Home >> January 2008 Edition >> European Satellite Pay-Radio:
European Satellite Pay-Radio:
Are the prayers being answered?
by Chris Forrester

Last March, as well as in May of 2007, we looked closely at the prospects for European satellite pay-radio, and asked whether “European DARS (Digital Audio Radio Services) had a prayer?” Today’s early 2008 picture is, on the one hand, much clearer, which is not to say all in the garden is rosy. Chris Forrester reports…

On December 18, Washington-based satradio veterans WorldSpace made another significant hiring, hiring Italian radio pioneer Roberto Zaino. This shows, despite more than its fair share of problems, that confidence in satradio remains high – at least in WorldSpace’s Italian project. Zaino has been closely involved in Italian radio for more than 30 years, first with Radio Milano and more recently with European broadcasting giant RTL’s Italian operation.

WorldSpace Italia is “majority owned” by WorldSpace, but it has a significant partner in Class Editori, which is probably picking up the bills for the Italian operation, with WorldSpace itself contributing space segment and the orbiting asset, as well as other expertise. The Zaino press release talks again about a late 2008 service introduction in Italy, with its equipment being installed on certain Fiat Group models (including some Alfa Romeo and Lancia models) in “late 2009”.

That’s the good news. The less than good news is that WorldSpace suffered another hammering on the NASDAQ in the build up to the Christmas holidays. Above average trading had seen its stock fall from US$2.80 to barely US$2, and as low as US$1.67, representing a market capitalization of $82m. WorldSpace owns two orbiting satellites (AfriStar and AsiaStar) with a book value of about $145m. We attempted to secure some clue from WorldSpace as to whether any statement to the market would be forthcoming, but it seems management has nothing to say, other than “we don’t comment on [stock] price movements”.

As recently as September, WorldSpace’ share price was in the US$4 range. Such a fall in value must surely limit founder and CEO Noah Samara’s hand – and raise doubts about his ability to mount his long-promised rescue and refinancing plans. In late November, Mr Samara told the influential Hollywood Reporter trade mag that the broadcaster needed US$200-$300M in fresh cash. The book value of the company’s satellites is given at about $145M. We can only hope that his plans are still in train.

Back in WorldSpace’s Italian market, all is optimistic. “I am very excited at the opportunity afforded me by WorldSpace Italia. I look forward to using this great new technology’s vast capacity to offer a wide variety of unique programming to our Italian customers who today yearn for radio that steps outside the traditional mould,” says Zaino.

Strangely, perhaps, there has been at least one consistent buyer of WorldSpace stock over much of the past several months, and that’s Santa Monica-based Aletheia Research & Management. In the period to September 30th, it was sucking up WorldSpace stock like a vacuum cleaner. Confusingly, it has also been a seller of small parcels of stock. This net buying spree seems to have continued, at least up to December 3rd. At that date, they held 36.02 percent of the equity, having picked up another net 1.6m shares in the days between Thanksgiving and December 3rd. Its total holdings are now standing at 15.29m of Class A shares. Aletheia started buying shares in February this year, and its total expenditure on WorldSpace stock to date is $63.3m.

But WorldSpace is not alone in Europe. World-be rival Ondas Media has linked with Space Systems/Loral to begin design work on its satellites for European pay-radio. Officially, Ondas’ move authorizes Space Systems/Loral to “begin work on developing Ondas’ satellite infrastructure, while allowing the teams to refine [the satellites] final parameters,” said Ondas Media’s CEO Jacinto Palacios.

This ‘Authorization to Proceed’ is a major announcement and is, undoubtedly, a very important first step in giving Europe a satellite pay-radio system that matches the technical functionality and appeal of a highly elliptical orbit (HEO) satellite optimized for European sat-radio reception.

“Space Systems/Loral is the only commercial supplier of Highly Elliptical Orbit (HEO) satellites in the market place and is currently building next generation satellites for both XM Satellite Radio and Sirius Satellite Radio. In addition to this experience, we were pleased with the company’s ability to meet our cost and schedule requirements,” says Ondas.

“Loral will play a strategic role in the progress of our space segment program,” added Dave Krueger, COO. “This agreement starts the clock for the countdown towards bringing our unique content offering to Europe by 2011.” Ondas also stressed its commitment to using S-Band for transmissions, almost the same frequencies as currently in use by XM and Sirius Satellite in the USA.

This announcement does not mean that Ondas Media yet has the cash to fund a pair of satellites, hence the deliberate lack of any update to the RFP issued last year to SS/L, but Loral now seems a ‘shoe-in’ as far as any eventual order is concerned. Fund raising is on going, implies Krueger, with more announcements expected imminently from Ondas. Also unclear at this moment is whether the relationship with SS/L extends beyond preparatory work into the ordering of certain long lead items, which might get the project into orbit sooner.

The industry consensus opinion on the Ondas can be summed up in one phrase—“impressive”. However, there’s still plenty of work to be done. Ondas Media (via Spain) has recently made an ITU filing for capacity in the 2 GHz band. “We are committed to transmission in the S-Band [as used by XM and Sirius in the US]. We are pursuing frequencies and as much real estate as possible. But we are committed to S-Band, and have been for some time. Our contracts, agreements and implementation agreements have all been focused on S-band,” said Krueger.

