The Middle East market has seen the recent addition of new Fixed Satellite Serivces (FSS) operators who are betting on the potential of Direct-to-Home (DTH) and broadband services via satellite in the region. But is the market really there for these services?
What drives demand for FSS satellite capacity?
Climate, geography, population distribution and culture combine together to create the "perfect storm" for satellite capacity, ground equipment and services in the Middle East market. At first blush, television and radio broadcasting lead the pack with hundreds of channels available on any of a dozen satellites blanketing the region; more channels are cropping up on an almost monthly basis. Satellite broadband Internet is gaining ground while backhauling for commercial cellular phones and corporate networks maintain a respectable pace behind.
The majority of satellite television, roughly 75%, is offered Free-To-Air (FTA) with revenue generated through advertising or subsidized at a loss for some other purpose such as education. Availability and low cost make satellite television more important in the Middle Eastern market then most other applications, but we anticipate broadband Internet to gain more prominence in the future.
This is the backdrop for our discussion of satellite operators who currently or will shortly concentrate their energies on this region. The two primary operators, Arabsat and Nilesat, are indigenous to the Middle East as they provide optimum coverage and maintain a direct presence where the bulk of the users exist. Along with them, Eutelsat, Intelsat and SES are growing a presence that challenges the dominance of the indigenous operators. We observe that to counter this threat, they have adopted world-class operating modes and business practices that both foreign and regional customers understand and appreciate. This market will be further affected by the launch of YahSat 1 around the end of 2010, introducing Ka band capacity and services to an already robust Ku band market.
What the regional FSS players have to offer
ArabSat
ArabSat has been covering the region for well over thirty years. Currently, they operate a fleet of five GEO communications satellites (located at 26° E and 30.5° E), the most recent of which was BADR-6 launched in 2008 with another new launch planned every year until at least 2011. They provide services in Direct-To-Home (DTH) television, transmission and backhauling for broadcasters, trunking for telecom and corporate networks as well as broadband Internet services.
By mirroring and possibly improving upon the business and technical styles of Eutelsat, Intelsat and other foreign companies, Arabsat has held on tightly to its leadership in the delivery of satellite TV. Importantly, they have shown strong commitment to the technology and business by continuing to invest in new satellites. This is the same strategy used successfully in the US by the Galaxy System (now owned and operated by Intelsat), which persevered through challenges brought by competitors and other technologies. The same can be said of the SES Astra system in Europe, which started along the same lines as Galaxy to become the focal point of TV programming within its coverage region.
Nilesat
NileSat was founded in the early 90’s and focuses primarily on DTH broadcasting services. Of the 450 channels offered over its three current satellites at 7° W, roughly 25% of them are subscription based with the rest sent out free to nearly 40 million homes with Nilesat set-top boxes. Over the past three years, NileSat has partnered with European service provider Eutelsat to provide coverage for the MENA region from that location. With the launch of Nilesat 201 in 2010, the two companies believe they will boost capacity in the 7° W neighborhood by 30%. This partnership should provide stability and investment, allowing Nilesat to control its market. A challenge from YahSat may already have started as they have announced a partnership of their own with SES.
YahSat
YahSat was formed in 2007 and is set to launch its first satellite, Yahsat 1A at 52.5° E, towards the end of 2010. A recently announced partnership with SES ASTRA will create YahLive, a DTH satellite television service. The satellite broadband service, YahClick, will launch when Yahsat 1b does in 2011. The company was formed when a strong demand for satellite capacity was identified in the MENA market, and even though three years will pass between forming as a company and opening their transponders for business, it is believed demand will still be sufficient to support YahLive and YahClick as well as two other "Yah" brands providing backhauling services and government applications to fixed and mobile users.
Intelsat
Intelsat, the world’s leading provider of fixed satellite services, recently announced significant increases in revenues and decreases in losses which were attributed in part to new business and renewals in the Middle East (among other regions). Currently, the Intelsat fleet maintains about a dozen satellites located at various points between 33° E and 85° E with footprints that include the Middle East, providing a variety of services for various customers and partners. There are plans to launch Intelsat 22 to 72° E in 2012 for increased coverage of the MENA region with connectivity into Europe, but first Intelsat 15 will begin providing Ku-band VSAT services to corporate and government customers when it launches this year. Services to military and the international media are one of Intelsat’s strong suits because of the global footprint and their experience serving these sectors. This gives them the advantage in those countries of the MENA where such activities are the greatest.
Eutelsat
As we mentioned previously, Eutelsat has an ongoing partnership with NileSat to develop their constellation at 7° E. Overall, Eutelsat’s fleet consists of 27 satellites placed at various points between 15° W and 70.5° E, 18 of which are capable of serving the MENA region. By 2011, those numbers will increase to 32 and 21 respectively. Aside from its broadcasting services, Eutelsat also provides corporate data networks and broadband services such as IP backbone connectivity, on-the-move broadband access, Virtual Private Networks (VPN) and IP content distribution. The IT-centric focus of Eutelsat, through a partnership with Viasat, gives them a potential lead in growing their ME business.
What the future portends for current and emerging FSS players
As a result of the efforts of the operators, the FSS marketplace and technical environment in the Middle East are essentially on a par with Europe and North America. The global recession has probably affected the appetite for new satellites and service providers, but the existing base is quite strong and moving ahead in terms of adopting modern technology like DVB-S2 and HD. VSAT services to enterprises and ultimately directly to the consumer are not developed to the scope of what is found in the Americas. However, there is growing demand for high speed Internet access outside of major cities like Dubai and Kuwait and this can only be addressed in the near term by satellite. The situation then is one where supply looks favorable in an environment of growing demand. The long term prospects are very good.
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Bruce Elbert has over 30 years of experience in satellite communications and is the President of Application Technology Strategy, Inc., which assists satellite operators, network providers and users in the public and private sectors. He is an author and educator in these fields, having produced seven titles and conducted technical and business training around the world. During 25 years with Hughes Electronics, he directed major technical projects and led business activities in the U.S. and overseas. He is the author of The Satellite Communication Applications Handbook, second edition (Artech House, 2004). Web site: www.applicationstrategy.com Email: bruce@applicationstrategy.com
Michelle Elbert is the Director of Marketing for Satellite Markets and Research and a consultant for Application Technology Strategy, Inc. She has extensive experience in the satellite and IT industries and holds an MBA from Concordia University. She can be reached at michelle@satellitemarkets.com
