by Theresa Foley

Broadband satellite customers want a lot more than raw satellite capacity and are willing to pay a premium for bundled “end-to-end” services, according to satellite service providers who are on the cusp of the trend of offering full service packages. The leaders–companies like Verestar, Cyberstar, New Skies and British Telecom–are acquiring teleports, fiber linkups, backhaul, Internet equipment and interconnections.

As they pull the pieces of this service puzzle together, they say they can obtain higher operating margins and a big competitive advantage over those companies selling raw transponder capacity. “There’s no doubt it’s higher margin. It’s also higher cost,” says Christopher Baugh, principal analyst at Northern Sky Research LLC.

Verestar, the former ATC Teleports, may be the most aggressive in the pack, following a key acquisition made in October to catapult it out of a horizontal role as a teleport operator to a full service provider. Verestar is acquiring Interpacket Networks Inc., a firm that has 280 smaller ISP customers in 100 countries for its Espresso Internet backbone interconnect service and other sophisticated services like caching and voice over IP.

David Liddle, Verestar’s vice president for content distribution, says Verestar is now expanding its Internet access platform, deciding recently to move up to more sophisticated routers capable of delivering voice, data and video, as well as larger amounts of traffic. Liddle says the ability to grab content from Internet collocation centers on a global scale is a key part of the strategy. And it appears to be working from the amount of satellite capacity Verestar now controls for its customers.

One possible option is for Verestar to build a content caching network around the 10,000 points of presence (POPs) controlled by parent American Tower Corp. in the United States through its cellular and broadcast tower network. Liddle says Verestar is looking at all technology including a concept called “pop in a box” that would deliver everything needed to set up a satellite caching point for content.

New Skies Satellites N.V., which went public in October, began working on its value-added service solution earlier this year. In May, New Skies began offering its Internet access service, Ipsys, to international ISPs. For Ipsys, New Skies uses its own “mediaport” in Washington, DC, and two in London. The teleport element of the Washington mediaport was acquired, and IP networking capabilities added onto it by New Skies. Fiber connects the mediaports to top tier ISPs. In Washington, New Skies leases an OC-48 fiber ring that provides a 2.5 gigabit pipe for ISP traffic to run from the satellite downlink at the mediaport into the terrestrial Internet backbone. In London, New Skies has two DS-3 Internet backbone links to the Telehouse and is also adding three more DS-3s to accommodate the growth of Ipsys.

Carl Wu, New Skies vice president of Internet services, says Ipsys connects users to three ISPs, a technique he calls multi-homing, as a way of avoiding high packet loss and congestion. “We help the customers by configuring routers and protocols,” Wu says. “The Ipsys service includes the teleport facility, space segment on the New Skies satellite fleet, IP connectivity to the Internet backbone, quality of service management, traffic optimization and router/BGP-4 configuration.”

New Skies has found the new approach, especially the offer of advanced router technical support, to be highly attractive to its customers, who tend to reside in off-the-beaten telecom path locales such as India, Southeast Asia, Latin America and the Middle East, where extensive experience with complex routers is scarce. New Skies is finding that 100 percent of the customers who try the service are signing up. “We are winning deals by offering quality service and customer support. Customers also appreciate our ability to activate service with short lead times,” Wu says. “You don’t have to be the lowest cost service provider.”

Loral Cyberstar, which is no longer a satellite operator after transferring its satellites to Loral’s Skynet company, has been a pioneer for several years in the business of offering end-to-end satellite services, having developed its offerings several years ago for the corporate network market. To enhance its end-to-end service offering, Cyberstar last year acquired Global Access, a business TV company that specialized in video transport over satellite. The acquisition positions Cyberstar for a move into the next generation distance learning and corporate networking communications markets. Cyberstar also has leased capacity on fiber optics cables running between the United States and Latin America and the United States and Japan so that it can offer hybrid networks where necessary.

Baugh says the satellite companies have several options to use in assembling the elements of a full service solution. The acquisition route is the most expensive but often the best, while other choices include building a capability internally, partnering, and leasing facilities from others. He expects the trend toward full services to continue, with more partnerships and deals to come in the months ahead.

Theresa Foley is Via Satellite’s Senior Contributing Editor.