Satnews Feature

South Korea introduced the first S-DMB TV service for mobile phones in May 2005.

The US cellular industry in previous years trailed its European and Asian counterparts in the race to introduce technologies such as mobile digital TV, an application intended to boost ARPU in the face of a nearly saturated cellular market. That gap has been narrowed recently, however, (mobile TV has launched in the USA) with new applications taking root and driven by pent up demand from US consumers for a richer mobile experience.  To gauge trends in the telecom sector, it might be instructive to look at developments in Asia and see what lessons can be learned from its experience.

It was a huge step for South Korea but one gigantic leap for Asia’s satellite service providers.

South Korea’s introduction of the world’s first S-DMB (Satellite-Digital Multimedia Broadcasting) TV service for mobile phones in May 2005 was a historic milestone highlighting the satellite industry’s key role in delivering mobile video and high speed IP broadband—the twin drivers of current telecom growth.

S-DMB provides cost-effective multimedia services to mobile users by interworking satellite systems with 3G and 4G terrestrial networks. It is a hybrid mobile satellite broadcast system where broadcast and multicast services are delivered by a satellite network.

Terrestrial repeaters that extend satellite coverage in urban areas complement this network. Among the hybrid mobile satellite broadcast systems in operation is the XM-radio system in the USA that broadcasts radio programming to vehicular terminals.

 For Asia, the launch affirmed its status as a first mover in hot satellite delivered technologies such as mobile video and IPTV (Internet Protocol TV). Earlier, in October 2004, Japan’s Mobile Broadcasting Corporation (MBCo) introduced the world’s first commercial S-DMB service for motor vehicles with three data, seven video and 30 audio channels.

Both TU Media, the unit of SK Telecom that launched the S-DMB service, and MBCo use Japan’s MBSat  (called “Hanbyol” in Korean) to deliver their mobile offerings. TU Media is co-owned by SK Telecom and Toshiba.

Leveraging satellite power

The advent of mobile TV on digital handheld devices, smartphones or car terminals adds an interesting facet—and a potential huge revenue source—to Asia’s satellite services industry still heavily dependent on DTH services for much of its revenues.

In South Korea, TU Media’s S-DMB service signed up some 370,000 subscribers by the end of 2005, compared to its target of 420,000. These subscribers, however, paid about $13 per month for seven video and 20 audio channels and used mobile phones costing some $750 apiece. TU Media, a consortium of 200 companies, expects to sign up six million subscribers by 2010.

In contrast, SkyLife, South Korea’s sole DTH provider, had over 1.8 million subscribers in the same year who paid less than $10 monthly for 160 channels.

TU Media’s video-on-the-go service currently offers news, sports, soap operas, movies and games. And to keep subscribers happy and place a lock on revenues, the company offers a 10% monthly discount for a one-year mandatory contract; 15% for two-years and 20% for three years. S-DMB revenues are expected to hit $813 million by 2010, according to TU Media.

While S-DMB’s revenue potential is clear, the technology still has to contend with issues relating to content and quality of service. Surveys found initial subscribers concerned about the limited content and overall service quality. Only 24% said they were satisfied with the service while 45% voiced dissatisfaction.

The pricey handsets (Samsung Electronics’ SCH-B100 and SK Teletech’s IBM-1000) seemed less of a concern to subscribers than the quality of service, however. 

But that was then and TU Media has since gone forward with installing the 8,000 repeaters or low power gap fillers for enhanced indoor coverage in urban areas, guaranteeing almost complete terrestrial blanketing of a country with a land area of less than 100,000 km2 and better leveraging the power of MBSat.

This satellite’s high EIRP downlink signal enables smartphones, other digital handheld devices and car terminals to receive the downlink signal. MBSat carries high power S- band transmitters and a 12-meter S-band high gain antenna to deliver high EIRP.

MBSAT currently delivers digital multimedia services such as MPEG-4 video and data to mobile users in South Korea and Japan.

IPSTAR goes mobile

Shin Satellite’s iPSTAR-1Broadband Internet Satellite, the world’s first Internet satellite, this December announced it was joining the mobile race by offering mobile broadband services for moving vehicles, but one different from that provided Japanese customers by MBSat.

