Asia: Showing Signs Of Stability And Growth
By Peter J. Brown
Asia has a lot to celebrate. Last year was capped off by the successful mission of Yang Liwei, the first Chinese taikonaut to orbit the Earth in a Shenzhou spacecraft. Among other things, this sets the stage for more Chinese space missions in the not too distant future.
Yet, there is more to be excited about than manned space flight. Last September, for example, SK Telecom Co. of South Korea and Mobile Broadcasting Corp. (MBCO) of Japan proceeded to forge a co-ownership agreement for MBSAT, a broadcast satellite that is designed to beam voice and multimedia content to cell phones and other mobile devices starting in mid-2004.
News in mid-November that China and Thailand have signed a long-awaited frequency coordination agreement that resolves once and for all the dispute involving the Asiasat 4 satellite operated by Hong Kong-based Asia Satellite Telecommunications (Asiasat) and the soon to launch IPStar satellite run by Shin Satellite is exciting, too.
As a whole, satellite industry players in the region seem a bit more upbeat, although still cautious in their pronouncements about the signs of economic stability and growth that they are detecting. The Direct-to-Home (DTH), Internet Protocol (IP) data and mobile broadband sectors are on the top of the list of hot growth prospects, along with universal digital TV (DTV) roll-outs that are just getting underway in Japan and scheduled to be completed by 2010 in China, for example. Still, few people if any are willing to describe themselves as bullish at this point.
"The Asian market is the most complex when it comes to executing sales. It is recovering a bit," says Christopher Baugh, president of Florida-based Northern Sky Research. "Prices are still depressed, and overcapacity will remain an issue for the next 12 to 18 months."
The launch of IPStar next year will have a dramatic impact on the region, adds Baugh. With 30 Gbs of new high-speed capacity, Shin Satellite, a national carrier in Thailand, will have to overcome a big hurdle in the form of a regional distribution strategy for IPStar, which is crafted on a country-by-country basis.
A year ago, Peter Jackson, CEO of Asiasat, described the status of the region. "We are seeing a lot of talk but no real action," says Jackson, although he emphasized that China in particular was starting to ease up on foreign enterprises wanting to do more business there.
Has this situation changed? "We do see something happening in major markets like India and China. India has implemented some deregulations, but at the same time brought in more regulations. An example is its latest issuance on the ownership of media companies," says Jackson.
A Positive But Complex Situation In India
There is always a considerable diversity of opinion when it comes to the multiple markets that are encountered in the region. India, where the government still has tight restrictions on DTH licensing, content and the cable sector, is an excellent example. But where certain market restrictions apply, other business ventures are growing.
"There is a lack of clarity in India surrounding the roll-out of digital TV as the government has flip-flopped after mandating the use of conditional access technology on cable systems from its original deadline of last July," says Graham Kill, CEO of Netherlands-based Irdeto Access. "This uncertainty has delayed digital TV and conditional access implementation in metropolitan areas across India with one exception, and the cable industry is upset because major investments have already been made well in advance of the original deadline in anticipation of complying with the Conditional Access Bill."
Targeted content and partnerships with local broadcasters and electronics retailers in India have, however, proved to be a significant business advancement for Worldspace Corp. The company recently secured 15,000 initial paid subscribers to its India satellite service.
"India has been an ideal geographic area for us to expand our business because customers are wanting targeted content," says Noah Samara, chairman and CEO of Worldspace. The company is working directly with local broadcasters such as Radio Indigo and KL Radio within urban areas, including Bombay, Bangalore, New Delhi and Chennai.
Good Coordination Agreements Must Be In Place
Simply introducing a new satellite distribution technology or launching a new service option in Asia, however, provides no guarantee of success. The spirit of international cooperation is often tested in the process as well, especially when it comes to new satellite ventures.
Because the door is wide open to broadband in Asia, this situation requires careful scrutiny. Among other things, Intelsat has forged a partnership with Shin Satellite that uses Intelsat capacity today for IP data, and will continue to use it for back-up purposes after the launch of IPStar.
"If the business is there we would certainly look into providing a broadband platform in Asia. We are currently talking to potential service providers in the area and would develop a product that made sense for the market," says Erich Fischer, Intelsat’s senior director of broadband and growth businesses.
According to Jackson, for newcomers breaking into the market has been difficult, and some have large ongoing problems. "As the orbit locations and the individual satellites fill up, the situation will get worse," Jackson says. "However, satellite customers are now realizing that not all satellites are the same and are starting to ask about interference and coordination before they lease capacity so we expect to see a differentiation on satellite pricing."
Having A Strong Brand Helps
Asia is a complex business region where consolidation is still taking place, and where powerful entrenched national players exert considerable influence over the shaping of the marketplace. At the same time, Asia is at a crossroads especially as the issue of replacement capacity looms. Many countries that have national flagship satellite operators are feeling the effects of coverage limitations or what might be best described as a heavy emphasis on single-nation spotbeaming.
For Intelsat, which currently maintains 398 C-band and 98 Ku-band 36 MHz equivalent units in the region, there are lots of reasons for optimism. "The good thing about the Asia- Pacific region is that it encompasses such a large area, thereby ensuring that there is always some upside out there. At the same time, the region continues to experience fierce price competition," says Ashley Fernandez, Intelsat’s regional vice president for Asia.
North Asia, including South Korea, Japan and China with the lead position of their traditional carriers well established, continues to be the most difficult part of Asia in which to make any meaningful progress, according to Fernandez. He indicates that a lot of time and energy must be devoted to cooperative endeavors where the outcome is muted and where no head-to-head competition is allowed to manifest itself.
