When it comes to the Middle East satellite services market, don’t let the stereotypes fool you.

Yes, the region is beset by military and political conflict; there’s no denying it. But away from the TV cameras, there is progress being made here, particularly when it comes to selling broadband Internet access by satellite and DBS TV.

To get a better sense of what’s happening in the Middle East, Via Satellite contacted some of the major satellite players in this region. They gave us their views on the progress, potential and perils of doing business in the Middle Eastern market.

Regional Players…

With Ku-band satellites centrally stationed over the Middle East, the Arab Satellite Communications Organization (Arabsat) is one of the region’s most important service providers. Small wonder: Arabsat was established by the Arab states in 1976. As a result, Arabsat can count on the cooperation and support of its members’ regulators and PTTs.

“At present Arabsat owns and operates three satellites,” says Omar Shoter, Arabsat’s assistant director general for marketing and external affairs. “Arabsat 2A and 3A are co- located at 26 degreesE, and used for analog and digital broadcasting. Meanwhile, Arabsat 2B, located at 30.5 degrees, is used for Internet access, telecom, and VSAT services.

As part of providing complete satellite services to the region, Riyadh, Saudi Arabia-based Arabsat supports digital/analog TV and radio. In fact, “all Arab countries broadcast their TV programs on Arabsat,” says Shoter. “ART and Orbit transmit their Middle Eastern pay TV digital bouquets over the system, while individual countries like Saudi Arabia, Oman, Morocco, Mauritania, Yemen, Sudan, Egypt and Jordan use Arabsat for domestic rural services.” Arabsat also supports regional telephony, occasional TV backhauls, Internet access, VSATs and business services.

Eurasiasat is another Ku-band service provider jointly founded by Turk Telekom of Turkey, and French-based satellite manufacturer Alcatel Space. Eurasiasat provides both Broadcast Satellite Services (BSS) and Fixed Satellite Services (FSS) throughout the Middle East, plus parts of Asia and Europe. However, “our core market is Turkey and the Turkish speaking region,” says Ilhami Aygun, Eurasiasat’s director general and CEO. “Our major business customers are TV broadcasters and Internet-based applications service providers.”

Eurasiasat uses the Alcatel-built Turksat 2A satellite (a.k.a. Eurasiasat 1) to provide this footprint.

Eurasiasat 1 delivers DBS and Internet signals throughout the region to 50-60 cm DirecTV-style antennas. To do so, it uses two fixed 50 dBW+ BSS onboard antennas. One is aimed at the Middle East, Western Europe and Central Asia, the other at Russia. Both beams overlap over Turkey.

“The West beam competes with established European high-power satellites,” says Aygun, “while the East beam brings high-power coverage to less well-served regions.” In addition, Eurasiasat 1 is equipped with two steerable FSS beams, “which can be pointed where demand dictates.”

Netherlands-based Irdeto Access is a designer and manufacturer of conditional access systems for pay TV, both by satellite and cable TV. It’s been selling this signal encryption technology for more than 30 years, and has more than six million “Smart Cards” in use worldwide.

In the Middle East, “we have four major clients: Multichoice Middle East, Arab Radio and Television (ART), Showtime, and Cable Network Egypt,” says Karim Esseghir, Irdeto Access’ Middle Eastern account manager. “All of these are doing conditional access by satellite. In addition, ART is also providing pay TV services via satellite in America and Australia.”

Shiron Satellite Communications may be based in Israel, but its broadband satellite products can be found throughout the region. Shiron has developed and now manufactures a two-way broadband via satellite communications system called InterSKYT. The InterSKYT system supports fast Internet and IP applications.

“All kinds of service providers are using our products throughout the Middle East,” says Toby Olshanetsky, Shiron’s vice president of sales. “Due to the delicate political situation, some of the companies are using Shiron equipment that has been sold to foreign service providers and rebranded.”

… And One Big International Player

Initially an international consortium, Intelsat is now a privately-held service provider that spans the globe. In the Middle East, Intelsat provides a full range of broadcast, telecom and Internet data services through its fleet of C-/Ku-band satellites.

“Our blue-chip customer base includes the leading international carriers, ISPs and broadcasters,” says Samir Dajani, Intelsat’s regional vice president for the Middle East and North Africa. “In the Middle East, we’re talking about major telecom operators such as TCI of Iran, Saudi Telecom and Etisalat of the United Arab Emirates.”

