The Middle East: Broadcasting, Broadband And Business Growth
By Nick Mitsis
When one thinks of satellite communications and the Middle East, 24-hour-a-day combat operations executed in part through the use of space-based technology materialize in one’s mind. Even though the recent political unrest plaguing this part of the world has proven to be advantageous for satellite service providers fighting their own corporate financial battles, the buck does not stop there. In fact, near- and long-term satellite users within the Middle East seem likely to change garb from army fatigues to a jacket and tie, and commercial satellite solutions promise to advance beyond their military counterparts.
As a new year approaches and a more peaceful reality hopefully begins to engulf the region, satellite industry executives are refocusing on concrete business applications that are in dire demand from Israel to Kuwait. And for the Middle East, these market segments fall into two main areas: broadcasting and broadband.
The Regional Play
This part of the world already has a satellite communications sector backboned by some of its pertinent regional satellite providers, Arabsat and Spacecom, along with Thuraya Satellite Telecommunications Co. Together, these companies offer mobile, fixed, broadcast, telephony and broadband services to the region.
Among these players, the Saudi Arabian-based Arab Satellite Communications Organization (Arabsat) serves its 21 member countries with four spacecraft offering broadband, telephony and broadcast services. Even though this player has been transmitting programming in the Arab region since 1976, it has faced some business challenges that are still hampering its core content business today. Most notably, in December 2001, eight transponders out of 20 on Arabsat 3A failed, due to an electrical power anomaly following the breakdown of one of its two solar arrays. Many analog broadcasting channels and multiplexes were relocated to Arabsat 2A because of the failure.
Arabsat 3A, an Alcatel spacebus 3000 spacecraft, was launched by an Ariane 4 rocket on February 26, 1999, and co-located with Arabsat 2A at 26 degreesE. By the end of December 2001, Arabsat 3A was still operational, but with a drastically reduced transponder loading. Likewise, there were only two analog channels reported operating on this satellite, Abu Dhabi (11840 H) and Algeria 3 (11897 V).
This past June, Arabsat transferred the analog service from Arabsat 2A to Arabsat 2C, according to company officials. Viewers continued to receive programming by using the same receivers and antennas in the same direction, but viewers needed to retune their receivers for the new frequencies and adjust the feed-horns for the new polarities. The new setting is expected to continue for the coming three years without any change.
Focusing on its broadcasting client base is paramount for Arabsat because this is by far one of the strongest applications within the region for satellite services. In fact, some industry research indicates that the Arabic pay-TV market sector comprises 400,000 households with growth expectations to reach 500,000 households within the next few years. The report "Middle East Satellite Communications and Internet Via Satellite," published last year by U.K.-based DTT Consulting Ltd., further states that there is considerable room for growth in the number of specialized TV channels and international programming aimed at non-Arabic nationals living in the Middle East. Understanding this dynamic, Arabsat’s newest spacecraft Arabsat 2D has been transmitting three digital bouquets since this past April, carrying 30 TV digital programs in addition to private TV broadcasting of some of Arab states.
Like Arabsat, Spacecom Ltd., also offers broadcast services within the Middle East region. The Israeli company is the marketer and service provider of the Amos 1 and soon, Amos 2, satellites, both at 4 degreesW.
The Amos 2 satellite, slated for a December 2003 launch aboard an Ariane 5 rocket, will expand Spacecom’s reach, bridging the company’s established satellite footprint in the Middle East with a cross-connect link between the United States and the region. Primarily, Amos 2 will give Spacecom a vital link to the U.S. IP backbone and other broadband services, positioning the company to take advantage of future market segment growth.
As the broadcasting arena strengthens, broadband applications are also a growing part of the satellite business within the Middle East. But in general, this region has been the slowest in expanding this market application. In fact, of the last four countries without conventional commercial dial-up ISPs, three were in the Middle East–Afghanistan, Iraq and Syria, according to the U.K. report. Since last year, broadband availability within the Middle East began to grow. The number of users, the report states, grew 88 percent between April 2001 and September 2002.
Rounding out the regional play is the mobile satellite carrier Thuraya. Since the late 1990s, the United Arab Emirates-based company has been offering satellite telephony service through mobile phones that combine satellite, GSM and GPS.
The Thuraya 2 satellite was put into orbit this past June aboard a Zenit 3SL rocket, which also deployed Thuraya 1 in 2000. Thuraya 2 will build on the company’s current offerings, but may also be used to open up new directions for growth by allowing the company to bolster capacity in some areas, expand into new markets or diversify into new satellite-based applications.
If there is an application expansion for Thuraya for enhanced mobile services, it may not come without challenges. Even though approximately a quarter of the households in the region now have a fixed telephone line, mobile penetration is still behind the competitive curve, according to industry reports. The U.K. report mentioned above says a little more than 100 mobile lines per 1,000 people make up that landscape in the Middle East, while close to 150 lines per 1,000 people round out the fixed line arena. Likewise, the Internet access market is significantly different than that of other regions, the report adds, stating there is more use of prepaid card and Internet cafes.
