Government Series – Part II: Satellite Players Helping the Public Through Civil Programs

By | August 1, 2009 | Feature, Telecom

The market for satellite technology has remained strong over the last few years, shrugging off the financial woes experienced in consumer markets. Although sales curves are at a notably lower pitch than two years prior, the satellite market is still relatively healthy, avoiding, to date, the doom and gloom scenarios being experienced in other industries. The appetite for broadband connectivity amongst the world’s population has increased and governments around the world have begun rolling out some of the largest satellite networks ever deployed to meet this growing demand.

Market opportunities in regions around the globe are strong. Satellite’s ability to cost-effectively blanket land masses with high-quality digital service makes it the logical choice for many innovative government programs. In turn, these government programs — and a host of others — provide good opportunities to players in the satellite market.

Government Drivers

Nations which lack highly developed telecommunication infrastructures are languishing as neighboring countries take advantage of Internet connectivity and the benefits that come with connectivity to the World Wide Web. With the exception of a handful of dictatorial regimes and countries mired in civil conflicts, nations around the world are investigating ways to improve their existing infrastructure.

"How can you make sure all of a government’s services reaches all of its citizens?" says Ramesh Ramaswamy, vice president of international marketing at Hughes Network Systems. "The provision of these so called e-governance services involves three different aspects: information, interaction, and transformation. Information can be many things. For instance, an individual might want to know where to apply for a driver’s license or download the application form. Then comes the interaction phase, where he actually applies for it online. Reliable broadband services are obviously a necessity to allow the individual to interact with the government in some way. Once there is information and interaction, then you can effectively transform communities. Governments thus realize their populations need broadband connectivity. Nine out of 10 government funded telecom projects are to bring broadband to underserved areas. Depending on the country, these programs take on different forms to help bridge the gap in communications"

Follow the Money

As the world shifted from wired to wireless technologies, the demand for basic voice connectivity exploded, allowing untold millions to experience their first phone call. Now telecommunication providers of all stripes are racing to meet the pent-up demand for broadband connectivity. But one major hurdle faces all of the contestants: money. Money is the lubricant of industry, and countries use several different approaches to fund regional or state broadband initiatives. "Different countries use different approaches to expand their telecommunication infrastructures," says Doron Elinav, vice president of marketing for Gilat. "Universal Service Obligation (USO) is a very common approach. The government mandates that carriers provide services to underserved areas, but the government doesn’t provide the funding. If you want to keep your license, you must provide these services whether they are profitable or not. Funding can also come from a country’s Universal Service Fund (USF), where a fee is levied on all telecommunication services. The fund is then used to subsidize services which otherwise wouldn’t be profitable. Of course, there is still the classic funding mechanism for new initiatives where the government outlines the size and scope of a satellite project and then sets asides funds specifically for the project."

The success of government-sponsored satellite programs around the world, combined with the dramatic drop in prices for VSAT hardware throughout the last decade, has stoked further demand for satellite services. In March, more than 1 billion euros ($1.4 billion) were allocated in the European Union (EU) Economic Recovery Package to promote broadband connectivity across Europe. The goal is to provide access to broadband services to all of Europe’s 500 million citizens. "If we’re serious about having prosperous and vibrant rural areas, we still need to help everyone get the most out of modern technologies. We must do our utmost to bringing Internet technologies to all citizens of Europe. Internet technologies contribute to half of productivity growth in the EU, and the EU’s member states cannot afford their rural areas missing out on this potential, especially not in these times of economic crisis," says Viviane Redding, European Commissioner for Information Society and Media.

As with the broadband stimulus plan in the United States, members of the satellite sector had to close ranks and educate government officials on the advantages and costs effectiveness of utilizing satellite technology in rural and areas. The European Satellite Operators Association (ESOA) has taken an active role in the educational process. "Satellite capacity is already in place to enable a sizeable and rapid roll-out of satellite broadband services throughout Europe. With the right application of funds, satellites can connect at least a million farmers, local residents and rural businesses to the Internet by the end of 2010," Giuliano Berretta, chairman of ESOA, says.

Asian Governments Embracing Programs

India has a population of 1.1 billion people and only 30 million personal computers, making it especially challenging to bridge the digital divide, says Ramaswamy. "To solve this problem, the government launched an initiative to roll out rural e-service kiosks to provide citizens with access to broadband and associated e-governance services. Citizens would come to the kiosk and get information on weather, farming practices, open a bank account, take a educational course or send and receive money. The government was offering to subsidize the operation of the kiosk and service providers were given licenses to operate a kiosk based on competitive tenders. Bidders who asked for the lowest subsidy (or better still, offer to pay the government) were awarded the license. Revenue streams for the operators are through various valued added services offered in these kiosks. Hughes has received orders to roll out and provide services to over 20,000 such kiosks."

