Impediments
Despite this progress, Russia remains a tough place to sell satellite services, says David Hartshorn, secretary general of the Global VSAT Forum (GVF). "In all of the world during the past eight years of the GVF's existence, there is one country where we have worked harder than anywhere else to liberalize regulations and seen less improvement in local conditions, and that is Russia." Three years ago, things were even worse, with "less than 5,000 operating ground stations in Russia," he says. The growth of the market was hindered by the Russian government's onerous regulations. "We calculated that it cost up to $10,000 per terminal to cover various licensing fees - one required for each terminal - and took many months for the licenses to be processed by the Russian bureaucracy," he says.
Since then, Russia has substantially streamlined its licensing procedures, reducing both costs and processing times, says Owers. "If your earth station has a small antenna and a low EIRP [effective isotropic radiated power], you can apply for your certificate under the simplified procedure."
This said, the liberalization of Russia's earth station laws comes with a Kremlinesque catch: You have to use Russian satellite bandwidth, usually marketed by RSCC, in order to qualify for relaxed regulation. RSCC has spent $780 million to launch five Express-AM satellites to upgrade its technology and strengthen its position in the domestic market, Yuriy Izmaylov, the company's director general, says. This has increased RSCC's in-orbit capacity from 89 transponders in 2001 to 273 in 2005. Despite the improvements that RSCC has invested in, the Global VSAT Forum would still like the Russian-provided satellite bandwidth requirement to be waived, Hartshorn said.
"We're encouraging the Russian government to consider broadening its rules, so that their end users can take advantage of competitively-priced services from non-Russian carriers," Hartshorn says. The Global VSAT Forum has raised this issue with the U.S. Trade Representative, who has put the subject on the agency's World Trade Organization agenda, he says. The Forum also plans to hold a high-level summit with the Russian government in Moscow, in conjunction with the National Assembly of Satellite Communications [Russia's satellite industry association] and the European Satellite Operators Association, to further pursue the issue of relaxing Russia's licensing rules,
Along with its restrictions on VSAT licensing, Russia also remains a tough place to import and export satellite equipment. "We've tried to export Russian antennas to customers in other parts of the world," says Advantech's Shakhgildian. "We have succeeded, but only after the vendor spent many months trying to get export permission from the Russian government."
Sales resistance among Russian businesspeople, an entrenched post-Soviet bureaucracy and a lingering distrust of foreign intentions are the main inhibitors to doing business in Russia on a good day in Russia. But when privately-owned companies such as Yukos oil group are legalistically attacked by the Russian government - resulting in the incarceration of Yukos CEO Mikhail Khodorkovsky and "the effective re-nationalization of the core assets of Yukos oil group," according to the Financial Times newspaper - it is enough to make the most daring of investors think twice before dealing with Russian companies.
But international investors are not staying away, says Slekys. "People had predicted doom and gloom for Russian investment in the wake of this whole business with Yukos," he says. "But that's not the case. There's enough strength in the Russian economy even without a booming oil and gas sector to make it worthwhile. Take telecom. It is growing at a healthy double-digit rate, and if the government proceeds with its e-Russia initiative, telecom overall and satellite services in particular will continue to grow substantially in years to come." According to the Moscow Times, e-Russia is "a much-hyped, 76 billion ruble ($2.5 billion) program to boost the country's use of information technology." E-Russia projects include putting tax forms online, installing computers in schools and developing better legislation for the IT sector.
One risk-reducing tactic for investors interested in the Russian market is to find local partners who know the business landscape and who do not have a history of conflict with the current regime. "It is extremely important to have local representation in Russia," says Chris Alfenito, Miteq's director of sales for satellite communications products. "Not only are they using the same language as potential customers and working in the same time zones, but local partners understand subtle cultural nuances that" international companies may not.
Despite the many impediments to business, Russia is a natural market for satellite services. And despite President Vladimir Putin's nostalgia for the glory days of communist rules - in April he called the demise of the Soviet Union "the greatest geopolitical catastrophe of the century" - there is no doubt that this pragmatic KGB alumnus is committed to advancing prosperity in current-day Russia. After all, Putin recognizes that a modern, thriving country is a strong country and that satellites can play a pivotal role in bringing all of Russia firmly into the 21st century.
James Careless is senior contributing writer to Via Satellite Magazine.
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