ShinSat has a name for its product: iMOVE. ShinSat claims iMOVE allows users to track iPSTAR while their vehicles are moving. This, said ShinSat, should enable users to do video conferencing while on the road and allow the production of live, on-the-move satellite news broadcasts instead of having TV crews stop and deploy their antennas.

The system’s low-profile array antenna permits automatic connection and has a claimed uplink speed of up to 1.5 Mbps. ShinSat noted its system is cheaper based as it is on monthly subscription fees compared to the standard practice of blocking and leasing airtime for a satellite feed.

ShinSat said iMOVE" is available in Thailand, China, Vietnam Australia and New Zealand and should be available in the rest of Asia-Pacific by 2007.

iPSTAR or Thaicom 4, the largest commercial satellite in space, was launched in August 2005. It carries 94 beams and has a capacity of 45 gigabits per second covering all of Asia Pacific. It is designed for digital high-speed Internet access and can send and data, video and audio simultaneously.

It provides a broad range of broadband applications and high-speed Internet access such as E-government, corporate Intranet, Virtual Private Networks (VPNs) and VoIP.

Australia is becoming an important market for iPSTAR’s broadband services. ShinSat is expected to sign up 2,000 new subscribers a month by the end of 2006, double the rate a few months ago. IPSTAR’s market in Australia and New Zealand consists of some one million households and small businesses.

ShinSat’s Australian partner said iPSTAR has consistently provided its customers with reliability, security and speed. It is also a ubiquitous and affordable broadband solution that meets the needs of remote customers in Australia and New Zealand.

Excaping market saturation

Philippine Long Distance Telephone Company (PLDT), the Philippines’ largest telco and Asia’s eighth largest mobile provider, remains keen on both mobile TV an IPTV as a means of breaking into the lucrative broadcast industry and improving ARPU for its industry leading cellular service.

Its intent to acquire an obscure company called GV Broadcasting, which analysts say seems increasingly probable, will give it immediate entry into both business. GV Broadcasting is a licensed DTH satellite television provider that intends to be the country’s second DTH provider after Philippine Multimedia Satellite Systems, provider of the Dream DTH service.

It has also applied for a certificate of public convenience to install, operate and maintain a Philippine-wide digital mobile TV system.

In a disclosure statement, PLT said it remains interested in developing its content strategy, and is looking at services such as DTH, IPTV and mobile TV. PLDT expects its broadband and business process outsourcing operations to take over from cellular as its main revenue drivers in the years ahead.

Mobile penetration in the Philippines is nearing saturation and was estimated at 43% in late June. PLDT through mobile subsidiary Smart Communications, Inc. owns some 60% of the market. Revenues from its mobile business will continue to grow but at single-digit levels, hence PLDT’s focus on DTH, IPTV and mobile digital TV.

Europe and the USA fall behind

A step behind Asia in the deployment of satellite delivered digital multimedia services is Europe where a wide range of trails based on S-DMB and DVB-H standards were recently carried out.

S-DMB is scheduled to make its European debut in 2009 following extensive trials. An initial commercial rollout is set for 2007, with full-scale deployment in 2009.

As in Korea, European 3G users will receive streaming television and video on their handsets at an affordable subscription fee in the range of 10 euros. The service will be available anywhere in Europe.

S-DMB’s European launch follows the MAESTRO (Mobile Applications & sErvices based on Satellite & Terrestrial inteRwOrking) trials that sought to use the technology to implement a broadcast/multicast layer complementary to existing 3G mobile networks. MAESTRO’s satellite component was designed to reuse current 3G technology, minimize the development of new products and technologies and increase the content delivery capacity of networks.

Results from pilots of broadcast DVB-H mobile TV services among consumers in Finland, the UK, France and Spain revealed clear consumer demand for these services and pointed to future business models for commercial mobile TV services. The DVB-H pilots involved broadcasts of live digital TV content over DVB-H networks to the Nokia 7710 smartphone.

As a result, Alcatel and Eutelsat are expected to launch a geostationary DVB-SH satellite covering Europe in 2008. Alcatel is to deliver DVB-SH terrestrial repeaters beginning 2007. DVB-SH (satellite services to handheld devices) is a hybrid architecture using the S-band that its proponents claim is more powerful than S-DMB.

