ComNews   10.12.2016  

 





Leonid Konik,
Editor-in-Chief

Russian Skies Calling

Russia’s satellite services market was worth less than US $1.02 billion in 2012, and had risen to an estimated US $1.15 billion in 2013. This is only about 1% of the global satellite services market (including satellite TV). But the sheer size of Russia, its unique geography and the low population density of Siberia, the Far East and its Subarctic regions hold a promise of dramatic growth in the years to come.

The Far East Federal District of Russia, for example, which is sized upwards of 6.2 million square km (or more than 2.4 million square miles), has a population density of only 1 person per 1 sq. km (or 2.6 per square mile). Given this kind of population density on such a vast territory, it is obvious that, more often than not, satellite coverage will be the only way to provide broadband Internet access, TV signal, or backhaul for cellular base stations. Subarctic Russia stands on a permafrost tundra. It would be either too cost-prohibitive or prove downright impossible to sink a fiber optic cable there.

 Some of the reasons why Russia’s satellite services market is so modestly sized include the chronic shortage of satellite bandwidth assets, which owners of Russian satellites experience on a regular basis, the inferior quality of Russian-made satellites, and the regulatory barriers that foreign satellite operators have encountered in Russia until very recently.

But all that may be about to change. One of the two Russian satellite constellation owners, Gazprom Space Systems (GSS), a part of the national gas holding Gazprom, successfully launched two new satellites (Yamal-300K and Yamal-402) on the cusp of 2012 and 2013, instantly multiplying its orbital capacity to a 129.5 transponder equivalent (TPE). The capacity available on Yamal-300K and Yamal-402 has sustained Russia’s satellite market for all of 2013 and all of 2014 so far.

Russia’s another constellation owner, the state-owned Russian Space Communications Company (RSCC), has no capacity available at this point. The recent RSCC launches, which were in August 2011 (Express-АМ4 made by Astrium) and August 2012 (Express-MD2 made by the Russian Khrunichev State Research and Production Space Center), were failed due to a problems with the launch vehicle, Proton-M. The existing RSCC satellites are loaded to 95-99% of their capacity.

But RSCC did not despair, initiating an ambitious constellation renewal program on an unprecedented scale with 8 new satellites scheduled for launch before 2016. The first one, Express-АМ5 manufactured by Russia’s Academician Reshetnev Information Satellite Systems (ISS), blasted off from Baikonur launch site on 27 December 2013. But because the craft was too heavy, the Proton-M with the upper stage Breeze-M was not strong enough to propel it beyond the interim orbit. With that in mind, ISS has, for the first time ever, fitted its satellite with an electric propulsion. That engine, made by Kaliningrad’s Special Design Bureau Fakel FSUE, will be taking Express-АМ5 the rest of the distance to its designated orbital position at 140º E. ISS expects the satellite to reach its final destination in about 100 days, so RSCC counts on its new satellite to be up and running some time in May 2014.

RSCC has five more satellites scheduled for 2014: Express-АМ8 (14º W), Express-АМ6 (53º E) and Express-АМ7 (40º E). The launch of the two other craft, the DTH Express-АТ1 and Express-АТ2, is planned for 16 March 2014.

The strategic vision declared by RSCC is to make it to the top five of the global satellite players. The only hitch is that, whereas back in 2011 the company had wanted to achieve that same target in 2015, it has had to push its deadline back to 2020.

It is not going to be easy for RSCC to get there. In the most recent ranking of the world’s premier fixed satellite operators, released last August by the American research and publishing agency SpaceNews, Inc., RSCC was two spots down from where it was in 2012. And it was six spots down from its heyday in 2008, when RSCC managed to climb as high No. 6 on the global satellite charts.

Whereas in 2011, RSCC grossed US $229 million and scored 9th in the SpaceNews rating, in 2012 it earned only US $209 million and ended up 12th. The Hong Kong-domiciled AsiaSat and Thailand’s Thaicom, which had ranked 11th and 12th respectively in 2011, pulled ahead of RSCC in 2012 with the 10th and 11th slots, respectively.

