Satellite broadband has long been a hot topic in the industry, but up to this year, the market generally has failed to live up to the expectations that it would serve as a growth driver for satellite players. However, 2007 may well be considered the year when the tide began, and with technology improvements and strong demand, satellite broadband may move from being a concept to a strong business.

While the United States and Asia garner most of the headlines and attention in terms of satellite broadband, the European satellite broadband market is heating up. Throughout 2007, SES Astra, Eutelsat and Hughes Network Systems Europe have made significant announcements as they look to tap into this market. Both SES and Eutelsat have launched consumer satellite broadband propositions in what is shaping up to one of the most significant years in the history of satellite broadband in Europe.

While there are different strategies at play, most agree that the satellite broadband market in Europe is ripe for growth. “There is unmet demand in Europe,” says Patrick French, a satellite analyst at NSR. “It just comes down to having the right package at the right price and a good distribution network and distributors who can offer decent customer service. Choice of distributors will be a good indicator of the eventual success of SES Astra and Eutelsat. The potential is there for success in Europe and the price/quality of service at first glance appears to be correct. Again, distribution will be key since people won’t buy the service if they don’t know about it.”

Eutelsat

Eutelsat is particularly aggressive in this market, rolling out its consumer broadband proposition, Tooway, across Europe and also announcing plans to add a dedicated Ka-band satellite to its fleet in order to offer a compelling proposition to customers who are unable to access terrestrial broadband. Jean-François Fremaux, director of development and multimedia products at Eutelsat, says the operator has a “two-phase” plan. “Our objective is initially to use our existing Ka-band capacity on Hot Bird 6 at 13 degrees East — and some complementary Ku-band capacity on the Eurobird 3 satellite — to start deploying our consumer broadband product in certain European markets,” he says. “These services will be offered through our distributors to customers with a good quality of service and a standard price offering. This gives us a good base to test the market and to raise understanding of Tooway as a consumer-conceived product for consumers and not a low-end enterprise product. Phase two consists in launching a powerful Ka-band multi-spot satellite that will improve dramatically the quality of service at an affordable price.”

While the satellite broadband market is considered only a niche sector for the overall broadband market in Europe, is still “a big niche” for the operator, says Fremaux. “Analysts estimate that in 2010, up to 3.5 percent (or 6 million) of the 170 million homes in Western Europe will lack terrestrial broadband access,” he says. “This figure is much higher in Eastern Europe, where 8 million (or 11.8 percent) of 67.6 million homes have no affordable access. In Turkey, about 3.5 million of 20.5 million homes are unserved.  In total, you have a market representing almost 15 million unserved households in 2010.”

Eutelsat is working alongside ViaSat in delivering its Tooway service. Mark Dankberg, ViaSat’s CEO, says the company see’s a “big opportunity for satellite broadband in Europe but not in the way it’s been attempted in the past. We think it will take a much higher quality of service, which really requires a different kind of satellite than those used primarily for broadbeam video distribution,” he says. “The opportunities are there for any satellite operator that takes a leading role with the right type of satellite with coverage in the right regions. In general, a diversified satellite fleet operator has inherent advantages compared to a niche operator, so the opportunities for SES Astra or Eutelsat could be substantial. At present, Eutelsat seems more focused on this, though.”

Dankberg is optimistic that ViaSat can build a successful business working with Eutelsat. “We think it’s potentially a very significant business for both of us,” he says. “Our technology is primarily oriented in two key directions: One, driving down the cost of delivering a lot of bandwidth to end users in terms of both peak speeds and volume of data; and two, being able to manage large, scalable networks and the associated amounts of bandwidth effectively.”

However, Dankberg believes it is too simplistic to say that developing a successful business model is just about bigger and more powerful satellites. “It is how those attributes are brought to bear on the cost of bandwidth,” he says. “We do think that, all other things being equal, high-power satellites can help reduce bandwidth pricing on the ground. But a low- or medium-power satellite targeted at broadband service can easily trump a high-power satellite that is aimed at broadbeam video distribution.”

SES Astra

SES Astra also is making moves in the broadband space, pinning it faith on a new high-speed broadband service, Astra2Connect, launched in April. “I think the residential market is fairly untapped due to the fact that in the past, the cost of the terminals has always been quite high,” says Alexander Oudendijk, SES Astra’s chief commercial officer. “The Astra service is greatly reducing the [customer premise equipment] cost and offers service charges that are now comparable to terrestrial alternatives. We believe now that the keys to success is using the available satellites and maximizing the opportunities in the various markets, closing deals with resellers and helping them in the marketing of the service,” he says.
Oudendijk cites Germany, where the country’s Ministry of Economics estimates that 2.9 million households do not have access to a high-speed Internet connection, as an example of the potential market size. “We therefore do believe that broadband over satellite, even in Western Europe, can play a very important role, not so much in taking huge market share but closing the digital divide between the rural and the urban areas,” he says. “ Even in other parts of Europe — Central and Eastern Europe and Russia — there is still substantial number of households that are not addressed at all be terrestrial means.”

