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Challenging Times For Nilesat
author: Chris Forrester, Editorial Director, RapidTV

Nilesat is going through something of a challenging period, with recent actions described by some critics as ‘dictatorial’ and heavy-handed. On the positive side it is very easy to tell a story that’s all good news. Revenues are good, and in October it started commercializing its latest satellite, Nilesat 201, launched on August 4th.

Forrester_Fig1.jpg Moreover, Nilesat is reporting more than 572 channels are now transmitting from its 7 degrees West position, making it the hottest of ‘hot spots’ for Arab viewers. It is also seeing — at long last — a steady stream of HDTV channels flowing onto its satellites, currently numbering 24 and targeting around 35 by the spring of 2011. Even better, perhaps, is the 7 degrees West spot that has won back the ‘Orbit’ portion of the now merged Orbit Showtime (pay-TV) Network back. (Nilesat always carried the Showtime pay-channels).

In early November, the Company began migrating channels from its first satellite (Nilesat 101) onto the new bird, and a batch of new HD channels went live. Nilesat’s own facility is a hive of new buildings, first for the tracking and control of the new satellite, but also the expansion of its ground control segment to handle fresh uplinking contracts, new channel launches and the like. A new management building is also under construction, which will provide office space for broadcasters themselves — but not studios. Studios are firmly under the control of Cairo’s giant — and very busy — Media Production City a few miles away and within sight of the famous Giza pyramids.

The growth in HDTV is meaningful. Two transponders are already used by Abu Dhabi Sports for their HD transmissions, and another three are allocated to Orbit Showtime Network (OSN). More will follow, says Nilesat’s chief engineer, Salah Hamza. “Other HD players are coming. Everyone is transmitting using MPEG4, but there’s a standards problem. For example, Abu Dhabi is using DVB-S2 for its transmissions, but OSN is using DVB-S. DVB-S2 is more efficient but unfortunately there is a shortage of DVB-S2 receiver boxes in the market, but they will come and the market will then converge.”

Nilesat, at least with 201 launched, is now soaking up all its allocated frequencies from 7 degrees West. That could change, suggests Hamza.

“It is a challenge to plan and launch a new satellite. A Nilesat 202 would be mainly a back-up to 201, but HDTV needs extra capacity, so perhaps a new orbital slot will be needed for our expansion.

Comtech_ad_SM0111.jpg “In our region, people watch on the same dish from 7 degrees West to 26 degrees East. There are no limits to placing dishes on our homes, so a new slot is quite feasible. It costs just $20 to install a dish and LNB. Finding another orbital slot is needed. We have filings, but they are not yet co-coordinated. Or, perhaps, we can co-operate with another operator who has suitable rights. But all our studies tell us that within two years we will have fully filled our frequencies.”

So far, so good. But on the debit side of the balance sheet there have been more than a few challenges, not the least of which is a slew of satellite jamming problems that are a real nuisance and a technical pain in the neck. There have also been highly controversial problems with contentious services, resulting in channels being removed from Nilesat. Currently, more than a dozen channels are affected.

The jamming problems during July’s FIFA World Cup transmissions from Al Jazeera Sport included signal jamming during the competition’s crucial final event. The consequences have been severe, with diplomatic relations stretched to the limit between Qatar, Jordan (allegedly the source of the jamming), and Egypt — more on this subject in a moment.

Similar problems have occurred for Arabsat at an ‘official’ level, with the Ethiopian government being accused of interfering with signals from an opposition political movement in Ethiopia. Eutelsat transmissions have also been affected over the region (and Europe), with targeted signal jamming of BBC Persian services.

Nilesat also has the interesting task of finding a new role for Nilesat 101, its first craft. Still, with a year or two of optimal life left, Hamza says it could sell or lease the craft, and is studying its various options. “One of the options is to sell, but the craft could be our own insurance policy in case of problems.” Hamza explained that from 7 degrees West, life was now “extremely crowded” — developing new markets from that orbital slot has been firmly ruled out due to co-ordination problems. “We could move it to another place,” he said. “Nilesat does not have other orbital positions. But if we sell or lease it to another operator, then we can happily move 101 to that new position.”

Forrester_Fig2.jpg Hamza admitted that, one of these days, his team would need to start thinking about Nilesat 202, even though 201 provides full redundancy for the fleet as it exists today, as well as adding some new frequencies. “Our board of directors are naturally reluctant to spend money when there’s little prospect of revenues, and 202 would be, itself, an in-orbit back-up for 201. But it is necessary as we have no back-up in orbit at the end-of-life of 102. 202 should start its build around 2012-13, for launch shortly after. So it is in our thoughts.”

The successful launch and healthy state of 201 is one load off Hamza’s mind, as it would be for any operator. His other problems are pesky in comparison, but troublesome and potentially a very real diplomatic and commercial challenge.

Last month Nilesat took down four so-called “religious channels”, and the news later emerged that more than a dozen others were warned to get their acts together or risk being removed from their massive potential audience of some 40m viewing homes.

