With almost 3.8 billion people, the Asia-Pacific accounts for over 60 percent of the world population. China and India alone has about 40 percent of the world’s total. Given the rising incomes and improving economic conditions, Asia continues to draw satellite service vendors and equipment manufacturers who are always on the lookout for new opportunities.
Asia’s 47 countries also make the region so immensely diversified and heterogeneous as a market that companies doing business are faced with ever increasing cost of marketing and different regulatory regimes. Unfortunately for satellite service providers, the two biggest marketplaces, China and India, have remained recalcitrant in opening their markets.
According to many Asian satellite providers, the global economic downturn in 2008 and 2009 did not have a serious impact on their businesses. They believe fundamental growth drivers of the industry remain in place, and predict that the Asian satellite industry will continue to have opportunities for growth. In the meantime, other interesting satellite events continue to spice up the 2009-2010 Asia satellite saga, but could very well blemish a very promising satellite marketplace.
China: Power of Numbers
With a population of 1.4 billion, an economy ranked as the third largest and fastest-growing in the world for the past 30 years and a per capita income of US$6,567 in 2009, according to the IMF, China is Asia’s biggest potential market for satellite services and equipment. Strangely, satellite television remains technically illegal in China, thanks to a 1993 regulation that specifies only guesthouses, three-star hotels (and above) catering for foreign guests, and buildings exclusively for office and residential use by expatriates, are allowed to use satellite dishes. For this reason, there is no China-branded satellite company and most TVs come with just a smattering of local regional Chinese channels and, of course, the channels that are provided by the China Central Television, the state television broadcaster that uses a network of 19 channels to broadcast different soap operas, entertainment shows, and Chinese government propaganda.
A growing Chinese middle class and improving standards of living have stimulated the demand for more high-tech equipment. This gave way to a black market for satellite equipment that allows access to the BBC, CNN and of course MTV, to escalate. In most cities, gray markets have popped up providing satellite cable services — including cable boxes and regularly updated encryption cards — for anyone willing to pay around US$300 a year to get channels like BBC World and CNN, HBO and Discovery Channel and many others. Thus, content deemed pornographic, violent or threatening to state interests, though banned in domestic channels, is easily picked by satellite dishes.
Numbers vary, but analysts generally agree with the assessment that there are about 50 to 60 million illegal satellite TV dishes in China receiving programming that is nominally broadcast for the Hong Kong and Macau markets or the entirety of Asia.
Reports say that in 2008 alone, more than 10 million satellite dishes with the ability to receive overseas signals with the DVB-S (Digital Video Broadcasting-Satellite) standards were shipped in China, and last year approximately 40 million gray-market dishes were shipped for installation in urban areas.
Earlier this year, the government released new rules to combat the problem. Companies that install satellite equipment are now required to buy permits under a system that would track all dishes sold in the country. They ban satellite receiving equipment on open markets. But the new rules may have little effect because China’s State Administration of Radio, Film and Television (SARFT) lacks the power over local government branches to enforce the rules nationwide.
Last year, Terry Lu, chairman of DVN Group, a Shanghai-based company engaged in digital TV’s development, promotion, and application service, estimates that China has a TV user base of 400 million, including 150 million urban cable TV users. He concludes that China has a potential digital TV user base of 250 million. This is confirmed by other analysts who estimate that there are more than 150 million Chinese cable TV subscribers as of mid 2010 with about half receiving cable from SARFT. In contrast, more than 350 to 400 million households in China are located in relatively underserved or unserved regions, according to SARFT. The estimated 200 million households with a TV set but no cable connection currently receive TV signals via analog terrestrial transmission or illegal satellite set-top box and antenna. The launch of Zhongxing-9 (Chinasat-9) in 2008 has since served many unserved regions in China and generated a huge market for satellite receiving systems and their related chipsets.
Established in December 2006, China Direct Broadcast Satellite Co., Ltd, (China DBSAT), which operates Zhongxing-9, a joint venture of China Satellite Communications Corp. and Sino Satellite Communications Co., Ltd., is considered the exclusive domestic satellite operator in China. Based in Beijing, China DBSAT has five in-orbit satellites and provides satellite bandwidth and integrated satellite communications solutions for telcos, broadcasters, government agencies and enterprises. China DBSAT, considered the second largest operator in Asia, has been assigned by the government as the gatekeeper to the Chinese market. With the exception of AsiaSat and APT Satellite Holdings, both of Hong Kong, non-Chinese satellite operators are not allowed to offer services directly to Chinese end-users.
