Ground Segment Focus: Diversify or Drill Deep into a Niche?

When faced with a shifting market, business leaders more or less have two options to adapt: they can expand the business into new markets to stimulate growth, or they can take advantage of their specific expertise and dig into established niches. To address this dichotomy, a group of leaders in the ground segment business moderated by Keith Buckley, president of Communications & Power Industries’ (CPI) ASC Signal Division, gathered at the “Ground Segment Business Focus: Diversify Your Markets or Drill Deep into Your Niche?” panel at SATELLITE 2017.

The panelists began by looking at the question from the perspective of their respective companies. Marzio Laurenti, CEO of Telespazio Brazil, described his company as being “technology agonistic,” or willing to take advantage of any advances in telecomm technology that could benefit its customer base. “We see a lot of cheap bandwidth coming to the market and that could be put to good use for us, especially in the short term,” he said. “This will, in principle, unlock new market segments. So we’ll expand our market, especially [compared] to the old ecosystem … in order to provide something more than simple connectivity.”

Vince Matherne, vice president of strategic development at Encompass Digital Media, identified his company as primarily a broadcast technology services firm. “We don’t see ourselves first and foremost as a teleport operator even though we do operate teleports,” he said. For other, similar companies, he said it’s important to answer that question of where your business fits into the ecosystem. “Are you a services provisioning company focusing on a specific market, or are you a teleport [operator], where you may need to shift your business model to chase dollars?” he said. Matherne believes teleport operators need to take the question one step further, too: “How deep and how far do you want to go across your market? Do you integrate with partners? Do you perform acquisitions?” These kinds of questions, Matherne says, will help determine the direction in which you can take your business, whether that’s very broad or more specific.

Koby Zontag, vice president of media sales and business development at PCCW Global, agreed with Matherne but also pointed out that the size of your business is another determining factor. PCCW is able to stretch its reach due to the global nature of its services. “Our core business is telecomm connectivity. We have a very vast fiber network, but on top of that we also have some teleports — one of them is probably the largest teleport in Asia,” he said. According to Zontag, the teleport business is only a small part of what the company does. “However, we are doing all kinds of stuff — broadcast, VSATs, point-to-point data, everything that our customers are asking us for that we can provide in a more cost effective way,” he said.

Zontag also underlined that as prices for bandwidth continue to decrease, value added services will only become more important. “That is what we are trying to do with our teleport business, making it a media center” that addresses more specific customer concerns, he said.

For smaller teleport operators it’s more difficult. Zontag believes that in order to diversify, a company needs a reliable foundation to lean back on if things go awry in the market. “You have to be solid in the one thing you do so you know you can try something else. If you are doing VSAT and want to do broadcast, you need to know your VSAT side is strong enough to support your ventures,” he said. “The question is how solid are you in what you do” and whether or not you have a good foundation that allows you to experiment with risk.

Laurenti also emphasized the importance of size, and posited that spreading your reach is likely the better option if you truly wish to compete in the global market. “If you want to be in this business, you have to play big. The price of bandwidth is declining but we all know that the cost of ground structure is increasing exponentially. So, to play as a global service provider where the growth will be, you need to think big,” he said.

For James Trevelyan, head of sales at Arqiva Satellite & Media, the risk inherent in diversifying broadly is only worth it when he’s confident the company “has a right to win in whatever market in which it’s playing.” Arqiva is a rather large company with a broad portfolio, he says, which makes this question a tricky one to answer but always relevant. “The temptation to diversify further is like an itch you can’t scratch because you can’t reach it … but you want to stick to the focus. Invariably when things do turn in specific sectors, we try to stay relevant and make sure we’re winning more than our competitors.” Rather than branch off into an entirely new market, Trevelyan thinks it’s viable to leverage existing investments and “wrap that into the services we provide to our existing customers.”

Regardless of which direction leaders take their companies, the group agreed that working together with other teleport operators and companies in the ground segment space is very important and in fact, according to Laurenti, it’s “sometimes a necessity to expand your business.”

“Our market is clearly a cooperative market. All teleports usually have more resources than they need,” Zontag said.

Trevelyan agreed, noting that it’s “almost impossible to do everything yourself on a global scale.”

“If you go into any of our teleports or any teleports at these guys’ organizations,” he said, motioning to the rest of the panel, “you’ll see enormous coexistence. We are part of the fabric of this system and you can’t work in isolation.”

When it comes to those two main choices: diversifying or drilling into a niche, Matherne stated that there are risks both ways. “If you diversify across everything it’s harder to be an expert in anything,” he said, which makes it difficult to provide solutions to customers with very specific needs. On the other hand, “if you don’t diversify, when that area hits the skids, you’re in trouble as well,” he added.

Ultimately, Trevelyan says it’s a balancing game of scale. “You have to have some scale whilst keeping focus.” VS