by Theresa Foley

Russia enters the new millennium planning to launch several new, modern satellites that should improve the transponder shortage of the late 1990s. However, Russia’s enormous problems in its telecoms development will continue to handcuff its domestic satellite companies, and the country’s closed regulatory system will do little to make outside operators welcome.

A New Russian Fleet

The good news for Russia was the launch this fall of Lockheed Martin Intersputnik’s LMI 1. As of presstime, Eutelsat’s Sesat was scheduled to be launched in November or later. The Russian Satellite Communications Co. (RSCC) had a setback on October 27 when a Proton launch failure destroyed the Express A1 satellite.

The introduction of new satellites will continue in 2000, with two more Express As scheduled for launch by summer, plus the possibility of two new Troyka satellites for RSCC around mid-year. RSCC is under pressure to fill its slots and use the positions and frequencies allocated to it by the fall of 2000, when Russia’s international priority for certain slots will expire if they are not occupied.

RSCC operates 11 satellites, including two older Express’s at 14 degrees W and 80 degrees W; eight Gorizonts at 11 degrees W, 40 degrees E, 53 degrees E, 90 degrees E, 96.5 degrees E, 103 degrees E, 145 degrees E and 140 degrees E; and an Ekran at 99 degrees E. Of those, six had surpassed their scheduled life times by fall and two more were to reach the end of predicted life in 1999. Customers and operators inside Russia are anxious for the new capacity. "Express A is a very important project for Russia," Nikolay Lukyantsev, RSCC deputy director general, said.

The first two new Express As, including the one that was destroyed, were fully booked prior to launch, he said. Intersputnik, broadcasters and VSAT customers were going to use the lost satellite.

The Express As are being built by the French-Russian team of Alcatel Space and NPO PM RSCC, and the Russian Space Agency, RKA. If the investigation of the Proton failure can be resolved quickly, the second Express A will be ready for launch early in 2000, and the third by the middle of 2000. The second Express was to be placed at 14 degrees W, replacing an Express 2, carrying only nine transponders, that was launched in 1994.

Alcatel and NPO PM also built Eutelsat’s Sesat satellite, which will expand Eutelsat’s reach into the country. Russia has been a Eutelsat member since 1994 and has a two percent investment share in the organization. Eutelsat also covers Russia with its Hot Bird satellites at 13 degrees E, which carry a digital package of NTV channels for a Russian audience. Another Eutelsat satellite, W4, will be positioned at 36 degrees E with Sesat to provide additional services for NTV.

"Sesat is an excellent commercial project for Eutelsat in the sense that it takes us another step along the Marco Polo route to the East in response to market demand to take Eutelsat into the global league," says Guiliano Berretta, Eutelsat’s director general. "The satellite’s wide beam provides opportunities for interconnectivity between Western Europe and Russia, while the steerable beam will in principle cover the India/Pakistan region. It will be an important business-to-business satellite, which we expect to be used for applications such as two-way Internet access with no dependency on terrestrial links, for corporate networks using dynamic bandwidth allocation, and for the Euteltracs fleet management messaging and positioning service."

Berretta says Sesat is a ground-breaking industrial venture, since it represents the first time a satellite operator has contracted the construction of a satellite to a Russian prime contractor (NPO-PM) with a payload supplied by Alcatel Space in France.

Michel Siorat, Alcatel Space Industries vice president for commercial and international business, says the cooperation shows it is possible to work with the Russians: "Their equipment is reliable and works very well. We have no more problems with them than with other manufacturers."

Siorat says despite Russia’s economic dilemma, Alcatel, which supplies the payload, had no trouble collecting payment in U.S. dollars for the Express series from NPO PM, the prime contractor. "We have been paid on schedule on the contract. It was a standard price," he says.

The Alcatel-NPO team continues its cooperation on Troyka, which is the result of a 1996 RSCC initiative to seek Western cooperation to upgrade its aging fleet and finance the new satellites. RSCC required that a Russian satellite manufacturer serve as prime contractor, and asked for proposals. The Russian government was going to provide slots and launchers, in exchange for sharing the rights to market capacity on the new satellites.

Two projects were selected: the three-satellite Troyka, consisting of higher capacity Express K satellites from NPO and Alcatel, and Yamal, a two satellite-system from the satellite arm of the giant Russian natural gas company Gasprom, that would be built by Russian aerospace manufacturer Energia with a yet-to-be-selected non-Russian partner.

Troyka and Yamal have taken longer than anticipated to move ahead, but each showed signs of progress. In October, Troyka’s backers were close to obtaining financing. "We are in agreement but there are difficult problems with guaranteeing political risk and providing penalties for the Russians if we do not launch in time," Lukyantsev says.

