VSAT Potential Rises in Developing Markets

The mood of optimism continued on day two of Comsys’ VSAT 2012 conference. The morning was full of information about exciting new business plans as companies tried to target VSAT opportunities in developing markets. The morning kicked off with ex-Gilat exec, Yoel Gat talking about the plans for his new company, Satixfy, which aims to shake up the VSAT market by helping to usher in the era of a sub $200 VSAT, which it aims to launch at some point next year. Gat spoke about how the prices of VSATs have come down and could ultimately reach $100 by 2020. “In 1970, a VSAT cost $35,000. Everybody today knows the price for a VSAT is $300 to $350. Can we really get to $100 VSAT in 2020? I think it is definitely possible. We think $200 per VSAT could be a crucial price point to those who don’t subsidize the equipment. It will drive more capacity out of the satellites.”
   Gatt says the company wants to contribute lower cost terminals to the market and used his speech as a call to arms to the satellite industry point to work with them in developing this new cost VSAT. He added, “We are looking for satellite partners who would be interested in such a service. (We think) there is a room for a new ASIC in this market. It will drive costs down, and increase space segment efficiency. We want to be part of building new eco-systems for fascinating new consumer markets. We want change the game. We are looking to try and sell the chip to existing VSAT players, as well as get involved in the service business ourselves.”  
   O3b Networks CCO John Finney was up next and confidently predicted that the operator would be in commercial service by the time VSAT 2013 came around. Finney who joined O3b from the telecoms industry admitted he has been surprised just how innovative the satellite industry has been. He said, “When I came to the industry, I regarded satellite as one of the least competitive environments. The reality was how wrong was I? We see new technologies coming to the fore. Our motive is to create new applications and revenue streams. It is not to churn through the existing install base.”
   Finney’s presentation had echoes of Mark Dankberg of ViaSat’s presentation yesterday when he talked about the satellite industry taking on the telecoms industry and taking the fight to them. He highlighted work O3b was doing in the Pacific as a good example of this. He said, “We love kicking some terrestrial, fiber butt. There are strong business cases for satellite. For example, we have changed our model in the Pacifics. We are taking on fiber. It is giving these island nations an asset. Also, we have just closed two contracts in Africa in the last six weeks. In both cases, we have won against fiber. This is a big step forward.”
   O3b is also targeting the Latin America market and with a vibrant cellular market in Brazil, the operator could be set to make some strong progress here in the backhaul market. “Brazil is a market that has all from our perspective. You have the will of that economy to embrace new technologies. The growth of DTH is soaking up all of the bandwidth. We are meeting CTO’s of cellular operators of Brazil on a regular basis. They have a challenge, which is how to make 3G data profitable.”
   Africa could also prove interesting for the VSAT market as operators look more and more at bridging the digital divide here. One company, the STM Group, has highly ambitious plans to bring a cost-effective satellite broadband service to Africa. Emil Youssefzadeh, CEO, STM Group, said, “We aim to introduce our services in Africa in 2015. In the space segment, we want to put a satellite in orbit that covers 18 countries. We think Ka VSATs will exceed reliability of most terrestrial links. Ka-band with these features is more than adequate for these residential needs. Ka-band is the future of broadband in Africa. We want to render a service of 20 Mbps. In our target markets, there is no broadband cable service, so the competition will come from 3G and 4G services. The type of consumers we are targeting are to middle and upper class households. They expect the same quality of service as when they travel abroad.”
   The main challenge for the STM Group will be in maintaining customer service rather selling the service. “The biggest market we can address is Nigeria which has 150 million people. We have been developing a plan to sell the services. Delivering the service and maintaining the service is a far bigger challenge. We don’t think selling the service will be an issue,” said Youssefzadeh.
   The company, which is likely to be one to watch in Africa, over the next few years is now close to securing the funding it needs to move to the next stage of its business plan. “We are in the process of doing our first round of equity funding. Within the next six months, we will be in a much more advanced position as regards initial funding,” comments Youssefzadeh.    One of the biggest developing markets of all is India and Shivaji Chatterjee, vice president, enterprise services, Hughes India said the VSAT market was ripe for growth here. Chatterjee spoke about the fact there was around 175,000 active VSATs in India. Hughes India itself has seen fairly strong growth in this area. In 2009, it had 30,000 VSATs installed in India. By this year, that figure had doubled to 60,000. The company has shown strong consistent VSAT growth over the last few years. According to Chatterjee, India remains both a complex market to do business due to the savvy nature of the Indian consumer, but also one where there are huge opportunities.