Russia: Deploying Satellite Applications, Gaining Market Strength

By | October 4, 2004 | Broadcasting, Europe, Feature, Telecom

With the expansion of the European Union, the makeup of the Eastern European satellite market has changed. Today, when people speak of this market, they are referring to Russia and its former Soviet republics; members of the former Yugoslavia as well as Albania, Bulgaria and Romania. And even though familiar economic challenges remain, this Eastern European region continues to show market promise.

So how are satellite equipment and service sales doing in this region? The answer is that oil-rich Russia is the brightest star in "new" Eastern Europe. From VSAT solutions to consumer services, Russia is taking a strong lead regarding satellite demand within the Eastern European region.

Recently, Modern Times Group (MTG) has strengthened its position in Russia by increasing its stake in DTV, a Russian free-to-air (FTA) channel and StoryFirst Communications, a U.S. entity that owns and operates CTC, Russia’s largest privately-owned commercial TV network, as well as 13 regional stations.

MTG acquired a further 1.9 percent stake in StoryFirst Communications, lifting its shareholding to 39.9 percent. In addition, MTG announced the acquisition of the remaining 25 percent stake that it did not own of the DTV Russian TV channel. MTG is also one of the leading media and pay-TV providers in Scandinavia and is becoming a key player in the Baltic region in its expansion beyond Scandinavia.

Satellite service providers say the Russian TV audience is the largest in Europe and the market continues to show great potential. Satellite-delivered programming expansion into Central and Eastern Europe began years ago and now with the advent of free-to-air and/or pay-TV businesses in demand, companies like MTG are further penetrating countries in the region. DTV’s share of viewing in the core demographic group of 12- to 49-year-olds has grown steadily since 2001, according to executives following this market.

"When it comes to satellites, the Russians know what they want," says Chris Alfenito, Miteq’s director of satcom sales. "We like demanding clients who know what they are doing." Russia’s demand for satellite equipment services is mirrored by the former Soviet republics of Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan, which also have substantial oil and gas resources. In contrast, a lack of exportable natural resources has kept satellite investment dollars scarce in Albania, Bulgaria and Romania. Meanwhile, tough government regulations in Ukraine has kept Western satellite providers out of this nation. All these political and local scenarios are garnering regional new applications that call for satellite connectivity.

Market Considerations

It is important to note that Eastern Europe possesses an old technological, geographically challenged telecommunications network. In nations that have the money, such as Russia, this fact provides satellite equipment and service providers with tremendous opportunities. In resource sectors such as oil and gas, for instance, the need to connect remote drilling and pumping stations with corporate head offices makes satellite the only choice for providing far-flung, quickly deployable communications. Meanwhile, satellite is similarly the sole option for carrying corporate networks, nationwide lottery terminals and distance education across vast distances.

Also, government regulations and license fees have hindered the uptake of satellite services. For instance in Russia, high VSAT licensing fees and the requirement for satellite service providers to establish hubs within its borders have stalled penetration of this market, says Arunas Slekys, vice president of Hughes Network Systems (HNS). "The good news is that there is a new telecom law that calls for a modest licensing fee, compared to the past when it exceeded the cost of the VSAT itself," he says. "This will undoubtedly make it much easier to sell services throughout Russia."

Bread-and-Butter Satellite Applications

The ever-present demand for basic communications is central to the health of Eastern Europe’s satellite industry. Take banking for example. In order to provide reliable, secure connectivity between the head office and its branches, Kazakhstan’s Halyk Savings Bank has installed an HNS VSAT network. Operated by Katelco, a satellite services provider based in Almaty, Kazakhstan, Halyk’s network connects its main data center in Almaty with 150 remote branches via a VSAT network.

Not only does this speed transactions and reduce paper, but Halyk’s adoption of satellite is making it easier to update the company’s IT systems to modern TCP/IP standards. (Katelco is also uplinking a DTH service of 30 domestic and international channels over Intelsat 904, and offering high-speed Internet access via satellite to business customers.) In a similar vein, the National Bank of Azerbaijan in Baku is communicating with its branches through Delta Telecom, a satellite services provider that uses HNS VSAT equipment.

Eastern European governments are also turning to satellite to improve internal communications. For instance, the State Tax Committee (UCC) of Uzbekistan has deployed an HNS VSAT network to carry out tax collection and audit information transactions between its main database and its 246 remote offices.

Meanwhile, the Ukrainian Customs Committee has adopted HNS Direcway VSATs to link the Committee’s head office in Kiev with 250-plus remote sites. Unlike Uzbekistan, the UCC is not employing VSATs to collect taxes, but rather to provide LAN interconnections, telephony, and Internet access.

In Kazakhstan, the telecom company Astel OJSC ( is using 500 Gilat Dialaway IP VSAT ground stations to support voice/data services in that country. Beyond operating a 100- site VSAT network of its own, Astel has deployed two 200-site networks for the Kazakhstan State Postal office and the State Center on Pension Payment, respectively. Both networks provide voice and fax telephone service, plus e-mail, Internet access, and e-government services to rural users across the country. In a region as vast as Kazakhstan, only VSAT technology can provide services to users in remote areas says Alexey V. Vaganov, Astel OJSC’s marketing director.