Gascom, which took on Alenia of Italy in October as its partner on the Yamal 200s, is a joint stock company, established in 1992 by Gasprom and RSC Energia to become an independent satellite operator. It leases some capacity from RSCC and operates one new satellite, a Yamal 100 launched in September. The launch included two Yamal 100s that had been purchased from Energia, but one of the satellites, which was to have been positioned at 49 degrees E, failed immediately after launch. Telemetry from the satellite failed and Gascom was still unaware of the cause of the failure in October, according to Nickolai Sevastianov, Gascom’s general director.

The working satellite was positioned at 90 degrees E and Gascom planned to use half its capacity for its own use and half for outside customers, Sevastianov says. Gascom users include a 60 earth station network for Gasprom, a broadcast network to support Gasprom’s digital television station, and corporate networks for Gasprom and outside customers.

The Yamal 200 satellites will have twice as many transponders as the Yamal 100s and operate in both C- and Ku-band. Alenia will be responsible for the payload, while Energia will provide the satellite buses, and Gascom the financing, Sevastianov says. "We are going to work as an operator, and we are selecting partners to work with us on marketing and sales." The satellites could be launched as early as late 2001.

Replacing the aging fleet will be a major challenge for RSCC in 2000. Michael Topalov, executive vice-chairman of Inspace, which is an advisor to the Russian Space Agency on Yamal and Troyka, says Russia is under great pressure to launch the new satellites or find some other way to occupy its slots by late November 2000. If the new satellites cannot be orbited by then, he expects Russia to make agreements with non-Russian satellite operators that need orbital slots and are willing to pay to use the ones belonging to Russia.

Another new source of capacity is the LMI 1 satellite, launched September 27, to its position at 75 degrees E by Lockheed Martin Intersputnik. The joint venture belongs to Intersputnik, a 23-member intergovernmental organization that provides marketing, and Lockheed Martin Global Telecommunications, which provided an A2100 satellite. The project cost $250 million. The investment should be recovered in five years, and beyond that Lockheed Martin and Intersputnik will divide profits on an 83/17 percent basis respectively.

The joint venture plans to put four LMI satellites into orbit. The 44-transponder LMI 1 will serve Russia, the CIS, Europe, Asia-Pacific, the Middle East and Africa. Prior to launch, Intersputnik signed contracts to lease a large portion of the 44 transponders aboard the satellite, but whether the two primary tenants on the satellite would actually need all the capacity for which they had signed up was uncertain, according to Lockheed officials. Rostelekom, a Russian long distance and telecom service provider, took 25 C-band transponders, and Sistem Telecom, a new Russian multimedia services company, contracted for eight Ku-band transponders for TV distribution and multimedia services.

Stefan Kollar, Intersputnik’s sales director, says Rostelecom will need no more than 10 of its transponders through the first half of next year, since the company must complete its ground infrastructure for the network. Sistem Telecom should be using all of its transponders by the middle of 2000. By late November, Kollar expects contracts to be signed with Middle Eastern and Asian customers for the remaining eight Ku-band transponders.

"We have more requests for the C-band transponders left than we have capacity. Many Russian companies need them for TV distribution and a couple of companies from the Indian region need them for Internet services," he says.

Kollar says Intersputnik of Moscow will ask the LMI board at a November meeting, scheduled to take place as we went to press, to approve the start of the second LMI satellite, which could be orbited 30 months later. However, Lockheed Martin officials say they are not inclined to approve a second satellite until capacity on the first is sold.

Broadcasting In Russia

In the DTH field, Media Most of Russia was able to advance its DTH service, NTV-Plus, in 1999 with the help of the Bonum 1 satellite, a Hughes-built satellite launched November 22, 1998. Under a 14-month contract, Hughes built an HS 376 satellite with eight 80-watt Ku-band transponders and provided a launch on a Delta rocket. The project cost, including insurance and mission control, was $150 million. A loan from Chase Manhattan Bank, guaranteed by the Ex-Im Bank, and further guaranteed by the Russian state bank, Vnesheconombank, funded Bonum.

Bonum is a division of the Media Most holding company, the only company in Russia that provides DTH services. In October 1999, NTV-Plus had 65,000 customers and an estimated 200,000 viewers, and was adding 6,500 new subscribers each month. The service carried 30 digital TV channels, including its own and foreign programming. The satellite is capable of transmitting 48 or more channels, and NTV planned to add at least five more in the fall. How long it will take for Russian TV to operate profitably was unclear.

"NTV-Plus is a long term project and cannot become profitable in a year or two," says Marina Levashova, press secretary for NTV-Plus. "The television industry was hit hard by the August 1998 crisis. NTV-Plus lost more than 100,000 subscribers. These people still have the equipment but do not have the money to pay the monthly charges."