The International Play
When one takes a step back from the regionals, the full richness of the Middle East for satellite broadcasting and broadband applications surfaces. In fact, this is the reason some of the major global satellite providers have not only maintained their presence in the region, but are looking to expand their offerings in the near future.
Take Eutelsat for example. Eighteen of the Paris-based satellite operator’s spacecraft offer service in the Middle East. In addition to addressing regional needs, Eutelsat offers requirements for interconnectivity with Europe, Asia and the Americas.
On the broadcasting side, Eutelsat carries 51 Arabic channels from the Middle East. The biggest contributor to Eutelsat’s broadcasting portfolio comes from the United Arab Emirates with 17 channels transmitting programming through the Eutelsat network.
"We also see strong channel growth opportunities from Saudi Arabia and Qatar," says Olivier Millies-Lacroix, director of sales and product coordination for Eutelsat. "We are also already seeing enhanced offerings with MPEG-4 broadcasting of university courses to Arab universities in such countries as Jordan and Lebanon."
In reference to the broadband side of the equation, Eutelsat is also making some headway. Because of the inherent limited terrestrial infrastructure, large rural populations and presence of multinationals in enterprise markets, broadband demand will remain high.
"We are seeing strong growth opportunities for Internet access from the European backbone to the Middle East," adds Lacroix. "In addition, there will be a substantial need for satellite broadband applications in the reconstruction of parts of Iraq, as well as neighboring countries since the wars."
In fact, companies like New Skies Satellite NV are aggressively seeking to expand their broadband portfolio in the Middle East. "Saudi Arabia, Kuwait and Lebanon are the countries most in demand for enhanced broadband services," says Hussein Oteifa, director of sales in the Middle East for New Skies. "Voice over IP (VoIP), Internet backbone connectivity and two-way share service are the most in-demand applications."
But New Skies is not out of the broadcasting marketplace–quite the contrary. When Arabsat 3 experienced its anomaly, many customers migrated onto New Skies’ fleet. "More pay- TV services are needed in the region," Oteifa adds. "Even though competition remains tough within the region, we continue to see significant broadcasting business growth from the Middle Eastern countries."
SES Global is also witnessing an increased need for broadcast satellite services in the Middle East. "There is a growing need for more satellite capacity within the region," says Robert Bednarek, executive vice president for corporate development with SES Global. "This region has very strong national broadcasting systems, and barriers are being broken to further allow international players such as SES to provide services to the region." Most notably, the need for more programming distribution is increasing and that delivery cannot be met well by terrestrial services, he adds.
In the broadband arena, SES Global’s reach into the Internet and VoIP sectors is also gaining headway in many countries in the Middle East, and Bednarek sees strong business opportunities for broadband traffic to increase within the leading countries in the region.
Like its European counterparts, North American-based Intelsat Ltd. is not only serving the broadcasting and broadband needs of the Middle East. The company is incorporating hybrid solutions that are yielding more than 10 percent revenue growth for Intelsat, coming specifically from the Middle East region. Samir Dajani, Intelsat regional vice president, Middle East sales, says some of the major clients for Intelsat come from Saudi Arabia and Iran.
"There is major deregulation happening, specifically in Saudi Arabia, that will further open up broadband possibilities for Intelsat," Dajani says. "VSAT applications in the Gulf region will increase in the near term and Internet trunking for enterprise will also grow in demand."
On the broadcasting side of the business, Intelsat offers Middle Eastern countries an opportunity for return-channel connectivity. "There is still strong competition from the cable distributors, but international programming going into the region and local programming being distributed out of the region are strong businesses and ones that we see increasing in demand," Dajani adds.
One of the surprise successes in the Middle East market has been Panamsat. Throughout the past two years, this satellite operator has gained a market share of nearly 15 percent. For years, the PTT monopolies tended to use space segment of satellite operators in which they had a shareholding, most notably Intelsat and Arabsat. Times, though, are changing and broadcast opportunities are opening up to companies such as Panamsat.
The Pas 10 satellite, located at 68.5 degreesE, has 24 C-band and 24 Ku-band transponders that offer strong service within this region. The satellite’s footprint covers Europe, Africa, the Middle East, the Indian region and Asia. Pas 10’s C-band customers include the BBC, CNN, CCTV, Discovery, Doordarshan, ESPN, MTV, NHK, Nickelodeon and Sony. Its Ku-band payload contains multiple high-powered beams focused on Africa, Europe, India, the Middle East, Central and Western Asia as well as Northeast Asia. Many of the beams can be switched between the various regions, offering flexibility in the creation of new platforms for the delivery of video, data and IP-based services.
Regardless of application growth for the Middle East, one thing remains certain: those players offering space segment will continue to service this region. While economic and political unrest continues to plague the Middle East, all the major players are maintaining a presence and, with no doubt, expanding their offerings to meet the growing demands within the broadcasting and broadband arenas.
Nick Mitsis is the editor of Via Satellite magazine.