet. Half the world does not participate in the global economy in any way, shape or form. The developed world increasingly understands the value of changing this through governmental, private and NGO enterprises. It is not strictly a charitable exercise but a way to grow demand and markets. We cannot call the economy ëglobalí until it attains a much greater scale. The sooner undeveloped countries have access to the information and communication revolution, which in many ways we can steer, the sooner there will be unprecedented growth and demand not evident in mature economies. An example of how we extend the reach and become truly global is seen in SESí support of the One Laptop per Child, OLPC, Initiative. OLPC is designed to put connectivity and access to information into the hands of children around the world, to connect them with others – to people in their village or in nearby villages, to anywhere in their country or, one day, anyone around the world. Business Week Magazine recently advised new professionals to stay away from the space business because it offered ëno futureí. The engineering and science expertise that is the foundation of our industry is aging with many near retirement, and our replacement bench is thin. When it comes to attracting talent, you could say, we have an image problem natural to a maturing industry, and we have an advancement opportunity problem for the ambitious new engineer we do attract. It is science and invention that makes us grow and there is a clear shortage on the horizon. Just as half the American military will be composed of Gen X and Y soldiers who grew up in a digital world, my fondest hope for our industry is that we can say the same. If we canít, the future will be a lot harder to face.