Cover Story: Access Asia: Open Markets Mean More Opportunities
Peter J. Brown
Asia remains fragmented when it comes to the state of the regional economy. Although news in mid-November of a second large IPO in the Asian telecom sector seemed to point to a possible turnaround, this development is tempered by the fact that only East Asia and India are poised to see any substantial capital investments as 2003 gets underway. The jury, however, is still out as far as the overall health and robustness of the Asian economy as a whole is concerned.
"All of the countries in Asia that went into recession in the last two years have emerged again and growth has resumed around the region," says Bruce Middleton, managing director at Asia Pacific Aerospace Consultants Pty. Ltd., in Hawker, Australia. "Growth is not as strong as it was in 1996, but probably on a more sound footing after reforms that followed the 1997 crash." The degree of economic rebounding, on the other hand, is garnering mixed views from many satellite executives working in the Asian region. "I am still waiting to see an upturn," says Asiasat CEO Peter Jackson in Hong Kong.
Eui Koh, vice president for Asia Pacific at Netherlands-based New Skies Satellite N.V., travels throughout the region. He sees promising signs of economic recovery, especially in the People’s Republic of China and South Korea, while the majority of Southeast Asian countries are still coping with economic uncertainties. "We in the satellite communications industry tended to be perhaps six to 12 months behind in feeling the downturn, and I expect that may be true in any recovery we are likely to see," says Koh. "While we see regions of demand for our services, we do not see signs of a sustained recovery yet."
"The overall economic climate is still very difficult. One has to be very careful qualifying projects in terms of technical and commercial feasibility. Any money available is very reluctantly and selectively spent as everyone is waiting for the recovery," says Bernd Steinebrunner, vice president of marketing at CA-based STM Wireless Inc. "Having said that, I can see a turn in capital spending and investment coming in a six-to-nine month timeframe, as there will always be the increasing need for communication."
The satellite industry in Asia has a pretty good idea of where the indicators are pointing. The business models are not new in every instance, and there is always a concern about the ability to move quickly on a sequence of new opportunities across multiple markets.
"The biggest growth prospects in Asia for satellite services are digital TV and broadband. DTH services only have been available relatively recently in just a few countries and are growing," says Middleton. "The takeup of terrestrial broadband services in some places like Korea, Taiwan and Singapore is encouraging for prospects in other [places] where satellite is the only practicable delivery technology."
Propelling this satellite engine ahead is the growing recognition that any remaining regulatory obstacles need prompt attention. "There is an irresistible trend toward more open markets that is sweeping through telecom markets and starting in broadcasting markets. Recent accession to the World Trade Organization in the case of China and Taiwan with interest by other countries, such as Vietnam, is giving more impetus to the trend," says Middleton.
"In most developing countries, and in many developed countries, there is a legitimate concern to manage the trend toward open markets in a way that does not cause undue economic damage and social upheaval," he adds. "The policy implements used for this objective frequently involve constraints on unfettered participation by foreign companies. The United States does it, Europe does it and so do countries in Asia."
Flexibility By Design
New Skies’ Koh is part of a team that has been in the process of executing a balanced global strategy since its inception. "When it comes to video or IP, we do not know which will be the more attractive application over the next two years," says Koh. "By stressing a diversified revenue mix from both a service type and geographic perspective, we have been able to capitalize on growth in certain regions and it cushions us from downturn in others."
New Skies is making a significant move in Asia. The satellite operator is aiming at providing satellite services to a number of companies with ambitious plans in the region. "We see a big need for inter-regional business communications between one part of Asia and another. And not just for thin route VSAT," says Koh. "Companies want Internet and broadband connections for their remote sites. For example, one of our customers, Software Technology Parks of India, has set up a branch office in Shanghai."
With its IPsys Internet backbone service, New Skies is offering high bandwidth DVB and SCPC links for ISPs, while providing access to Europe via NSS 703, and soon to North America via NSS 5 and NSS 6, for international traffic, including news content.
While the regional economy as a whole may be slow to emerge from the setbacks suffered in the mid-’90′s, the regulatory environment is experiencing what Koh might describe as a breath of fresh air. "Asia is entering an important period with respect to national regulatory affairs," says Koh. "Companies are making significant investments in satcom systems throughout Asia and, with the inherent inter-regional nature of satellite communications, countries are taking a more pan-Asian approach.
