The Middle East is a vibrant region for satellite communications. With HD on the cusp of major growth and operators like Yahsat and Arabsat delivering a stock of new capacity to the region, is a new era for satellite communications emerging there?

In 2011, the Yahsat 1A satellite, one of the highest capacity satellites ever to enter the Middle East communications market, was launched. It heralded the official entrance of a new satellite player with the ability to completely change the dynamics of the market.

With so much new capacity coming online from both regional players and larger operators such as Intelsat, SES and Eutelsat, one of the key questions is whether there will be enough demand for the available supply. Patrick French, a senior analyst at NSR, says there is more than enough capacity being launch in the Middle East to meet the foreseeable demand.

“We are seeing a shifting demand. Some governments are going from Ku- to Ka-band in some cases,” says French. “We think there is plenty of capacity coming into the market. We don’t see any severe supply constraints, except for specific exceptions. If someone needs capacity on a very specific local slot with a specific beam, there is no guarantee that capacity will be available. But, in general, there is a good bit of new capacity coming into the market.” 

Optimism Grows

Yahsat will launch its 1B satellite this year, and thus have two of the most powerful satellites in the region. Tareq Al Hosani, Yahsat’s CEO, believes there is “an insatiable desire for instant broadband connectivity” in the region. Yahsat believes its new YahClick service will be the catalyst for a raft of consumers and businesses moving to broadband services via satellite. According to Al Hosani, there are many reasons for optimism. He says, “One of the key definers that we will be able to offer through YahClick’s Ka-band technology is that it enables subscribers to access our high-speed broadband service through a small receiver dish — similar to the DTH TV antennas. This will significantly cut costs and will mean that customers will have a reliable Internet service that they can access directly from the satellite, avoiding the last mile connectivity issue which is often the major cause of service disruption.”

Attacking a number of different market segments will be key to the potential success of Yahsat going forward, according to Al Hosani. “YahClick’s proposition also means that it supports a wide-range of market segments other than the consumer market,” he says. “For example, we will be able to offer broadband solutions to government agencies for school networks and various other e-government solutions. YahClick will also offer both primary and back-up connectivity to business users. We are also working on new applications including transportable solutions for satellite news gathering and disaster recovery.”

If successful, Yahsat could make a significant impact on the market, though a lot will depend on how the company performs in the broadcast arena. A recent deal involving Middle East broadcaster MBC Group could be a sign of things to come. French says, “Yahsat would have to prove that they can create a new TV hotspot. I don’t think we can say today they have succeeded in doing that. It will take time. To say they have shaken up the Middle East market, they will have to become successful in TV/broadcasting. The UAE government deal they got was not open to competition. YahClick is very interesting and has a lot of potential. It needs time to really show that it will generate a lot of interest. I think Yahsat is on the cusp, and has a lot of potential, but they have not succeeded yet.” 

Ka-Band

While Yahsat has gained a lot of headlines in recent years, it is not the only Ka-band story in the region. Arabsat has also invested in new satellites and has just completed investment in its fifth-generation satellite program. Khalid Balkheyour, CEO, Arabsat, says the company will take a “calculated and targeted approach” towards Ka-band.

“We have already put a Ka-band payload on our just-launched satellite 5C. Our strategic partner, Riyadh-based King Abdul Aziz City for Science and Technology (KACST), has leased the full Ka-band payload to support telecommunication, broadband and military applications in Saudi Arabia,” says Balkheyour. “So, 2011 was somehow already been the year of Ka-Band for us, but we do not intend to stop there. We are carefully reviewing the opportunities, be it through direct partnership with major players or service providers, customers, broad market research and competitive offerings. But, all of our next-generation satellites will definitely host Ka-band payloads.”

Although the enthusiasm for Ka-band is spreading, not everyone is rushing headfirst into the new bandwidth. Salah Hamza, CTO, Nilesat, says, “I think there is good opportunity for Ka-band broadband provided that regulators in different countries will authorize it. On the other side, we don’t have plans during 2012 to commission Ka-band satellites.” 

