With a population of around 250 million people, Indonesia is a great market for both DTH and cellular backhaul. We talk to some of the key protagonists in the region and find out whether the market can live up to its undoubted potential.

Sly Vision is a pay-TV success story in Indonesia. The operator, which goes under the Indovision brand has around 2.3 million subscribers, and Handhi Kentjono, the vice president of the company says the company expects to end 2014 with that number closer to 3 million subscribers. Kentjono also believes the market in Indonesia has the capability to reach anywhere between 16 to 22 million DTH households, which means there is still plenty of growth in the market.

While India maybe the ‘Wild West’ of DTH in Asia, Indonesia is not far behind with a number of pay-TV operators competing for marketshare. Sky Vision, the region’s number one buyer of satellite capacity, has around 130 SD channels and will look to expand this to 160 channels with exclusive content. The company has an S-band satellite with 10 transponders, a number capable of hosting its 160 SD channel goal. Kentjono, however, believes Sky Vision needs more satellite capacity, and says the company is already thinking about its next satellite.

“We plan to acquire a new satellite so that the second satellite will boost our capacity and we can have a better offering in the future,” he says. “When we launch a satellite, it will be on the same spectrum, so S-band, which has 150 Mhz. That will be another 10-transponder satellite that we are looking at. In terms of the timeline, we are looking to buy this satellite in the next 2.5 years. We will look to buy the satellite just like we did with the existing satellite. The previous satellite was built by Boeing, but we will open the bidding and it will be an open competition among all manufacturers.”

Not many DTH operators offer their services via S-band, but Kentjono believes this is a key competitive advantage for the company. “In Indonesia, where you have 17,000 islands, this gives a lot of reasons why satellite is needed. Being an equatorial country, and with much rain, this creates a greater need for satellite. So, we are happy to use S-band. This satellite can withstand the weather of the tropics,” he adds. “Secondly, we have been in the business quite some time. Our brand, Indovision, is very strong. We have the top three pay-TV brands in Indonesia: we have Top TV, Indovision and OK Vision; all of those are within our platform. With Indovision there is 94 percent awareness — that is very high. So, this is very conducive to the acquisition of new customers. We have 30 exclusive channels that other platforms cannot have.”

While the company may invest in a new satellite, it will leverage its position in the market to invest in other technologies to boost its proposition.
“The great effort will be to bring a return path, both wired and wireless. We will deploy this with our affiliate company to customize our existing DTH service. We want to bring the interactivity of IPTV,” Kentjono says. “There will also be the continued migration from MPEG2 to MPEG4, but I would say the return path is a must, if we want to add new service to our platform.”

Other Players

Sky Vision is not the only player in the market, however. There are a slew of new players, such as Aora TV, that are trying to steal marketshare.

Aora TV, which has had a DTH licence in Indonesia since 2008, relaunched its service the same year it received the license and now has around 500,000 households in Indonesia taking its services. Guntur Siboro, Aora TV’s director of satellite TV, says the market has a lot of potential for growth. “Current pay-TV penetration in Indonesia is only about 5 percent. This is due to the availability of good FTA channels where most Indonesians can receive FTA signals almost everywhere. There are 11 national FTAs and many more regional FTA channels, so the options to watch TV are plentiful,” he says. “Acquiring pay-TV subscriptions is not that difficult, but retaining them to continue to pay for premium contents and not falling back into FTA offers is an ongoing challenge. The challenge is to change the perception of the public. Almost all pay TV platforms in Indonesia offer the same international channels and therefore there are not significant differences between the respective pay-TV platforms.”

Siboro believes there are a number of variables to consider when it comes to demand, but he remains fairly optimistic. “We would need more satellite capacity if the market continues to grow, if there is a growing availability of local TV channels, and if the market is ready to adopt HD services,” Siboro says. “Our current satellite provider has plans to launch a new satellite soon so our capacity requirement should be easily met.”

HD and Ultra-HD

One of the big questions is the potential take-up of HD and even Ultra-HD services in the market. It seems that take-up of HD is still somewhere off where it needs to be. Aora TV launched its HD services in 2011 with 10 HD channels but recently halted the offering because, as Siboro admitted, the market “was not yet ready for such services.”

Sky Vision only has five HD channels, and Kentjono says the operator “has not placed much of a bet” on HD. Even though he points out the operator believes in HD and has boxes in the market that enable HD, it is not a big driver of revenue or subscribers for the company. “The driver of the take-up is not on the quality of the pictures, but rather the quality of the content,” Kentjono says. “We are not really big in HD — it is there as a platform for us to launch. For us, with the constraints of capacity, we prefer to use the capacity to create distinctions in the content, and this is all about exclusive channels.”

