By Christopher Baugh and John Stevenson, Northern Sky Research

Despite all of the turmoil and spectacular collapses within the telecom business sector over the past 18 months, a steady and substantial year-on-year increase has occurred in the volume of data traffic.

Specific business applications expected to be major drivers of new traffic — both intra- and inter-enterprise – have not materialized, but other applications are appearing with less fanfare. For example, small business and remote office use of both DSL and cable network access services grew by more than 50 percent in the United States from 2001 to 2002. Total North American revenues from all such services are projected to exceed $10 billion during the current year. DSL and cable modems represented more than 95 percent of all business broadband subscriptions in 2001, while the now sizeable HFC cable portion of this market has been the subject of almost no concerted marketing effort in the United States.

The success of satellite-based network access service providers has been very limited in comparison. Even including both one- and two-way transmission offerings, 2002 enterprise broadband satellite service revenue amounted to a maximum of 4 percent of the DSL and cable totals. More importantly, the take-up rate of new services introduced in North America by Hughes Network Systems, Gilat Satellite Networks [NYSE: GILTF], Spacenet and others do not show the sharp initial surge experienced by this business sector, particularly by the DSL operators, in the initial terrestrial broadband service rollout.

Beyond these macroeconomic comparisons, Northern Sky Research recently has undertaken a comprehensive set of analyses covering the prospects for an expanded range of satellite- based services to the enterprise. This analysis initially centered on estimating return-on-investment (ROI) to enterprise users in a variety of different scenarios by using a microeconomic foundation. Attractive ROIs for individual enterprise customers are a critical prerequisite for the network or application service provider. Without a relatively short-term positive ROI outcome at the enterprise level, it seems clear that the chances of success for a satellite services provider are slim.

The following are important input-side assumptions in this new analytical work:

The entire enterprise, business or agency (headquarters, regional and/or branch offices and all local or remote sites) has state-of-the-art terrestrially based networking infrastructure already in place at the local area network (LAN) level.

All such enterprise or agency locations also are able to make some type of wide area network (WAN) access via terrestrial means, either now or by contracting for this access with a telecom or network service provider. What two-way satellite access services may then provide is either a cheaper alternative to this terrestrial access or an augmentation of the terrestrial network connectivity to obtain broadband access in the 1 Mbps to 4 Mbps range.

A service provider also can facilitate a range of enterprise content distribution network (eCDN) services, based on at least some of the same infrastructure, for use in a wide range of intra-corporate applications. Those applications include e-learning/training, in both live and on-demand formats, as well as Web-based conferencing.

One indication of this analysis is how a satellite-based service is used to supplement basic ADSL access in use at a remote office site. The ADSL access provides a standard 512 Kbps link inbound. The satellite service upgrades this to the equivalent of full T-1 connectivity. Under the right circumstances, this produces a positive ROI within nine months of deployment. The data communications industry calls this approach dual-access configuration. The technology requires just one additional appliance (a multi-homed WAN gateway) at the enterprise site. Dual-access is becoming popular for a number of reasons, even where it involves two terrestrial NSP subscriptions (such as for redundancy and/or backup purposes). It is finding growing use in terrestrial fixed wireless access services. However, the opportunity for current satellite-based access platforms has not yet been explored.

An example of an output for a satellite-based broadcast service is shown in the chart to the right. The application scenario in that chart is restricted to the support of distance learning programs (i.e., a case in which satellite services have already proven popular when using traditional video broadcast infrastructure). In more detail, 50 remote sites are included in this case and use Web-based e-learning capabilities. This configuration is supported by an IP-based eCDN software package, with all of the capabilities that such products can provide.

Important capabilities include both live and on-demand content, including streaming video and synchronized presentations to the desktop, with distributions of supporting files and content all accessible to the end-users via a customized Web portal. Each of these features can benefit from built-in satellite multicast support. In such a case, positive ROI can be achieved for the portion of the enterprise modeled within 18 months, even when the e-learning programs are introduced incrementally beyond the start of service.

Independent projections have confirmed that such applications are becoming important elements of the enterprise ASP market. For example, the projections included in the chart on page 4 cover growth in the worldwide collaborative conferencing services market. As can be seen, a large portion of the total expected growth is within the IP video networking area. Satellite service providers have yet to mount serious integration, development and marketing initiatives corresponding to this opportunity. This trend clearly will hamper them, given the strong momentum being established by a range of terrestrial service specialists.

Obviously, the ROI available to the satellite service provider remains a key factor in determining the full range of terrestrial- and satellite-based enterprise applications.

This article is based on a Northern Sky Research report entitled “Satellite IP Data Services for the Enterprise.” Complete information can be found at http://www.northernskyresearch.com. Christopher Baugh can be reached at [email protected] or by phone at 407/352-5295.