"There is an increasing willingness on the part of governments to consider a wide variety of technological solutions to meet the needs of underserved areas and to provide access to services that will benefit their populations such as telemedicine and distance learning," he adds.
Singapore Is A Vibrant Hub
Over the past two years Ascent Media Group, formerly Liberty Livewire, acquired a pair of facilities in Singapore. These acquisitions included the 4MC production house, which was built primarily to handle the launch of MTV Asia, and the Asia Broadcast Center (ABC), which has Discovery Asia as its primary origination and uplinking services client, explains Scott Davis. Davis is the president of Santa Monica, CA-based Ascent Media Network Services, formerly Livewire Networks.
"We are servicing several regions out of Singapore, providing multiple feeds with multiple languages and dialects," says Davis. "Discovery has been rapidly expanding its menu of specialized networks. We’re also providing support for the burgeoning MTV Networks Asia operation."
ABC is a fully equipped uplink facility, one of the three major uplinking facilities in Singapore. 4MC offers post production, origination and other services, with its satellite link delivered by Singtel.
As far as the regulatory climate, Davis gives the government of Singapore high marks when it comes to devising strategies for attracting new industries, as well as helping existing businesses to expand. "The mood here is upbeat with the recognition that in terms of video services in particular, there is considerable growth potential," says Davis. "New services continue to launch with an emphasis on more customized commercial video applications."
Relying on transponder utilization rates to serve as a primary indicator of the overall viability or health of the satellite sector in Asia is not the best way to proceed, according to Davis. "With the compression technology available today, I do not expect transponder utilization rates to go up. I know of C-band customers who are running at 12 to 1, with talk of some pushing ahead to 14 to 1 in the near future," says Davis. "It was not so long ago that people had to use a full transponder for a single channel."
For full service providers like Ascent Media Network Services, which offer longhaul fiber transport out of Singapore in addition to satellite uplinking and production services, the issue is not the mode of transport, but having the ability to deliver the entire network with seamless end-to-end connectivity. "The wave of the future involves server-based solutions," says Davis, who adds that he sees a lot more emphasis on the part of content owners on strategic packaging and enhancing distribution opportunities, rather than on grabbing a lot of space segment.
India Leads The Charge
The regulatory shift in India over the past two or three years is perhaps one of the most significant changes to the satellite landscape in Asia. For Elias Zaccack, who serves as the Bethesda, MD-based vice president of international sales at SES Americom, the decision to launch AAP 1–formerly known as GE 1A–in late 2000 was the right one, and at just the right time, particularly in South Asia.
"India has strived to deregulate its satellite access policies, especially for broadband services. Why? India wants to become an Internet powerhouse, and the demand for VSATs in India is remarkably strong as a result," says Zaccack. "At the same time, potential DTH ventures in India are driving the satellite market as well. The same can be said about potential DTH ventures in Hong Kong."
India may have deregulated to a certain degree, but this does not mean that country has extended unlimited access to every satellite service vendor. There are still nuances in the regulatory code that warrant close scrutiny. Foreign satellite operators can provide services, but only under certain conditions. For certain applications, there are still myriad rules that give the Indian satellite operators preferential treatment. While it would be helpful if the market were more open, Zaccack is excited by the fact that India has gone this far to deregulate the IP trunking and broadband satellite sectors. In his opinion, India has huge telecom requirements in these areas, while consumer market opportunities are simply not there. "I view IP trunking via satellite in India as a stopgap for the next three or four years until fiber takes over," Zaccack says.
The View From China’s Doorstep
In early 2003, Asiasat plans to replace Asiasat 1 with Asiasat 4, a Boeing 601HP satellite, with 28 C-band and 20 Ku-band transponders, including four operating in the Broadcast Satellite Service (BSS). At the same time, work on Asiasat’s new Tai Po Satellite Control Center is almost complete.
From his office in Hong Kong, Asiasat’s Jackson is watching the strong, continuing growth in TV channels, both in terms of DTH and cable. "The growth in the number of television channels will be propelled by terrestrial operators engaging in retransmission, while the increasing use of satellite newsgathering (SNG) equipment is apparent in news shows due to the fact that the days of talking heads in news shows [are] fading fast," says Jackson.
