In my last column, I concluded that direct-to-home (DTH) video was more vulnerable to bad economic times than wholesale video distribution or VSAT services. This month I consider broadband satellite. If wholesale satellite services are less subject to bad economic times than retail services and DTH as practiced in the United States (where the satellite operator is dealing directly with the consumer) looks vulnerable, can broadband be doing any better? For a number of reasons I would say yes.

First, broadband rapidly is becoming a necessity, while video is not. Few people make their living watching TV, but increasing numbers of people work remotely and use the Internet to allow it. Even those in non-office professions such as agriculture need access to weather and commodity information. In many areas, trends towards e-government also make Internet access important. Beyond these types of necessary access there is an increasing demand for access to entertainment via the Internet. Indeed many see the possibility that broadcast video as we know it will be replaced or supplemented by video provided over the Internet.

The increasing need for Internet access can be seen in the continuing growth of satellite broadband subscriptions and revenues. Hughes saw a 14 percent increase in both subscribers and revenues in 2008 along with an increase of ARPU from $62 in 2007 to $65 in 2008. More importantly, unlike DirecTV, Hughes added more subscribers in 2008 than were added in 2007. It is important to note, however, that although Hughes’ 2008 revenues were divided roughly 50 percent in the first half of the year and 50 percent in the second, subscriber additions were split 60 percent in the first half and 40 percent in the second. So while Hughes is doing well, it is feeling the effects of the economic downturn.

Clearly, broadband growth is being slowed by the declining economy, but it is still increasing. Perhaps the most important reason is that satellite broadband does not have the same level terrestrial competition that DTH does. All of the factors that support the growth of Internet usage, and hence broadband connectivity, also directly support the growth of satellite broadband services. This suggests that satellite broadband likely will continue its steady growth.

At the same time, that retail satellite broadband shows continued success in the United States there is a competitive satellite broadband model. This is the model used in the rest of the world, where a broadband satellite operator wholesales a technical solution and supplies satellite bandwidth to local resellers. SES, Eutelsat, Thaicom, Telesat and others have offered this type of service for varying lengths of time in different regions. The majority of service is offered in the more expensive Ku-band, with only Telesat making a major use of the more cost effective Ka-band. Eutelsat is building a large Ka-band broadband satellite and ViaSat is building an even larger one, which is intended to provide connectivity at one-tenth the cost of the cheapest satellite capacity available today.

ViaSat’s ViaSat-1 is a Loral 1300 satellite with 72 spotbeams and capacity of up to 110 gigabits per second. Its size speaks to ViaSat’s belief that there is a large market for satellite delivered broadband. ViaSat is also convinced that the "sweet spot" that allows a broadband provider to fill it’s customer’s needs, is a moving target and that use per subscriber will double in about three years.

There are two retail satellite broadband providers over the United States, Hughes and WildBlue. Both are doing well. Soon ViaSat also will provide wholesale broadband capacity. Although terrestrial broadband buildout continues, it is not universal and contains many dead zones in so called "covered" areas. A combination of uncovered rural and urban and suburban dead zones will provide room for a growing satellite broadband industry for the foreseeable future, and the growing importance of broadband access will increase the appeal of this industry. While growth may slow during the current bad times, satellite broadband services will remain a successful niche for well managed companies to exploit.