HD

The other major driver for satellite capacity in the region is likely to be broadcast, and in particular HD services, as the number of channels begin to increase. However, as a region, there are challenges for widespread HD adoption. French says, “The big question is, can you launch HD into the more generalized FTA market in the Middle East? That gets more challenging. If you are a national broadcaster, you don’t have to look at the business model. You have money already there. What is challenging is commercial HD channels. So, how do you make a commercial model for HD channels given the business model in the Middle East is generally FTA? That is very challenging, but be do think HD in the Middle East will come on.”

Balkheyour says the number of HD channels is on the increase. “The latest figures we have indicate 18 percent growth for the number of HD channels in the MENA region. We lead the way in FTA HD transmission in the region, and we have 90 percent market share of FTA HD transmission. All in all, we now have more than 30 HD channels including premium content such as Abu Dhabi sport channels, Al-Jazeera channels and the newly launched Saudi sport channels as well as other 15 FTA channels,” he says.

Nilesat also expects to see more activity, according to Hamza. “The real growth in HD started in 2011,” he says. “You have pay-TV operations, and on the other side MBC started the first FTA HD channel. Some governments and private TV channels have started also, so the total number of HDTV channels is around 36 and it is expected to increase to more than 55 this year.”

Jawad Abbassi, CEO of research organization Arab Advisors, says the company is seeing “good growth” for HD in the Middle East. “By January 2011, the region already had 24 pay-TV HD channels and 10 FTA HD channels. Arabsat has 22 HD channels and Nilesat had 18 HD channels by the end of 2011. We expect we will see more HD channels coming into the market. Consumer electronics are changing the landscape and many people have HD sets in their homes now. I expect to see double-digit growth in the number of HD channels in 2012.”

OSN

One of the companies at the sharp-end of the HD revolution in the Middle East is OSN, one of the main pay-TV operators in the region. The company now offers 19 HD channels, and according to Emad Morcos, vice president of business development and strategy at OSN, the operator will continue with its aggressive expansion plans for HD channels. The operator will need ever-increasing satellite capacity, as not only is it increasing its HD offering, but has also started to offer 3-D TV services in the region.

Bringing more local content will be center to its strategy going forward, says Morcos. “As we have consolidated the best in Western programming, we are now increasing our investment in Arabic content. We are also in discussion with other partners that want to enter into the pay-TV environment, we hope to make a number of announcements in 2012 with regards to our strategy.”

Morcos expects the Middle East broadcast market to follow global trends in terms of content preferences and technology adoption. “The MENA Region media consumption is following global trends both in terms of content and channel/platform preferences and in terms of technology adoption, therefore we expect increasing non-linear consumption as well as triple/quadruple play adoption,” he says, adding that the company also believes HD and mobility will drive pay-TV adoption. “MENA customers are more and more sophisticated and strive for content and service quality, hence OSN is investing in quality content, new technology as well as in strategic partnerships that enhance the TV experience while maximizing financial returns.” 

A Warning

The Middle East broadcast and broadband landscape may offer many causes for optimism for all players across the value chain, like in many regions, but satellite could face increased competition in some markets. One service provider operating in the region is Don Telecom, which provides telecoms services via satellite.

Don Telecom’s general manager, Zakie Karam, says that because of the competition in the data market, the company will have to go more into Africa rather than rely on the Middle East data market in order to grow revenues. “What has occurred in somewhere like the Middle East is that you will need much less satellite. There will still be requirements for satellite, but it will be much less. The market for satellite is shrinking in the Middle East,” she says. “Governments in the region are becoming more knowledgeable when it comes to providing fiber. More networks are now being built out in the Middle East, which as I said, is eroding the market for satellite,” she says.

The focus on Africa has happened in a very quick, dramatic fashion. Karam adds, “In the coming months, our revenue split will be 70 percent Africa and 30 percent Middle East. This has been a big change. In the Middle East, we had fairly strong access to customers so the revenue split not that long ago was in favor of the Middle East, but the business is now moving to Africa. It is now an Africa focused business. The Middle East data market via satellite will probably be 20 percent of what it was six months ago, compared to what we have seen recently. The data communications market via satellite is dying in the region, but it is good news for the customer. It is a sign of progress. It will impact the company, but it is good for the countries to have a reduced price to fiber like connectivity.” 

