Possible Entry Strategies For Provision of Satellite Services by Foreign Company/Operator in India

In the present state controlled satellite regulatory environment in India, Foreign Satellite Operators (“Satellite Company”) can consider two entry options to establish its business presence in India and provide satellite services in the Indian subcontinent.A. Providing Services Through ISRO. The Satellite Company can provide bandwidth capacity services to Indian end users (such as DTH and VSAT service providers) through Indian Space Research Organization (“ISRO”). For this purpose, the transponder capacity is canalized through ISRO and ISRO’s approval may be forthcoming if alternate capacity is not available on INSAT satellites. As the leasing process involves the Department of Space (“DoS”), the Wireless Planning & Coordination Wing of the Department of Telecommunications (“WPC”) and the concerned Ministry (for instance in the case of DTH, the Ministry of Information & Broadcasting), the process is definitely time consuming and with no clear assurance of achieving approval. The foreign satellite should be coordinated with INSAT satellites in terms of the International Telecommunication Union’s (“ITU”) Radio Regulations as a pre-condition for lease of capacity. A short term lease (usually on a yearly basis) is signed by ISRO or by its commercial arm, i.e., Antrix with the Indian customer, and between Antrix and the Satellite Company. There is no privity of contract between the end customer and the Satellite Company though typically the Indian customer and the Satellite Company agree on the commercial terms prior to approaching ISRO. The lease rentals are generally marked up by ISRO for provision of capacity to the end customer. INSAT reserves the option of not extending the capacity lease for subsequent years and require the end customer to migrate to a INSAT satellite, as and when alternate capacity is available. This indirect route of providing capacity to the Indian market has been adopted by several foreign satellite operators in the past including SES Americom, Asiasat, and New Skies.This model gives the Satellite Company immediate access to Indian market through ISRO with minimal capital investment in India. This route however may not meet the long term business objectives of the Satellite Company due to the instability and indirectness of the access structure (i.e., solely through ISRO); procedural compliances; ISRO’s veto on termination or renewal of the lease, etc. Alternatively, collaboration with ISRO to jointly develop, launch and operate a satellite can be also considered by the Satellite Company (similar to the joint development of the Measat system program, proposed to be established under a joint venture company with Antrix).B. Establishment of an Indian Satellite System. The Satellite Company can alternatively consider to independently set up satellite systems in India. Indian satellite systems (“ISS”) are satellite networks which are informed, notified and coordinated by WPC under the relevant ITU’s Radio Regulations and procedures.In the year 1997-1998, the Government of India (“GoI”) announced the Satellite Communication Policy Framework (“SatCom Policy”) and formulated the norms, guidelines, and procedure for registration of Indian satellite systems by private Indian companies and allowed limited use of foreign satellites (i.e., uplink from India) in special circumstances provided the satellites were coordinated with the INSAT satellites. Pursuant to the SatCom Policy, the GoI authorized ISRO to set up a Committee for Authorizing the establishment and operation of Indian Satellite Systems (“CAISS”), with its Secretariat at the Satellite Communication Programs Office at ISRO Headquarters at Bangalore.In terms of the SatCom Policy, an Indian company incorporated under the laws of India is permitted to register its satellite systems for establishment, operation and maintenance of satellite systems in the Indian orbital spectrum and to offer communication transponder capacities/bandwidth to service providers. Indian orbit spectrum is the orbit-spectrum for which filings are done by WPC with the ITU and informed, notified and coordinated by WPC under the relevant ITU procedures. Satellite Company can consider establishing an ISS in terms of the SatCom Policy. Foreign equity investment upto 74 percent is permitted in the Indian company subject to obtaining the prior foreign investment approval from the Foreign Investment Promotion Board.The Satellite Company would need to submit an application to the CAISS for setting up the satellite system together with the technical description of the proposed system including intended services and service area; network description and characteristics; and other details. As a condition for grant of authorization, the satellite control and monitoring facility including the telemetry, tracking and control (“TT&C”) facility center for the satellite will need to be located in India and all foreign personnel deployed for installation, operation or maintenance of the TTC facility will need to be cleared by the Ministry of Home Affairs, GoI. Additionally, the satellite launched or leased would need to be on an orbital slot that is informed, notified and coordinated by WPC under the relevant ITU procedures for which filings will need to be done by WPC with the ITU.The system established under the authorization will be accorded the status of an Indian Satellite System for providing satellite based services and transponder capacity/bandwidth on a commercial basis in India and will be eligible for all the preferential treatment accorded to such systems in service provisioning in India prescribed under the SatCom Policy. The authorization will be liable to terminated by CAISS, in case of default or contravention of any terms and conditions stipulated in the authorization including on failure to establish the satellite system within the time specified in the authorization or any extensions thereof, and impose any penalty as it may deem fit under the provisions of the agreement.There is presently only one ISS in India, which is Agrani (Zee Group/Dish TV venture). Agrani has been set up with the objective of establishing, owning and operating a satellite system to provide satellite capacities in and around the Indian sub-continent. Agrani has however so far not been able to set up a satellite system even though it has entered into a long term collaboration with ProtoStar I Ltd. for lease/purchase of transponder capacity. No other application is presently pending before the CAISS for its consideration for setting up an ISS.In the year 2004, Binariang Satellite Systems (“BSS”) of Malaysia, agreed to enter into a joint venture relationship with Antrix for extension of Antrix’s marketing and business operations in and to the Asia and Pacific region in the area of satellite communications. No progress has however been made by ISRO in the aforesaid venture as of date.My next article on the subject will deal with the approvals, registrations and authorizations required for setting up an ISS in India.Seema Jhingan