In addition, closed or private networks continue to be installed by companies and governments, according to Jackson. "They are not using terrestrial systems because either they do not exist at all the required locations, or because they are too expensive. These customers also require security and backup as well," says Jackson, who adds that a series of recent disasters have driven home the value of satellites. "This is proven on each occasion that terrestrial systems go down because of terrorism or natural disasters."
The need for reliable large data file transfers, Internet content and streaming video also is a key driver in this market. "One of our most successful applications is banking networks. In almost all cases, the banking networks are also used to provide broadband services, such as business TV or broadband data/Internet," says STM’s Steinebrunner.
As for the state of regulatory affairs, has the climate changed at all? "Not much, we are seeing a lot of talk but no real action," says Jackson, although he emphasizes that China is starting to ease up on foreign enterprises wanting to do more business there.
Ka-Band Not Gaining Momentum
As for the status of the Asia Pacific market for Ka-band services, Koh believes it is too early to tell what the impact of Ka-band will be and when a viable market will materialize. Only Korea and Japan have access to Ka-band capacity, which includes Koreasat 3′s Ka-band platform.
"There is potentially a very large untapped demand for Ka-band, particularly for two-way broadband, SNG and emergency services," says Koh. "NSS 6 has up to 10 Ka-band uplink spotbeams that can serve the major media, content and communications cities of the Asia Pacific region. If the demand for Ka-band does not grow in the near term, this capacity can be used for Ku-band services."
"The near-term opportunities for Ka-band are limited," says Steinebrunner. "For business users, Ka-band is just not an option given the reduced availability due to rain fade and the general Asia Pacific rain zone. The biggest opportunity might lie in consumer type applications where availability is less of a concern. Traditional two-way consumer solutions, however, have proven to be financially difficult."
"Ka-band is of interest at present mainly in north Asia, and several satellite operators are flying it and/or planning to do so. It is not yet a commercial success, and Ku-band is still preferred," says Middleton. "However, there is increasing interest in Ka-band as growth in Ku-band becomes more restricted."
"How large or untapped is the Asia Pacific market for Ka-band services? With so much Ku-band available, I see no real need to use Ka-band at this time," says Jackson.
Resolving A Few Loose Ends
The region’s economic growth pattern is likely to lack uniformity for satellite service providers for some time to come. Beyond that, there are a few unresolved situations that bear mentioning.
The Chinese government continues to investigate the jamming of the Sinosat feeds that started to occur last June. While fingers are pointed at the Falun Gong spiritual movement and accusations are made that the unauthorized signals may have originated in Taiwan, the file for now remains open. China already has indicated a desire to proceed with an emphasis on the hardening of future satellites, starting with the Alcatel-built Apstar 6 which is going up in 2004, in order to prevent future jamming. China is no doubt concerned that the extensive satellite networking planned for the 2008 Olympic games in Beijing might prove to be a tempting target.
With Asiasat 4 scheduled to replace Asiasat 1 in early 2003, Jackson says efforts are still underway to devise an acceptable coordination scheme affecting Asiasat 4 and Thailand-based Shin Satellite’s IPstar. Frequency coordination and orbital allocation-related problems are not unique to this region, and there is a sense of optimism surrounding the talks between this specific pair of satellite operators.
The dual launches in rapid progression of New Skies’ NSS 6 and Panamsat/JSAT’s Horizon 1 will quickly add more than 80 Ku-band transponders to the region. NSS 6 is going up in December (this had yet to happen at our press time) if all goes according to plan, and this A2100AX from Lockheed Martin Commercial Space Systems carries 60 high-power 36 MHz- equivalent Ku-band transponders with an ability to handle 12 Ka-band uplink spotbeams as well.
Asia is awash in Ku-band capacity, and more is on the way. Are the market forces building such that the period of slack demand is now over? Satellite planners and industry strategists have their work cut out for them as they strive to ensure a smooth ride over the coming months. The Asia Pacific region as a whole has its bright spots, but beyond the DTH crowd, does it have a substantial pool of users in place who can support all of the new spotbeams? That remains to be seen.
Peter J. Brown is Via Satellite’s Senior Multimedia & Homeland Security Editor. He lives on Mount Desert Island, ME.