"Telcos are still our largest customers, and this encompasses primary and secondary tier customers. Although we serve primarily as a wholesaler of capacity in the region, our Galaxy DTH venture in Hong Kong is an indicator that we are always looking at new opportunities beyond the traditional boundaries of our wholesale business," says Fernandez.
Asia’s Appetite For Sports
Among other things, the demand for sports programming in Asia often gets overlooked. Many companies are mapping out how to best maximize their potential revenue from Asia’s enormous appetite for sports, with the summer Olympics heading to Beijing in the coming decade, for example. For satellite facility operators, segmenting feeds and performing niche market production and distribution services represents one solid way to woo new clients who are looking to tap into the sports craze.
"Besides store-and-forward technologies, providing production and distribution services for sports events such as football (soccer), rugby and cricket is big business in Asia," says Scott Davis, president of Ascent Media Network Services, part of Santa Monica, CA-based Ascent Media Group.
As content becomes more regionally specific and as customers continue to put more product up there, the focus at Ascent Media is on how to best originate a sophisticated mix of high-end channels for each customer. "The emphasis is on complex presentation, multiple languages for both voice and subtitle, all in a tapeless, highly-reliable and fully- automated environment," says Davis. "This is happening at a time when there is an ever-increasing demand for more value-added services, including origination, content management and content creation."
Regional satellite operators and satellite terminal and hardware vendors alike are constantly exploring new opportunities in Asia. "We are looking at all new possible applications across our satellite fleet all the time. The deal we have recently concluded with Connexion by Boeing on their use of Asiasat 3S Ku-band capacity to offer in-flight broadband services is a very good example," says Jackson. Singapore Airlines and Japan Air Lines are two of the many regional air carriers that intend to implement the Connexion by Boeing service.
Awaiting The Next Application
As new video projects come online and as niche content delivery takes hold in Asia, they require flexibility and the right mix of satellites. "In addition to IP service, we have a large Europe-to-Asia turnaround business via our partner teleport in Israel, along with IP service from the U.S. West Coast to Asia via NSS 5," says Maurice Liu, vice president of Asia-Pacific sales for Netherlands-based New Skies Satellite NV, which established occasional use service in early 2003. "We are working with Tandberg Television and Skystream Networks on MPEG-2 and MPEG-4 content delivery, and we also offered a video turnaround service using the Swe-Dish small terminals for broadcasters to cover news from Middle East to North Asia."
According to Liu, everybody is awaiting the next killer application. Many arrows are pointing to Wireless Local Area Networks (WLANs) via satellite as the prime candidate in this regard.
"Our projects match the expectation that Wi-Fi in Asia is poised to really take off in the near future, especially in Asia. Overall, I am upbeat but not bullish as regional demand is coming back up, although there is still a glut of capacity aimed primarily at India and China," says Liu. "As the domestic players in places like [South] Korea and Malaysia fill up, there is a realization that no new satellites are readily available."
He describes China as working very hard on market access, and he urges patience as the current government gains a new sense of confidence. "It is going to change. I have seen it becoming more open," says Liu. "There is a sense that the very confined market in Japan may soon open up too for foreign players next year. We should see a much [more] relaxed application process underway in Japan."
No Extremely Large Subscriber Bases In Sight–Yet
With such an enormous population, the extremely large potential subscriber bases in Asia must be factored into any aggressive game plan with respect to video, multimedia or IP data. The old set-top box (STB) model only goes so far today as 21st century Asia is poised for vast changes in terms of everything from wireless telecom to digital TV services.
"SK Telecom already has 18 million subscribers out of the total 35 million cell phone users in South Korea today. SK Telecom’s plan is to broadcast to mobile devices via S-band feeds direct to subscribers off the MBSAT satellite along with Ku-band feeds to S-band ground stations and repeaters in order to reach subscribers in shadow areas and ‘urban canyons,’" says Kill. "It is the consistency and ubiquity of the signal, together with the bandwidth efficiency, that will differentiate SK Telecom’s planned multimedia service. After purchasing new models of mobile phones, PDAs or in-vehicle systems, subscribers to the new service will be able to enjoy a range of entertainment and informational services."
Competition Is Keen
No matter where you look, the issues of relatively low disposable incomes and insufficient infrastructure, including distribution grids, seem to be on a collision course. With billions of eager consumers, however, Asia only has to experience a mild economic turnaround to trigger a demand for a wide range of new services and products.
"IP is still the key satellite play in Asia. IPTV, for example, enjoys some of its broadest penetration in Asia, and although today it is a small component of the vast video market, IPTV enjoys lots of support from incumbent telcos all across Asia," Baugh says. "WLAN and Wi-Fi in Asia in particular is a mixed bag. Satellite could be a key enabler, but there are regulatory issues, coverage limitations, and on the risk side, the need for a mass deployment of Wi-Fi enabled devices synchronized to a massive VSAT deployment."
Asia may seem wide open to new strategies and new partnerships, but the level of sophistication present in the region as a whole when it comes to all things telecom often goes underreported. Terrestrial service competitors are making substantial progress too as they scoop up new customers at a brisk pace. Satellite continues to hold the high ground in Asia, and one can only see demand for satellite services growing there throughout the coming years.
Peter J. Brown is Via Satellite’s Senior Multimedia & Homeland Security Editor. He lives on Mount Desert Island, ME.