SIC 4899
COMMUNICATIONS SERVICES, NOT ELSEWHERE CLASSIFIED



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.

NAICS Code(s)

513322 (Cellular and Other Wireless Telecommunications)

513340 (Satellite Telecommunications)

513390 (Other Telecommunications)

Industry Snapshot

Because of an increased interest in communications technologies and information transmission, satellite systems have been driving growth and commanding high visibility in SIC 4899: Communications Services, Not Elsewhere Classified. Difficult economic times and a weak telecommunications market had a negative impact on the industry during the early 2000s. Continued expansion depends 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 2000s, many weather, communications, and remote-sensing satellites were in operation, along with a number of multiple-satellite systems.

Organization and Structure

Commercial space launches, satellite communications goods and services, and satellite remote sensing are the major segments of this industry and provide the bulk of its revenue. Voice and data communications, mobile services, vehicle tracking and navigation, and broadband data transmission for the Internet are growing segments. Beginning with its inception in the 1960s, this industry has been the realm of government agencies, the military, and international consortia. In recent years, however, new technologies and increased privatization have 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 carry 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 must be located within line of sight of one another and usually are 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-multi-point 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 compete with fiber-optic cables because both systems transmit data. Over time, the cost of transmitting information via satellite has become almost as low as the cost of transmitting via land. It is unlikely that one technology will win out over the other, because each has its advantages. In fact, a study done by COMSAT Corp. showed that cable and satellite technologies complement one another in many respects.

The satellites considered to be the most competitive alternatives to cable are Ku-band, beam-hopping, multibeam satellites. These conserve energy by allowing simultaneous switching among beams. Other cable competitors are C-band, fixed multibeam satellites that use a series of beams but do not permit rapid switching between them. The beam-hopping, multibeam system costs an estimated 27 percent less than cable, whereas the fixed multibeam is 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 varies, depending on variables such as the time of day, frequency, power, duration of lease contract, orbital position, and type of satellite. In recent years, the rate for domestic analog C-band channels ranged from $200 to $600 per hour, or $55,000 to $230,000 per 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 include fixed broadcasting, data transmission, and telephone service, have accounted for about 85 percent of all U.S. satellite service revenues. 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 have made their services attractive for "narrowcasting" applications for educational or corporate programming. Private business television (BTV) is a rapidly growing area of information transmitted via private networks with very small aperture terminals (VSATs). Users have grown to rely on these systems for intracorporate data, video, and telephone communications. Retail companies use VSATs for credit card authorization and remote inventory control, and the travel industry relies on VSAT services for its reservation systems.

Mobile satellite services (MSS) are a more recently developed services market. Whether mobile satellite services will continue to expand will depend on the allocation of enough of the radio frequency spectrum to accommodate multiple communications systems. Market growth will depend 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.

Both domestically and abroad, land mobile satellite services (LMSS), which include applications such as navigational services, cellular telephone services, and digital radio, are expected to be the fastest-growing MSS application. About 80 percent of mobile satellite service revenues come from LMSS applications, such as location and messaging services for trucks; aviation and shipping make 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 include 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 American speech and television transmissions to Europe. In December of the same year, 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, versus 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 of 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 August of 1964, the International Telecommunications Satellite Consortium (Intelsat), an international corporation for the construction, launching, ownership, and operation of communication satellites, was established. Intelsat is an international not-for-profit consortium of 143 countries whose members contribute capital in proportion to their use of the system and receive a return on their investment. All users pay Intelsat utilization charges, which vary depending on the type, amount, and duration of the service used. The Intelsat system provides 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 is accessed by thousands of earth stations, ranging in size from 50 centimeters to 30 meters. COMSAT is the U.S. government's representative to Intelsat and is the sole source of access to Intelsat for U.S. companies.

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 contain twice as many transponders as their predecessors and have the digital compression technology to expand their capacity by squeezing several channels of video per transponder. One example of the new breed of high-capacity satellites is AT&T's Telstar 401, which began operation in January of 1994. Telstar 401 has 24 C-band transponders and 24 Ku-band transponders.

Demand was expected to remain high for small, low-cost satellites, called lightsats and microsats. Lightsats weigh less than 1,000 pounds and microsats less than 250 pounds. These smaller models are increasingly the models of choice for new communications systems. In 1994, Hughes Communications Inc. began its direct-to-home satellite service, DirecTV, which incorporates 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—led by DirecTV—began offering high-speed satellite links to the Internet. According to DirecTV, its direct broadcast satellite (DBS) system, when combined with a personal computer, would allow 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), and more than 500 were scheduled to be launched in the next three to five years. 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). Although the number of such systems changed as the sponsoring companies consolidated their efforts and new proposals were put on the table, there were about 29 constellations launched or planned in 1999. 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 66-satellite network for mobile telephone service. It began voice and pager service in 1998 but filed for bankruptcy protection in August 1999. It had problems with 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, which is another name for medium earth orbit (MEO). Service was expected to start in summer of 2000, using a system of 9 or 10 MEO satellites. ICO began as a spin-off from Inmarsat, which offered an expensive mobile voice service previously and uses 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. Its initial service coverage was much smaller.

Satellites were expected to provide 10 to 15 percent of the global broadband Internet and data transmission service early in the twenty-first century. This market was projected to grow from $200 million in 1999 to $37 billion by 2008, according to Pioneer Consulting. The most ambitious and well publicized broadband scheme 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 was planned to use 288 LEO satellites to provide Internet access anywhere in the world, beginning service in 2004. Systems planned to compete in this market included SkyBridge, 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 has filed with the Federal Communications Commission (FCC) for a MEO constellation of 20 satellites and another GEO system of 14 satellites.

