Africa: Demand High; Obstacles Remain

Steady Growth

Russell Southwood, CEO of U.K.-based Balancing Act recently published a report called African Satellite Markets that looks in detail at the state of the market on the continent. “Satellite bandwidth has been growing very rapidly across all regions,” he says. “Growth has tended to come from specific market sectors. In particular, there has been considerable growth from both the banking sector — connecting ATMs — and the cellular sector.” Southwood also sees the recent mergers between operators as giving the merged entities some greater degree of flexibility about meeting demand.
“But whatever the underlying position with operators, the larger resellers have often bought considerable amounts of bandwidth,” says Southwood, adding that price stability in the region is influenced by some trends towards greater liberalization on the regulatory side, and in East Africa by the arrival of international fiber in 2008 which will result in bandwidth prices of between $1,000 to $2,000 per megabit per second per month.
“Satellite operators will be unable to match the lower end of this range and will therefore lose business in the fiber- connected urban capitals of East and Central Africa,” says Southwood. “This lowering of prices on the eastern side of the continent will knock-on to the western side of the continent, starting in South Africa. The latter will have a choice between two fiber cables and will almost certainly choose the cheapest capacity.”
Despite these concerns and the fact that competition from pay TV, IPTV and DSL broadband is increasing, satellite is benefiting from this overall increase in telecom and entertainment-driven activity. When it comes to the integration of last-mile connectivity for wireless networks, Gilat Satellite Networks expects significant growth in East Africa and West Africa in particular, says Janna Koretskaya, Gilat’s regional vice president of Africa,
“Over the years, VSAT technology has become increasingly affordable to a wider range of end users in Africa,” says Koretskaya. “As this trend continues, we believe we will see operators using VSATs as part of hybrid networks, where VSAT is integrated into a broad networking solution that includes DSL, Wireless Local Loop, Wi-Fi and even WiMAX.” Koretskaya credits the high demand for satellite services to the fact that the continent is so far behind in terrestrial telecommunications infrastructure. “New investment in antennas and the deregulation of some markets has allowed the continent to jump ahead of the old types of fixed-line infrastructure. IPTV via satellite is also driving demand, and we expect that demand to continue to grow in the coming years,” she says.
Intelsat, which works with leading African direct-to-home (DTH) providers such as MultiChoice and Sentech, considers itself the leading service provider for broadcasters. Intelsat offers its African customers more choices as far as video compression is concerned, along with access to more advanced high-definition TV programming coming from Europe, says Flavien Bachabi, Intelsat’s regional vice president, Africa. Regional content delivery growth also is helping satellite service providers maintain their competitive edge. “We are seeing significant growth in satellite-enabled broadcasting, Internet trunking and cellular backhaul initiatives throughout the continent, especially in the countries experiencing political stability and progressive regulatory reforms,” he says. “Countries with significant regulatory reform include Nigeria, Morocco, Ghana, Uganda and South Africa, to name a few.”
SES New Skies has planned to replace its NSS-703 satellite at 57° East with the NSS-8 spacecraft to increase C-and Ku-band coverage of East Africa, says Michael Schwartz, senior vice president, marketing and corporate development. But after the loss of NSS-8 in a January launch failure, NSS-703 will continue to serve customers in the region until 2009. “We have not observed major rollout of cable television networks. Distribution of satellite television is mainly a DTH market. Some terrestrial networks redistribute satellite programming,” says Schwartz. “Our customers are looking for satellite services mainly because of lack of reliable terrestrial alternatives, fast deployment of satellite-based services and reduced opportunity cost.” Schwartz offers examples such as cellular operators who use satellite to connect their different switching centers in order to offer instant access to their mobile subscribers and national and private TV broadcasters who are using satellite to maximize their reach as well as their advertising revenue.

Steady Growth

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