In terms of his views on Ultra-HD, Kentjono says would be far away along the road. “Statistics show in Indonesia that 94 percent of TV consumed in Indonesia is consumed on televisions smaller than 32 inches. Fifty-three percent of the TVs sold in Indonesia are still Cathode Ray Tube (CRT). So, there is not a lot of differentiation between SD and HD,” he says. “I don’t see us shifting our aim from exclusivity of content to HD content. However, you can’t stop technology. HD and Ultra-HD will ultimately dominate the market.”

OTT and Satellite Broadband

DTH operators around the world are faced with competitive pressures from not just FTA offers, but also new online offers. Kentjono ultimately sees Over-The-Top (OTT) as being a complement to DTH in Indonesia.

“OTT will only make an impact once there is a strong broadband network in Indonesia, which currently it does not have. The growth of broadband in Indonesia today is mostly driven by the wireless industry, not DSL or fiber. The level of capacity is very limited. Nevertheless, I think OTT will surpass the broadband services in terms of growth rates. However, OTT is more prone for particular demographics and on small handhelds,” he says. “Since wired high speed broadband Internet access is not readily available in Indonesia, the impact of OTT services such as Netflix will not be felt for at least 10 years.”

Interestingly, while Indonesia may lack the terrestrial infrastructure, there could ultimately be a play for satellite broadband. Kentjono admits he thinks it is a great proposition. “I am surprised it has not been as strong as it should, given that Indonesia consists of 17,000 islands. I think HTS would be very good for Indonesia. I must say it is more in the realm of possibility,” he says. “I don’t think Thaicom is doing particularly well with its spot beam services in Indonesia. But, nonetheless, I don’t rule out HTS to have great success in Indonesia. If there were any company perfectly positioned to deploy HTS based services in Indonesia, it would be us. So, yes, we would be interested in providing a satellite broadband service.”

Backhaul

Of Indonesia’s approximately17,000 islands, a number of the smaller islands in the Eastern part do not have that much fiber, thus leading to a demand for satellite backhaul, according to Prashant Gokarn, chief strategy and planning officer at PT Indosat, a locally based satellite operator and service provider.

“Our wireless networks have around 350 sites for satellite backhaul. We also have another 100 sites that are also low power solar powered sites, which also use satellite for backhaul,” he says. “The challenge will be when more sites become 3G and 4G enabled. Ultimately, when this happens, satellite will be a more expensive option. That is the biggest threat to the use of satellite in terms of backhaul.”

PT Indosat has two satellites and, according to Gokarn, they play a “key role” in bringing new capacity to market. Its Ku-band capacity is mainly used for satellite television and its C-band capacity is mainly used for communications. The vast majority of the capacity is used for the business sector — such as banks and oil and gas companies. There is a strong demand for satellite based backhaul services, says Gokarn.

It is not surprising that the demand for bandwidth is strong given the way mobile services are being used in Indonesia.

“People in this market are very comfortable using data services,” Gokarn says. “For example, Indonesia is one of the largest Twitter and Facebook markets. Most people here access the Internet on their mobile device.”

Bogi Witjaksono, managing director of PT Multimedia Nusantara Satellite or MetraSat, a major telecoms player in the country, admits the company could use more satellite capacity.

“Indonesia is an archipelago country and the population is very scattered in many regions and islands. The penetration of fiber is still very slow. Satellite will still play an important role in Indonesia’s telecommunication infrastructure. The demand means growth will be very significant as the smartphone and broadband cellular markets are seeing rapid growth,” he says. “PT Multimedia Nusantara Satellite, as member of the Telkom Group [the main telco in Indonesia], which provides satellite services, is still looking for transponder capacity to support Telkom’s overall broadband infrastructure.”

Witjaksono expects satellite to play a vital role across Indonesia due to the country’s unique geography.

“Satellite still is an important part of the basic infrastructure as the penetration of fiber has been slow,” he says, “The growth for satellite-based backhaul services will be double this year as the demand of mobile broadband is still very challenging to deal with. The key growth driver over next 12 months is the backhaul for the new node B of the cellular network, which is hungry for more bandwidth.”

New Satellites

With so much demand for satellite capacity in India, Gokarn admits that PT Indosat will have to invest in more C-band and Ku-band capacity. “We are definitely evaluating the options in terms of using the orbital locations we have. The decision time for procuring a new satellite is right now. So, we are heavily involved in this process,” he adds. “Indonesia is clearly a capacity-constrained market right now versus supply. It has been the same for a number of years now. Where we have been surprised is with the amount of demand we have seen for Ku-band capacity. The numbers of people using pay-TV via satellite, as well as taking HD services has been more than we expected.”

The capacity shortage is definitely a problem being keenly felt by Indonesians in both C-band and Ku-band.

“All three operators in Indonesia are in the process of launching replacement satellites in their slots; however, this will be unable to fill the demand-supply mismatch in the short term,” Gokarn says. “Video, especially HD pay-TV, will be a key driver of capacity. In the mid-term, three to five  years, there could be demand for remote broadband in the Ka-band. Indonesia has been in the forefront of the satellite sector for many years and I don’t see this changing any time soon.”