By September, the service center was receiving 10,000 calls a day, which was a sign of improvement. "Lately the situation has been stabilizing and we cannot meet all the requests of new subscribers," she says. "We believe that the NTV-Plus project will become profitable within the next two years."

NTV-Plus began to deliver its digital TV service into the United States in October as part of an international expansion. NTV is also one of Intelsat’s big customers inside Russia, using 1.5 transponders to beam programs into 11 time zones inside the country.

International Participation

Besides the mainstream Russian satellite companies, many U.S. and European companies supply capacity or hardware to the Russian market.

Since the early 1990s, Scientific-Atlanta has been selling equipment for both the TV and voice/data sides of the satellite services industry into Russia. Scientific-Atlanta is still deploying circuit-switched data networks in Russia even though the rest of the world is moving to packet-switching, says Stephen Spengler, Scientific-Atlanta’s director of worldwide sales for satellite telecommunications. He says the growth of VSAT networks in Russia has been somewhat impeded by regulatory difficulties in the area of licensing, but some operators have been able to overcome these challenges and implement networks on a national or regional basis. In 1995, Scientific-Atlanta was selected to provide more than 50 earth stations across Russia for Teleport TP, a company owned by Metromedia International Group and Rostelecom, to support long distance telephone calling and intercity data communications.

ITC Sirena, a company developing a network to help Russian airlines manage ticketing and reservations, also purchased a Scientific-Atlanta Skylinx-based network for voice and point-to-point on-demand data. Another sale was to V-Sat Telecom, which used Scientific Atlanta’s Skylinx dish in a private network for the oil company Rosneft in a precursor to the more advanced network that Comsat just won the contract to supply.

RSCC and STS, a local programmer owned by Story First, has bought Scientific-Atlanta’s Powervu digital TV transmission equipment for TV program distribution services, and Mantysk, another broadcast customer in the administrative region of Khanty Mantysk, has purchased a DAMA/Powervu system to distribute local television to 120 cities and towns.

Intelsat satellites in all three ocean regions provide links from Russia into North America, the Far East and also for domestic services. "Domestic service in Russia is where we have seen the most growth. Existing Russian satellites cannot keep up with demand," says Yuli Wexler, Intelsat’s group director for Europe. Intelsat’s domestic Russian business has grown from 14 transponders (36 MHz units) in 1996, to 18 in 1999. Revenues from Russia grew 6 percent from 1998 to 1999. A new satellite, Intelsat 901, will be launched in early 2000 to expand Intelsat services in Russia.

One of Intelsat’s Russian customers is Teleross, a subsidiary of GTS, which uses satellite capacity for an "overlay network" carrying voice and data for corporate customers. The service started in mid-1999 and takes 72 MHz of Intelsat capacity. Several other smaller Russian networks that cater to the domestic oil industry also are on Intelsat.

Digital services, broadband and a move toward packet-switched networks instead of circuit-switched ones also were evident in several satellite projects under way in Russia in 1999. MCI Worldcom, for example, one of the world’s largest telecom carriers, expanded its satellite services in Russia and Eastern Europe in May to include digital services in partnership with RSCC. The MCI service uses 10 Russian satellites and Turksat. Five international earth stations in New York, London, Moscow, Azerbaijan and Kazakhstan connect the network, and support transmission rates from 64 kbps to 2.048 Mbps and higher. MCI customers use the network for interactive data, file transfer, Internet, voice, data and videoconferencing.

Comsat Corp. is supplying its Linkway 2000 satellite network product to V-Sat Telecom Inc., a U.S. company that is installing a broadband network for Rosneft, a Russian oil and gas network, to connect ten subsidiaries located throughout Russia.

Interest in improving Russian satellite networks exists, but the country may have to wait to catch up to the rest of the developed world. Wexler says Internet services inside Russia lag a year or more behind other parts of Europe. While Internet demand has begun to pick up, the provision of ISP links to the U.S. Internet backbone was not occurring in Russia at the same rate at which it has been in other non-U.S. markets.

"The Russian market is in need of everything from a telecom standpoint. The immediate need is for basic telephone infrastructure and high-speed data circuits," says Spengler. "Pure demand is high. The question is, who can afford it? Russia is vast in size, it has an undeveloped infrastructure, and the means to grow. It also has a heritage in satellite communications; there is an understanding of how it works. The lack of funds and satellite resources means that in the near term, the market may not be strong, but with new satellites from RSCC and Intersputnik, the quality and the coverage will improve." v

Theresa Foley is Via Satellite’s Senior Contributing Editor.

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