The primary strength of satellite technology remains point-to-multipoint applications such as broadcasting, but the use of satellites for point-to-point services is growing as satellite network operators integrate their services with terrestrial wired and, in a few years, wireless technology.

“What we have seen in the last three years is the realization of satellite as a point-to-point technology,” Jon Kirchner, vice president of global marketing for Loral Skynet, told Satellite News. “We see it in a variety of different forms, whether it is Ka-band or Ku-band. What we are able to do today is to compete very favorably with terrestrial services, not as a direct competitor but more as an effective compliment to it.”

The satellite industry must embrace the combination of its technology with terrestrial infrastructure in order to compete in the future, said Max Engel, industry analyst with Frost & Sullivan‘s Space and Communications Group.

“The only way that the satellite industry is going to move out of a narrow niche where it does things that terres-trial alternative can’t, is to cooperate with terrestrial alternatives,” Engel said. “By doing that, you end up in the position where you have access [to markets] you don’t otherwise have. Instead of saying to someone, ‘We want you to sign to this all-satellite solution [that may seem complicated].’ You are saying, ‘We can add a satellite portion to what you are doing and you will never notice.’ It seems like an absolute win-win scenario to me.”

Landline/Satellite Hybrid

To get a sense of the importance satellite companies are placing on offering a unified satellite/terrestrial service, one needs to just track the announcements from major names in the industry. The most recent example would be Hughes Network Systems LLC (HNS), which announced the rollout of its Direcway Unified Broadband service June 6. The service will allow enterprises to deploy a combination of broadband technology — terrestrial and satellite — to best meet their business needs, HNS said.

“Throughout the last three or four years, it has become clear that if you want to build a broadband network, you have to have satellite as a component,” Mike Cook, senior vice president for North America at HNS, told Satellite News. “Terrestrial services are limited in their geographic coverage, whether that be cable, [digital subscriber line] or fiber. If you need broadband and you have a network that is dispersed across the United States, sooner or later you are going to come up with locations where you have to have satellite broadband as part of the mix.”

So with companies moving toward networks that encompass both satellite and terrestrial technologies, the opportunity for companies such as HNS to provide services with a single point of contact became apparent.

As HNS explored this growing trend, it became obvious that a large amount of coordination would be required to make such an opportunity happen, particularly because HNS would have to work with many companies to bring a solution to the market, Cook said. “We [learned we] would have to work with 20 or 30 people in order to get the terrestrial part of it sorted out,” he said. “We realized that enterprises that wanted to build a terrestrial broadband network were having to do the same thing.”

With that in mind, HNS fell back on one of its core competencies to bring its service to market.

“HNS manages networks for people, and we can provide a more comprehensive service, which recognizes the fact that these technologies, to a greater extent, have to coexist,” Cook said. “We can use that to implement an integrated network and give the customers what they are looking for–a single point of contact, a single bill and a single look and feel of the network but at the same time be able to provide a solution that covered the technologies that were required by that particular business.”

That single point of contact could be a key differentiator when companies begin to compete for business in what HNS estimates is a multi-billion dollar market, Cook said.

“In the past we have said the market for VSAT networking is probably $3 billion to $4 billion per year,” Cook said. “If you look at the broadband opportunity while embracing the terrestrial technologies, it means that there are not any multi-branch networks that are not opportunities for us to try and serve. So the market opportunity in our estimation gets nearly a threefold increase. We are probably looking at an addressable market of $12 billion if we embrace [terrestrial] technologies. And in most of those networks, there will be an element, sometimes a significant element, of satellite broadband.”

A Wireless Future

For the moment, HNS’ Unified Broadband offering focuses on bringing together satellite and landline terrestrial technologies, but the company plans to include wireless technology to the mix, Cook said. HNS is looking at wireless technologies such as Wi-Fi and WiMAX (a wireless wide area network technology that offers broadband connectivity over a range of about 30 miles from the access point) and is in talks with service providers, he said.

“At the point at which they become enterprise-grade services, we expect to encompass them within the scope of Direcway Unified Broadband,” Cook said. “Today, it is a little early still. It will be another year to 18 months before we see significant deployment of WiMAX, in particular, at a level that is usable in the context of enterprise networks.”

While HNS is taking a wait-and-see approach, Loral Skynet is more actively engaged in developing networks that bring together satellites and terrestrial wireless elements. Earlier this year at the Pacific Telecommunications Council’s annual conference in Hawaii, Loral Skynet deployed a Wi-Fi network that was only enabled with satellite technology.

“I think of satellite as just another form of wireless,” Kirchner said. “When we talk about Wi-Fi/WiMAX, we are all part of the same big wireless family.”

Satellites will play a key role in helping wireless technologies providing backhaul services, particularly when it comes to services such as providing Wi-Fi hotspots and connectivity for Internet cafés, Kirchner said.

“The role of satellite in a Wi-Fi solution is essentially a trunking application,” Kirchner said. “We are connecting an IP hub and the Internet to a hotspot any place where fiber connectivity doesn’t exist and enabling somebody to get connectivity.”

Beyond that, other opportunities will open up on the backhaul side, particularly if solutions like WiMAX meet expectations. Specifically, there will be a play for satellite- enabled WiMAX solutions to go head-to-head with services like Wildblue to deliver broadband access to homes, to the small office/home office and to the small to medium enterprise markets, officials said.

A satellite-enabled WiMAX solution “probably is the least expensive in terms of barriers of entry to the user to gain broadband access, because the only thing you have to have is a computer,” Kirchner said. “Even at today’s prices, a computer is less expensive in most cases than today’s least expensive VSAT dishes and outdoor set-top boxes. So there is a nice economic model, when you look at the end user, that makes it so attractive for service providers in those regions to deploy a Wi-Fi- or WiMAX-based service. Your Wildblues of the world and other purely satellite-driven services are going to face some competition because the cost of acquisition for their service is going to be much higher, so long as you have to install a dish and a set-top box.”

Changing The Mindset

As the satellite industry moves forward with its hybrid network offerings, a key challenge will be to overcome certain self-perceptions of satellite’s role in the communications arena.

“It is as much a mindset challenge as anything,” Kirchner said. “I think the satellite community has always had a hard time thinking of itself as a terrestrial extension.” Satellite companies need to break away from traditional satellite-centric thinking and look at themselves simply as providers of services, he said. “It is about understanding business models and what is going to drive an economic proposition for both the end user and a service provider.”

Creating and managing a solid group of partners also will be key in achieving success in marketing hybrid networks, officials said.

“What we have to be good at is managing partner relationships,” Kirchner added. “How do you stay core to what you do but at the same time bring the right pieces together to create something that someone is actually going to buy? You need to have in-country relationships on the ground–a network of ground operators that can go in, install a dish and maintain it while we network-manage the service.”

“It may not be worth going after an Internet café in Africa, but perhaps it is worth your while going after all the Internet cafés in Africa,” through partnerships with the local service providers, Engel added.

Engel emphasized the need for partnerships because “satellite as the last-mile [solution] is not going to do particularly well because of these alternatives that are coming on line. But even if you see satellite not filling the last-mile role, it is going to be worthwhile for entrepreneurs to set up small local terrestrial networks with satellites backhauling the network to the major fiber transport. There is a real opportunity for satellites there.”

—Gregory Twachtman (Max Engel, Frost & Sullivan, 210/247-2404; Mike Cook, HNS, 301/428-7083; John McCarthy, Loral Skynet, 212/338-5662)