Barry Spielman Issue: Europe 2003
Article no.: 4
Topic: VSAT Technology Provides Broadband Access to the Small Business Market
Author: Barry Spielman
Title: Director Corporate Marketing
Organisation: Gilat Satellite Networks Ltd
PDF size: 68KB

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Article abstract

Consumer Internet access via broadband satellite looked like it would boom. Instead, it was the SME and SOHO markets around the world that have grown. Fixed satellite service providers are paying for hubs at ISPs and lowering connection rates giving the ISPs swift, painless entry into the SME / SOHO markets. There is a growing SME market in Eastern Europe and the CIS with a need to connect dispersed sites in areas where the alternative technologies are limited or too expensive.

 

Full Article

Several years ago, broadband Internet access via satellite for the consumer market looked like the next great boom. In retrospect, while the tremendous potential in this market still exists and is likely to manifest itself in the future, the great hopes were premature. The downturn in the capital markets followed by the worldwide economic crisis never allowed the consumer market to take off. What has emerged instead is the small business, small to medium enterprise (SME) and Small Office/Home Office (SOHO) markets, which have turned out to be quite lucrative. Changing Markets – From Consumer to Small Businesses In November 2000, StarBand Communications Inc. was launched in the United States. A couple of years later, the company (a joint venture between Gilat Satellite Networks, Microsoft, Echostar and a financial investory) services more than 40,000 users across the United States, making it one of the largest VSAT networks in the world. Other VSAT vendors, such as Hughes Network Systems also entered the consumer arena and deployed thousands of sites. However, the number of users for these companies is a far cry from what was hoped for at the time, and though the potential still exists for a dramatic increase in the number of users when the economic situation improves (some research reports show as many as 50 million Americans will remain outside the reach of DSL or Cable connections, thus making satellite-based access perhaps the only choice for broadband), it was clear that a shift to the SME and SOHO markets, where the budgets and need for the service existed, was required. The shift did not only take place in the United States, but around the world as well. The SME and SOHO markets offer strong potential for broadband users in general and VSAT vendors in particular. This is also the case for Russia, the rest of the CIS, and Eastern Europe. The lucrative, but largely underserved SME and SOHO arena, had yet to be tapped until recently, by satellite equipment and service providers. In the quest to expand their client bases, many forward-thinking Fixed Satellite Service (FSS) operators have begun to offer ISPs a swift and painless entry into the SME and SOHO markets by assuming the full purchase costs of the hub and allotting them space segment at attractive rates. Whereas most SME/SOHO enterprises conduct their affairs on a comparatively smaller scale, their need for sophisticated, IP-based voice and data services, private networking and application sharing, parallels those of larger corporations and thus the demands upon service providers have risen accordingly. This phenomenon, augmented by the standardization of the IP platform and the increasing cost-effectiveness of VSAT networking and equipment, creates a viable and revenue-generating alternative in these blooming service provision segments. As mentioned, the FSS operators need to grow their businesses and are willing to take non-conventional steps to do so. The market downturn left an excess amount of available bandwidth on the satellites. The broadband arena is seen as an area of potential growth in a sluggish market, and the SME/SOHO markets offer strong potential for growth in that area. Intelsat, for example, recently teamed with a VSAT vendor to provide a platform for the company’s Intelsat Broadband Services, which they initially plan to provide to service providers throughout Latin America. In Europe, Satlyx was established to provide two-way satellite broadband communications services to enterprises, consumers and small office/home office (SOHO) users throughout Europe. Satlynx is a joint venture between FSS operator SES Global and Gilat. Global Examples The Connexstar service, for example, provided by Spacenet Inc., became the first satellite broadband service to provide affordable, commercial-grade, wide area network (WAN) connectivity to America’s small and mid-size multi-unit enterprises. Among the many customers of the Connexstar service are: Diebold, Steak N’ Shake, Do it Best, American Farm Bureau Federation, Dairy Queen and others. In Asia, large Indian telecommunications companies, such as Bharti Broadband Networks Ltd., Comsat Max Ltd. and HCL Comnet Ltd., have deployed these broadband networks for applications ranging from banking, ATM, interactive data, tele-education, newsgathering and Internet access. In Africa, South Africa Telkom Limited is deploying a satellite hub station and thousands of broadband VSAT terminals, which could reach a cumulative deployment of more than 26,000 units over a five-year period, making it when completed, one of the largest VSAT networks in the world. In Latin America, Star One in Brazil has deployed thousands of broadband access VSATs for consumers and small businesses. Compartel in Colombia is deploying 500 telecenters across the rural parts of the country that will combine telephony and Internet access. Brazil’s Communications Ministry is deploying a two-way, satellite Internet service in order to bring citizens in closer contact with the government. The network will serve Brazil’s new GESAC (e-government) program that was established to provide Internet access to millions of citizens in 3,200 communities nationwide. Potential in Eastern Europe and the CIS The emerging markets in Eastern Europe and the CIS offer potential for the small business markets as well. While these markets have traditionally been rural oriented due to a lack of infrastructure, this is a situation that is changing rapidly in many countries. There is a growing SME market with a need to connect dispersed sites in areas where the alternative technologies are limited or too expensive. Even in the public sector, there is a growing need for a central office to connect to many sites providing content delivery. This can be seen, for example in networks deployed by the Kazakhstan State Postal Office (KazPost) and the State Center on Pension Payment. The new networks will provide corporate telephony, fax, data, Internet, e-mail, e-post and e-government services to users across Kazakhstan. The corporate sector also has requirements for traditional enterprise applications such as banking, lottery and gas stations. Banks have been a traditional VSAT application, allowing for ATM machines as well as the banks regional offices to be linked to the central office. Large banks the world over, and especially those who have offices in more rural areas, are VSAT users. Lotteries are also a popular corporate enterprise application. GTECH Corporation was the first lottery services provider to use satellite communications in an online lottery system, and has since proven that VSAT networks are an affordable, reliable, easily deployable platform for any lottery location. They have tens of thousands of government-sponsored lottery sites across the United States and around the world. Gas stations, too, have become a popular VSAT application, whether it be to provide data communications between the stations and headquarters or converting the station into a one-stop shopping site. In the time it takes motorists to fill up their tanks, they can withdraw cash from an ATM machine, buy groceries, or check up on news, sports, weather and the stock market by accessing the Internet through a pump-side PC, connectivity for which is provided courtesy of the VSAT network. Moving Forward Like everyone else, VSAT providers have been negatively affected by the general economic slowdown. However, unlike providers of competing technologies, VSAT providers seem to have had better sense of the finite demand for their products and where they fit in specific consumer, corporate and government markets. The most advanced VSAT products support multiple telephone channels and an Ethernet port for personal computer (PC) connection. Delivering toll-quality voice and IP transmission, these VSAT networks represent an ideal solution for small office/home office (SOHO) users and Internet Café services. Conclusion 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. This is particularly true in the emerging markets of the CIS and Eastern Europe where VSAT technology will lead the effort to eliminate this “digital divide.”