Russia and CIS Markets on Rise in Spite of Challenges
By Greg Berlocher | March 18, 2010
by Greg Berlocher
An interesting mix of challenges and opportunities were put forth by a panel of satellite services providers focusing on the Russian and CIS markets. Of the different countries in the region, Russia was singled out due to potential market growth.
All of the satellite service providers agreed that there were three significant challenges to doing business in Russia: lack of space segment, regulatory hurdles and hardware prices. Stefan Kollar, deputy director at Intersputnik, outlined the challenges of finding available space segment. “We can still find small chunks of bandwidth, but C-band is pretty full and Ku-band capacity is filling up as well,” he said.
Oleg Kuts, general manager at STEC.com, explained that STEC often has to aggregate small, noncontiguous blocks of bandwidth on different satellites, which increased their investment in their terrestrial infrastructure. Kuts, whose company operates a Gilat hub, will sometimes work out cooperative agreements with other Gilat hubs in Russia to carry each other’s traffic.
Arie Rozichner, regional vice president of Russia for Gilat, concurred with his fellow panelists regarding onerous licensing and regulatory hurdles in the Russian marketplace; however, he pointed to improvements and has good expectations for the future in this area. “The roadblocks to doing business are being removed slowly, one by one,” said Rozichner. “I have never seen a government move quickly when it comes to regulations. “
“Hardware pricing is a definite barrier to entry in the Russian market,” said Arunas Slekys, vice president and general manager, Russia, for Hughes. “Half the price of every VSAT goes to the government. A $1,000 VSAT terminal ends up costing $2,000. There are much better ways to go to raise tax revenue, such as pay-as-you-go. “
Although challenging, the outlook for the Russian market is positive. The number of transponders serving the Russian market is expected to grown from roughly 150 to near 500 over the next five years. There are roughly 40,000 VSATs installed now, and most of the panelists concurred that the market can absorb a 10-times growth factor over the next decade.
Other markets, notably Azerbaijan, Uzbekistan and Kazakhstan, were discussed as promising but less robust than Russia. Matthew Botwin, managing director for Regent Square Group, pointed out that Poland was a bright spot and has continued to meet expectations.
Rozichner summed up the market potential for this broad region nicely, stating: “It is hard to characterize the entire region, but what unifies them is the need for a good infrastructure. Satellite makes sense as the first technology choice. Most countries don’t want to re-invent the wheel and will look to other successful deployments of broadband services. Satellite is the obvious choice.”
All of the satellite service providers agreed that there were three significant challenges to doing business in Russia: lack of space segment, regulatory hurdles and hardware prices. Stefan Kollar, deputy director at Intersputnik, outlined the challenges of finding available space segment. “We can still find small chunks of bandwidth, but C-band is pretty full and Ku-band capacity is filling up as well,” he said.
Oleg Kuts, general manager at STEC.com, explained that STEC often has to aggregate small, noncontiguous blocks of bandwidth on different satellites, which increased their investment in their terrestrial infrastructure. Kuts, whose company operates a Gilat hub, will sometimes work out cooperative agreements with other Gilat hubs in Russia to carry each other’s traffic.
Arie Rozichner, regional vice president of Russia for Gilat, concurred with his fellow panelists regarding onerous licensing and regulatory hurdles in the Russian marketplace; however, he pointed to improvements and has good expectations for the future in this area. “The roadblocks to doing business are being removed slowly, one by one,” said Rozichner. “I have never seen a government move quickly when it comes to regulations. “
“Hardware pricing is a definite barrier to entry in the Russian market,” said Arunas Slekys, vice president and general manager, Russia, for Hughes. “Half the price of every VSAT goes to the government. A $1,000 VSAT terminal ends up costing $2,000. There are much better ways to go to raise tax revenue, such as pay-as-you-go. “
Although challenging, the outlook for the Russian market is positive. The number of transponders serving the Russian market is expected to grown from roughly 150 to near 500 over the next five years. There are roughly 40,000 VSATs installed now, and most of the panelists concurred that the market can absorb a 10-times growth factor over the next decade.
Other markets, notably Azerbaijan, Uzbekistan and Kazakhstan, were discussed as promising but less robust than Russia. Matthew Botwin, managing director for Regent Square Group, pointed out that Poland was a bright spot and has continued to meet expectations.
Rozichner summed up the market potential for this broad region nicely, stating: “It is hard to characterize the entire region, but what unifies them is the need for a good infrastructure. Satellite makes sense as the first technology choice. Most countries don’t want to re-invent the wheel and will look to other successful deployments of broadband services. Satellite is the obvious choice.”