By Sam Silverstein
As countries across Asia move forward following their prolonged economic slump, the satellite industry is mobilizing to take advantage of the brightening conditions and the pent-up demand of consumers eager to improve the quality of their lives with modern telecommunications capabilities.
The rapid acceptance across Asia of hot satellite applications such as direct-to-home (DTH) television, coupled with fast-growing consumer demand for TV programming, Internet access and other services, is fueling optimism among satellite company officials about the role their industry will play as countries across Asia move forward in the global economy. "I think that in the next couple of years, we are going to see [more] markets opening up in Asia," says Jan Wendt, regional sales operations manager for the Asia-Pacific region at Intelsat in Washington, DC. "There is a trend toward growth."
Beyond video services, satellite companies are continuing to establish themselves as suppliers of transmission services to other market segments, including rural cellular phone networks, voice over Internet protocol (IP) services, and corporations in need of data services in remote areas. Carriers are looking forward to expanding their operations in high-potential countries that have been difficult for international players to enter, led by China and India. And long-awaited satellite-broadband systems, such as the IPStar system developed by Shin Satellite Public Co. Ltd. of Nonthaburi, Thailand, are finally getting off the ground.
"I would not say the market is returning to its heyday, but it is certainly reassuring to see new applications coming in," says Peter Jackson, chief executive officer of Asia Satellite Telecommunications Co. Ltd. (Asiasat) of Hong Kong. "We are not just testing the engineering. These are real applications with real commercial bite."
Still, persistent issues such as depressed transponder prices and cumbersome government regulations remain a challenge for the satellite industry in Asia and are likely to continue complicating matters despite healthy and expanding demand for satellite services, according to satellite company officials and analysts. Moreover, competing ground-based communications networks are expanding their reach and can be expected to give satellite providers a run for their money in a growing number of market sectors. The bottom line: There are plenty of opportunities for the satellite industry to prosper across Asia, but those opportunities could dry up just as easily as they are appearing.
"Satellite companies should not wait for anybody," says Beram Sorab Gazdar, a satellite industry analyst with Frost & Sullivan in Mumbai, India. "They should try to leapfrog [the competition] and capture markets."
Among the most exciting growth areas for the satellite industry are the Chinese and Indian markets. Both countries have huge populations and are likely to be enormous markets for satellite services, but government restrictions have hindered progress. In India, for example, regulatory hurdles and content- distribution issues have kept down the numbers of satellite television subscribers even though the majority of the country's population is in rural areas, Gazdar says. China also imposes rules that make it difficult for the satellite industry to make strides.
Regulatory hurdles aside, one of the most powerful drivers for the satellite industry across the Asia-Pacific region is the booming interest in television programming, says Simon Twiston Davies, chief executive officer of the Hong Kong-based Cable and Satellite Broadcasting Association of Asia (CASBAA). Not only are Asian viewers demanding greater breadth in the kinds of channels they can watch -- and flocking to DTH satellite platforms to find it -- but there is growing demand in other parts of the world for content produced in Asia, Davies says. This interest is generating demand for transponder capacity to beam the programming to other continents.
"There are lots of expatriates who are paying significant premiums for tailored content" from their home countries, says Davies. "It's a sign of the maturity of the Asia-Pacific market" that locally produced material is in demand outside the Asia-Pacific region.
The buying habits of Asian consumers also are strong indicators that the market across the region is maturing rapidly, Davies says. "You see more digital televisions on sale [here] than in almost anywhere in the world," he says. "In Asia, there is a remarkable correlation between the size of apartments and the size of TV sets...people are obsessive about their TVs."
The DTH television business is proving to be especially significant for Malaysian satellite operator Measat Satellite Systems Sdn. Bhd. The Kuala Lumpur, Malaysia-based company hosts the Astro DTH platform and is working on expanding its DTH business in Indonesia, a potentially huge market for satellite TV service, says Paul Brown-Kenyon, chief operating officer of Measat. "This is good news for us. It is building on our existing business," he says.
Brown-Kenyon notes that the satellite TV business is particularly attractive to satellite operators because DTH suppliers typically are looking for long-term relationships with satellite operators and are willing to pay more to use satellites at optimal orbital slots or "neighborhoods." "DTH customers are the highest-quality customers to have," he says. "Once they are established, it is difficult for them to move."
Measat currently operates the Measat-1 and -2 satellites and soon plans to launch a new satellite, Measat-3. The company is confident it will remain busy providing transponder capacity for DTH, video-distribution and other services, and is not overly concerned that Asia will go through another sharp decline in the years to come and leave Measat with a glut of unused capacity, Brown-Kenyon adds. "The demand-supply balance is readjusting."
At Asiasat, too, officials are pleased with their strong role in Asia's growing DTH and video-distribution sectors. "TV will be the preeminent user of satellites for many years to come," says Jackson.
SingTel Optus Pty. Ltd. of Sydney, Australia, meanwhile, is awaiting delivery of a pair of new D-series satellites that will serve DTH customers in Australia and New Zealand. And New Skies Satellites BV of The Hague, Netherlands, markets its high-power NSS-6 satellite as an ideal platform for satellite TV services for the Asian market.
Jose del Rosario, senior analyst and regional director for the Asia- Pacific at Northern Sky Research in Manila, Philippines, says the strong demand for video services is likely to help healthier satellite operators maintain pricing for their transponders despite the oversupply problem that has kept lease rates under pressure throughout the region. "For applications that are key, such as video, prices have remained stable since customers are wary of signing contracts with smaller operators [whose] future is not seen to be that certain," he says in an e-mail message.