“We have no formal regulator covering satellite transmission. There is no Ofcom, no FCC, and no CSA. We had always hoped that the market, perhaps with a little help from us, would regulate itself,” said Hamza. “A poor channel or a channel with bad ideas would close. It has been said that some channels have powerful and wealthy backers, but I can tell you that the channels we have removed are all profitable channels. They are making very good revenues. Unfortunately some of their material is very naïve.” He explained that, in the main, the channels were broadcasting “medical” remedies, usually with little or no foundation as to any practical benefit, and frequently based on plant extracts. “They would promote these plant remedies and say they would cure this or that disease or problem, or boost someone’s sexual performance. All our advice is that the claims are quite untrue.” Further adding to the complications is the fact that in some Middle East countries the products being sold are reportedly licensed as medications, but not in others!

“Then there are other channels which claim to have this or that religious expert on the air, and frequently giving out thoughts and ideas that are plainly wrong. The problem is they are appealing for funds, and seemingly receiving them. We are happy to carry religious channels, from any persuasion, but the people on air must be qualified,” says Hamza.

Forrester_Fig3.jpg Hamza said that some channels had received warnings from the countries where the uplink licenses had been issued, so were fairly easy to deal with. He added that other channels were exploiting the more vulnerable viewer, with near-gambling elements. “The games were quite stupid, asking viewers to say what number comes between 4 and 6, and saying they could win $10,000 if they got it right, and depending on premium-rate telephone calls to make their returns.

“Worse, we understand they weren’t even selecting a ‘winner’,” he said. “We would love to have an OFCOM to put a stop to this stupidity, but we don’t, so we have to take action ourselves. The one channel quickly became two, then three, and more as people realized how easily money could be made. We have not stopped a single channel because of religion but have only stopped these quite stupid channels from exploiting viewers. We are aware of our responsibilities in this region. The whole region is conservative, and some parts are extremely conservative, especially those areas that do not have cinemas or theatres. We have a responsibility to ensure that broadcasters remember these sensitivities.”

Hamza said that letters were sent to the channels concerned ahead of the suspension, and that Nilesat considers the stoppages to be temporary — provided the channels modify their ways. “We have more than these 12 channels [broadcasting], but these were the worst. We now hope that the others, who are borderline, will now modify their content,” he added.

Nilesat’s decision has been highly controversial locally. “The stoppages are, I am sure, temporary and it is just 12 channels out of 572. It is a warning to everyone. To be honest, a greater problem would be the impact it has on our reputation. We are trying very hard to be fair. One very encouraging sign is the response we have had from other branches of the media, which understand our dilemma and support our action. We all understand why, other than in an emergency, a cardiologist shouldn’t be treating pati ents with a brain tumor. Each has his specialties. But it seems in religion everyone and anyone can be an expert. We recently saw the owner of a music channel decide to move to religious broadcasting because it made more money — and it did!”

As if all this is not enough there is the problem of deliberate signal jamming. Nilesat is most reluctant to comment on the World Cup jamming earlier this year. The general consensus is that the signal jamming came from Jordan, but Hamza insists that there can be no criticism of the Jordanian authorities. “It is wrong to blame Jordan, when it could easily have been people from over a border entering the country,” he says. “The industry needs a code of ethics and one that will see all countries honor that code. At Nilesat we will not accept a channel that broadcasts against a legitimate government. We need to conclude this code of ethics, and this should include satellite operators and the channels.”

Forrester_Fig4.jpg Hamza reported some good news in that demand is such that transponder bandwidth prices are holding up robustly. Nilesat has turned in consistently good numbers these past years, and even though net profit for 2009 was a little softer (at about $37m on revenues of $116m, and where 2008’s numbers were $39.7m on revenues of about $100m), Hamza remains extremely optimistic about future prospects. “Nilesat 201 is a little more powerful, and we now reach to the south of Sudan.” He explained that Nilesat’s 201 orientation is a little further south than 101 and 102 and this is directly related to programming rights — leaving Europe out of the footprint makes it easier for his broadcasting clients.

“The market will see corrections from time to time, with some channels closing and others opening. But we see a steady demand for new channels, and of course there’s the trend towards HDTV. We already have Abu Dhabi using HDTV, and we know there are other major channels coming. We hope to see more than 30 high-def channels on air by early 2011.”

Two full transponders have been contracted for an all-IPTV service, which will take a portfolio of Nilesat channels, adding a pay-per-view service, and beaming the result into residential compounds, and gated communities in the region. By taking an IPTV-based service the operator can more easily supply the programming directly into his customers.

Nilesat 201 also has 4 Ka-band transponders on board, and will be kept for wholesale clients as well as backhaul and Occasional Use clients. Hamza says Nilesat will not be itself subsidizing receiving units for broadband by satellite. [This is different to the likely business model being applied by the upcoming YahSat from Abu Dhabi/Ed].

In other words, pretty much all in Nilesat’s garden is looking in good shape. There’s solid business in hand with a robust backlog of long-term contracts, and the prospects of adding HD simulcasts of a large number of existing SD channels exists. Indeed, it will take years before the standard definition versions vanish, which can only be a plus to Nilesat’s revenues for some time to come.
About the author
Chris Forrester is a well-known broadcasting journalist and industry consultant. He reports on all aspects of broadcasting with special emphasis on content, the business of television and emerging applications. He founded Rapid TV News and has edited Interspace and its successor Inside Satellite TV since 1996.  He also files for Advanced-Television.com.