As shown in South Korea, European consumers want a wide range of channels and content suitable for watching on mobile devices. And as in South Korea, the most popular types of content were news, sports, music and soaps. Europeans, however, wanted to pay less than the South Koreans did for their mobile TV services.

With actual market experience in hand, TU Media intends increase its video channels to 14 and offer more compelling content such as more of the soaps Korea is popular for.

In the USA, 2007 should see the first national rollouts of mobile TV services by Modeo (a subsidiary of Crown Castle Media) and by partners SES Americom and Aloha Partners. SES Americom provides the infrastructure that supports Aloha Partners' mobile TV network called Hiwire.

Both Modeo and Aloha Partners are deploying DVB-H. Modeo, however, will first trial it’s mobile TV offering to a select group of users in New York City in early 2007.

On the other hand, Verizon Wireless has announced its adoption of Qualcomm Inc.'s MediaFlo technology for its mobile TV service that will broadcast data, audio and video streams, and information such as stock market quotes and weather reports.

The different technologies used to deliver mobile TV mirrors the jousting among technologies seen in Asia and Europe with the winner being decided by subscriber revenues. Both services were trailed at selected locations in 2006.

The case for mobile TV in the USA rests on the huge market numbers: there are currently about 200 million cellphone subscribers and a penetration rate of 65% nationwide (higher than cable TV, home Internet access and computers). About seven billion text messages are sent every month in the USA.

S-DMB vs. DVB-H

Despite its first mover advantage, S-DMB will have its hands full against DVB-H, which is being pushed by a consortium led by Nokia. Research firm Informa Telecoms & Media. projects DVB-H to dominate as the international video standard with 121 million users by 2011, or 57% of the world market.

DVB-H is also receiving traction in Asia because of DAPA, the DVB-H Asia Pacific Alliance. DAPA and Nokia this October conducted a DVB-H technology workshop in Singapore, the first of its kind in Asia Pacific.

But S-DMB and DVB-H are just two satellite delivered mobile TV technologies on the plate of Asia’s satellite service operators. There’s also Japan's ISDB-T and Qualcomm’s MediaFLO. These, however, will also require deploying additional network infrastructure, developing new handsets, adding new spectrum—and forking over a lot of money.

Asia’s satellite operators also have to consider IPTV, high definition TV (HDTV), digital radio, two-way Internet and the “headend in the sky” model that involves bundling content and technology into a turnkey package as among the applications that should generate huge demand for satellite capacity.

A plate of pleasant choices

Which brings Asia’s satellite operators to a pleasant problem: a plethora of choices in which to sink their money.

Choosing the next moneymaker will be no easy task.  The safest bet, however, seems to be IP or delivering high speed IP broadband from point to multipoint at the least possible cost while forging alliances with terrestrial network operators.

Satellite maker Loral Skynet is convinced video and IP broadband will drive growth in Asia’s satellite service companies. The company believes China and India will be the lead players in video distribution and DTH applications.

Video will be a key market driver, especially when China legalizes DTH. As for IP broadband, Loral Skynet said that out of the more than 50 announcements from satellite service providers of new business in Asia in 2005, over 75% of these were IP broadband related. Regulatory challenges, however, were holding back growth especially in the huge markets of China and India.

Recovery at last

Loral’s observations also confirm a reassuring reality: the satellite industry continues on a growth path begun in 2005 after years of weak revenues and flat growth.

The commercial launch industry is continuing a recovery begun in 2005 when global revenues rose 7% after years of decline. Arianespace, International Launch Services and Sea Launch, the world’s major launch providers, are bullish on the industry’s short-term growth with launches scheduled to replace ageing satellites operating over Asia.

The Satellite Industry Association (SIA) has said consumer focused satellite services drove growth in 2003 and 2004. SIA noted that companies from every major region and across each sector (operators, manufacturers, teleports, value-added resellers, carriers) reported improved business in 2005.

It said satellite services were leading the industry’s recovery, accounting for 63% of industry revenues totaling $97 billion in 2004. DTH accounted for over 80% of satellite service revenues.

China’s intent to begin DTH satellite broadcasting in time for the 2008 Beijing Olympics should further strengthen the satellite industry’s recovery. The recent launch of China's first DTH satellite was to have been the key that unlocks China’s vast DTH market.

