China: Huge Market, Complex Agenda
By Peter J. Brown
The satellite sector in China is a mature business, ready for steady growth and eager to leapfrog ahead with as many third-generation satellite solutions as possible. This ability to skip an entire generation of satellite technology in many instances puts China in an ideal position when it comes to setting its future course.
According to projections supplied by Patrick French, regional director, Europe and senior analyst at FL-based Northern Sky Research, transponder demand for broadband along with narrowband VSAT and other services will more than double throughout the next five years across all of East Asia including China, while the dominant video services sector, which surpasses all others combined, including telephony and carrier services in the region, will expand by 40 percent.
As far as third-generation solutions are concerned, a good example is the DVB-RCS contract that Nanjing Toptry China-Spacenet Co. Ltd., a broadband access service provider, signed with Alcatel Space in 2003.
"Alcatel Space has a long-standing cooperation with China in satellites. This cooperation is an integral part of the strategy of Alcatel Space; it involves Chinese authorities; it extends from the field of satellite telecommunications and broadcasting to long-term cooperation for navigation systems and risk management systems using satellite capabilities," says Alcatel Space Spokesperson Laurent Zimmermann. "Alcatel Space certainly hopes to build on its success with Toptry to expand sales of its satellite broadband access system, the Alcatel 9780."
China is also closely monitoring the launch of Digital Multimedia Broadcasting (aka Digital Mobile Broadcasting) by the Mobile Broadcasting Corp. (MBCO) in Tokyo, for example, via the recently launched MBSAT joint venture with SK Telecom in Korea.
"For geopolitical reasons, China does not want to fall behind in mobile broadcasting. The State Administration for Radio, Film and Television (SARFT) has already sent two delegations to Japan to learn more, but it is not likely that we will see any commercial breakthrough in China before 2006," says Thierry Raymaekers, sales and marketing director for Irdeto Access in China.
Yoshitake Yamaguchi, MBCO’s acting general manager, is keenly aware of the Chinese interest in DMB. "As the world’s first S-band digital multimedia satellite service for mobile and personal users, many foreign companies including Chinese companies have visited our headquarters," says Yamaguchi, who hopes that the Chinese have made a positive evaluation of the new MBSAT satellite, which has two separate beams covering Japan and Korea. However, as of today, he sees no firm opportunities for MBCO in China.
An ITU Deadline Looms in 2005
While the upcoming Olympics in Beijing in 2008 and the huge International Expo in Shanghai in 2010 have been marked on everyone’s calendar, another date looms. Raymaekers reminds everyone that the International Telecommunication Union (ITU) has imposed a deadline of 2005 for China to start acting on its assigned DTH frequencies and orbital slots via Sinosat 2, which will operate at 134 degrees E, along with the satellite Apstar 6.
The State Planning Commission (SPC) is authorized to lead this DTH project and to coordinate the team of relevant agencies, according to Raymaekers. SARFT oversees content approval, transmission and broadcast monitoring. The Aerospace Ministry heads up design and launch of the satellite, while the Ministry of Information Industry (MII) will be in charge of standards including set-top box standards and production.
"The current thinking among the key agencies is to not use the CCTV Integ-rated Platform, and to establish a new DTH pay-TV platform that will be operated by a new company, jointly owned by the relevant government agencies [SPC, SARFT, MII and Aerospace]," says Raymaekers. "The question remains whether foreign equipment providers will play a significant role in DTH broadcasting."
Currently, besides filling the allocated DTH satellite orbital slots, the Chinese are also preoccupied with restructuring companies in the satellite communications sector for IPOs, according to Raymaekers.
"One thing is sure. The Chinese autho-rities like to have total control of satellite, so that they can shut off any channel in the shortest time if they want to do so," says Eui Koh, Singapore-based president of the Asia Pacific Satellite Communications Council (APSCC). "It is still a sensitive industry and it is strictly administrated. Chinese government policies will still play a large role here," says Taili Wang, an associate in the Beijing office of Coudert Brothers.
No Integrated Satcom Agenda Exists in China
Does one agency in the Chinese government seek to impose some sort of monolithic control or a single set of policies over all satellite activities in the country? Interestingly, when we asked Roland Schua, Germany-based VSAT manufacturer ND SatCom AG’s chief representative in China, about which government agencies control the commercial satcom agenda in China, he pointed to SARFT for media and broadcast, along with the Education and Energy Ministries. In other words, one encounters lots of flexibility in this vast marketplace. Koh agrees that many government agencies are adopting their own broadband services via satellite for their own use.
