Comsys Conference Promotes Healthiest VSAT Market in Years

   Ex-Gilat executive Yoel Gat shared his company’s plans for its new entity, 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.”

   Gat said 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 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 also talked about the satellite industry taking on the telecoms industry and highlighted work O3b was doing in the Pacific as a good example. “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 is also proving itself as an interesting VSAT market, as operators look more and more at bridging the digital divide. 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.

   Simon Bull, a senior consultant for Comsys, said the event shows there is definitely a change in the air for the VSAT business. “Enterprises and consumers are consuming bandwidth as fast as telecoms operators can increase it. By rights, the VSAT business should be dead. But, there are almost 3 million VSATs in service. In terms of revenues, we are doing better than ever, although the growth in the number of sites has slowed. The change to the VSAT industry has been massive. VSAT is seen a much lucrative and viable industry by the satellite industry than it ever has before.”

   Many speakers, including Bull, said a “revolution” was taking place across the industry. David Bettinger, CTO, iDirect said that a perfect storm was approaching where technology advancements and market demand were moving hand in hand together to create a number of new opportunities. Bull added, “Demand (for VSAT services) is exploding. VSAT technology development is accelerating. VSAT vertical value is there. Our days should focus back where we started, providing value beyond bandwidth. There is a real opportunity for this business.”

   The demand for high-quality data and video services is certainly a key behind the drive for the VSAT industry. Segments such as oil and gas, maritime, cellular backhaul, military are bandwidth hungry. The demand for bandwidth as Bull said “is going through the roof”. “Data rates are as high or higher for secondary connections than they were primary just a few years ago. Average rates now running at between 1 and 2 Mbps versus perhaps 512 Kbps 2-3 years,” said Bull. “In the mining business, the primary operations can now demand links of upwards of 50 Mbps. The amount of data people are consuming is going through the roof. Many UAVs are now equipped with 8 or more HD channels, not all of which can be used due to VSAT bandwidth limitations.”

   Bettinger also highlighted the potential for growth across different verticals. “We see a lot of growth in different areas. Maritime is one of the only verticals that really has no other choice but to use satellite. Applications such as crew welfare and monitoring are good examples here. The utilities market and the move to the smart grid will drive some good growth to our industry. Oil and gas is still driven by high crude oil prices. Cellular backhaul growth is also huge. There is new value coming to the backhaul market,” he said.

The launch of high-powered satellites such as ViaSat-1 and EchoStar-17, to name but two, is driving satellite deep into broadband and data businesses. Hughes Network Systems (HNS) is seeing strong demand in both the enterprise and consumer market, with in particular, the enterprise market starting to come back.

   Pradman Kaul, CEO, HNS said, “We operate over 900,000 VSATs currently. We have almost 800,000 VSATs in North America. In the consumer business, we have around 628,000 subscribers. Now Jupiter (EchoStar-17) has launched, we hope the growth will now start to accelerate again. We have gone beyond providing transport. We are also seeing a resurgence in the enterprise market. For a few years, we thought this market was declining. We will see the enterprise market resume its growth. There is a buoyancy in the sales channels.”

   Interestingly, both Kaul and Mark Dankberg, CEO, ViaSat, spoke of the opportunities for Hughes and ViaSat to pick off more than the low-hanging fruit in the consumer broadband market. “The consumer market is big and getting bigger. We believe in the North American area. We have roughly 14 million under-served or unserved households. The current penetration of these 14 million is around 1 million between ViaSat and Hughes. It is a very robust market for the next 4-5 years. 40 percent of rural users have speeds than less than 10 Mbps. We believe we can provide a better service than DSL in those areas. We can attack the low end of the DSL market,” said Kaul.

   Dankberg said ViaSat had worked hard to change mindsets towards satellite and get people away from seeing it as some kind of “last resort” as regards broadband. “We have to move our choice up (where people perceive satellite broadband compared to alternatives). So, we said this we have to do this ourselves. Our selling point is speed. We thought speed was the value proposition. My total focus was (lets be) ‘better than DSL’. Our story is that satellite is better than broadband alternatives. 42 percent of our new subscribers came from terrestrial. In the United States, there are 30+ million DSL subscribers. The telco industry is bleeding subscribers to cable. Our market could go to tens of millions. We could one day form partnerships with telcos,” he said.

   Dankberg said the satellite industry has to become much more data-centric from now on. He added, “The satellite industry has been built about broadcast, but now it is about data. Everything will have to change in the industry. It does not need to leave people behind. There is room for all the participants. We think the payloads will have to change. I think about Ka-band as a business model. It is changing in profound ways. Consumer is the fastest growing. But, you have aero, maritime, defense, backhaul. If bandwidth is the currency, this is the way to deal with them.”