"With the right application of funds, satellites can connect at least a million farmers, local residents and rural businesses to the Internet by the end of 2010."

— Berretta, ESOA

In 2007, the Australian government announced the Australian Broadband Guarantee (ABG). Roughly 85 percent of Australia’s population of 18 million people are concentrated in five major population centers, with the remaining 3 million people spread out over a continent the width of the United States. The aim of the ABG program is to provide affordable broadband connectivity to residences and small businesses that reasonably compare to those in metropolitan areas. The Australian government defines this as a service that offers a minimum speed of 512 kilobits per second (kbps) download and 128 kbps upload, with 3 gigabytes of data usage per month.

The rules are clear: narrowband communications need not apply. The ABG is about promoting higher speed connectivity, which would compliment the Australian National Broadband Network. The goal of the National Broadband Network is to provide high speed broadband services to 98 percent of Australian premises. Satellite is the obvious choice to serve Australian homes and businesses outside major urban areas. It is the most cost-effective solution to deliver broadband connectivity to low density populations. To minimize the cost to subscribers, the Australian Government offers a subsidy of Australian $2,750 ($2,197) to offset the capital investment for two-way satellite hardware. To date, the government has budgeted A$270 million ($215.7 million)) over the next four years to fund the ABG. "It wasn’t economically feasible to provide broadband services to Australians living outside major metropolitan areas. The subscriber density was just too low. End users in underserved areas essentially get a "voucher" when they sign up for a broadband services which is then used to subsidize the cost of the hardware and installation," says Ramaswamy.

In Vietnam, the Ta Van project "is a good example of what is possible" through a government project, says David Hartshorn, secretary general of the Global VSAT Forum. "The project started out very small and provided broadband connectivity to two small villages. One was connected by a fiber circuit and the second utilized an IPStar VSAT. WiMax repeaters then lit up both villages. The villagers saw the relevancy and supported the network, which then became economically sustainable. The United States Agency for International Development (USAID) provided some seed money and the Vietnamese Data Communications Company provided matching funds. Based on the success of this program, Vietnam has earmarked $60 million in USF funds annually over the next three years."

Darrell Owen, a contractor who helped manage this last mile initiative for USAID, says there were two primary project goals for the Ta Van project: getting Vietnam’s Universal Service Fund up and running, and demonstrating the WiMax deployment. "Historically, when countries put in VSATs for their USO obligations they would only carry a voice circuit or two. We wanted to demonstrate that you could light up a whole village with broadband services, including voice. USF funds shouldn’t be limited to just providing voice, the focus should really be on bandwidth," he says.

This point has not been overlooked by the satellite industry. "Telecommunication service providers have been using VSATs to meet USO obligations for many years. What they are discovering is that the same hub they use to provide voice communications to rural locations can also be used to deliver cost effective broadband connectivity," says Elinav. USF will play an important role in the rollout of nationwide broadband initiatives. Over the last decade, governments around the world levied a small fee, typically 1 percent to 3 percent, on all telecommunication revenues generated in their respective countries. The fees were deposited in national USFs, which are being used to close the digital divide. Unfortunately those funds are sitting in bank accounts and, to a very large extent, are not being spent. "Billions of dollars in USF funds are sitting idle and aren’t being used for their intended purpose," says Hartshorn, who points out that the economics of many projects have fundamentally shifted with the introduction of broadband initiatives. In the past, satellite was often used to provide voice in rural areas. Now that broadband can be delivered, local subscriptions to services make many of these projects financially sustainable. "This a huge shift," he says.

Hartshorn admits that, so far, many governments have been slow to spend money from these funds, but the hunger for broadband connectivity is changing the playing field. "Once a government realizes that satellite-delivered broadband is financially sustainable, these projects aren’t a sunk cost any more. The projects can be financed in different ways, so the government ultimately gets their money back in the form of new jobs, foreign investment and a stronger tax base. Economic sustainability is a powerful new message." Hartshorn also believes USF funds could help meet the Millennium Development Goals (MDG) adopted by the United Nations. "Member nations agreed to a 2015 date for bringing about these goals. Telecommunications is one of the enabling technologies that can help countries achieve these important goals. For instance, distance learning can help the standards of education and telemedicine can increase the standards of health. There is a large chorus of voices all singing the same song. Countries need to show quickly that they have taken concrete actions to meet the MDG goals they signed up to; that they have been earnest in their actions."

Conclusion

The market for non-military government satellite networks will remain strong for the foreseeable future. Buoyed by broadband inclusion programs around the world, networks exceeding 50,000 sites have become more common. Billions of dollars of funding is available, but satellite players must show compelling evidence for countries to spend these funds. The more broadband services can be shown to be economically sustainable, the faster broadband networks will be rolled out. It is up to the satellite industry to educate governments on the advantages of satellite technology and then fight for their fair share of the funds.

Live chat by BoldChat