What Makes The Middle East Different

Clearly, the Middle East is a far different market from North America and Europe. It all starts with politics. Not only is Israel still at odds with the Arab world at large– with the uneasy exception of Egypt–but the Palestinian question, Islamic fundamentalism, the pariah status of Libya and Iraq, the internal tussle between fundamentalist clerics and moderate democrats in Iran add to the explosive climate. Moreover, the firm government control in other less volatile states such as Syria and Saudi Arabia means that the Middle East is anything but politically tranquil. Beyond the headlines, however, is a region facing numerous challenges.

The region’s Islamic countries are all uneasy about the encroachment of Western values. Granted, each is responding to these influences in differing ways–censorship of Western TV shows deemed too provocative or immoral being a common tactic–the fact remains that they’re uncomfortable with the onslaught of Coca-Cola, Baywatch and Microsoft.

Of course, Israel is an exception to this trend. This country’s political isolation from its neighbors, however, limits Israel’s ability to soothe the Arab world’s anti-Western sentiments.

Then there’s the issue of money and infrastructure. Although the Middle East has its share of relatively well-off urban dwellers, many Middle Easterners live in primitive poverty. As well, the vast spaces of this region–and the harsh deserts that dominate much of it–means that decent terrestrial infrastructure is limited.

For satellite companies, this truth is a double-edged sword. On the one hand, lack of landlines boosts demand for satellite delivery. On the other, it also results in a poorer business base from which to attract paying customers.

Government regulation is yet another concern. In the worst case scenario, “there are countries like Iraq, where business is impossible due to the UN embargo,” says Irdeto Access’ Esseghir. “However, by and large the countries here are fairly open; not as open as the West, admittedly, but still open.”

Open, perhaps, but definitely not harmonized. For instance, “considering our large footprints, we have to face different standards of governmental regulations with different authorizations and constraints,” says Eurasiasat’s Aygun.

“It should be of a common interest to have more standardized rules since today telecommunication has to be considered as global,” Aygun wishes aloud. Logically he’s right, but in the Middle East, competing interests often impede any effort toward regulatory standardization.

Growing Pains

It’s true: even with all these hassles, satellite usage in the Middle East is in expansion mode.

What’s hot? “The major growth opportunities are in DBS and Internet services,” says Arabsat’s Shoter. Aygun agrees. “This is why Eurasiasat is creating a so-called ‘Hot Bird’ at 42 degreesE with several satellites,” he notes.

As of now, this slot is occupied by Turksat 1C and Eurasiasat 1; collectively, they have 50 Ku-band transponders on station. “With these two satellites, we can transmit more than 200 digital TV channels together with high speed Internet, and all these applications can be received via a single dish of 50/60cm diameter,” Aygun says. “This represents a big advantage for Turkish-based TV broadcasters where they can reach a minimum of five million Turkish-speaking households, and this also offers an edge to non-Turkish broadcasters wanting to enlarge their markets.”

Meanwhile, holding the 42 degreesE slot offers big advantages to Eurasiasat as well. The reason? “The market analysis done for Eurasiasat by Euroconsult, Vista advisors (Paris) and Kalba Inc. (USA) showed that, in the next five years, the demand in the region for new capacity at 42 degreesE position will increase substantially,” says Aygun. “There will be so much demand, in fact, that we will have to launch a new satellite every two years into this position.”

At Shiron, it’s the Internet that grabs Olshanetsky’s attention. “The hot sellers in the Middle East are fast broadband Internet access and Voice over IP. What Middle Easterners want–and what our clients are providing with our system–are links to the European Internet backbone. These links deliver fast access–72 Mbps downstream and 384 kbps/E1 Voice upstream–in a region that suffers from poor terrestrial infrastructure and remote location.

“Companies here want solutions that bring fast broadband IP to them,” he adds. “That’s where we fit in.”

As for Intelsat? “We see major growth opportunities in the Middle East in corporate network solutions,” says Dajani. “In this scenario, Intelsat is a prime capacity provider for VSAT applications, offering conventional Ku-band premium power with good coverage of the region.