SinoSat-2, produced in China, was to have provided broadcast TV, digital TV, live broadcast TV and digital broadband multimedia systems to the Chinese mainland, Hong Kong, Macao and Taiwan, according to Sino Satellite Communications (SinoSat), a state-owned satellite operator.

Although launched successfully in October 2006, the satellite later failed in November because one of its two solar panels did not deploy. A replacement satellite is three years away although SinoSat-3, another DTH satellite, is to launch as scheduled in May 2007.

Chinese media earlier speculated the launch of SinoSat-2 might trigger the amendment of Decree 129 that prohibits individuals from setting up satellite dishes that receive foreign programs. Telecoms regulator the State Administration of Radio, Film and Television is said to be considering amending the regulation.

Industry analysts predict that some 100 million households are expected to become DTH users between 2006 and 2010. The launch of ChinaSat-9 in late 2007 is also intended to exploit the coming boom in DTH. ChinaSat -9 is capable of covering most of China, making it possible for 98% of residents to receive DTH programming.

Asia: world DTH leader

DTH’s propagation in India and China will enable Asia/Pacific to remain the world's fastest growing TV distribution market. Analysts estimate the region’s CAGR at 13%, with revenues rising from US$16 billion in 2004 to US$30 billion in 2009.

Asia’s regulatory environment is also improving. India’s more liberalized telecoms regulations, for example, are believed to have contributed to its DTH rush.

Marketing a free-to-air (FTA) service on a DTH platform is the goal of newly organized Asia Broadcast Satellite (ABS) based in Hong Kong.

ABS in September acquired Lockheed Martin Space Communications Ventures (LMSCV) and Lockheed Martin Intersputnik (LMI) from Lockheed Martin Global Telecommunications. LMSCV owns and operates the LMI-1 satellite (now called ABS-1).

ABS-1 covers Asia, the Middle East, Eastern Europe and Africa with 28 C-band and 16 Ku-band transponders providing DTH and CATV services. ABS’ goal, however, is to market an FTA service via satellite to countries in Asia and the Middle East.

ABS sees DTH as a profitable alternative to existing terrestrial and cable TV in many developing markets where there are limited cable infrastructure and penetration. Offering FTA will allow ABS to quickly capture a large audience.

IPTV to the rescue

Internet Protocol Television (IPTV) via satellite, while in its infancy, offers steady revenue possibilities for satellite operators.

IPTV, which is TV over broadband connections such as DSL, FTTH and Ethernet, is broadband’s hot technology. It enables broadband Internet users to access TV broadcasts (both live streams and video on demand) via computers or on TVs with digital set top boxes. By distributing TV content over the Internet, IPTV permits a more customized and interactive user experience.

IPTV carries the promise of high market growth and, for Asian telecom operators, minimal investment in new IP networks. The value of Asia’s IPTV industry was estimated at US$300 million in 2005. China’s IPTV market alone was valued at US$36 million last year and Japan is world leader in FTTH installations.

Asia is the heartland for IPTV. Research firm IDC predicts 30 million people will be using IPTV worldwide by 2009, two-thirds of them in Asia.

This welcome mat for IPTV in Asia offers satellite service providers a window to exploit as analysts agree that IPTV will become mainstream. The question is not if but when.

South Korea entered the IPTV arena when KT Corporation, its largest fixed-line and broadband operator, launched a trial IPTV service in November 2006.

KT said the trial service includes a broad range of applications including broadcast, DVD, video conferencing, video-on-demand and multimedia messaging. Also available are multiple pictures-in-picture, remote programming of digital video recorders and digital photos.

The trial service provides 24 TV channels, 1,200 on-demand videos and 27 interactive services ranging from education to finance. An electronic program guide and user-created content are available.

It was rolled out to 260 households in Seoul and Yangpyeong County, southeast of Seoul, where broadcasting signals are often weak or distorted.

The government has selected two consortia for the IPTV trials. The two consortia are led by KT and Daum Communications and include content providers, broadcasters, cable and satellite operators and electronics makers

A niche service?

Satellite delivered IPTV will become an important revenue stream but is expected to evolve into a niche service said Northern Sky Research (NSR) in an IPTV market study. NSR believes the IPTV via satellite market should account for a small percentage of the market potential terrestrial-based platforms are likely to generate.

