After an anxious wait for owner Shin Satellite, the IPStar spacecraft, which the company designated Thaicom 4, was launched earlier this month onboard an Ariane 5G rocket. Shin now will attempt to tap into the growing demand for high-speed Internet services in Asia with one of the most ambitious satellite projects in the world. Shin plans to use the spacecraft, which offers 94 spotbeams and a capacity of 45 gigabits per second, to compete against terrestrial alternatives in providing low-cost user terminals and bandwidth to homes, Internet cafes and small and medium enterprises. Shin also plans to target areas where there are no terrestrial options.

The challenge for Shin will be to sell as much capacity as possible in a short time frame after the satellite beings operations in September. Prasit Sujiravorakul, a satellite analyst at Capital Nomura Securities said Shin needs to achieve 25 percent capacity to reach breakeven on the spacecraft. “The project should reach the breakeven point in one to two years,” he said. “They should have 40 percent growth in subscribers over the next year. If they are successful in China or India, they can very soon reach the breakeven point.”

Richard Moe, a satellite equity analyst at MacQuarie said, “My belief is that if you are talking to 2 million to 4 million broadband subscribers, which are beyond the reach of ADSL [asymmetric digital subscriber lines] for the foreseeable future, that is not an ambitious target when you are talking about half of the world’s population, which includes India and China. I think their strategy is a winner. The degrees in which it becomes a winner still remains to be seen, but I would think in the next couple of years it should become apparent that there is a huge amount of demand for its products and optimistically, we could see significant progress along that road over the next six to nine months.”

In an exclusive interview to Satellite News international editor Mark Holmes, Shin Satellite CEO Dumrong Kasemset, talks about the launch as well as his hopes and expectations for satellite broadband services in Asia.

Satellite News: What was your reaction to the launch of the satellite?

Dumrong: We are very pleased that we have had a successful launch of the satellite. Everything has gone well. We are pleased with the results so far. We are very much looking forward to the commercial launch, and so are our customers, as they have been waiting quite some time.

Satellite News: What are the major challenges for Shin Satellite in the year ahead?

Dumrong: The number one challenge will be the commercialisation of Thaicom 4. The commercial program is quite different to what we have with traditional satellites. With a conventional satellite, we are paid according to the number of transponders linked to television broadcasts. For example, if 10 channels come to your station, you uplink the 10 channels and no matter how many customers that gains, you get the same money for those transponders. With Thaicom 4, we will have a different business model. We sell transponders according to what the operator sells in terms of bandwidth to the end user. Basically, every customer the operator gets turns into revenue for us. We have a vested interest in the end-user subscriptions.

Thaicom 4 is consequently a major activity for us and our partners in terms of branding and marketing. These are activities that both ourselves and our customers are involved in. We just can’t sell the transponder, uplink the capacity and let them get on with it and leave them alone. We have to help them get the job done.

Satellite News: How much capacity have you sold on the Thaicom satellite and what are your targets?

Dumrong: On a conventional satellite like Thaicom 5, we already have a deal with one of our partners, UBC, for half the Ku-band capacity. That means when the satellite is launched, which will be the second quarter of next year, they will buy the uplink. With Thaicom 4 , it will take the telcos time to rollout the service in each country. For example, for our first NSO [National Service Operator, the name for an entity that buys the bandwidth for a country with the purpose of reselling it to smaller entities] in Thailand, it will probably take about six months because they already have a large capacity demand. Our job is to make sure we can support their rollout to 300,000 subscribers. For China you are talking about capacity of 12 gigabits per second, which is roughly 1.2 million subscribers. Therefore, we have to plan how fast and how far they can get the 1.2 million subs in place. It will take around three years to rollout the service completely.

Satellite News: Has your business plan been affected by the fact that the satellite has been launched later than planned?

Dumrong: I think we are the fastest to get a broadband satellite into orbit. It is the biggest satellite and the largest capacity available in the world today. We will be the largest platform globally. I don’t know if we could have got there sooner. When doing this, there are financial and technical challenges. There are also commercial challenges, but we have had success with the first generation of services so far. We already have 20,000 terminals in the market using conventional satellites in orbit today. That is 20,000 subscribers at fairly high prices but those are early customers such as SMEs. In the second phase of the operation we are actively looking to address the end users. The cost part will be much lower and the volume will be much higher and affordability will be much better. If we launch successfully, you should be able to buy the Thaicom 4 services from us for anywhere in the region at $50 a month. It might even be cheaper in some places.

Satellite News: How difficult it will be to sell satellite broadband to subscribers?