Although demand for satellite services in Asia has begun catching up with the transponder supply, the industry is continuing to operate in a low-price environment for satellite capacity. David Ball, vice president of Asia-Pacific operations for Wilton, CT-based Panamsat Corp., says many satellite users across the region have grown accustomed to the buyer's market that exists at many orbital slots. "Some customers are very cost sensitive. They look at premium capacity, but they are not willing to pay the premium," he says.
Ball says satellite operators should be more cautious than they have been about launching new satellites, and he suggested that the industry pay more attention to matching orbital slots with the most appropriate size of spacecraft. He predicted that the Asian satellite landscape will change somewhat during the next few years as some operators, particularly small, regional players, find the cost of investing in replacement satellites prohibitive and either consolidate with other operators or disappear altogether. In some cases, operators may stop short of combining with other firms and choose instead to jointly develop orbital slots as a way to share costs, Ball adds.
Jackson agrees that the issues that have hurt the satellite industry in Asia during the past few years, including overly optimistic demand forecasts that led to the launch of too many satellites and a resulting oversupply of transponder capacity, especially in Ku-band, remain a key concern. "The fact that there have been too many transponders out there will not change overnight," Jackson says.
He adds that Asiasat has worked hard to avoid engaging in price wars with other operators, but has not been able to entirely escape the trend. The company's strategy has been to stay away from long-term deals with customers interested in rock-bottom pricing.
One effect of the emphasis on low prices that has gripped some satellite operators and customers is that operators across the board are faced with customers who expect bargain rates and must be convinced that paying more is worthwhile. "Demand is picking up, but prices are lagging behind. You would think they would start going up," says Patrick Brant, president of Loral Skynet, operator of two satellites serving Asia, Telstar 10 and Telstar 18. Bedminster, NJ-based Skynet operates those satellites in cooperation with APT Satellite Co. Ltd. of Hong Kong, which refers to the spacecraft as Apstar 2R and Apstar 5.
Even as the satellite industry continues to rely heavily on the DTH and video-transmission businesses to bring in revenue, companies are finding other opportunities, particularly in less-developed areas with poor ground-based infrastructure. In the more advanced countries of East Asia, such as Japan, South Korea and China, demand for video services is likely to remain stable going forward, del Rosario says. Meanwhile, countries in Southeast Asia, such as Indonesia, can be expected to drive demand for satellite-broadband services as they strive to extend data-transmission capabilities to communities beyond the reach of terrestrial networks, he says.
Del Rosario adds that the new mobile broadcasting services being offered in Japan and South Korea by Mobile Broadcasting Corp. of Tokyo, could also turn out to be success stories.
Satellite operators in Asia are also benefiting from growing consumer demand for services that are at the core of the terrestrial communications business, such as cellular telephony, according to analysts and satellite operators. Mobile satellite phone operators had once hoped to build lucrative businesses supplying service to users who roam beyond the reach of ground-based cellular towers, but found that relatively few people were interested in acquiring specialized handsets or paying for satellite airtime. In place of satellite-based handsets, cellular networks are installing satellite-linked towers in remote areas, a concept known as cellular backhaul.
Cellular backhaul has helped Intelsat compensate for its declining business providing long-distance telephone service -- once the mainstay of the global satellite operator, says Wendt. "In many places the number of subscribers is still relatively small, but cellular operators [often] have obligations to reach" rural communities, she says. The prospects for growth look good, she adds, because cellular networks often represent the only feasible way to provide people in remote areas with phone service.
In addition to allowing the extension of cellular phone service to areas unserved by landlines, satellites enable cellular operators to add redundancy to their systems, adds Brant. Redundant connections via satellite can help cellular networks remain in service even when bad weather or other unavoidable conditions knock out land-based facilities.
Ball, who is based in Sydney, Australia, says Panamsat is increasingly supplying transponder capacity to help businesses extend data connectivity beyond areas where fiber and other ground-based networks are readily available. Today's advanced satellite modems, coupled with the heavy dependence by many companies on data-intensive services such as videoconferencing, have encouraged the development of on-demand networks that can quickly supply bandwidth but do not require users to accurately predetermine how much satellite capacity they will need, says Ball.
Asia also is proving attractive to mobile satellite operators, although satellite-based phone and data services remain a relatively small chunk of the overall satellite market in the region. Thuraya Satellite Telecommunications Co. is working with investors to finance its planned expansion to Asia, an effort that involves the deployment of another geostationary satellite, Yousef Al Sayed, Thuraya's chief executive officer, says in an e-mail message. Thuraya, of Abu Dhabi, United Arab Emirates, hopes to begin service by the fourth quarter of 2006, Al Sayed says. Thuraya currently serves customers in the Middle East, Africa and Europe.
Thuraya would join mobile-satellite firms including Iridium Satellite of Bethesda, MD; Globalstar of San Jose, CA; and London-based Inmarsat, which already have established businesses in Asia.
As in other parts of the world, demand for mobile-satellite services in Asia is being driven in large part by data applications, says Mans Lejeune, sales director for the Asia-Pacific market at Paris-based France Telecom Mobile Satellite Communications, a supplier of service from Inmarsat, Iridium and Thuraya. With prices on the decline, improving technology and the pending arrival of Thuraya in Asia, mobile satellite operators should see interest in their services expand, Lejeune predicts.
Sam Silverstein has been covering the commercial satellite industry since 1995. He is a freelance writer for Via Satellite.
[Copyright 2005 Access Intelligence, LLC. All rights reserved.]
