With over one hundred million households, the United States is currently the largest market in the world for broadband services. About sixty percent, or 60 million households currently access broadband services from various sources, mainly terrestrial. Satellite broadband service reach only one million households, or less than 2 percent of broadband households in the U.S. Clearly, there is a lot more room to expand satellite broadband services in the U.S. market and major operators such as Hughes and Viasat are determined to develop the market to its full potential.
A recent study by NSR, Broadband Satellite Markets, revealed that the satellite broadband sector has weathered the effects of the depression of 2009, citing the achievement of the milestone of one million subscribers in the US as a good indicator of the potential and opportunities in the market. The North American market for satellite broadband services heated up with Carlsbad-Calif.-based equipment manufacturer Viasat announced two years ago that it will be launching a new High Throughput Satellite (HTS) Viasat-1 and enter the service provision market. The announcement came in the heels of Hughes’ launching in 2008 its all-Ka-band satellite Spaceway, which increased capacity available in North America. Viasat subsequently announced its purchase of broadband service provider Wildblue last year giving it much needed retail and distribution infrastructure for its services.
Wildblue, which only launched its service five years ago is fast catching up to Hughes, currently the market leader with a little over 500,000 consumer subscribers to its HughesNet satellite broadband service. WildBlue’s latest announcement at the end of 2009 has its subscribers at 430,000. However, WildBlue has reached almost the limit of its service capacity in some key areas of the country that forced it to halt its sales operations in 70 percent of the country due to bandwidth limitations. The expected launch of Viasat-1 in the first quarter of 2011 should make available increased capacity from this all Ka-Band satellite, billed as the most powerful satellite to date.
Hughes subsequently announced that it will launched another all Ka-Band satellite to be called Jupiter, scheduled for launch in early 2012. Both Viasat-1 and Jupiter are promising over 100 Gigabits of capacity which can provide broadband services to over a million new customers per satellite.
Both Hughes and WildBlue are counting on the unserved and underserved markets for broadband services, mainly in rural areas, which both companies estimate to be in the 10-15 million household range. So, even with two HTS satellites coming up, which can serve a maximum of 3 million subscribers, there is still a relatively large addressable market for satellite broadband in North America.
The SOHO/ Enterprise Market
To achieve the full market potential of satellite broadband, according to many analysts, would require reaching not only to consumers but to other markets as well. Hughes has traditionally been serving the enterprise market and are focusing on both enterprise and consumer markets. Viasat has announced that its new satellite Viasat-1 will be serving not just the consumer market but the enterprise, government, military and other vertical markets as well.
A recent Frost and Sullivan study on the "Business Market for Ka-band Broadband Services" said that "The business market for Ka-band is more promising than the consumer market, and it will continue to be more profitable for the first few years during which Ka-band service is available. "
"Operators that had built their business models around the consumer or small office/home office (SOHO) market may have to rework them to target the more viable enterprise market instead." the Frost and Sullivan study said.
One company that is focusing exclusively on the higher end of the consumer market and the SOHO and enterprise markets is Spacenet (see article "Finding Niche Opportunity…"). By focusing on this specific market segment, it is using its core competencies as a distinct advantage to compete in the market.
Stimulus Funding for Satellite Broadband
While the market for broadband services in the U.S. shows great potential, it still lags behind among developed countries. The International Telecommunications Union (ITU) which ranks annual broadband penetration rates in every country, ranks the U.S. 15th behind South Korea, Iceland, Sweden and Norway among others. This has led the US to provide stimulus funding to promote broadband access especially in rural areas. Unfortunately, satellite companies were unsuccessful the first two rounds of funding from the American Recovery and Reinvestment Act, which earmarked US $7.2 billion to extend broadband communications across the country.
A new program set to be announced this month, however, will allocate specifically US $ 100 million for satellite broadband services and both Hughes and Viasat will be actively participating in the process.
As NSR, noted in its Broadband Markets study, it believes that ensuring 100% broadband coverage in any country will almost always include the use of satellite broadband access services as the most economical way to reach the last few percent of households and businesses. However, the leading challenge that service providers will face in the coming year is changing existing perceptions in government agencies, in addition to consumers, about what satellite broadband access can really do using the second generation of HTS, according to NSR. As Viasat’s Mark Dankberg has been saying in many trade conferences, "the satellite industry needs to do a better job of selling itself to the broadband market."
Competition from Terrestrial
Both Hughes and Viasat are investing heavily on the satellite broadband market in the U.S. But is it a viable market in the long run? Will terrestrial technologies such as Wi-Max, 3G, 4G wireless or LTE will eventually reach the markets that satellites are going after?
Hughes’ Senior Vice-President Mike Cook is not worried about competition from terrestrial-based service providers. "There will always be a segment of the market that will never be addressed by the terrestrial service providers such as wireless, Wi-Max and others. With the new high throughtput satellites that we now have and will be deploying in the next few years, we will have a very competitive solution for consumers," he said.
WildBlue’s President Tom Moore agrees. He estimates that about 20-25 percent of the market will never be cost effective to be served by any terrestrial service. He said that the wireline technologies are based on home density and the smaller the density of homes increases the cost of deployment by several orders of magnitude. The cost can be up to hundreds of thousands per home in areas where there are fewer than 50 homes per mile, he said.
Ka-Band as the Future
The developments in the U.S. of using Ka-Band satellites for broadband services are being closely watch in other regions who are launching their own Ka-Band systems in the next few years. Viasat is involved in the rollout of Eutelsat’s Tooway Ka-Band service next year and will be providing its SurfBeam 2 technology to the Ka-Band service Al Yahsat is launching in the Middle East in 2011.
Hughes, on the other hand, will be supply Avantiwith advanced Ka-band networking infrastructure for Avanti’s HYLAS 2 satellite which wil lcover Europe and the Middle East. That’s in addition to Hughes initial US $24 million contract to supply Ka-band technology for HYLAS 1.
How these Ka-Band initiatives will do in the markets they are serving will bode well for future Ka-Band services in other bandwidth–hungry regions of the world.
Conclusion
The prospects for satellite broadband in North America certainly looks bright. Viasat’s CEO Mark Dankberg, in a recent testimony before the US Congress on the National Broadband Plan, sees the potential in satellite broadband much like the introduction of satellite Direct-to-Home (DTH) services in the US in the 90s. He sees a viable market where there could be several HTS satellites serving millions of consumers in this decade.
However, WildBlue’s Tom Moore cautioned that for satellites to be continually viable, it has to keep up with the
development in terms of quality, speed and reliability that terrestrial technologies. He said that at current rates, speeds are doubling every three years and satellites have to keep up or exceed this pace of development to remain competitive.
Much is at stake in the satellite broadband market in North America. As I pointed out earlier, the world will be watching the developments in this region.
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Virgil Labrador is the Editor-in-Chief of Satellite Markets and Research based in Los Angeles, California. He is the author of two books on the satellite industry and has been coering the industry for various publications since 1998. Before that he worked in various capacities in the industry, including a stint as marketing director for the Asia Broadcast Center, a full-service teleport based in Singapore. He can be reached at virgil@satellitemarkets.com
