By Peter J. Brown
Satellites have always enjoyed an advantage over terrestrial alternatives when it comes to beaming one-way transmissions over vast distances. Broadcasting the same signal to any number of receivers spread over thousands of square miles is one of the applications where satellites excel. However, when it comes to two-way services, the satellite industry continues to search for ways to compete with terrestrial offerings.
One way in which satellite service providers know that they can still prevail over terrestrial providers is either by offering connectivity to remote sites that terrestrial lines cannot reach or by offering the right service - reinforced by a well-refined business model - in areas where telecommunications infrastructure and the competitive forces it sustains come into play. The opportunities and revenues are there, but so is the challenge of establishing a profitable service.
"This is a very interesting marketplace that is increasingly characterized by niches where the principal value is defined by application-specific opportunities and asymmetric data flows," says Scott Calder, CEO of Utah-based Mainstream Data Inc. "The highest growth area for VSAT service providers will be in markets where terrestrial solutions are not a good fit. Additionally, geographic markets where low-cost terrestrial alternatives are not available will continue to provide opportunities for VSAT service providers."
Calder sees competition in this market for two-way data services becoming more aggressive due to a constant downward pricing trend and the steady expansion of wired and wireless terrestrial alternatives. "This will continue to have a dampening effect on the growth of VSAT networks generally," he says. "Ultimately, it is applications that drive industry growth, and the applications growing rapidly are typified by large outbound bandwidth requirements with moderate inbound needs. Interactive distance learning and digital signage are where the action is today."
Maintaining momentum in this market is a challenge, although the vast pool of potential customers with an insatiable appetite for data is unlikely to diminish anytime soon, says Jon Douglas, marketing director at Virginia-based iDirect Technologies. "We have seen a number of customers upgrading from narrowband applications to VSAT broadband Internet protocol (IP) networks, as well as upgrading existing VSAT platforms to take advantage of greater network efficiency and gain access to solutions such as voice over IP (VoIP), videoconferencing and other broadband IP applications," he says. "Two-way data transmission is being integrated into customers overall networking needs as part of a larger hybrid network solution. By enabling true broadband IP over satellite networks, our customers have the ability to utilize satellite access at each end of a network or integrate it into a network that utilizes satellite access points as well as landline termination, depending on the availability and economics."
In terms of overall operating costs, two-way data transmission via satellite is inherently more expensive than terrestrial two-way connectivity. This fundamental rule has been shaping strategic thinking in the VSAT sector for years, but satellite solutions remain appealing for a variety of reasons. "The true economies of scale with satellite come when the application is highly asymmetric, such as in the case of mostly one-way broadband IP multicasting with a thin-route return path," says Ron Clifton, president and CEO of Ottawa-based International Datacasting Corp. "The industry is still recovering from the recent recession and telco meltdown, and capex [capital expenditure] financing for needed upgrades is still tight. Customers we are talking to are saying they are tired of proprietary protocols and want open standards such as DVB-RCS [Digital Video Broadcasting- Return Channel via Satellite], but the first generation of DVB-RCS products have not met expectations. Customers are waiting for the next generation," he says.
At Gilat, there is a sense that the market for two-way data services via satellite is reawakening after a slowdown in 2002 and 2003. "We see a growing demand for high-bandwidth platforms, along with voice and retail applications. New needs are arising and there is a growing demand for a variety of applications. However, on the other side, the demand for lower prices is ever-present as well," says Gil Meyran, Gilat's associate vice president of marketing. The company has been emphasizing the shared-hub concept as a cost-effective solution for two-way satellite transmissions. Gilat's product family can combine various applications over the same hub, and by using advanced management and control schemes, multiple customers can share the same hub.
Thanks to a combination of performance enhancing proxies (PEPs), header compression and other techniques, the satellite sector can drive efficiency while not sacrificing link performance at the same time, says Meyran. "We see these new technologies evolving, as well as header stripping and improvements in quality of service. These techniques will make the transmission of VoIP and video more efficient and are required for enhancing quality." The improvements in compression techniques will increase the amount of data transmitted while greatly reducing the need for added bandwidth, he says. "With more data flowing over existing space segment, the profitability of the service providers will grow and the penetration of VSAT networks may grow, too," Meyran says. Trying to grow VSAT networks in a world where IP-based services are the rule rather than the exception means that satellite operators and service providers can no longer keep up with the pack by simply offering an end-to-end solution. The offering must include a comprehensive and flexible menu for each customer.
According to Richard McPhaden, vice president of marketing at Quebec-based Polarsat Inc., vendors must incorporate additional features that benefit the service provider or end user, including acceleration, security, quality of service and compression. "Simple raw pipes are no longer sufficient in this market," he says. "There is a steady business in customers looking to upgrade their networks, and the market appears to be quite active at the moment." McPhaden says the Southeast Asian market is an area where competition is picking up. "Economies have rebounded and [companies] are now looking at new infrastructure investments," he says. Though the impact of new regional networks from companies such as Wildblue and IPStar, for example, remains to be seen, he says.