USTR Report Cites Continued Satellite Market Protectionism in China, India

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PARIS — The U.S. government has again singled out China and India as nations that maintain barriers to foreign satellite service providers in order to protect domestic, government-owned satellite operators.

In its annual report on telecommunications trade agreements, the U.S. Trade Representative (USTR) pays special attention to the state of the satellite services markets in the world’s two most populous nations, both of which are fast expanding their satellite telecommunications sectors.

The report concludes that not much has changed in either nation despite regular promises from their government agencies that trade barriers would be eased.

The USTR report says U.S. organizations asked to provide an update on the situation in China and India found a continued “lack of transparency in rules governing the provision of satellite capacity” in both nations. “The requirement to sell capacity only through government-owned satellite operators is problematic.”

In both nations, the end result is the same — a government roadblock to access to end users of satellite services that gives government-owned satellite operators a de facto monopoly on the business except in exceptional circumstances.

But China and India achieve this result in different ways.

The China Direct Broadcast Satellite Co., China DBSat —which was created in 2007 to merge China’s three domestic satellite fleet operators — is the sole company that has a satellite services operating license. Two Hong Kong companies that are partly owned by the Chinese government — APT Satellite Holdings and AsiaSat —have access to the Chinese market. But both have reported difficulty in maintaining their market shares in recent years for reasons that may reflect Chinese government policy more than decisions by customers.

In the case of India, the Indian Space Research Organisation (ISRO), which is the nation’s space agency, operates a fleet of Insat telecommunications satellites. ISRO has had trouble maintaining sufficient Insat capacity to meet India’s exploding demand for satellite television, and in these circumstances it has permitted non-Indian satellite fleet operators into the market.

But the market entry is done only through ISRO, meaning a foreign satellite operator must come to terms with its ostensible competitor, ISRO, in order to reach Indian customers. ISRO purchases the satellite bandwidth at prices it deems acceptable, and then resells it to customers.

In one of a dozen industry submissions that informed the USTR report, the U.S. Satellite Industry Association (SIA) said ISRO then adds its own charges to the initial satellite bandwidth price, making that capacity more expensive than what it would be without ISRO acting as a middleman.

“ISRO may structure contracts with the goal (explicitly stated at times) of moving the service to one of ISRO’s satellites once capacity is available,” the SIA said in its statement to USTR. “ISRO determines the rate at which the market grows.”

All this would appear at variance with India’s New Telecom Policy of 1999, which grants access by Indian customers to Indian and foreign satellite bandwidth, in coordination with India’s Department of Space. ISRO is part of the Department of Space.

SIA said that once Indian authorities have determined that the foreign satellite operator has completed broadcast frequency coordination with the Insat system — a procedure handled through the Geneva-based International Telecommunication Union, a U.N. affiliate — “there are no technical or commercial reasons why foreign satellite capacity should need to be procured through [ISRO], a direct competitor of foreign satellite operators.

“Local users in India should be allowed to contract directly with any satellite operator that has the ability to serve India,” SIA said in its statement.

Another curiosity in India’s regulatory regime, SIA said, is its ban on the use of Ku-band frequencies for broadcasts to cable head ends. With Ku-band globally accepted as suitable for these transmissions, “[t]here is no technical or logical policy reason for this restriction,” SIA said.

Finally, Indian regulations on mobile satellite services include a security-related requirement that, in order to receive an operating license in India, mobile satellite operators must deploy gateway infrastructure within India. For a system such as Iridium, which uses links between satellites to bypass the need for an elaborate network of gateway Earth stations, the regulation is an obvious handicap. SIA said “more-advanced technologies other than locally established gateways can fully meet security concerns. This requirement should be removed.”

The principal commercial satellite fleet operators have long adopted a do-not-make-waves policy with respect to the barriers in India and China, hoping that over time, the evolution of demand in these two nations will be sufficient to crack open their markets.

USTR said, as it has previously, that it will “continue to raise the … concerns regarding the barriers to supplying satellite services in China and India and will encourage these countries to consider changes to their respective frameworks.”

The USTR report, “2011 Section 1377 Review on Compliance With Telecommunications Trade Agreements,” is dated April 2011 and reflects industry and trade association comments submitted at the end of 2010. The report is mandated annually as part of the Omnibus Trade and Competitiveness Act of1988.

 

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