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"This is Ground Control to Major... bow-Wow": Updates on the Russian Satellite Industry by Andrey Gidaspov
"This is Ground Control to Major... bow-Wow": Updates on the Russian Satellite Industry
Sometime in the 1950s, the famous Italian monkey trainer Capellini showed his impressive skill at the famous Soviet Circus on Tsvetnoi Boulevard in Moscow. One day he was approached by some stern-looking men in grey suits. They pulled him aside and bombarded him with awkward questions, like -- how much time do you usually spend training a monkey to wear shiny shoes? Or how well can they handle injections? Can they carry human diseases? What happens when a monkey is alone for extended periods of time?
Soon after that meeting with Capellini, some interesting events began to occur in the Russian capital. Black autos with tinted windows would stop in the middle of the day or night in Moscow neighborhoods and teams of athletic guys would come out to hunt stray dogs. The odd thing was that these guys would catch only dogs that weighed less than 6 kg and were no taller than 35 cm. The barking fellows were put in mini-vans and driven to the "Dynamo" soccer stadium.
What connected these two events? You've probably guessed by now. Soviet space scientists and bio-medical professionals (in the Institute located near "Dynamo") were selecting the best crew for the first space odyssey. Apparently, monkeys were too sensitive and unprepared for long flights in inconvenient conditions, while stray dogs grilled by every day Moscow street life were just perfect for the harsh realities of the vacuum, noise and other unexpected disturbances of space travel. Paving the way for future cosmonauts, from 1951 to 1961 some 29 space shuttles filled with men's best friends flew towards their own "Space Oddity." Finally, on April 12, 1961, Yury Gagarin became the first man to challenge space, opening the doors for the Soviet/Russian satellite industry.
Little did he know that in just 40 years the Russian Space Agency would serve as a futuristic travel agency sending wealthy tourists into the first astral travels. Don't you see it as science fiction coming true? When ecstatic Richard Branson comes out with his space odyssey plans, Stephen Hawking tests anti-gravity, Roman Abramovich is packing his stuff to meditate on the Moonlake and probably making plans for a new Chelsea soccer field at the Lunar crater Daedalus, there is a sense of new reality around us. The future is above us, gleaming through the shuttle window.
However, let's leave space travel for some time and have a look at mother Earth. In Russia there is still a great need for satellite communications pinging from some 25,000 locations that do not have telecom connections. The Russian satellite industry has become vital for a country of that sheerness. Connection to some remote areas in Siberia, the Far East and North is only possible by satellite.
In 2007 the key factor in the development of the satellite industry has become the National Educational Project that stipulates installation of about 12,000 VSAT-terminals to connect Russian schools to the internet. Over 12,000 terminals are also required to provide universal services in Russian remote areas.
According to the Russian Space Communication Company (RSCC), the satellite market is growing further due to large national projects, an increase in TV and radio-broadcasting networks, especially in the regions, as well as a gradual decline in equipment costs. The only deficit in the market is the lack of orbit-frequency spectrum. Two major Russian satellite operators, RSCC and GazCom are set to launch new satellites in 2007-2010. Thus, to cover Central and Western regions RSCC will launch its Express-AM33 and Express-AM44 and Express-MD1 satellites in September and December 2007. Furthermore, adding satellite capacity for Eastern and Central Russia, RSCC will launch «Express-AM4» and «Express-МD2» in 2008. On top of that, to specifically cover radio broadcasting needs, RSCC plans to send three more satellites into orbit.
With 80% of the Russian satellite market share, RSCC affirms that TV represents a rapidly growing segment of the satellite service market: last year its share reached 35% among all RSCC services. Thus, RSCC satellites provide services to over 115 Russian and foreign TV and radio channels. Corporate clients and operators contribute some 30%, while the internet accounts for 20%.
At the same time, foreign clients represent 48% of all RSCC service volume, while the saturation of transponder capacity only grows (in 2005-2006 it reached over 90%). Development of regional TV remains among the segments with the best prospects in the Russian satellite market. According to analysts, in 2006 some 15 regional satellite networks were installed. The trick is that satellite broadcasting is often the only available means to deliver quality regional programs to digital broadcast networks. Sixty regional satellite TV channels are broadcast in 49 Russian regions today, reports RSCC. RSCC is ready to invest some USD 2 billion in the next eight years.
RSCC's major rival, GazCom, also plans to invest about USD 2 billion to develop its satellite fleet by 2015. As Vedomosti reported, GazCom is set to launch two more satellites "Yamal-300" in 2008, plus six more later. All in all, by 2015 GazCom will launch 15 satellites. While in 2000 GazCom broadcast only five channels, today it carries 80. In parallel, the demand for GazCom's satellite capacity grows at 15-20% annually.
Russian VSAT Market Trends
Analysts estimate that the VSAT market in Russia will grow 50% to 70% in 2007, and the number of installed VSAT terminals should reach 20,000. Many existing Russian satellite operators have over 1,000 terminals within a single's operator network. There is growing competition among equipment suppliers, where major market players, like ViaSat, HNS, and Gilat Network Systems are being threatened by new players, including iDirect Technologies, ND SatCom, Shiron Satellite Communications and EMS Technologies.
Among the core customers are corporate companies and operators, energy and oil companies, and retail chains. Yet their number is somewhat limited, while operators try to cater to their needs with ever lower pricing. Thus, the competition among satellite operators continues to grow. One major problem that adds to the competition is a lack of orbit frequency spectrum. Operators are awaiting availability of the Ku-spectrum that should be available in 2008 in both RSCC and GazCom.
The major regions where VSAT business is focusing on are the Urals, the Far East, Chukotka and Kamchatka. These remote areas with harsh terrain are in dire need of modern communication, and VSAT provides the perfect match for them. At the same time there is a trend towards further specialization of satellite operators: some work in a lower price niche, and others work mainly with corporate customers building VPNs and carrier networks. Yet, many operators are cultivating ties with the same corporate customers, cutting tariff rates.
Consolidation among operators is not yet significant, as the market is large enough for operators to co-exist. One interesting trend has been that large system integration companies are buying local satellite operators, investing into infrastructure and moving towards the VSAT business niche.
While the government makes steps to simplify VSAT registration procedures, operators indicate that this process has not been perfected yet. For example, there are contradicting regulations between two government agencies, the Russian Ministry of Communication and the Russian Consumer Control Agency, on obtaining sanitary and epidemiology certificates. Also, VSAT operators identified these procedures among the most expensive and labor intensive. Another problem is import of radio electronic equipment to Russia. There is a list of equipment recommended by the State Committee on Radio Frequencies (SCRF). Yet the Customs Committee does not take SCRF recommendation as a regulation, and requests permits for these imports.
(You can find contacts for major Russian satellite operators and integrators at: http://www.gidabyte/catalogue/sat_rus/
About the Author
Andrey Gidaspov lives and works in Hong Kong and has over ten years of experience in business consulting in the IT and telecom (ICT) fields. From 1995 to 2004, Andrey worked as an IT and telecom sectors advisor to the U.S. Department of Commerce in Central Asia and Russia. In September 2004 Andrey moved to Hong Kong with his family and opened his telecom consulting business - GidaByte (www.gidabyte.com).
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