Oftel Paints Bright Picture

By | June 18, 2003 | Feature

The UK is experiencing one of the fastest growth rates in broadband use, although the take-up rates for satellite broadband remain low. These were two of the main conclusions of a recent benchmarking study by the UK telecoms regulator Oftel. The study looked at all the main countries in Europe as well as the United States.

According to Oftel, there is in excess of 4,800 subscribers who have broadband satellite access in the UK. In Germany, there are fewer than 10 companies providing two-way satellite services and there are approximately 1,000 end users. For one-way broadband service, Germany has around 10,000 subscribers. In the U.S. market there were 221,000 satellite and fixed wireless broadband subscribers last year.

Oftel also compared prices of satellite broadband in Europe. In France, it pointed to the fact Netsystem offers a one-way service for 36 euros ($42.3) a month with a downstream speed of 300 Kbps. Deutsche Telekom offers a one-way service with a downstream speed of 756 Kbps with prices beginning at just under 20 euros ($23.5) with additional charges above 0.5 Gbyte per month usage. In Sweden, Swepet offers a one-way services starting at 395 krona ($51) a month. While the UK satellite broadband market may be small, a number of companies are aiming to make an impact. According to Oftel, operators such as Aramiska, Tiscali, Europe Online and Broadsat Opensky are aiming to offer services in the UK, as well as numerous other European territories.

The market is growing in the UK. Aramiska has between 1,300 and 1,400 customers in the UK and around 2,000 customers overall. It also operates in France and Spain. It hopes to have revenues of around 20 million euros ($23.7 million) and be cashflow positive by the end of the year. It is targeting the small- to medium-sized enterprise (SME) community. Its entry-level packages start at GBP99 ($165) a month, but this can support up to 30 PCs. It launched its services in the UK at the end of 2001.

Philippe Bodart, the CEO of Aramiska, believes the company has exceeded expectations despite the take-up of satellite broadband being slower than expected. He told Interspace: “If I take the Oftel numbers on broadband take-up in the SME community, we have in any given month between 5 and 9 per cent of market share in the UK. This is far better than what my expectations were when we started this business. It was more like a 3 per cent figure in my head. Having said that, the take-up of broadband has been slower than anticipated as well. The penetration, although the government is doing a massive effort to increase broadband awareness, has been slow.”

Bodart believes the operator can carve out a substantial niche for itself in the SME market in the UK. “I think the most we can expect is 9 to 10 per cent of the SME market. We are almost alone now in offering the service. I think 10 per cent is really a good number. It may go a little higher.”

Bridge Broadband also hopes to make an impact in the UK satellite broadband market. It is a unit of Flexia and has been part of the broadband landscape for a while. It entered into a distribution agreement with Hughes Network Systems Europe to provide broadband Internet services. It launched satellite broadband services to the business and educational community in the UK in October 2001.

Reuben Cook, CTO of Flexia, told Interspace that he believes the satellite broadband market in the UK could grow significantly over the next two years. “The growth we are seeing is substantial as well as exponential based on the increased awareness of broadband in the UK. The BT campaigns have done a great deal for all, not just those who are offering BT fixed-line services. The whole [satellite broadband] industry is benefiting from their campaign. There should be huge growth in the next 18 to 24 months.”

Cook said that satellite broadband will play a key role in the push to provide broadband services to rural parts of the UK. “We have seen and taken part in a lot of initiatives in the UK, such as the CLA Broadband Rural Britain Campaign. Such initiatives are definitely driving broadband demand. There are also a number of community-based projects and regional development agencies looking to utilise best of breed satellite and wireless technologies. In light of the UK and European Union e-government deadlines, there are significant grants available to enable anyone to have broadband anywhere – this can only be provided (economically) through satellite. According to certain reports, 60 per cent of the UK can still not get ADSL – there is a window of opportunity here.”

While satellite broadband still looks expensive as a consumer option when cable or ADSL options are available, Cook believes it is a natural fit in the SME community. “If costs are shared between a community or business park, they can be quite similar to ADSL. Grant availability further addresses the price balance. Developments include satellite capacity improvements with more powerful satellites being launched. Space segment is more abundant and affordable and component cost reduction is making VSAT technology price competitive.”

While Aramiska and Bridge Broadband look to the SMEs for revenues, some companies are looking to tap into the demand for satellite broadband services in other sectors. In particular, Jupiter ICT, a satellite solutions provider, which has 193 customers, sees education as being one of the key drivers of satellite broadband. John Crump, sales and marketing director for Jupiter ICT, told Interspace: “We have found there is massive demand for satellite solutions, but more from schools than from small companies. We have around 40 schools as customers. But certainly, over the last three months, demand has risen quite dramatically.”

–Mark Holmes

(Contact: Reuben Cook, Flexia Plc, e:mail: Reubenc@bridgebroadband.co.uk; John Crump, Jupiter ICT, e:mail: John.crump@jupiterict.co.uk; Peter Gumm, Aramiska, e:mail: P.gumm@aramiska.net)

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