This government policy has earned the ire of the United States and many other countries providing satellite services, citing China’s commitment to the World Trade Organization.
In the meantime, China’s Ministry of Industry and Information Technology (MIIT) announced in April this year that the country has 786.50 million mobile service subscribers, 17.89 million of which were 3G network users, which further add to the demand for satellite capacity.
India’s DTH Market
Since the start of commercial services in 2003, the Indian direct-to-home (DTH) satellite television industry has been growing at a rapid pace on the back of huge investments of existing and new players. According to research firm RNCOS, the DTH market in India subscribers and expected to reach 19 million by the end of the year.
Because of the excellent audio and video quality, DTH services are now poised to attract even larger number of subscribers. DTH subscribers are projected to grow at a compound annual growth rate (CAGR) of around 28 percent during the 2010–2012 period. With an estimated 125 million cable TV homes nationwide expecting to switch to DTH, there remains a vast future growth potential.
Currently, the Indian DTH market is being served by six private players — Dish TV, Tata Sky, Sun Direct, Big TV, Airtel Digital TV and Videocon D2H. There is also Doordarshan, which provides free DTH service. Dish TV, owned by the Zee Group, leads the pack of major service providers holding an estimated 35 to 40 percent share of the market and is joined by Monster.com, Shaadi.com and Yatra.com to increase its value added services (VAS) and introduce other convergent services like Internet. While revenues from VAS and interactive services are gaining prominence, DTH for car TVs is being looked as the next big revenue stream.
R.K. Arnold, secretary of the Telecom Regulatory of India, said during an industry forum in March this year the 19 million digital homes in India is only about 10 percent penetration of the market. By 2018 he says that digital penetration should be about 42 percent. He predicts that major sporting events lined up during the year, such as the Commonwealth Games 2010 in October and the soccer World Cup 2010 this June in South Africa will be driving the increase in the adoption of newer technologies such as high definition (HD) TV service in India.
"India currently has about 300,000 HD-ready households and by year-end this will go up to three million," Arnold said. Currently, Discovery HD is the only channel available on HD service in the country, but Doordarshan plans to launch a channel on the same platform for the Commonwealth Games.
India is also charting out a plan to implement digitization with Doordarshan,towards full digitization by 2017. Uday K. Varma of the Ministry of Information & Broadcasting of India says the final plan would be announced once the stakeholders in the industry provide their views and various issues such as tax, and analog-digital co-existence are sorted. For years, operators have been complaining of heavy taxes and regulatory caps, which they say are hindering the digitization process as adoption of new technology requires tremendous investment.
India’s present regulatory environment essentially requires providers of Indian domestic services to use the Indian National Satellite (INSAT) system. INSAT has become the largest domestic communication satellite system in the Asia-Pacific region with 11 satellites in service — INSAT-2E, INSAT-3A, INSAT-3B, INSAT-3C, INSAT-3E, KALPANA-1, GSAT-2, EDUSAT, INSAT-4A, INSAT-4B and Chandrayan-1. Together, the system provides 211 transponders in C, Extended C and Ku bands for a variety of communication services. However, many industry players are complaining that the restrictive satellite policy is artificially suppressing demand, which in turn leads directly to a reduction in growth, profits and therefore lower tax revenues.
Industry Players Beg: Open Up
During a Cable & Satellite Broadcasting Association of Asia (CASBAA) industry conference last year, industry players asked the government to open up the market to satisfy pent-up market demand for more satellite capacity over India.
"Despite the extraordinary success of ISRO over the past couple of years, the digital telecoms and DTH markets remain seriously under-provisioned in terms of transponders," said Simon Twiston Davies, chief executive officer, CASBAA. "Commercial satellite services such as VSAT systems delivering national communications backbones and DTH services for home subscribers just can’t source enough satellite capacity from the domestic market. Additional market deregulation supporting international partnerships is essential."
The same sentiment was raised by the office of the U.S. Trade Representative (USTR) in April this year when it lashed out India, together with China, for not meeting their international commitments to open their domestic satellite services markets and maintain coherent regulatory regimes.
