Market Survey of Eastern Europe

Detailed surveys of these six countries were carried out primarily by face-to-face interviews with key government, institutional and private sector executives. The findings have been assessed strictly from the viewpoint of the business viability for two sustainable satellite based services, Direct-to-Home Digital Video Broadcast (DTH DVB) and Broadband Internet Access based not only on the known factors addressed in this survey such as competition, regulatory approaches and disposable income per household, but also on future initiatives and plans, both public and private.

In Hungary, there are three main factors inhibiting potential DTH DVB satellite broadcasting new services. These are: a) that the incumbent is the state-owned broadcaster with a close to de facto monopoly; b) that there is little, if any, regulatory support for satellite DTH DVB even though DVB-S standards are perceived as the best; c) and, perhaps of greatest importance, is the small size of the market that is likely to be achievable.

It is expected that in major cities in Hungary the terrestrial infrastructure will serve most of the broadband Internet needs. However, the population in the rest of the country will still remain largely underserved, presenting opportunities for satellite services, providing these can be offered at a cost low enough to be appealing to residential, business and government/institutional subscribers at a lower level of income compared with urban users.

In Poland, from a strong start resulting in 1,050,000 DVB-S subscribers, this market has appeared to have started to level out. While in part this may be due to the comparatively high costs, the lack of knowledge of DVB-S certainly plays a part.

Currently, broadband Internet access as a whole is very low in Poland (2.5%). Primarily this is due to the low level of the economy and the lack of interest in broadband service. The satellite broadband Internet access services currently in place are priced so high as to be completely unaffordable to all but a very specialised market.

In the Slovak Republic there is currently no viable DTH DVB market and there is not likely to be one in the next five years. The prime factors are the lack of interest on the part of the government, the competitive pressure from Slovak Telecom and, as always, the lack of ability to pay.

While use of the Internet in the Slovak Republic is higher than the Central Eastern European average, this is deceptive insomuch that virtually all of it is based upon low cost dial-up service. Currently there is a very significant gap between dial-up and DSL costs and, although there is a need for broadband Internet access, both costs to the subscriber and terrestrial competition would preclude any viable business case in the near future.

In Bulgaria there appears to be a need for additional satellite coverage in the DTH and Satellite-to-Headend markets, both of which are comparatively buoyant. Given this, and the fact that cable television companies have been testing digital TV, high speed Internet, video-on-demand and VoIP services as a means of increasing cash flow, the market need and market prospects are both reasonable as long as the cost is affordable to a predominantly agricultural country.

Although superficially there would appear to be a major potential market for broadband satellite Internet access in Bulgaria (particularly as many ISPs currently use satellite) this is deceiving. Even the cost of dial-up, limited to a small number of hours per month, is currently excessive in terms of the general economy.

A DTH DVB market could well exist in Romania for a new entrant, but is dependent upon the success of the Adisam launch and, given that it is successful, its speed of penetration. As the potential market for a new entry is essentially identical to that for Hungary, there might be some possibility for a single service addressing the needs of both countries.

With only about 2,200,000 Internet users of any type in Romania in 2003 (28% of households), the apparent potential for satellite alternative services appears high. It is expected though that in major cities the terrestrial infrastructure will serve most of the needs. However rural households (in Romania that is over 50% of the total households) will still remain largely underserved, presenting opportunities for satellite services. However, to be viable, these must be provided at a low enough cost to appeal to subscribers with a low income, or alternatively local authorities must be persuaded to provide community access.

In Turkey the satellite infrastructure is a monopoly of the Turksat segment of Türk Telekom. This segment will not be privatised as part of the Türk Telekom privatisation programme. Thus, under the policy of the current government, no DTH DVB competition would be achievable.

The digital divide for broadband Internet certainly exists in Turkey with a large population living below the poverty line, not only in rural areas but also in the major cities. Turkey is both suited to satellite Internet access and has an essentially wide open market for this service, however the uncertainty of the privatisation process, its potential slowness and the limited impact on broadband Internet access that new equity holders are likely to achieve, may negate these advantages.

Overall we have found that in the majority of the countries under study there is a significant digital divide gap between urban and rural areas, the latter potentially representing the satellite service market.

Currently a number of factors are inhibiting the use of satellite services to narrow the digital divide in Central and Eastern Europe on a national basis:

The first of these is cost, not only of the services themselves, but their relationship to the very low disposable income in all of the seventeen countries surveyed. This is exacerbated by the fact that much of the potential market for satellite services is in the remote and rural areas of each country. Invariably this demographic group has a lower than average disposable income.

A second factor is one of education. The knowledge and use of both DTH DVB-S services and broadband Internet services (distributed by any means) is low in many of the countries surveyed, a factor which is again worse in rural and remote areas.

A third factor affecting the potential for satellite services is the fact that in all countries surveyed there is, despite, in most cases, competition, a residual monopoly culture favouring state owned telecommunications organisations. Such organisations, and indeed competitive organisations where they exist, usually have significant investment in terrestrial infrastructure networks. These infrastructures generally still have a major potential for return on investment. These matters inhibit any private sector support of satellite communications. In addition, it gives rise to considerable lobbying against satellite communications, if indeed a government considers, for example, DTH DVB-S standards.

Another fact is that the majority of the countries investigated have comparatively small populations, different languages and can be divided into those that currently have good telecommunications service and thus do not represent a market; those which have needs for satellite services but which have constraints to obtaining them; and those that are extremely poor and recently war ravaged and while they have a major need for any type of telecommunications service, do not represent any viable market in the foreseeable future.