Sky's the limit for satellite internet

The remote areas of the region will get a new link to the internet soon as telecoms service providers such as Arabsat and Yahsat launch the next generation of equipment to provide broadband connections to rural consumers often ignored by their rivals.

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When Hesham Khalipha reached the podium to address delegates at a recent conference, he half-jokingly issued a disclaimer to the audience of telecommunications executives.

"What I'm about to say is probably not going to make the operators here happy," said Mr Khalipha, the senior marketing manager for the Arab Satellite Communications Organisation (Arabsat). As he made his presentation, it was clear that Arabsat was looking to enter a market long dominated by its ground-based peers. The company's latest fleet of satellites - including one to launch on Tuesday at the Arianespace launch site in Kourou, French Guiana - will begin to offer broadband internet services across the Gulf, Levant and Afghanistan area by next year.

"We want to monetise the satellite services beyond the traditional role of satellites," Mr Khalipha said. "Arabsat, in general, is superior in thinly populated areas but with this project, we're trying to move beyond that." At a conference where the discussion mainly revolved around the challenges of marrying content with regular telecoms services, the announcement was highly significant. Aside from immediately becoming a new competitor to every telecoms operator in the room, it would also provide a crucial step at improving the quality and accessibility of broadband in the Arab world.

Arabsat, which is based in Riyadh, was established as an intergovernmental organisation founded by the Arab League in 1976, but began operating on a full commercial basis in 2004. It has four satellites in space, including one launched two weeks ago from the Baikonur Cosmodrome in Kazakhstan, offering a range of broadcasting and communication services. About 6 million internet users in the Middle East - or about 12 per cent of the total online population in the region - have access to broadband networks and most live in the GCC region. That number is expected to increase as broadband use in the region is forecast to grow at an annual rate of 25 per cent until 2013, figures from the Arab Media Outlook show.

Although recent research reports have determined that the Middle East's internet connectivity is among the poorest in the world, methods to improve broadband quality are beginning to materialise as governments make investments aimed at improving telecoms infrastructure. "Ar@b Surf" is Arabsat's plan to bridge the region's consumer digital divide. The service will be available in the second half of next year and offer broadband speeds between 512k to 8Mb for "rates competitive to existing DSL services".

The first phase of Ar@b Surf will focus on the Levant, Iraq, Afghanistan and Saudi Arabia. Subsequent ones will expand its coverage across the MENA region. "I think the satellite services are essential although some people are saying that terrestrial networks and fibre connectivity are sufficient enough not to rely on satellite," said Khalid Balkheyour, the president and chief executive of Arabsat.

"Consumers should have that access to broadband and how they get it should be their choice, whether it be through satellite, DSL or fibre. Our aim is to make it very competitive so they have luxury to be connected." Arabsat joins Yahsat, the satellite firm owned by Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, in launching consumer internet connections. Yahsat will be able to reach about 26 countries ranging from Kazakhstan to South Africa once its first satellite, the Yahsat 1A, is launched next year. A second, the 1B, will be launched in orbit later next year.

Yahsat will also be able to provide broadband internet, television and telephone services across its satellite connections. "If you talk about broadband and connectivity, we are not doing something new," says Jassem al Zaabi, the chief executive of Yahsat. "What we are doing is providing a complementary service to the terrestrial part. With the new technology that we've adopted, we'll be able to provide affordable broadband."

Both satellite companies' broadband services will be provided on the "Ka" frequency band and will connect to computers using a receiver the size of a hardcover book. Services will either be marketing directly to consumers or through a licensing deal with a local provider. But Arabsat and Yahsat are not the only satellite players looking to the Middle East's skies. Nilesat, a company based in Egypt, has four satellites mainly providing broadcast services, including more than 400 video channels.

And last month, Eutelsat, the provider of satellite telecoms services, and ictQATAR, the telecoms regulator in Qatar, signed an agreement to launch a satellite by 2012 that will provide television broadcasting and government services. Launching the satellites will not be cheap. Mr Balkheyour says Arabsat has invested about US$1.6 billion (Dh5.87bn) in its fleet of four next-generation satellites while Mr al Zaabi says Yahsat has secured about $1.2bn in funding for its two satellites.

Analysts say it is unlikely that urban residents in the Arab world will flock to the new wave of satellite broadband services. Their DSL and fibre-optic connections provide reliable and fast internet connections without the need for an antenna that is required to link up to a satellite. Urban centres are not the intended market for satellite firms. The companies focus on consumers in remote locations where traditional operators cannot provide competitively priced service.

According to recent figures from the UN, 77 per cent of the people in Afghanistan live in rural areas, as do 74 per cent of Yemenis, 58 per cent of Egyptians and one third of Iraqis. In the UAE, only 15 per cent of the population resides outside of urban centres. "Satellite is regarded as a less than ideal platform for data services including broadband, as it is less reliable and more expensive than fixed-line alternatives, particularly fibre, which is the best platform for broadband," says Matthew Reed, the senior analyst of Middle East and Africa for Informa Telecoms and Media.

"[But] given that demand for data services is often rising even in these same places, there is arguably an opportunity for satellite providers. But it would be mainly in more developed markets perhaps in very specific business or public sector applications rather than as a mass consumer broadband access technology." Recent studies forecast there will be about 600,000 satellite broadband subscribers in the Middle East by 2015, although that will be a fraction of the entire broadband market.

But Arabsat and Yahsat each expect to make a profit by delivering satellite broadband services to consumers at about the same cost as a conventional broadband connection. "The good thing about the satellite industry is that it's very long term because you cannot put an asset in the sky and figure out what to do later," Mr al Zaabi says. "It is a hard industry to get into because of the fees, the launch risk and the amount of [initial] investment you have to put forward. But once you do it, the operational risk is low and your operational expenditure compared to other telecoms services is very reasonable and I think it is going to be a very profitable business."