Buddy, Can you Spare me a Problem? The State of Play of the Global VSAT Market
How things have changed! Now, not only do the problems exist – let’s refer to them as needs (it’s more marketing friendly) but also customers are willing and have the means to pay for them. Today, we have broadband satellite providing internet access not just in the remote areas but right up close to population centres; innovative service providers are marketing hybrid satellite networks on the basis of their increased reliability and quick deploy systems which provide large scale connectivity to those first on the ground when disaster strikes. So let’s take a closer look at what needs are emerging and how leading VSAT service providers are rising to the challenge. Then we’ll take a look into the crystal ball to see where this is heading.
Consumer Broadband
Yes, everyone wants to get onto the Internet. No news there! What’s changed however is that governments are now actively removing the barriers to take-up for those people without terrestrial access; in the same way they have done for telephony in the past – i.e. Internet access is ranking near telephony access in terms of importance. Governments are directly subsidising the cost of the VSAT hardware and installation at premises and/or using wireless to aggregate demand within a community and are also using satellite to provide the trunks to the internet. Even in markets such as the US, where the likes of WildBlue and HughesNet have generated subscriber numbers in the 100’s of thousands through commercial means alone, government stimulus packages are seen as an opportunity to provide higher (18Mbps) services to rural areas.
Staff Amenity
For business customers requiring workers to also spend their off duty hours away from home, on-site, on-ship, etc; staff amenity has gone from a nice-to-have to an important staff retention strategy. Shortage of skilled labor, high training costs, family trends (parents seeking to remain connected with family life when they are away), have meant workers need to be able to make phone calls and access the Internet wherever they may be – both for social interaction and to occupy their time outside work hours.
Business Broadband
Email and internet access – tick! What’s new is the level of data usage and the fact that application developers are recognising we don’t all have fibre links and so, have to deal with latency. The need to communicate effectively over cellular/wireless networks has lead to newer versions of applications such as Citrix and MS Windows automatically sensing when they are communicating over a link with high latency and taking steps to mitigate its effect on the user experience. This is great for satellite, where stories abound of users having time to make a cup of tea waiting for their poorly designed applications to load. Increased data usage and phone calls is also raising the bean-counters’ blood pressure on the costs of using traditional mobile communications devices (e.g. Inmarsat, Iridium and the like). Whilst unchallenged for safety-of-life and hit-the-ground running (e.g. first responders in a disaster zone) communications requirements, customers are searching for a lower cost alternative; especially now they need to accommodate non-operational requirements such as staff amenity.
Happy Days?
So you’re thinking: we’ve got customers with needs, plus the money to pay for solutions; an industry ready with the solutions - all good. Right? Ah, no. Satellite marketing is yet to catch up with engineering. Now, while my marketing brethren are busy coughing and spluttering as they choke on their lattes and the engineering folk are doing "high-fives" down the hallway; lets look at what’s happening and then what needs to happen.
Yawning Gap between Consumer and Enterprise Markets
The bifurcation of the VSAT market into consumer and enterprise (i.e. corporate and government) providers is increasing. Consumer providers are becoming more vertically integrated, particularly in concentrated markets such as the US. Thus we have equipment manufacturers like Hughes going beyond service provision to operating their own satellites. This model has been followed by the likes of iPSTAR in Asia and Viasat in the US, through its purchase of WildBlue. In terms of penetration, this model has been particularly successful in the US but some worry about whether it will stifle innovation in the longer term.
If the bonds (shackles?) between ground equipment, service provider and satellite have become stronger in the consumer market, the enterprise market has gone in almost the opposite direction. Newer VSAT hub manufacturers such as iDirect have differentiated themselves by lowering the cost of entry, to enable smaller providers to offer services in this market. Even customers with reasonable sized networks can now seriously contemplate operating their own hubs. The question is whether iDirect has effectively loosened the grip providers have had on their customers. Traditionally, providers have often been able to retain customers on the basis that for them to change from one provider to another has meant replacement of the ground equipment, which has been both a hassle and costly.
Although there has been widespread adoption of the DVB-S (Digital Video Broadcast- Satellite) standards on the outbound (hub-to-customer) link, the inbound has mostly remained proprietary – i.e. manufacturer specific. So a Hughes terminal and a Gilat terminal can theoretically receive the same outbound broadcast stream, but can’t operate on each others’ networks. In recent times, there has been a push to standardise the inbound through the adoption of the DVB-RCS standard but the lack of a large enough installed base means that it will be some time (if at all) before this has a material impact. With a profusion of service providers, an effective means of catering for time-sensitive traffic like voice, enterprise customers have taken to iDirect-based services with gusto. This means more iDirect terminals on the ground but unlike in the consumer market, a greater range of service providers for the customer to churn to.
Don’t get me wrong. Choice is a good thing. I am concerned however, that service providers are in for a world of pain. We are pushing providers to recognise the threat early and articulate their value proposition better, so that they don’t have to resort to the lowest common denominator – namely price, in order to win business. The last thing the industry needs is more customers buying on the basis of price and then having a bad experience because the service provider cannot afford to meet their bandwidth demand.
Blood Pressure Pills for the Bean Counters
Here is good example of the industry meeting the needs of the market. It is now possible for a container ship with a VSAT terminal and stabilised antenna to maintain connectivity as it transits from the US to Australia. The VSAT terminal is able to seamlessly "roam" from one Ku beam to another, in much the same way as your mobile phone changes base stations as you drive along the highway. This provides ship owners with a cheaper, more flexible option to not only meet operational requirements but address crew retention needs. But it doesn’t end there. Sea Tel and KVH are now producing smaller stabilised antennas that are opening up opportunities serving new class of vessels. At 24" (60cm), the antenna can comfortably be carried by vessels down to 60 feet (29m), which takes it into tourist vessels and the luxury yacht market. The only problem with these small dishes is that you tend to need more bandwidth to prevent interference. Answer: savvy operators are now using the tracking capability of the onboard antennas to access satellites in inclined orbit. Inclined orbit satellite bandwidth satellite is usually heavily discounted because you need a tracking antenna. Here the cheapness of the bandwidth is being used to compensate the increased bandwidth usage. Impressive.
Have the Marketers Missed the Boat?
Yes and no. There’s plenty of excellent work being done. Unfortunately, the bulk of it centres on features not benefits. But even that’s not the real problem. The real problem is that not enough is being to ring in the changes – the equipment’s better, cheaper, with products that go well beyond simple data carriage. We have allowed ourselves to be pigeon-holed as the service of last resort – the last chance saloon of connectivity. Although this sentiment is out of place with reality, it is widely held view by customers and governments alike, including that PR guy. The challenge for us is to capture the customer’s imagination. As Viasat’s Mark Dankberg recently remarked, we can do this by taking a page from mobile’s marketing handbook – e.g. 3G no good for your iPhone? Don’t worry, 4G will fix it. VSAT communications marketing needs a Version 2.0 – i.e. forget about what you thought about satellite, 2.0 is here.
Then we won’t be asking for problems, customers will be asking for our solutions.
-------------------------------------------------
Chris Frith is the principal consultant and founder of AUSPresence, a professional services firm providing thought leadership and tactical support for customers in the satellite industry, looking to lift their performance. Chris held senior positions at Optus Satellite Services before establishing AUSPresence in 2005. At AUSPresence, Chris has been successful in assisting its customers analyse their past successes, pick winning markets for future growth and put systems in place to achieve their business objectives. Chris holds a Computer Engineering Degree and a Master of Business Administration from the Australian Graduate School of Management. He can be reached atchris.frith@auspresence.com.auorphone +61 413 596 325.