"Broadband IP applications are well under way to be implemented on a broader scale," says Schua.
"There really is not an integrated satcom agenda or policy within the Chinese government, from our experience. Major government departments are free to select a networking solution that best suits their needs," says Richard McPhaden, vice president of marketing at Quebec-based Polarsat, which just inked a deal with China Aviation.
According to Paul Budde, managing director at Australia-based Paul Budde Communication Pty Ltd., when it comes to forming partnerships, there is considerable enthusiasm on the part of Chinese government and industry.
"At the same time, there is plenty of evidence to suggest that in doing business, China will always have an eye on the longer term. For ventures involving the intellectual property, skills and experience of foreign companies, not surprisingly, Chinese companies will be looking at how they can acquire these assets themselves over time," says Budde. "This does not mean that China is not willing to form reasonably close business relationships with foreign companies."
Budde points to the Alcatel Shanghai Bell joint venture where Alcatel holds a 51 percent stake as an example of an effective joint venture, "the foreign partner appearing to have achieved a good outcome by paying close attention to the in-country set up.
"While China may be a little more circumspect in its business dealings with U.S. companies, pragmatism will normally dominate negotiations. What is on offer and how much they want it will be the most critical factors," says Budde.
Budde describes the Beijing Olympics as putting China under considerable pressure to do deals considerably faster than they would otherwise have done.
"Matching what is available to what they need is a big issue in this situation. A striking example of working with foreign companies is Beijing-based Capinfo, which is primarily owned by the Beijing Municipal Council, using equipment from U.S.-based MeshNetworks to build 5,000 information kiosks in Beijing for the Games all linked by state-of- the-art wireless mesh technology," says Budde.
McPhaden emphasizes the importance of a combination of sound technical solutions, a willingness to customize the solution to truly fit the customer’s requirements, a good in- country representation and, most importantly, a good working relationship with the customer built on trust and mutual understanding. McPhaden does not anticipate that vendors such as Polarsat, which provide complete network solutions for government industry applications, are having a major boom in business because of the Olympic Games in Beijing.
U.S. Barriers Remain
Two recent satellite orders from Asian operators APT Satellite Holding and KT of Korea, for example, went to a European manufacturer, Alcatel Space. This has a number of people scratching their heads. Are U.S. satellite manufacturers severely handicapped compared to the Europeans, and unless the U.S. government eases the restriction, will the advantage enjoyed to date by European manufacturers become completely one-sided in the region as a whole?
"U.S. satellite manufacturers are looking from the other side of the bank, while satellite manufacturers and component vendors from Europe, Israel and Canada have a field day in China," says Kuo. "Certainly, U.S. satellite manufacturers are losing out on great opportunities in China, and the domino effect may happen in other countries, too."
Regardless, U.S. policy and subsequent legal barriers to space cooperation with China, commercial or government, are firm and show no signs of abating, according to Joan Johnson-Freese, chair, National Security Decision Making Dept., U.S. Naval War College in Newport, RI.
"As long as this is the case, the United States aerospace industry is handicapped not only because other countries are penetrating the Chinese marketplace while the United States watches, but also because other countries are moving from niche aerospace industry capabilities to industrial autonomy, competitive to the United States," says Johnson- Freese. "The larger issue is that the interests and ambitions of the United States and the rest of the world in space are going in different directions. Much of the world is interested in space development as part of the globalization and supporting ‘knowledge workers’ while the United States’ focus is on the military aspects of space and ‘control’ of the associated technology."
"U.S. companies will always face additional obstacles if a partnership involves the transfer of any sort of knowledge or techno-logy that the U.S. government might consider sensitive and requiring an export license. U.S.-China relations are still stuck with a lot of regulatory baggage from the 1980s and 1990s," says Timothy Logue, a Washington, D.C.- based space and telecommunications consultant.
With Sinosat 1A, Alcatel Space became the first European manufacturer to provide a satellite to China. Parent company Alcatel was also the first company in the telecom sector to establish its APAC headquarters in China. This took place in Shanghai in January 2000. Last summer, for example, China Satellite Communication Corp. (Chinasat) announced that Alcatel Space would build Chinasat 9.
"Satellite TV broadcast is a long-awaited market in China. However, for it to be successful, several conditions relating to Chinese government concerns have to be answered," says Zimmermann.