“We have seen more than 100 percent growth in Ku-band VSAT networks in the past two years,” he adds. In other words, Intelsat is not imagining this opportunity. It exists in the Middle East.

Where Rural Telephony Fits In

Which brings us to rural telephony via satellite. Or perhaps, it doesn’t. The reason: there’s still very little money to pay for this service in the Middle East, and hence, little activity in supporting it as well.

“Arabsat used to provide rural telephony, but it does not constitute a significant share in our services,” says Shoter. “Rural telephony is not identified as a major application in our business model,” adds Aygun. “But supplying telephone network backbones is a major part of it, so rural telephony by VSAT could easily be a sub-application of it.”

Intelsat’s Dajani, however, still hopes to provide widespread rural telephony in the Middle East.

“Intelsat has always been very committed to connecting even the most rural parts of countries with the rest of the world,” he says. “In the Middle East, our rural telephony business is unique since we provide capacity in both C- and Ku-band for domestic applications. Both our Atlantic Ocean and Indian Ocean region satellites are a suitable fit for the region. Additionally, we can secure global and regional connectivity with the same satellite.”

How To Succeed In The Middle East

As far as Arabsat’s Shoter’s concerned, attracting customers isn’t a problem in the Middle East. Instead, “the real challenge is providing enough space segment and new services.”

Shoter is correct: the demand exists here for satellite services. However, to succeed, they must be affordable, and they must be marketed within the political and social realities of this region. If this means working closely with state-owned PTTs, so be it. If it means censoring TV shows to avoid losing one’s license, then do it.

As drastic as this may sound to Western readers, such conditions are common in the Middle East. Those companies who want to do business here need to heed these realities, and more besides.

In particular, religion and politics must be given attention. You can’t stomp through Riyadh hawking Israeli earth stations, any more than it would be wise to promote Sunni Muslim TV shows in Iran.

But what about the Middle Eastern economy: can customers afford satellite in these cash-strapped days? Yes, says Shoter. “The downturn in the world economy has not affected Arabsat business,” he adds. “On the contrary: there is a continuous growth in the demand on our services.”

“However, Eurasiasat’s take-up profile is not doing as well as expected,” says Aygun. “Our core market is Turkey, and Turkey is currently facing a severe slowdown of its economy,” he adds. “However, the market still exists there, and the demand will resume when the Turkish economy recovers, which is expected soon.”

On the other hand, “the world economy downturn and notably the collapse of the Internet-based economy has also contributed to the relative slowdown,” Aygun says. Translation: Eurasiasat would sure like to see the world economy get back into gear fast.

So would Intelsat. “The downturn of the economy has affected most types of businesses on a global basis,” says Dajani. “Our business, like most others, has been somewhat affected.

“When the September 11th attacks first occurred, Intelsat saw an increase in our occasional use television traffic more than triple what we normally carry over the Atlantic, and a seven-fold increase over the Indian Ocean regions,” says Dajani. “We expect traffic to continue to increase in the Middle East as we are still receiving additional requests, and customers are deploying SNG equipment into countries here.”

DBS/DTH isn’t the only aspect of the Middle Eastern satellite business that’s improved recently. “The events of September 11th have also resulted in an increased interest in videoconferencing,” says Olshanetsky. “Businesspeople are more reluctant to travel these days and as a result, we’re seeing an increase in demand for videoconferencing solutions.

“In addition, many companies are seeking satellite back-ups for their existing terrestrial systems,” he adds. “We’ve seen an increase in demand since 9/11.”

The Future Remains Unclear

So what lies ahead for the Middle East? This is a notoriously difficult region to predict trends with any reliability. So instead, Via Satellite offers what we hope to be reasonably educated guesses.

First, DBS and Internet demand will continue to grow in the Middle East: politics, religion, and war notwithstanding.

Second, Arab antipathy toward Western values won’t prevent these states from assessing Western satellite technology, and picking whatever solutions best suit their needs.

Third, successful marketers will stay clear of thorny issues when approaching potential clients here. They’ll stick to the benefits of their wares, and put their customers’ interests first.

Fourth, the political and geographical realities of the Middle East will still play to satellite’s favor. In other words, this will remain an expensive and dangerous place to lay cross-border fiber optic cables. For reliable communications links that can be deployed quickly, satellites will retain the upper hand.

James Careless is a contributing writer to Via Satellite.