SES Astra is working with Belgian satellite company Newtec on Astra2Connect service. Serge Van Herck, Newtec’s CEO says companies such as Newtec are bringing in technologies that made low-cost effective broadband services a reality rather than possibility. “The space segment accounts for the largest part of the operational cost of a satellite access system,” he says. “Thanks to the use of Sat3Play technology, it achieves the highest possible bandwidth efficiency and enables operators to offer true broadband experience at a more competitive price. Sat3Play can be operated as a multi-service provider platform. This gives the opportunity to ISPs to start a service without investing in a full system, attracting ISPs and retailers that otherwise never would have been able to start offering these type of services.”

Van Herck believes Newtec’s Sat3Play technology will play a vital role in underpinning SES Astra’s role in developing this market. “For the first time in Europe, SES Astra together with Newtec, has made it possible to offer affordable broadband over satellite services: the end user equipment — necessary to use the service — consists of an interactive satellite antenna as well as a low-cost and easy-to-install satellite modem.”

SES Astra also is exploring Ka-band possibilities. “We have Ka-band capacity available on our satellites at 19.2 degrees East, which can be combined fairly easily with 23.5 degrees East in a dual feed scenario,” Oudendijk says. “That is something we will be looking into as we develop the product with Newtec. It may evolve into a Ka-Ka play in the not too distant future. We are looking to gain first some experience in the market and seeing how the product develops. We will then make a decision on whether we want to procure a more powerful dedicated Ka-band for this purpose,” he says. “If the market take-up is what we expect it to be, and bearing in mind that there is a limit to the availability of Ku-band capacity also in Europe, there is a good chance it will move towards a Ka-band situation. Whether this will be a dedicated Ka-band satellite or a Ka-band payload on board a more conventional Ku-band satellite remains to be seen.”

The fact that both SES Astra and Eutelsat are aggressively going after this space is significant, says French. “The interesting development is the simple fact that they are going ahead with these services,” he says. “It appears that Eutelsat’s decision to purchase a high power Ka-band satellite clearly indicates the financial commitment this satellite operator is willing to put behind the success of its services, … But distribution agreements will be key to the ultimate success of these services in Europe.”

Hughes

Another player looking to make an impact in the satellite broadband market in Europe is Hughes. Earlier this year, the company launched its HughesNet Managed Network Services, a suite of fully managed virtual private network (VPN) solutions for multi-site enterprise networks that allows  customers the choice of broadband access technologies at each site, whether DSL, satellite, private line or in a combination. To date, Hughes has rolled out about 3,600 locations in three countries across Europe and will deploy another 1,200 units in three more countries by the end of this year, says Mike Darcy, president of Hughes Network Systems Europe.

Darcy believes there is a “enormous” opportunity for the company here. “The opportunities the European broadband market present to Hughes are enormous,” he says. “More and more companies are viewing state-of-the-art secure and reliable communications as strategic to their business and are investing in new networks. At the same time, companies are tending to move away from the traditional direct operations to acquiring fully managed end-to-end services under [service level agreements] from a single provider. For Hughes this represents a fantastic possibility.”

In the United States, Hughes is set to be much stronger in the broadband market thanks to the launch of the Spaceway-3 Ka-band satellite. The spacecraft, expected to become operational in early 2008, has 68 Ka-band transponders and has been dubbed a “game changer” by Hughes executives. While Spaceway-3 will not have a direct impact on operations in Europe, “Hughes in Europe will profit profoundly from this endeavor, as it will provide us with the understanding to develop our own services as we move ahead in Europe,” says Darcy. “If we wish to appropriate the term ‘game changer’ for Hughes Europe, we can say that right now our ‘game changer’ is the capability to provide pan European optimized networks with satellite and terrestrial delivery to our customers. This is something which is not being offered as a standard solution by any of the other managed service providers in Europe today.”

Bottom Line

All players are optimistic that the satellite broadband landscape will develop strongly throughout the next year. “There have been a number of announcements and services launched addressing the consumer market and we can surely anticipate others in the future. Ka-band will help increase the bandwidth available and decrease the cost of satellite bandwidth which will help grow the market opportunities,” says Darcy.

With the business-to-business market not expected to grow at a very fast rate, Oudendijk believe the residential market is the area for satellite companies to target. “It will grow much faster but cannot be addressed by the classical VSAT players due to the fact that their terminals are simply too expensive,” he says. “You need to have a different product that has a much lower price point. We see the residential market being much more dynamic than the classical business market,” he says.

“We think in the next few years that the European market could build on the success of WildBlue in the [United States]. Not merely by imitating WildBlue but by building on the core sources of value that WildBlue has begun to tap into in the [United States] and then translating those core sources of value into the uniquely European market environment,” says Dankberg. “But since that is going to depend on new satellites, then it follows that there won’t be significant changes reflected in the market until those satellites can be deployed — probably around 2010.”

It seems as though the tipping point for satellite broadband has been reached in Europe. With the costs for providing the service coming down, the demand from users unable to access terrestrial services — but still wanting broadband — the fact that satellite operators are committing sizeable resources to ambitious projects means this could be a vibrant and very dynamic market to watch over the next few years. If the companies can execute their business plans, the myth of satellite broadband’s failing may be dispelled once and for all.