Hosted Payloads

An important topic of discussion for the satellite industry in 2012 will undoubtedly be hosted payloads. The Middle East already has some hosted payload-type deals taking place, one involving ictQatar, a government organization out of Qatar, which has teamed up with both SES and Eutelsat to bring dedicated satellite capacity to businesses and the people in Qatar.

However, other deals are also in the pipeline. Arabsat is set to announce a hosted payload deal this year. “We are currently in an advanced negotiations stage where we have already completed all the preliminary leg work allowing us to start negotiating the commercial terms of this partnership that we expect to become effective in early 2012,” says Balkheyour. 

Cusp of Change

One of the interesting aspects about the Middle East communications market was the role satellite played as significant political events unfolded last year. The demand for media and the need to be connected was brought into sharp focus in 2011, as political and civil unrest caused some of the world’s most powerful news stories. Satellite players had to adapt quickly. Looking back on this, Balkheyour says, “Enormous capacities on our fleet were dedicated to securing the delivery of the news and live events from the many theaters to the viewers. This was also the opportunity for us to prove our commitment to the highest level of broadcast quality we seek to have all across our fleet. We were able, through extensive technical assessment, to pinpoint details of sources of jamming that were targeting a number of news channels widely watched in the region. We also support our customers by providing back-up capacity and other technical solutions to minimize intentional jamming in the future.”

Nilesat, which is based in Egypt where a change in government was brought about, also saw activity here. Hamza says, “Nilesat is a regional satellite operator and a private investment company, so the political problems in Egypt did not affect its activity. During the Arab revolution we suffered from intentional interference on our satellites; for instance, interference was coming from the former regimes against certain news channels and from opposing parties to the regime.”

The region is on the cusp of change, which in some ways could mirror what is going on politically. Operators with deep pockets are launching satellites, but with the HD market still in its infancy, and a market yet to be established for broadband via satellite, there are as many questions as answers. “It is implementation that is going to be a big thing. So, one of the questions will be, will someone be able to establish a new FTA video slot? Will someone be able to establish pay-TV services beyond OSN? Will HD services really see strong take-up? Will Ka-band be warmly received and see high-demand in the region. I don’t necessarily see new trends, but more implementation of the trends that have developed in the last year or two,” says French.

Balkheyour expects new business models could emerge in the region. He adds, “Definitely the introduction of new technologies including Ka-band and HD could enable new business models and fundamentally change the relation among satellite operators, broadcasters and telecom services providers. However, the satellite industry has proven over the years to be of the most resilience and adaption, and it will continue to serve the needs of many segments for many years to come.”

The Multimedia Exchange Network Over Satellite (MENOS) was initiated by Arabsat and Newtec to aid certain broadcasters, such as news broadcasters, to effectively transmit and exchange multimedia content. MENOS was officially launched in 2009. Simon Pryor, Newtec’s product marketing director, outlined which direction the MENOS project will take as it enters its third year. “One of our focus areas is newsgathering. We now have a product range to allow newsgatherers to support both live- and file-based news workflow up to 1 Mbps at a low usage cost. They can send their stories back to newsrooms. The deployment of the fast newsgathering service is one of the major challenges for us in 2012,” he says.

Other developments include helping broadcasters with workflow management. Pryor adds, “Another big focus this year is the expansion of file-based workflow support. MENOS has always had IP file-based capability, but will now support integrated managed file-based workflows, and all the associate metadata. It is something that the broadcast industry is struggling to manage as they introduce these file-based workflows into their contribution networks. Our goal is to provide this capability in a way that suits the market needs being easy to use and cost-effective to deploy.”

Pryor believes the MENOS project has struck a chord with broadcasters. “The new Arabsat satellite (5C) has given the Arab States Broadcasting Union (ASBU) extra capacity allowing them to deploy HD services in addition to SD,” he says. “The extra bandwidth supports more concurrent users, demonstrated by the traction with broadcasters like Al Jazeera. Iraq now has a virtual network on the MENOS platform to be able to improve their national contribution and exchange of content. The extra capacity allows the ASBU to support such a growing network.”