Two other satellite operators with Russian roots, GSS and Intersputnik, kept their 2011 rankings in 2012: 23rd with US $81.3 million and 24th with US $80 million, respectively.

The top five international satellite players, and their ranking order, were the same in 2012 as the year before. In the descending order, the top five positions were held by Intelsat, SES, Eutelsat, Telesat (Canada) and SkyPerfect JSat (Japan). The top three made US $6.68 billion between them in 2012. If we compare the revenue of Intelsat, SES and Eutelsat for that year, those three earned 18 times as much as Russia’s top three satellite players RSCC, GSS and Intersputnik put together.

In 2008, the research agency Euroconsult, Satellite Finance magazine and SpaceNews voted RSCC “regional satellite operator of the year.” RSCC grossed US $228.1 million that year, nearly as much as it would in 2011. GSS has shown a similar dynamic: its revenue peaked at US $83.7 million in 2008, and that figure has never been matched since. However, both RSCC and GSS had exactly the same number of spacecraft in orbit in 2012 as they did in 2008: 11 and three, respectively.

Meanwhile, international regional operators saw their revenues climbing year to year, 2008 through 2012. AsiaSat, for one, grossed $133 million in 2008 and US $234.2 million in 2012. Thaicom’s revenue increased from $128.2 million to $239.7 million in the same years, and Arabsat’s revenue climbed from US $157.6 million to US $300.5 million. China Satellite Communications Corporation saw a revenue growth from US $117.4 million to US $205 million.

For any satellite operator, revenue growth is tied to new craft in orbit. As soon as GSS launched its new satellites Yamal-300K and Yamal-402, its revenue shot up to a record US $89 million the first year in 2013 (according to a ComNews Research estimate). On the other hand, RSCC’s revenue kept shrinking in 2013, and bottomed out at US $184 million by year-end (according to a ComNews Research estimate). One reason for this was that RSCC’s Express-АМ1 satellite, which had begun malfunctioning as early as 2010, was sent on its disposal orbit in April 2013; the other reason was the July mishap with Express-MD1, which was subsequently lost. As a consequence of those misfortunes, Russia’s satellite services market saw its first change of transponder capacity leadership ever in the summer of 2013 as RSCC was pushed out by GSS with 129.5 TPE of capacity beamed to Russia versus RSCC’s 103.4 TPE.

To a large extent, the problems experienced by both RSCC and GSS are attributable to the inferior quality of Russian-made satellites. On average, they never even reach the half of their manufacturer-warranted active lifetime. But a whole new problem emerged more recently: Russian launch vehicles have suffered one emergency after another.

The situation is changing, however. RSCC and GSS no longer order their satellites from Russian manufacturers only. They also order outside Russia, from Thales Alenia Space (TAS) and Airbus Defense and Space (formerly EADS Astrium). Moreover, now TAS and Airbus Defense and Space both have joint manufacturing ventures in Russia. Since Russia’s Federal Space Program did not budget for at least one vehicle for an RSCC launch in 2014, RSCC may be compelled to pay for a commercial launch for the first time in its history (to date, all RSCC launches have been paid for by the Russian government). This may give RSCC more freedom in its choice of satellite manufacturers going forward.

The years 2012 and 2013 were a turning point for the mobile satellite industry as well. Thuraya and Iridium both secured the legal right to provide services all over Russia in 2012. Globalstar completed the full rollout of its second generation global network in mid-2013. And Inmarsat finalized its Russian strategy, which is divided between its independent service provider and its subsidiary Moscow Teleport. Thus, by mid-2013, the Big Four of the global MSS market were all in Russia

Last but not least, Russia joined the WTO in August 2012. According to the Protocol on the Accession, signed by the Russian Federation with WTO, and the Schedule of Specific Commitments in Services as its appendix, from 2015 on, there should not be any limitations on market access for any satellite services provided by foreign satellite operators to any Russian legal entity possessing a license for telecommunication services.

So from 2015 on, there will be more competition in Russia’s satellite services market than we have ever seen before.
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