Kruger has promised a number of announcements would soon be upcoming, and although he was silent on the precise shape and timing of the announcements, they can easily be listed as:
  • Next round of financing
  • Securing frequencies
  • OEM deals
  • Major strategic partnerships
  • Content/Programming
  • Satellite/s order
  • Launch contract
All represent significant fiscal and logistical hurdles. Coming up with the financing is perhaps a greater challenge, as the global markets are less receptive today than six or nine months ago. Ondas’ frequency intentions are also a little muddy, and it is unclear at this stage which filing Ondas might use, but in any case, it would be a lower priority than that in place for the SES-Eutelsat ‘Solaris’ j-v (see below). The ITU rules treat any S-Band filing for a HEO craft on the same level as a GEO filing, unlike L-Band BSS where GEO ‘trumps’ non-GEO.

But there are other major barriers to entry into the European market, not the least of which are the SES/Eutelsat plans within the 2 GHz space for their ‘Solaris’ joint-venture Geostationary satellite, where the S-Band payload is targeting Europe’s growing appetite for DVB-H TV-to-mobile services. W2A will exploit 30 MHz of S-band frequencies to be used “flexibly” in 6 x 5 MHz spot-beams covering each of the main European geographic and linguistic markets (Britain/Ireland, France/South Belgium, Germany, Italy, Poland, and Spain/Portugal. The €130m j-v, announced a year ago, is already well advanced with plans to supply a 12-metre S-band antenna on Eutelsat’s upcoming W2A craft (under construction at Alcatel Alenia Space), and slated for launch about 15 months from now.

Sources suggest the ‘Solaris’ plan is wholly unaffected by the Ondas news. It has access to a priority ITU filing “and is on schedule for launch in early 2009,” said our source.

The general consensus seems to suggest that the S-band could support two active players, and the logic might suggest that one of these should be ‘programming and content’ operator, while the other should be more telco focussed (argues TerreStar). Ondas’ HEO plans would – seemingly – be additional to this pair.

As mentioned, W2A is a GEO craft, and the Ondas Media scheme is for HEO transmission, but using the same frequencies. Additional to these now announced plans we have TerreStar Global (which some industry insiders having suggested might end up in some sort of relationship with Ondas Media), ICO (which has some long-term claims to the same bandwidth), Inmarsat and EuropaMax, all active in much the same space.

TerreStar Corp is known to have instructed Astrium to carry out a feasibility study, but there’s no news as yet on a satellite order. ICO Global continues to argue for its single satellite launched in 2001 to be given frequency priority in terms of S-band and says it plans to develop a GEO craft over Europe.

Inmarsat, in particular, has well reported plans to build – with Thales Alenia Space (TAS) – an extended L-band payload contained within the ‘Alphabus’ project. A TAS/Astrium statement Nov 23 said: “The Alphabus programme is currently in the Critical Design Review phase, an important milestone to be reached in mid-December, and is on track for the delivery of the PFM (Protoflight Model) in the course of 2009 to the Alphasat programme. The Alphabus platform will be able to accommodate up to 190 high power transponders and large antenna farms, and will have a significant growth potential (20 kW payload power and 9 tonnes launch mass for the extended range).

The Alphabus project is best described as an “opportunistic” move by Inmarsat, although readers might remember that Eutelsat was also pitching to add satellite or mobile radio to Alphabus, had it been selected for the contract.

However, Inmarsat’s portfolio of future projects also includes a new vehicle with an S-band payload, but Inmarsat continues to stress that this is not a “build it and they will come project”, but an activity that will happen, provided suitable commercial partners – in particular, broadcasters – come aboard. They are not fazed by the Ondas announcement, but will not move on their own plans until a robust grouping is assembled.

Then there’s EuropaMax, which has some valuable high-priority filings through the Luxembourg administration for a HEO craft in 7 MHz of spectrum from 1668-1675 MHz (the so-called MSS extension band). EuropaMax has another slice of spectrum (and No 1 in the filing) for a HEO in the 1518-1525 MHz and 1668-1675 MHz ranges, and understood to be in play with Inmarsat.

We understand that Ondas is in discussions with EuropaMax over its well placed filing (No 3) for a HEO craft in the 2 GHz MSS band, just behind a filing made by Thales (through France).

Interest in pay-radio (and other MSS options) over Europe isn’t limited to satellite players like WorldSpace, Ondas, SES/Eutelsat and the others already mentioned. Audio equipment manufacturers that include Delphi and Kenwood are also keen to see some action. Kenwood, for example, says “it is talking to everyone at this stage”, which seems reasonable enough given the current fluidity in the marketplace. It is already developing digital broadcast technologies and products for Japan, Europe, North America and other markets, according to Mike Bergman, their R&D director. “In Japan, we had our first ISDB-T prototype receivers five years ago, and we’re currently selling full-segment ISDB-T in both mobile aftermarket and mobile OEM versions. ‘Full-segment’ means it supports full-resolution digital television (12 segment), and it also supports the lower bit rate mobile channels (1 segment). ISDB-T is popular in Japan, in no small part due to the fact that it is a free service,” says Bergman, formally a VP at Sirius Satellite Radio.

In other words, 2008 is shaping up to provide a ‘battle Royale’ in terms of satellite radio activity. The spectrum looks like it will be available (although WorldSpace has more than a casual say in this area as far as L-band is concerned). Hopefully, we’ll soon learn whether Ondas Media – or some other player – has secured next level funding, and sufficient to get a paid of satellites under way. It might be an interesting year, even for WorldSpace.

Author Biography
London-based Chris Forrester is a well-known entertainment and broadcasting journalist. He reports on all aspects of the TV industry with special emphasis on content, the business of film, television and emerging technologies. This includes interactive multi-media and the growing importance of web-streamed and digitized content over all delivery platforms including cable, satellite and digital terrestrial TV as well as cellular and 3G mobile. Chris has been investigating, researching and reporting on the so-called ‘broadband explosion’ for 25 years.