The Russian space market is undergoing a period of change, as the industry faces up being a major part of the country’s overall economy. Space is intrinsically linked to Russia’s DNA, and new innovation will be needed for the industry to grow and prosper.
There was a definite change of tone at SatComRus 2016 where the Internet of Things (IoT) and how it could impact the Russian space market was the main theme. In a departure from previous events, which really focused on the state of the market as well as Russian Federal Programs, the main theme underpinning this year’s event was undoubtedly the industrial internet in Russia and how it could help the Russian space industry.
After the event, Via Satellite caught up with Alexei Belyakov, vice president and executive director for the space and telecommunications technologies cluster at Skolkovo Foundation, to talk about the “NewSpace” environment in Russia. The Skolkovo Foundation plays a key role in new technology development and how these technologies can be commercialized in Russia and beyond. He told Via Satellite that IoT could definitely be one growth point for the Russian satellite industry.
“Given the number of remote locations (oil deposits, mines, pipelines, etc.) satellite IoT has very strong fundamentals here in such verticals as energy, oil and gas, agriculture, and transportation. Moreover, there are some underutilized constellations (Gonetz, for example) that might be very valuable in this segment,” he says.
However, in terms of new start ups focusing on the space industry in Russia, Belyakov admits he can’t say there are a lot. “At the end of the day start-up ecosystem strongly depends on many factors: capital availability, macroeconomics, entrepreneurial culture, etc.; not all these factors are ‘in best shape’ in Russia at the moment. However, at Skolkovo we managed to ‘assemble’ some interesting success stories,” he adds.
He talks of Dauria Aerospace, a privately funded company, and points to the fact that it has designed and launched three satellites, two of which have been sold to Aquila Space. Another company Belyakov highlights with Russian heritage is Astro Digital, which has created a platform and Application Program Interface (API) for working with images acquired from different constellations. This platform is used for creating services used in sectors such as agriculture and insurance to assess the level of damage, for example.
Belyakov believes there is now a heightened interest toward the sector from strategic investors in Russia. He says this interest primarily comes from telecom operators that see a threat coming from new generation of companies such as O3b Networks and OneWeb. “Our telecoms players are much more cautious and I do not believe they will rush to make multimillion investments like Google [and] Facebook did. Sometimes it is better to wait and see. Everyone remembers case of Teledesic,” he says.
However, while companies like Dauria and Astro Digital point to a brighter future, Belyakov says Russian space start-ups cannot really look to solely focus on Russia to be successful; they need to think globally. “There are examples of our startups raising money from international investors — I2BF Global ventures, Columbus Nova, and some others,” he says. This trend will need to continue for Russian companies to find success on the international stage.
Russia Space Industry Update and IoT
One of the main speakers at SatComRus 2016 was Igor Chursin, deputy head of the Federal Agency of Communications, who gave a positive update in terms of how he sees satellite fit into this new world. He said that IoT is now the focus of the satellite industry and satellite will “play an important role” in IoT in Russia. Chursin is optimistic about the future of satellite communications in the country and that things are progressing well with the latest Federal Program in this area, which runs between 2009 and 2018. Russia has successfully introduced seven new spacecraft which will all be ready for operations by 2019, with some of these dedicated to broadcasting. Russia now has 13 communications satellites at its disposal.
The success of this can be measured by the fact that the entire territory of the Russian Federation is now able to get broadband. Even the remote areas of Eastern Russia, according to Chursin, are now able to access broadband via satellite. He says Russia wants to develop a new cluster of satellites for several uses.
“We are planning to create seven new satellites in high elliptical geo orbit. We intend to broaden our orbital resources; we have a resource of 250 billion roubles ($3.85 billion),” he says. “This concept is being developed further still. We can see the reliability (of satellite communications) is being improved in the Russian Federation. In September, we delivered to the Minister of Economic Development for a final go-ahead for the government to go ahead with our latest plans for satellite.”
Yuri Prokhorov, director general of the Russian Satellite Communications Company (RSCC), also spoke a lot about IoT and how it could impact a company his. He admitted that there is now a community developing in Russia with a heightened interest in the benefits of IoT.
“There are various discussions around what the Internet of Things are. What we offer to the market is possibilities to deliver information from A to B. What needs to be defined is the role being played by fixed telecoms infrastructure in IoT. For satellite operators, do they need to modernize ground-based infrastructure to meet customer needs? In domestic and international markets, there has been a surplus of capacity,” he says.
