The Brazilian satellite market is booming. With the FIFA Soccer World Cup and the Summer Olympics slated to be held in Brazil in 2014 and 2016 respectively, coupled with a growing economy, demand for satellite capacity is at an all-time high.
The largest country in Latin America, Brazil accounts for over 50% of the demand for satellite services in the region. The current demand for satellite capacity in Brazil is now at its peak with domestic and international satellite operators looking for the best way to meet existing and future demand for the next 5 to 10 years. Meeting the temporary surge in demand during the World Cup and the Olympics are presenting major challenges for satellite operators to accommodate this temporary high demand.
Aside from occasional satellite demand, the major market segments that are growing in Brazil include: Broadcast (with the implementation of Digital Services and HDTV); Direct to Home (DTH) services with three major operators ( Sky, Oi, Via Embratel) and additional new operators coming to the market (GVT, DTHI and others). Another area of growth is the Digital Access and Digital Cities programs of the Brazilian government currently providing services to 12,000 locations and expected to expand; and the vertical markets such as Retail, Offshore, Banking, Distance Education and Telemedicine. Currently Anatel, the Brazilian Telecom Regulatory agency, lists 44 satellites with license to operate and provide services in Brazil. Among these satellites include 13 Brazilian-owned satellites and 31 foreign –owned satellites.
Government Demand
At the Congress of Latin American Satellites held in Rio de Janeiro in September, Heliomar Medeiros, Executive Director of the digital access program called GSAC managed by the Brazilian Ministry of Communications (Minicom)said during his presentation that he expected an agreement to be signed with Embratel (the current service provider of the digital access program) to provide additional Internet access to over 1500 locations around the country. With this expansion the GSAC Program will reach 13,379 locations, mostly to schools and telecenters. With the added capacity, GSAC will increase capacity from 375 Mbps to 600 Mbps, and average speed available for download will go up from 500 Kbps to 750 Kbps. For Medeiros, this is not enough. He mentioned that the lack of available satellite capacity is hindering their expansion plans. The contract between Minicom and Embratel is effective for two years, with a possibility of extension.
Minicom plans to launch during the next quarter a bid to purchase a platform for multicast that will be use for Telemedicine, Tele-education and educational channels, such as School TV and radio and the Armed Forces networks.
Ka-Band
Anatel is preparing regulations for the use of Ka-Band in Brazil. The goal is to define technical parameters such as power and quality of the receiving stations. The agency is relying on the cooperation of experts from Star One, Hispamar and Telesat in drafting the proposed regulations, which is expected to be completed this year and then it will be opened for public consultations.
There are no satellites with Ka-Band transponders currently operating in Brazil, but is expected to be introduced in the market within the next few years. One operator that is evaluating Ka-Band is Hispamar with the planned launch of Amazonas 3 satellite scheduled for 2013.
Anatel is submitting its methodology for calculating the minimum price for permits for exploration of new Brazilian orbital positions for the Superior Court for approval. The agency's expectation is that the bidding process will occur the first quarter of 2011. At this time Anatel have not selected among the nine orbital slots available for Brazil which one will be offered to the market, according to Anatel’s general manager of global satellite services, Joao Carlos Albernaz.
Rafael Guimaraes, HNS Brasil’s Marketing Director, believes that between 2011 and 2012 around 100 satellite projects with Ka-Band coverage across South America will be announced in the market, with or without the participation of Hughes. HNS in the Latin America region uses the same business model as in their operations in the U.S., where it controls the operation of the satellite and the gateways, in addition to offering the service to the consumer. But Hughes will want to try to establish a new kind of partnership with other companies willing to operate that service in Latin America, said Guimaraes.
DTH Market
According to August 2010 data released by Anatel, satellite TV continues to gain market share in Brazil. The latest statistics show that DTH comprising 42.8% of the Pay TV market. DTH subscriber growth has been largely fueled by Via Embratel which recorded a 48% increase as of second quarter of 2010. If such growth rates are sustained, Telmex DTH will reach a million subscribers before year end. In the second quarter of 2010, Sky, the leading DTH operator in Brazil, recorded 9% growth as compared to the previous quarter. Other operators such as Telefónica, Oi and Nossa TV, growth was flat and even negative in some cases. DTH market share consists of 64% for Sky, 19% for Embratel and a 17% for the rest of the operators together.
Sky currently has 2.1 million subscribers. Via Embratel has 655,000 susbcribers and their operation relies on Nagra's conditional access system and Coship's set-top boxes. The system uses the Star One satellite for satellite capacity.
Market Trends
The fill rate of the satellites serving Latin America is high, which Euroconsult estimates at 90% of capacity. What is most striking is that the highest occupancy rate does not reflect any failure by the operators to invest in new satellites. According to Euroconsult the installed capacity in Latin Americahas been growing more than the world average since 2007.
After a period from 2000 to 2005, when the satellite capacity in Latin America remained stable, came the period of heavy investment. In 2006, growth was 4.3%, in 2007 to 8.3%, in 2008 10.7% and 9.8% in 2009, respectively. "Some regional operators will start to invest in Latin America, as happened with South Africa three or four years ago. Emerging markets such as Asia, Africa and Latin America represent 70% to 75% of new capacity,” according to Euroconsult.
Jurandir Pitsch, Vice-President of Market development for Latin America of SES World Skies said during the conference that the issue of developing and launching national government-sponsored satellites are not as big a concern in the industry as the closed markets that are being promoted by some countries. "What worries us is the emergence of national fleets and the trends towards closed markets.” Pitsch said that Argentina, which operates its own national satellite system, is hampering the entry of international players. Bolivia also has a similar national satellite project and announced it would also close its market, according to Pitsch.
To Édio Gomes, technical director of Hispamar, the government should not be operating its own commercial satellites, but partnering instead with commercial operators. "I would like to see the Brazilian industry to make components for satellites. There are few suppliers," he says. Another area that the government can make a contribution is trough the development of satellite launch facilities such as the one in Alcântara in the Amazon region, which he said is one of the best in the world.
Major industry players will be launching new satellites such as the SES World Skies, which will put into orbit six satellites by 2011, three of which will cover Latin America. Telesat plans to launch two more satellites over the next two years. Intelsat plans to launch three more satellites for Latin America over the next three years and, moreover, plans to acquire satellites already in orbit and repositions them to their orbital positions they currently have. "That's the challenge. Now the question is whether the capacity we are adding is adequate or excessive," says Gustavo Silbert, President of StarOne.
Jurandir Pitsch mentioned that an alternative to adding more satellite capacity without the need to launch new satellites and introduction of new frequency bands such as Ka-Band (considered ideal for the broadband service to the mass market) is to move existing satellites from other orbital slots to the Brazilian orbital slots. But he said that this need to be a coordinated effort with the end customer. "We have to define where the spot will be placed, so it is only feasible if there is coordination between the operator and and the service provider or end user,” said Pitsch.
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B.H. Schneiderman is the Principal of Telematics Business Consultants. He can be reached at: info@tbc-telematics.com
