|Issue:||Asia-Pacific I 2002|
|Topic:||VSAT Networks Help Lead Telecoms Recovery|
|Title:||Vice President & General Manager for Asia, Africa and Pacific|
|Organisation:||Rim Gilat Satellite Networks Ltd|
The downturn in Asia’s telecom sector resulted, partly, from optimistic market projections and technology deployment. Fiber optic networks, DSL and wireless, despite a decade of growth, have faced losses. Many telecom sectors still have startup industry fundamentals. The VSAT sector, though, is doing well. The two top VSAT providers shipped 200,000 units in 2001 – possibly the largest total in history. The coverage, reliability and low cost of VSAT systems have proven to meet the needs of Asian businesses and consumers.
Looking back, it is no mystery what caused the downturn in Asia’s telecom sector: Projected demand was unreasonably high, business fundamentals were flawed and there was a glut of competition. This holds true for many of the most prevalent technologies. It was projected that leading carriers would deploy fiber optic networks over countless miles throughout the continent, but actual investment has been far less than expected. DSL is a technology whose performance promises a great deal, but it has yet to deliver. A decade ago, traditional telcos, application providers and consumers were confident that digitizing and supercharging the downlink on a copper phone line would be a quick and cost-effective path to broadband. That hasn’t happened, though in some Asian markets DSL is starting to make market inroads. In fact, Asia is currently the largest collective DSL market in the world with 8.4 million DSL users at the end of 2001, according to industry analyst firm Point Topic. In the wireless sector, the core problem is that – after more than a decade of steady growth – the industry still has the business fundamentals of a startup industry. Most providers are still operating at a loss, with some almost hopelessly underwater. Now that growth rates are starting to slow (a sign of market maturity), wireless operators should have cost controls in place to turn an operating profit – but few do. Skeptics can point to any number of dings in the wireless industry’s armor, including runaway costs, an overflow of competition, customer churn, falling revenue per subscriber and the questionable quality of new subscribers. In the mobile satellite telephony field, players such as Iridium, Globalstar, ACES and Thuraya faced a similar problem. They were sure there was sufficient demand to keep them all in business. They expected that millions of globetrotting business subscribers would be willing to pay nearly a dollar per minute for the convenience of their service. They were wrong. Upon that realization, those same mobile satellite providers thought they could offer rural telephony services to thousands of villages that, unfortunately, could not afford their rates to begin with. Which brings us to the market for two-way satellite networks based on Very Small Aperture Terminal (VSAT) technology. Like everyone else, Asia’s top VSAT providers have been negatively affected by the general economic slowdown. However, unlike providers of competing technologies, VSAT providers seem to have had a better sense of the finite demand for their products and where they fit in specific consumer, corporate and government markets. Perhaps this is because the VSAT industry has been around for more than 20 years and has weathered economic storms in the past. Despite weak economic conditions worldwide, the VSAT industry’s top two providers (accounting for 99 percent of the market) still managed to ship more than 200,000 units in 2001 – perhaps the largest one-year total in history. As in the VSAT industry, many other telecom providers are beginning to understand the changing demand in their core markets – and the fact that limited budgets exist for deployment of their products. Meeting Demand for Telephony and Internet in Rural Markets VSAT technology continues to be a tool that promotes regional development and economic inclusion. Nowhere is this more evident than in the market for fixed rural telephony. In fact, the rural telephony market is the fastest-growing segment of the VSAT industry. In this market, GSM cellular and 3G cellular providers cannot compete with VSAT networks. While a rural telephony VSAT network costs the operator between two and three cents per minute, mobile satellite systems cost more than 50 cents per minute. Similarly, CDMA and GSM have very high base-station costs. Therefore, unless there are at least 100 lines within a short radius, the capital expense for wireless alternatives is prohibitively high. Conversely, VSAT networks can cost the operator as little as US$500 per line in very low-density areas. This type of cost effectiveness has been demonstrated in several large VSAT networks of 2,000 sites or more in Latin America, in countries such as Colombia, Peru and Mexico. Fulfilling the Promise of Universal Access Making a phone call, surfing the Internet or receiving a fax are everyday functions of life taken for granted – by only half of the world’s population. For the other half, access to communication systems is far more elusive. The cost and infrastructure build-out needed to link a remote field office of 20 people or a rural community with 100 inhabitants through terrestrial solutions is often too high for operators or governments to undertake. It is in these situations that VSAT have taken center stage. The United Nations has designated VSATs as a pivotal technology for developing countries because they can use it to deliver on their promise of universal access. Universal Service Obligations (USOs) are implemented by governments to ensure that operators undertake the development of communications infrastructure in rural areas. Many governments face an ongoing challenge to provide basic telephony