The USTR’s 2010 report said U.S. has pressed Indian authorities in the past to open their market to non-Indian satellite fleet operators to no avail. Satellite associations in the U.S. and Europe shared the same concern although satellite fleet operators have elected not to raise their voices on India’s restricted market, in part out of concern that protests would backfire.
Several satellite fleet operators have been able to enter India in recent years because of India’s exploding DTH market, whose growth has outstripped INSAT fleet capacity. But the foreign players had to go through the Indian Space Research Organisation (ISRO), which runs the INSAT system. However, this scheme only adds cost to the service and on some occasion, ISRO reserved the right to terminate the foreign operator’s contract once domestic ISRO-provided satellite capacity is available.
Political Woes Aggravate Problem
Thaicom’s bigger problem may not even be technical or commercial in nature but political. On January 26, 2006, Singapore’s state-run investment arm, Temasek Holdings, bought Thailand’s Shin Corp. telecommunications conglomerate for 73 billion baht (US$2.2 billion). Shin Satellite, later renamed Thaicom Public Co. Ltd, was a part of Shin Corp. and was purchased by Temasek from company founder and then Thai premier Thaksin Shinawatra.
A few months later, on September 2006, Thaksin was ousted in a military coup amid allegations of corruption, electoral hanky-panky and a worsening Muslim insurgency in Thailand’s southern province. In the aftermath of the coup and a court hearing on corruption charges, Thailand’s Supreme Court on February 26 this year ordered the seizure of US$1.4 billion in contested assets belonging to the family of the former prime minister, ruling that Thaksin had abused his power for personal gain from the sale of Shin Corp. The government had applied for the seizure of the proceeds from the sale of shares owned by Thaksin and his family to Singapore-based Temasek.
The court ruled that Thaksin illegally hid his ownership of shares in Shin Corp. during his two terms as prime minister, despite saying that he had transferred them to his family. The court said Thaksin had also issued a cabinet resolution in favor of the mobile telephone arm of his empire, set satellite policies that benefited Shin Corpnd gave a loan to Myanmar in exchange for it doing deals with his firm. It ruled that Thaksin government’s illegal grant of a preferential eight-year tax holiday on its foreign operations cost the state over 16 billion baht (US$492 million) in lost revenues.
The Supreme Court ruling, plus a Criminal Court order for an arrest warrant on terrorism charge against Thaksin on May 25 this year, further peril Temasek-owned company’s finances and irritate the future of the Thaicom’s state concession agreement. In fact in April this year, at the height of the pro-Thaksin demonstrations in Bangkok, Thailand’s deputy prime minister in charge of security matter, Suthep Tueksuban, instructed the Ministry of Information and Communication Technology (MICT) to consult with the Juridical Council on the possibility of revoking Thaicom’s license. The government accused Thaicom of failing to suspend the broadcasting of People Channel Television (PTV), which for a time was used by the red shirted anti-government protesters to incite unrest against the government.
Thaicom denied defying the government’s order saying the company was not responsible for uplinking PTV’s signal and instead blamed its foreign customers, which deal directly with PTV. But the Bangkok government realizes it is treading on treacherous waters. To suddenly pull the plug on Singapore-controlled Thaicom would definitely engender a diplomatic row that will threaten the avowed unity and cooperation among ASEAN (Association of Southeast Asian Nation) member-countries, to which both Singapore and Thailand are members.
Prospects
Excluding government regulatory problems, Asian satellite industry growth will be driven in the long-term by two key factors: the technological advantages that satellites hold over terrestrial systems as a platform for the broadcast industry and increased competition across multiple platforms within Asia’s television, internet and mobile telecommunications markets.
Most operators agree that in the short to medium-term, as in the rest of the world, there is clear growth potential in HDTV technology, Internet Protocol Television (IPTV), video-to-mobile and DTH services, as well as in mobile and Internet connectivity in rural and remote areas.
Asia’s economic growth will continue to increase the requirements for wideband connectivity. In Asia alone, broadband wireless access represents one of the largest opportunities for transponder capacity lease, with an expected growth of 4–6 percent CAGR through 2020.
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Peter I. Galace is editor for Asia Pacific of Satellite Markets and Research. He writes extensively on telecommunications and satellite developments in Asia for numerous publications and research firms. He can be reached at peter@satellitemarkets.com