Dumrong: We already have successful services in countries such as India, Thailand and Australia. I think the kinds of services we provide on Thaicom 4 are well defined by the market and competing technologies. Thus, end users will already have an awareness of broadband. A number of customers will be in areas where there will not be an alternative. We do not think it will be difficult to explain to the end user what we are all about.

Satellite News: How do you see the satellite broadband markets developing in Asia, especially in areas where you will compete with terrestrial networks?

Dumrong: ADSL can address 70 percent of the market. I think a technology like IPStar, with a competitive cost structure and availability, will prove successful. Even in cities such as Bangkok, we expect to sign-up customers, as there is poor service in some areas. We think the market in Asia is at least 300 million to 400 million broadband subscribers. Our target is to gain 2 million to 4 million subscribers, so we are looking to gain about 1 percent of the overall market, and we do not think that will be a major issue.

We are a complementary network to terrestrial technologies, so we are not competing with them directly. We are not trying to gain 99 percent of the market. We are trying to get 1 percent. It is, however, a very important 1 percent, as they are in places where people cannot get service.

Satellite News: Do you see this being a key year for satellite broadband globally, with WildBlue launching services in the United States and your own plans in Asia?

Dumrong: It is the year for broadband satellite because, up to now, nobody has been able to provide broadband services in the region for $50 a month. That requires the lowest-cost user terminal, the most robust technologies and the lowest-cost satellite technology available, and I think this year you will see the whole thing coming together for once. I don’t know about other systems, but from our experience it takes a lot of work to deploy these terminals and get through the technical glitches. I believe we are there in terms of achieving the type of maturity that we need to have a large number of users.

Three years ago, we started out with the first customer. Now, in the first quarter, we passed the 10,000-customer mark. This quarter past, we passed the 20,000 mark without Thaicom 4. With that satellite, we feel as though our job will be a lot easier. We have been improving products in the market such as the ground terminals, and with the bandwidth much cheaper on Thaicom 4 than conventional satellites, we think we can easily cross the 100,000-customer mark very soon.

Satellite News: What are your subscriber targets in China and India?

Dumrong: I think these are our key, targeted, customers. In India, we have 6 gigabits per second worth of capacity. That means the expected sub total we can get from Thaicom 4 is about 600,000. In China, it is about 1.2 million. If they need more, we can build more; but let us face that problem when it comes.

Satellite News: Where would you expect to be with Thaicom 4 in two years?

Dumrong: We will be commercially successful and the success of Thaicom 4 will probably put us in a very good position in terms of further potential to grow in other parts of the world like Eastern Europe and Latin America. We also need to keep our eye on the existing business. In one year, we will have Thaicom 5 in orbit. In the next year, you will see the launch of HDTV [high-definition TV] in our part of the world and we will, as always, be the pioneer for this technology.

Satellite News: How soon do you think you would be in a position to move into Europe and Latin America?

Dumrong: As soon as wehave successfullyrolled out across the Asia-Pacific Region we will be in a position to review these opportunities.

Satellite News: How do you see HDTV developing in Asia over the next 12 months?

Dumrong: The market for HDTV will be different in this region. As you know, the average income is lower than in the U.S. and in Europe, so I suspect you will have different tiers to the market. Tier One is a low-cost mass market for DTH [direct-to-home], given the availability of $50 user terminals. Tier Two is the traditional premium pay- TV service. Tier Three will be the super-premium HDTV market. In 1995, when the first DTH platform got started, the user terminal was $500. Now, it is $50. It is the same with mobile phones, the prices came dramatically down. The costs associated with the user terminal will have a major impact in terms of the adoption of the technology. I like both the TV and broadband businesses.

Satellite News: What are you capital expenditure plans after Thaicom 4?

Dumrong: We have made a huge investment to prepare for the future and now we are looking for a return on that investment. What you see in terms of the Thaicom 4 launch, is that we have completed the main capital expenditure plan. We have also just announced an additional $100 million of capital expenditure for Thaicom 5, which we are partly financing with funds from operations and from new supplier credit.

Satellite News: If Thaicom 4 services were very successful over the next couple of years, how soon could you launch the next broadband Internet satellite?

Dumrong: It is too early to speculate that far. We need to focus on our job in the Asia-Pacific first.

(Richard Jones, Shin Satellite, richardw@thaicom.net; Prasit Sujiravorakul, Capital Nomura Securities, Prasit.sujiravorakul@th.nomura.com; Richard Moe, MacQuarie, Richard.moe@macquarie.com)