Prokhorov admits one of the big challenges facing RSCC, as well as other satellite players is “identifying” the need for satellite communications in this new IoT need. “The growth of Big Data will lead to an increase in the demand for satellite capacity … Big data will play a key role in verticals such as banking, retail, maritime, etc.” he adds.
One of the most interesting speakers at SatComRus was Vitaly Iotunion, an expert in IoT in Russia. He said that industrial internet has ceased to be a product of technologies, and that it has become a certain branch of telecoms and engineering. He believes what is occurring now globally regarding IoT is “huge” with the world’s biggest companies, as well the biggest car manufacturers going heavily into this area. However, its impact in Russia is harder to define. Iotunion admits that Russia is behind many countries in the European Union (EU) and the United States by around 7 to 10 years. “In 2007, the first program on industrial internet was devised. The profits of Chinese companies are in billions and we will see them here too. Other countries are also adopting a digital agenda. One of the tasks facing Russia is to modernize. We need to find out what the internet actually boils down too,” he says.
Iotunion cited the example of agriculture, where satellite-based IoT could have a huge influence in Russia. “We have seen considerable losses in the field. Here, we can evaluate the effectiveness of IoT. So, we need to find out what is the return by using satellite here. … We have seen that we can accomplish positive results in the automotive industry for example. I see the industrial internet being separate for each sector. RosTelecom is building a domestic platform with IoT in mind,” he adds.
Broadcast in Russia
While IoT was a hot topic at SatComRus, the success of the Russian satellite market will still be powered in many ways by the broadcast and pay-TV markets. One of the main acquirers of capacity in Russia is Orion Express. Its CEO Kirill Makhnovskiy says the company leases just under 20 transponders and that the level of pay-TV penetration in Russia is just under 75 percent.
“All operators are counting on changing dynamics, because the level of ARPU in Russia is among the lowest ones in the world. We look forward to its gradual increase in the coming years. Investment in increasing ARPU and other ways of the growth of the profitability of the existing base today is much more promising and expedient than investment in involving the remaining potential subscribers.”
While Over-The-Top (OTT) television has not made the impact in Russia it has in other markets, Makhnovskiy admits Orion is looking more and more in this direction. He says currently these segments in Russia suffer from a lack of regulation. He calls the law in relation to OTT services “quite vague.” Orion has created its own OTT project because Makhnovskiy says its younger audience prefer to watch content on tablets and mobile phones. Orion has formed a partnership with Telecard Online to enable customers to access content on their mobile or internet connected device. He says 30,000 subscribers are now accessing content this way and have downloaded a package of channels.
But, what does this all mean for satellite TV going forward? With more than 70 percent penetration, the market growth has “virtually stopped” according to Makhnovskiy. However, due to Russia’s geography, he believes satellite will remain in a strong position.
Julia Shakmanova, director general at STV, says the company uses capacity on three satellites: Express AT1, Express AT2 and the ABS 2, which allow STV to cover around 98 percent of Russia’s territory. STV is a Download-To-Own (DTO) operator, and thus has a fairly unique perspective of the market.
“According to our data, the intensive growth of subscribers base of Russian pay-TV operators is completed, the service providers are focusing on additional services and multiplatform solutions. This suggests that the priority for all is to increase ARPU,” says Shakmanova. “Previously, operators tried to extract additional revenue, playing with content of its different TV-channels packages, now it's the time of Value-Added Services (VAS). It is in their development, we see the greatest potential for revenue growth. In addition, market participants are seeking to optimize the costs, so we expect further technological development of broadcasting base and change the current format of communication services.”
Shakmanova says the development of broadband access to millions of Russian TV-viewers is giving them the ability to interact directly with the content. She cites the fact that many Russian TV providers have already launched their own OTT services. “On the leading edge in this respect are TV operators, whose primary business is the provision of cellular services. Traditional satellite TV providers also forced to develop in this direction,” she adds.In terms of the prospects for 4K in Russia, Shakmanova adds, “From a technological point of view, we are ready to organize the broadcasting of TV channels in the 4K format right now, the preliminary agreement on the additional capacity exists. The issue, as once with the broadcast in HD, rests in the possibility of subscribers to receive content in this format. To date in Russia, in my opinion, not enough households have UHD TV-sets to make 4K as a mass service. Nevertheless, a certain audience for this format exists, and looks forward to relevant proposals from the market.”
by Mark Holmes, Via Satellite. Issue 1, 2017.