Service providers in the Middle East & Africa now have more options when it comes to delivering broadband services to customers. The question is will their demands for satellite go up or down?

Although much has been said about High Throughput Satellites (HTS), the big question for many service providers is how they can play along in the game. Several market players say HTS is adding new possibilities to the market, while others say this progress is good but also painful.

The HTS multi-spot beam architecture supports large-scale frequency reuse to deliver more capacity and higher data rates to the end user. As a result, HTS systems provide significantly more capacity at a reduced cost per bit compared with regular satellites.

Demand on the increase

Supernet Limited, Pakistan’s leading satellite network service provider and systems integrator, specializes in providing end-to-end satellite based mobile backhaul networks. Supernet products and services also include a broad spectrum of Wide Area Network (WAN) and Metropolitan Area Network (MAN) solutions based on satellite, fiber optics, microwave radio and Internet. The company is one of the largest satellite communications system integrator and system service providers in Pakistan using approximately 500 MHz of satellite capacity in Ka, Ku and C-bands, according to Ali Akhtar, manager of VSAT products and defense at Supernet Limited.

“Of this 500 MHz, about 90 percent is being utilized for satellite backhaul networks for multiple Mobile Network Operators (MNOs) on the C and Ku band giving Supernet about an 80 percent market share when it comes to satellite backhauling for MNOs. These MNOs are currently operating 2.5G networks. When it comes to expansion of the 2.5G satellite backhaul networks we won’t be seeing any substantial growth in the next two years,” he says.

Akhtar sees the major reason for this being the aggressive penetration of fiber optics providing MNOs with a far cheaper alternate transmission medium. And even in areas where fiber optics has not penetrated yet, MNOs are going to think hard before increasing their demand over satellite. There are five MNOs in Pakistan and they give each other very stiff competition, which has resulted in low Average Revenue per User (ARPU) over the years. For remote sites using satellite, expanding them is going to be difficult considering the high capital and operational expenditure that is a signature of Ku and C band satellite networks.

Looking at another angle of the Middle East region, Riyadh Al Adely, CEO of Sky Stream, admits that 2014 was a good year for their offered services, although there were slight difficulties for the VSAT market, which have limited the expected growth of the industry.

“In my opinion, the sources of growth limitation are mainly two: legacy regulations for some countries while the stability and security had challenged the growth for others. GCC markets are still closed for new entrants and still dominated by monopolies. Other countries’ economies — such as Iraq, Syria, Afghanistan, etc. — are heavily affected by their securities,” Al Adely says. “The counter argument for my statement is the High Throughput Satellite broadband deployment in Syria, which some of my colleagues in the industry may consider as a success story. However, I believe the opposite. A couple of hundreds of Mbs in broadband is not to be considered a success story for such a potential market; if it wasn’t the war and the regulation, we would expect two digits of multiples increase in the demand at least from such potential market.”

The introduction of high throughput systems and the rollout of services have led to an evolution in operators’ business models. While satellite operators have traditionally adopted the wholesale model for conventional C- and Ku-band business, a large number of operators have adopted a certain level of vertical integration in managing their HTS. These operators intervene to a larger extent in the network management and selling megabits per second instead of raw bandwidth (megahertz) to the service provider or end user.

But, the good news for the satellite players in Pakistan, according to Akhtar, is that 3G/4G licenses have been recently auctioned in Pakistan. With the Pakistani MNOs all poised to become Internet Service Providers (ISPs), the data requirements are bound to grow now. This is where HTS step in with their ability to provide more Mbps in less MHz, bringing the total cost of ownership down.

As one of the potential Internet service providers in the Middle East, SkyGate Satellite Communications markets SES Broadband to end customers and businesses in the region. The provider offers download speeds of up to 10 Mbps using the Astra 3B satellite at the 23.5 degrees east orbital position, in the form of fast Internet solution for SMEs and residential users.

“We see growing demand for connectivity coming from this region. The Middle East and Africa are considered some of the fastest growing markets around the globe with great deal of potential especially for broadband Internet applications” Ashraf Hajjaj, SkyGate CEO says. “We provide [Voice over IP] VOIP, Video on Demand and TV capabilities mostly in Jordan, Syria and Iraq. The current high increase in demand witnessed in our market is followed by major service providers offering HTS now in the Middle East and Africa, mainly Yahsat and Avanti. The re-pricing presented by Yahsat has had a major effect on rescaling price levels with their marketing budget, which directly affected the equipment and services pricing generally.”

Supernet partnered with Yahsat to launch the YahClick service for the enterprise market in Pakistan. “For Intelsat’s Epic we’ll wait and see which bands their spot beams will have over Pakistan (probably all three i.e. C, Ku and Ka), when their satellites are operational. But, at the moment, HTS capacity over Pakistan is all in Ka band,” Akhtar adds.

With their Medium-Earth Orbit (MEO) satellites, O3b will be offering rates that will start making a lot of sense for MNOs for their planned 3G/4G data requirements. Eventually, two scenarios will be seen: one where Geostationary Orbit (GEO) satellites and O3b operate side by side with GEO taking on the 2G-voice-traffic and O3b taking the 3G/4G data, and the second where there will be a complete migration of GEO sites to O3b. O3b, Akhtar says, will most likely also consider approaching service providers to use their trunks for a stop gap arrangement until fiber optics reaches remote areas with the O3b solution acting as a middle mile and the last mile being a localized fiber ring/microwave network in the remote cities and towns.