services throughout their country. To meet this challenge, many have turned to VSAT networks for a low-cost, reliable public telephony solution. VSAT networks represent the most cost-effective solution for communities in areas where the PSTN is unavailable, overloaded or too expensive. Access to telecoms provides not only the ability to interact on a personal level, but perhaps more importantly allows remote and rural communities to deal directly with the marketplaces that traditionally resell their produce and products. The establishment of VSAT platforms has led to greater efficiencies and higher margins for these communities through closer coordination of what is in demand and what is produced. When talking about rural and remote areas it is important to note thatwe refer not only to territories such as the Australian outback but also to places that fall just outside a metropolitan area, such as populated villages and semi-urban cities. By using the latest VSAT technology, operators can leverage their networks to provide Internet services, such as e-mail – as well as telephony and fax – because IP is already integrated into the VSAT remote unit. The most advanced VSAT products, such as those offered by Gilat, support multiple telephone channels and an Ethernet port for personal computer (PC) connection. Delivering toll-quality voice and IP transmission, these VSAT networks are an ideal solution for small office/home office (SOHO) users and Internet Café services. Meanwhile, as the introduction of a broadband-enabled infrastructure in major metropolitan areas progresses steadily, millions of homes and small companies will remain without high-speed Internet service for years to come. VSAT providers are leading the effort to eliminate this “digital divide.” Only VSAT technology can fulfill this promise as it brings remote points one “short hop” away from the Internet backbone, regardless of their geographic location. Broadband, two-way satellite Internet services have already been successfully introduced at thousands of sites in Australia (Cable & Wireless Optus), India (Bharti Broadband), the Philippines (Textron), the United States, Europe and Brazil. Understanding VSAT Advantages Plus points of the VSAT’s solutions are ubiquity, quick deployment capability, voice and data communication functionality, and cost-control. One satellite can cover an entire continent. The range of satellite coverage means that initial cost is relatively lower than the infrastructure build-out necessary for terrestrial solutions. With the satellite in place, all that is needed to extend a network is the installation of an outdoor unit with a line-of-sight to it. The main cost of the VSAT solution is the earth station, which corresponds to about 60 percent of overall expenditure; maintenance and space segment costs make up the remaining 40 per cent. Mass production of components will tend to reduce costs as will higher capacity, higher data rate, earth stations. Progress has been made – over the last 20 years earth station prices have fallen from roughly US$15,000 to US$5,000. Space-segment savings can also be achieved using advanced modulation schemes and coding techniques. These permit digital information to be transmitted more efficiently from the satellite. The VSAT business case improves as satellite capacity becomes more abundant and affordable. In addition, because satellites are becoming more powerful they enable the use of smaller, and therefore cheaper, antennas on the ground. These advantages explain why VSAT networks have achieved broad global acceptance in the corporate, enterprise, market. For more than 20 years, many of the world’s largest retailers, petroleum marketers, auto makers and financial services firms have made VSAT networks their platform of choice for a wide range of interactive data, audio and video applications – including IP networking and broadband applications. Perhaps, one of the most important examples in China is Hebei Sky Data Networks & Communications Co. Ltd. (Sky Networks). Hebei is now deploying a satellite communications network to thousands of sites throughout the country. The network is expected to be one of China’s largest and, as a shared-hub service, is expected to provide wide-area and thin-route data communications for end users in the enterprise market – including, most notably, the Postal Service. The VSAT network will enable Sky Networks’ customers to deploy the very latest interactive data applications, including: credit and check authorization; inventory management; enterprise-wide e-mail; and Internet Protocol (IP) multicasting. Sky Networks is also working closely with Ericsson to provide PDAs (personal digital assistants) to mobile communications networks throughout China. While the use of two-way satellite networks for the business-critical applications mentioned above is certainly prevalent, VSAT providers are also meeting the sizeable demand specifically for high-speed Internet connectivity from small to medium-size enterprises (SMEs). In fact, new satellite broadband services have been introduced this year that provide commercial-grade, wide area network (WAN) connectivity to small and mid-size multi-unit enterprises at prices far below those available only one year ago. Bharti Broadband, for example, is offering this type of business-grade broadband service to SMEs in India Conclusion By offering broad reach, high reliability and high performance at compelling prices, VSAT technology is perfectly suited to the needs of Asian businesses and consumers. While the past year has been difficult for the entire telecom industry, a slow return to healthier economic conditions is definitely foreseen. Meanwhile, Gilat sees continued strong demand for VSAT technology in the constant effort to bring high-speed reliable communications solutions to everyone – no matter where they are located.