As for talk of any pending Chinese orders for jamming or hacking resistant satellites–in October 2002, the People’s Daily in China identified Apstar 6 as the first
Chinese satellite that would be deployed with anti-jamming technology aboard, Zimmermann makes it clear that, in general, ground-based and satellite-based antijamming solutions will most probably be a long-term trend for broadcast satellites throughout the world.
China also has a need for satellite technology to monitor floods, earthquakes, pollution and forest fires to name a few, according to Zimmermann. Navigation and location-based services such as air traffic control, search and rescue, intelligent transport and homing, along with a wide number of e-Services: e-learning, e-medicine, e-working, e-leisure, for example, are viewed as priorities as well.
The Lessons of Galileo
The Galileo project is a good example of how bold the Chinese are becoming in the satellite arena. Jean-Pierre Cabestan, senior researcher at the French National Center for Scientific Research (CNRS) in Paris has watched the situation closely.
"China’s interest was to get access to a GPS system that will help modernize its own observation satellite technology, and if possible, get access to the military side of Galileo project," says Cabestan. "The EU’s interest is less obvious: get China’s participation. The $200 million investment by the United States was not necessary, but the idea was to give China the option to get a non-U.S. commercial GPS system."
Of course, the problem is that Galileo is not just a civilian project, and this has triggered an intense discussion among EU security specialists. The French government is the strongest supporter of China, although other EU countries did not oppose having China on board.
And what about the EU assurances to the United States should China be tempted to use Galileo in an armed conflict with Taiwan?
"Galileo would become blind in such a case," says Cabestan. "But China keeps knocking at the door, hoping to get access to the military side of Galileo. My hope is that the EU will be able to resist. With Chirac and the like, as well as EADS’s commercial ambitions in China, I cannot guarantee that we will be able to resist all their demands."
"The Galileo project underscores the need for a post-cold war coordination among Western countries and their [Eastern] allies [Japan, Korea] as far as dual technology exports to China are concerned. Should we help China to enhance its military edge in the Taiwan Strait and its capacity to project forces across the Strait as long as this country continues to constitute a threat to the peace and stability in the Strait and as long as Beijing has not dismantled its 500 missiles targeted against the island?" says Cabestan.
"China needs to commit itself to only using peaceful means to solve the issue, and to reach some kind of agreement with Taipei on this issue."
"The State Aerospace Bureau is now really pushing the development of space technology. Since the launch of its first manmade satellite in 1971, China has established itself in the world of space technology; especially as this relates to applied satellites," says Kathleen M. Sweet, Lt Col. (ret) USAF, and an associate professor in the Department of Aviation Technology at Purdue University. "Currently, China’s research on recoverable satellites, soft-landing technology and microgravitation has entered a more mature testing stage."
Sweet reports that China plans on sending 30 additional satellites into space within the next five years, and that to date, China has successfully developed and launched 48 satellites with a success rate of 90 percent.
"China is purportedly developing laser weapons with the ability to destroy satellites and to disrupt communications systems. However, Chine realizes that a cheaper way is to simply disrupt the communications system with a computer virus," says Sweet.
Doors Are Opening, Optimism Is Vital
According to Peter Jackson, president of Asia Satellite Communications Co. Ltd. (Asiasat) in Hong Kong, China will continue to open up various parts of its media industry and foreign hardware suppliers that have offices in China or even joint venture manufacturing facilities in China will continue to see growth despite real competition from wholly owned Chinese manufacturers.
"With the frequent announcements of new partnerships and channels for national and overseas services, the China media scene is definitely a growth area," says Jackson. "For satellite operators, this increase in activity has created demand for facilities to distribute content to cable headends and customers, television viewers or even 3G service suppliers."
"There is a shift on the programming side in China as people recognize that there is a necessity for local or foreign content on the future DTH platform. For this reason, they allow many production houses with foreign programming companies," says Koh.
"The future for China generally looks very promising and the ability of any entity to do business in China requires that they have the right contacts and product. That is equally true in the satellite industry,"
Jackson says. "The regulatory situation in some industries does pose certain barriers, but no more than in other countries, just different. If I look at the barriers for Asiasat to buy technical products in the U.S. at this time it appears equally challenging."
China will continue to embrace satellite technology, and this eagerness will benefit many players in the international satellite community. But many issues must be resolved, and yet there is room for optimism, and a sense that solutions to these issues will be found.
Peter J. Brown is Via Satellite’s Senior Multimedia & Homeland Security Editor. He also volunteers as a satellite technology and communications advisor to the Maine Emergency Management Agency.