The industry expectations for growth were much higher after introducing HTS in the region considering their pricing and capabilities. Whether it is Ka or Ku bands, HTS has completed the portfolio of the satellite industry and made it much more mature. On the other hand, the market need to access data has grown up exponentially. For example, SkyStream traditional maritime customer requirement has grown 10 times more than it used to be six years ago and this applies to all market verticals.

The demand for data is increasing exponentially whether in the Middle East or Africa. The inland countries in Africa are still using HTS connections if no fiber connection to marine cable is needed. “Data requirements are increasing at least 50 percent every year due to [Over-the-Top] OTT application usage (in some cases 100 percent),” Samer Mehaidly, Group 7 senior management consultant says, agreeing with Firas Yamak, NextTier Solutions Ltd senior consultant, adding that data communication is on a continuous rise in Africa driven by mobile operators, the launching of LTE services and arrival of multiple undersea cables, accordingly, pushing data requirements to grow in fast pace as people are getting content hungry.

Cost raise or Decline?

Thanks to Ka-band satellite technologies, more people can now have Internet at home even without cable or wired phone service. Satellite networks are also increasingly becoming integrated with complementary wireless platforms, thus allowing the Internet service industry to reach larger areas at less cost.

“Costs have decreased to almost 50 percent in comparison to the beginning of this era. Within the next five years, demand for HTS services is forecasted to double, if not triple, and on the other hand will be accompanied by at least 50 percent drop in cost” Hajjaj says. This reduction in costs will be passed onto customers, mainly residential and small offices which are the preferred targets here. With better platforms and the capability of obtaining the necessary regulations, YahSat is seen to have facilitated the route to other players in the market through empowering VSAT solutions.

On the other hand, Mehaidly and Yamak agree to the fact that when compared to other modes of communications, satellite is still expensive. Wherever there is a chance to use another mode, customers or MNO’s prefer to use the other more, adding that although it is reliable but with slight delay, HTS is used as primary mode of connection in remote areas and in redundant mode in coastal and fiber linked areas. With HTS, the industry today has different offerings for different applications. HTS broadband pricing has firmly repositioned the satellite industry against terrestrial networks. O3b is another example of HTS being able to compete in performance and pricing against fiber. Epic (Intelsat) and Global Xpress (Inmarsat) are another form of HTS and looking to target markets such as maritime.

Shared Platform

When it comes to services on a shared platform, Supernet’s partnership with Yahsat has been very successful in bringing the Internet services ‘YahClick’ to Pakistan over their Ka band Y1B high throughput satellite. “We offer a 512 Kbps Internet link at rates as low as $18 per month. These are phenomenal rates for a satellite service. The Y1B has very strong footprints over Pakistan, which has also helped in bringing down the cost of the satellite terminal. You can get a terminal as low as $550. Again, that has been unheard of before in the Pakistani market,” says Akhtar. Based on this success, Supernet is in talks with equipment manufacturers such as Newtec and iDirect and satellite operators like Newsat and ABS to help plan and design for their own Ka band satellite network in Pakistan.

There are about 3,000 satellite links used for intranet applications for different enterprises and Supernet operates less than one third of them. Using YahClick for Internet delivery and their planned Ka-band network in Pakistan for intranet applications, especially for banks, Supernet is looking forward to increasing their market share substantially. “Add to this our efforts in developing the communications on the move market, airborne, maritime and terrestrial in Pakistan. This market at the moment is almost non-existent in Pakistan and we are definitely looking forward to bringing a good chunk of this business on to our portfolio. Couple high data rate applications with mobility, and you definitely have a superb business case for HTS in Pakistan,” Akhtar says.

According to Mehaidly, HTS is currently the redundant link; with most MNO’s in Africa using fiber where applicable. “In Ghana, we had a 10Mbps redundant connection while in Saudi Arabia we go through the marine cable (SAT3). Data need is currently increasing but we are mostly using the marine cable with HTS as redundancy link in case of problems with the SAT3 connection”, Mehaidly comments.

Yamak, on another hand, finds current demands are limited to linking land locked countries in Africa to the new cables reaching most coastal countries. As HTS have significant cost savings versus traditional satellites, however, it requires careful planning. Depending on the application of such mode, satellite communication is being used for redundancy except in remote areas. “In my opinion, HTS remains a temporary solution until replacing it becomes a viable business,” Yamak adds. “Currently we are less reliant on satellite communications versus 10 years ago. Wireless and fiber backhaul are now dominant and widespread.” However, communications solutions based on satellite are still used in remote areas requiring connectivity.

Competition

HTS remains a game changer against fiber optics considering the total cost of ownership; it competes in pricing and sometimes in performance such as the case with O3b. The presence of such products side by side with fiber will change prospects of customers; they will look at connectivity, which could be a mix of both instead of looking at particular product. Such an approach will definitely increase productivity and efficiency of customers’ businesses.

Al Adely believes that, very soon and once the security and military challenges are settled, “the markets will surprise us with the massive demands and the market will steer the industry, not the other way around.” VS

Fondan Mosmar is a translator and freelance writer, specializing in telecommunications. She is based out of Beirut, Lebanon.