Satellite-based IPTV revenues from 2005 to 2010 are projected at $1.6 billion compared to over $7 billion for 2010 alone for terrestrial-based services. Despite this, NSR said IPTV does provide a unique growth opportunity for the satellite industry especially in select regions.

NSR said given the proven broadcast economics of satellites in delivering content cost-effectively to large geographic footprints, particularly in underserved areas, growth of IPTV via satellite services should increase at a steady rate.

Talking about IPTV as a whole, research firm Gartner, Inc estimates the number of households worldwide subscribing to IPTV services offered by telecom carriers at some 49 million in 2010. Subscriber numbers are expected to rise from 6.4 million in 2006 to 13.3 million in 2007.

Global IPTV revenue should grow from $872 million in 2006 to $13.2 billion by 2010. Although IPTV presents telephone companies with the opportunity to sell TV services, Gartner said IPTV will not be a panacea to replace vanishing voice revenue for carriers but can help retain customers of their existing voice and broadband services.

IPTV, however, is a godsend for telcos (who lord it over Asian telecoms) that can dominate the technology end-to-end with their network infrastructure. End-to-end control allows telcos to guarantee enough bandwidth for their signal at all times, which is necessary for the high quality of service demanded by IPTV.

IPTV in the USA

IPTV presents telcos with the unique opportunity to enter the TV arena and provide triple play services. Telcos are, therefore, investing billions into new fiber rollouts and backend infrastructure. AT&T, for example, signed a US$400 million deal for Microsoft's IPTV Edition software and a US$1.7 billion deal with Alcatel.

AT&T also spent $5 billion to build the first IPTV network in the United States while Verizon Communications Inc. is spending $3 billion to deliver on-demand movies to subscribers via IPTV. Telcos, however, face stiff competition from cable and satellite TV companies that have an edge in numbers and experience, and resistance from customers who haven’t the slightest idea about why they should choose IPTV instead of cable or DTH.

Some 85% of US households are served by either cable or DTH. This high penetration rate means IPTV’s only growth path is by taking subscribers away from cable and DTH. And that means competing on price, no easy task for any new technology burdened by high infrastructure costs, but which is taking place in Europe.

The USA and Canada, however, are expected to have one of the highest IPTV growth rates over the next five years. Gartner Consulting forecasts IPTV subscribers doubling almost every year until 2010. Gartner noted the most-successful ongoing IPTV services are offered either as part of an overall household bundle of services.

Analysts feel IPTV could shake up the cable industry the same way that Voice-over-Internet Protocol (VoIP) has diminished the voice telephone business. But it should be years before IPTV pulls in significant market share.

IPTV’s potential can be seen in India. Research firm Media Partners Asia predicts that DTH will become India’s primary digital platform in the long term, taking over 65% of subscribers. IPTV is expected to take 25% while cable’s share should drop to 10%. India currently has some 100 million TV homes, 62% of which have cable.

IPTV, however, is another competitor for the satellite industry especially in developed countries with their advanced IP network infrastructure.

One analyst believes the satellite market will be affected by the growing competition from IPTV and cable service providers launching on-demand services on their two-way networks.

But in countries where infrastructure has yet to develop, satellite operators have a great opportunity to build strong brands and make major market penetrations.

HDTV by satellite is gaining an Asian foothold and iPSTAR is about to offer HD video on demand among other new services. ShinSat will offer its triple-play service in the form of “push HDTV,” which is video on demand on high-definition video. ShinSat said iPSTAR today serves almost 40,000 terminals compared to 26,000 in 2005.

The company said it can do both unicasting and multicasting. iPSTAR ‘s commercial broadband services are available in the six countries where it has gateways, including Australia and China. It is building two more gateways in China and expects to launch its service by yearend. It also expects to build a gateway in India.

There certainly are a lot of developments in Asian telecoms that can be very instructive to their US counterparts. One thing is certain--increasing consumer demand will be driving the mobile market in the next few years, and US operators need every lesson it can gleam from experiences in other regions.

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Peter I. Galace is editorial director of Satnews Publishers. He has written extensively on the telecommunications developments in Asia for numerous publications. Currently he is associate editor of Satnews Daily and Weekly editions, and art and production editor of the International Satellite Directory and the monthly e-zine, Satmagazine. He can be reached at peter@satnews.com.