State of The Union addresses begin with the president of the United States proclaiming that the state of the union is strong. After rounds of applause, the president lays out his legislative agenda. Eventually the word "but" creeps its way into the president’s speech. Regardless of how strong the country or economy, there are always anomalies and aberrations that are pointed out.
In much the same manner, the satellite industry can be categorized as enjoying a period of strong health. Demand for space segment is strong — so strong in certain regions that all available bandwidth is sold out. Business cases for new satellites are solid, allowing operators to sidestep the global credit crunch. But there are segments within the satellite business which are not as solid and perhaps even struggling. What does the future bode for these market segments? Will they limp along, be hobbled by the recession or, like the rest of the satellite industry, thrive? Satellite businesses such as broadband and mobile satellite services (MSS) that have built businesses targeting more consumer-oriented markets do not seem to be standing on a business base as solid as ones held by fixed satellite services companies. The consumer business is dealing with the same market forces that retailers around the globe face, but the satellite players have advantages that may help them survive during the economic slowdown.
Broadband
WildBlue and Hughes Network Systems have found success in the U.S. market with their broadband satellite offerings, and a third player, ViaSat, announced its plans to join the competition in 2011. Roger Rusch, owner of TelAstra Inc., a California-based satellite consulting firm, sees the broadband satellite business as one that could prosper even during a slow economic period, but is not sure there is room for more than two players. "There has been a strong case made for universal communications, including broadband Internet access. The central issues are: one, whether satellite-based service can be affordable, and, two, can satellites meet the demand for increasingly higher data rates?... The satellite services cost two to three times as much as terrestrial alternatives for comparable quality of service, however, most of the satellite service users are located in regions where there is no alternative, so some Internet users are willing to pay a higher price. High prices for satellite service will limit the market to more affluent rural people. Satellite service is not ideal for the rural poor who can use dial-up modems."
In Europe, Eutelsat has commissioned its first dedicated Ka-band satellite, and SES continues to expand its broadband business, though the company has given no notice that it plans to order a dedicated satellite. While Europe offers more terrestrial broadband competition for the satellite players than the United States, the satellite players should be bolstered by government programs intended to offer broadband access to segments of the population that do not have access to terrestrial broadband alternatives, according to research company NSR. "Such initiatives never come about as quickly as service providers would like, but it now appears that Europe is truly setting itself upon this path." France’s Numerique 2012 program has entered the competitive phase with several potential service providers, including SES Astra and Eutelsat. In October, the European Union (EU) issued a report calling for the mandating of universal broadband access in all EU countries. The goal is to introduce legislation by 2010. Many such programs have come to light since NSR issued its "Broadband Satellite Markets 7th Edition" study in June. "NSR is seeing real momentum being attained in these universal access programs and fully expects that many other countries in the EU will announce additional projects in the coming years," says NSR.
| "There has been a strong case made for universal communications, including broadband Internet access. The central issues are: one, whether satellite-based service can be affordable, and, two, can satellites meet the demand for increasingly higher data rates?" — Rusch, TelAstra |
But there are problems, such as a decision by the Irish Ministry of Communications, Energy and Natural Resource to exclude satellite broadband service providers from submitting a bid for the Irish National Broadband Scheme (NBS) competition, a program that includes providing universal broadband access to the estimated 10 percent of households not served in Ireland by early 2010, according to NSR. National Broadband Ltd., in partnership with SES Astra, challenged the decision in the Irish High Court but lost when the Irish Minister of Communications refused to accept any bids that made use of satellite services. Among issues raised in defending its position, the Ministry says that it had been in contact with the European Commission since 2006 and had been informed that satellite broadband was not seen as a viable mass market product.
"In Europe, NSR feels that there is a significant window of opportunity for satellite broadband service providers to ride on the wave of universal broadband access initiatives and to secure a long term role in providing broadband access services to a large fraction of the unserved market. Yet, that window can be slammed shut very quickly in no small measure due to overconfidence in our industry about satellite being the ‘best’ option and poor marketing efforts at all layers, including the current set of distributors, that create false perceptions about what satellite broadband can (or will) do for the average subscriber. Perhaps it is time for all European players in the market... to at least partially set aside their differences and to work together to get the marketing messages in line with reality, rapidly address and correct misinformation among key policy making bodies, and to fairly lay out the development path for the segment. Some small common measures may well play an immeasurable role in guaranteeing the future for the satellite broadband market in Europe," NSR says.
A new entrant, O3b Networks, intends to build a 16-satellite constellation to provide satellite broadband service to a market it estimates to be nearly 3 billion customers in developing areas. While O3b has backing of Google, among others, Rusch is not convinced this will guarantee success. "Most of these ventures have a fatal flaw: expensive ground equipment. The fundamental technical issue here is that the satellites move. In order for the user to obtain continuous service, the user terminal must have two separate antennas. Each of these antennas must have receivers and must track the satellites as they pass overhead. The antennas must provide for handover from one satellite to the next. Although this is technically possible, the cost for such terminals is five to 10 times more expensive than fixed antennas that are used for geostationary satellites. Consequently, these antennas will each cost several thousand dollars. This price tag is out of reach in the developing world," he says."
NSR also calls O3b’s plans "ambitious and definitely brave in these trying economic times.... If O3b does pull off its planned vision of bridging the digital divide in the midst of economic uncertainty that could prove to be long and deep, this will be the real revolution the company would have achieved. Serving the ‘other 3 billion’ and not the same 3 billion for enhanced services will be a serious but worthy challenge the company will face."
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