A number of satellite ventures designed to forward messages—short non-voice transmissions—were planned or underway. Although much less glamorous than global mobile telephone or broadband Internet access, these systems have immediate real-world applications. Orbcomm had 35 of its satellites in orbit by 1999, out of a proposed 48. 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. Leo One, a 48-satellite constellation, planned to offer store-and-forward messaging. E-Sat planned a six-satellite system focused on meter reading applications.

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 was planned by the European Community to create 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 were looking forward to using its images, which were to be of much higher resolution than what was previously available. Frost & Sullivan, a technical marketing research firm, expected the market for satellite imaging to grow at an annual rate of 17.1 percent through 2005. 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.

Current Conditions

Challenging times existed within the communications services industry during the early 2000s. Partially to blame was a downturn in the telecommunications sector. Ambitious telecommunications infrastructure build-outs during the prosperous 1990s were not met with anticipated demand. For service providers, this led to overcapacity, high levels of debt, and, ultimately, drastic cutbacks in capital spending. By 2003 a number of providers had declared bankruptcy or were in poor financial shape. In late 2002, The Economist revealed that, according to investment bank Morgan Stanley, annual capital spending might decrease as much as 34 percent.

One major roadblock for satellite companies during the early 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, thus requiring a more substantial investment up front. Conditions such as these hindered Teledesic's ability to move forward with its plan to build an "Internet in the Sky." In late 2002 the company cut most of its staff and halted construction of the first two satellites it had ordered.

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 these bleak conditions, the Satellite Industry Association (SIA) reported that on a worldwide basis, the industry fared relatively well during the early 2000s. Industry revenues climbed from $73.7 billion in 2000 to $78.6 billion in 2001, and then reached $86.8 billion in 2002. Satellite services continued to represent the lion's share (57.5 percent) of these revenues. According to the SIA, this category almost tripled in size between 1996 and 2002, fueled by demand for consumer video services. Within the services category, the majority of revenues ($42.5 billion) were attributable to subscription and retail services, with the remainder coming from the satellite transponder leasing. Throughout the world, 2002 sales related to satellite launches rose 23 percent. However, within the United States a decrease in the number of launches and falling prices caused sales to fall 9 percent. Satellite manufacturing sales climbed 27 percent in 2002, rising from $9.5 billion in 2001 to $12.1 billion in 2002. Within the United States, sales increased 16 percent during this time period, climbing from $3.8 billion to $4.4 billion.

Industry Leaders

The leading satellite company, as opposed to generic space company, is Hughes Electronics, a subsidiary of General Motors. Now almost entirely a builder and operator of satellites, its revenues in 2002 totaled $8.9 billion. One of Hughes' subsidiaries, DirecTV, had 10.5 million subscribers to its satellite TV service in early 2003. Competitor EchoStar Communications Corp., which operates DISH Network, had 8.1 million subscribers.

Boeing is the world's largest space company, but is not a major player in the satellite business. Lockheed Martin, also a leading space company and the world's top defense contractor, became involved in the industry after acquiring Comsat Corp. in the late 1990s. Loral Space and Communications was another industry leader in the early 2000s, earning $1.2 billion in 2002. According to the company, in addition to serving as the second-largest commercial satellite manufacturer, it also is an international leader in the area of "fixed satellite services, including transponder leasing for corporate data networks, broadband data transmission, content services and Internet connectivity."

Formerly known as Orbital Communications Corp. (OCC), ORBCOMM LLC operates a network of 30 low earth orbit (LEO) satellites and "terrestrial gateways" that are 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.

Further Reading

Anderson, Karen. "Eagle Eye in the Sky." Broadcasting & Cable, 25 October 1999.

"Business: Out of the Ashes; American Telecoms." Economist, 12 October 2002.

Foley, Theresa. "Star Attractions." Communications Week International, 16 August 1999.

Golden, Paul. "Analysts Say Consolidation Likely for Satellite Industry." Global Wireless, October 1999.

"An Industry's Brightest Days: Growing Its Subscriber Pie to Awesome Numbers." Satellite News, 22 November 1999.

Mooney, Elizabeth V. "SkyBridge to Compete with LMDS Carriers." RCR Radio Communications Report, 13 September 1999.

Nairn, Geoff. "Sector Is Reinventing Itself for the Next Millennium." Financial Times Survey Edition, 18 November 1998.

"New Focus for U.S. Satellite Industry." Interavia Business & Technology, September 1999.

Pian Chan, Sharon. "The Birth & Demise of an Idea. Teledesic Was Going to Create a $9 Billion "Internet in the Sky'—But it Didn't Fly." The Seattle Times, 7 October 2002.

Price, Christopher. "SkyBridge to Lift Capacity of System Satellites Cost Increased to $4.2 BN." Financial Times London Edition, 1 June 1999.

Satellite Industry Association." Satellite Industry Statistics 2002, 2002. Available from http://www.sia.org .

"Satellites: The New Direct-to-Consumer Model." America's Network, 15 September 1998.

"SES Americom's Chief Says Boring Is Good Business." Communications Today, 30 August 2002.

Shiver, Jube, Jr. "The Cutting Edge/Focus on Personal Technology Satellites at Risk in Crowded Skies." Los Angeles Times, 11 November 1999.

Smith, Bruce A. "Remote Sensing." Aviation Week & Space Technology, 11 October 1999.

"Teledesic Future in Question." RCR Wireless News, 7 October 2002.

Thyfault, Mary E. "Satellites Reposition for Broadband—A Batch of Service Providers Shift to Internet and Data." tele.com, 8 November 1999.

Wood, Lloyd. "Lloyd's Satellite Constellations." Available from http://www.ee.surrey.ac.uk/Personal/L.Wood/constellations/overview.htm .



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