Resource Industry Communications

As mentioned above, the oil and gas sector is Eastern Europe’s major economic engine. Since such resources are typically found in remote regions, reliable communications between such sites and headquarters regarding discoveries, production results, and resupply requirements are a must.

A case in point: Viasat has supplied its VSAT technology to interconnect sites managed by Luke Oil, one of Russia’s largest oil companies and adapter of satellite technology for corporate communications.

"Luke Oil is using both Linkstar ground stations and our Linkway broadband MESH product to connect its drilling sites in remote areas to its headquarters in Moscow," says Chris Leber, Viasat’s vice president and general manager. "Luke Oil also uses Viasat’s equipment to connect their corporate LANs worldwide, to help manage various aspects of their business."

HNS is supplying VSAT equipment to telecom carriers such as Kazakhstan’s TNS Plus and Russia’s SATTEL, so that they can provide end-to-end satellite networks to oil and gas companies in Eastern Europe. As with familiar Western companies such as ExxonMobil, BP and Shell, these networks cover the gamut of applications from basic data, voice and video connectivity at all locations, to remote monitoring of unmanned pumping stations, inventory control and the ubiquitous credit card transaction processing at service stations.

And such technology enhancements are catching on. In Kazakhstan, KazTransOil deployed a 63-site Gilat FaraWay VSAT network to enable monitoring of oil and gas pipelines, and to support enterprise voice and data communications. Intergas Central Asia has also installed a 30-site Faraway network to provide voice and data communications to outposts on its 5,600 miles of natural gas pipelines.

Distance Education

Providing high-quality education to Eastern Europeans is an economically daunting challenge–one that can be managed by satellites carrying interactive learning courses. This is why Russia’s Modern Institute for the Humanities has opted to establish a 155-site VSAT network, using Gilat VSAT earth stations and a Skystar 360E hub. Using satellite, the Modern Institute will provide distance learning, videoconferencing and Internet access to its branches stretching from one end of Russia to the other. Based in Moscow, the Modern Institute currently has more than 145,000 students enrolled in its courses.

Meanwhile, primary and secondary students in Moscow and Western Russia will soon have high-speed Internet access thanks to an HNS-supplied Directway solution at 9,000 schools. Signed in 2003, this deal is under the auspices of a contract between the Russian Ministry of Education and Runnet/Crosna, two local satellite providers. It amounts to only a small slice of the contract budget allocated by the government to bring Internet access and e-commerce services to citizens nationwide.


Gambling is as popular in Eastern Europe as it is in the West. This is why the Russian Satellite Communications Company (RSCC), the country’s largest satellite services provider, has signed a deal with the Russian gaming company, JackPot, to connect the latter’s gaming sites nationwide. Using a Gilat Skystar 360E hub and 500 VSAT earth stations, RSCC will help JackPot customers play not only on their own electronic terminals, but across the network in a bid to win system-wide jackpots. The network will also be used for JackPot’s own internal communications.


One of the most exciting opportunities in Eastern Europe is mobile telephony. It is a fast, quick-fix solution to the region’s inadequate wired networks that also offers 21st century benefits to its users. This is why TM-SAT ( signed a deal in 2001 with the Thuraya Satellite Telecommunications Company, RSCC and HNS to bring Thuraya’s satellite telephone service to Russia.


Urkaine may be a tough market for Western satellite companies to crack, but it is not impossible. One way of doing so is to license services to companies within that country, as HNS has done with Direcway. Specifically, Datasat, part of the Datagroup and Ukrsat are owner/operators of Directway hubs, and are now licensed providers of Directway services in Ukraine, thanks to deals signed in the last year.

Datasat provides a full range of satellite broadband services including high-speed Internet access, VoIP telephony and business television. "Deploying broadband satellite technology will dramatically increase our service offerings for our customers throughout Ukraine," says Alexander Danchenko, managing director of Datasat, in a published company release.

A Stronger Region of Satellite Opportunity

Even with differing regulatory regimes, tight money and cultural hurdles, Eastern Europe is becoming a land of opportunity for satellite equipment and service providers. Better yet, as this region moves toward Western-style prosperity, the market for satellite services is likely to grow. After all, the hunger for telephony and Internet access in a region of poor terrestrial infrastructure can only be satisfied by satellite; the same is true for premium multi-channel television services, corporate communications, and distance education. As consumers and business acquire the resources to pay for such services, satellite equipment and service providers will be there to provide them.

In fact, the global convergence of information communication technologies such as telephony, internet, TV and radio broadcasting coupled with demand for faster and more efficient Internet speed access has led to a sharp increase in the demand for broadband and it has become one of the fastest developing sectors in the global telecommunications industry. Russia, with a population of more than 147 million and traversing nine time zones, is one of the most diverse and rapidly developing telecoms and information technology markets according to analysts who track this region.

In fact, the very economic and political barriers that have kept this region’s telecom sector undeveloped may prove to be a boon to satellite equipment and service providers, simply because the cost of deploying North American-style to-the-home wired networks today is prohibitive. The day may even come when Eastern Europe is one of satellite’s strongest territories, compared to Western Europe and the terrestrially-competitive region of North America.

Susan Trott is a freelance writer and contributing editor to Via Satellite.

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