 SATELLITE GETS PERSONAL
Max Engel
September 1, 2008
 I want to discuss an interesting comment made at a Hughes Network Systems’ analyst day in June regarding potential target markets for satellite broadband services.
The comment came in a discussion of Hughes’ intention to offer corporate VSAT services to a smaller class of customer than Hughes previously addressed. Communications service offerings generally are moving down market. This is one of the reasons that satellite broadband finally is taking off, as increasing numbers of businesses and consumers see broadband access as an essential tool for any level of operations.
In the business world this is caused, in part, by the increasing use of once high-end software applications. As software applications such as Oracle and SAP becomes essential to smaller businesses, the market for broadband connectivity to support these networks grows, offering new opportunities to network providers. I have already mentioned Hughes’ desire to tap these markets, and the movement of WildBlue into business services also demonstrates this desire.
It is important to note that the two-way nature of broadband makes it essentially different from direct-to-home broadcasting. In fact, satellite broadband could be looked at as a one-site VSAT network. Of course there are those who insist that satellite broadband is a form of VSAT, and if you go by the size of the dish, this is a reasonable assertion. I find it much more useful, however, to divide the small dish world into corporate networks and single-site broadband installations because these market segments are only loosely linked, and the number of broadband sites tells you nothing about the number of corporate sites and vice versa.
The biggest problem in offering network services to these smaller organizations is that the level of effort that a Hughes or a Spacenet would apply to gain a contract with a 500-site gas station chain is not feasible when dealing with a five-store clothing retailer. It also is important to remember that these customers generally are not that technologically savvy. They do not have large — or perhaps any — information technology departments and require a lot of support that a more sophisticated organization might not. So the question is how to serve a new market segment that is wide open while still making a profit. The answer is to reduce the amount of customized attention required to win and service a contract.
This is where Hughes’ consumer arm comes in. As I have mentioned previously, the biggest problem with offering consumer services is that they must be very low touch. Automated provisioning and billing, help desk services and other strategies used to reduce the need for individual attention are essential to service consumers.
As it turns out, these same systems allow Hughes to serve a new class of customer. With some limited modifications, such as more robust help desk services, the consumer-oriented mechanisms that allow Hughes to make a profit in the thin-margin consumer business also will allow them to serve a new business market. In short, Hughes is able to pursue opportunities in the small business realm because of investments made in consumer-focused businesses that were justified by consumer market revenues. Once the investments were made, however, the capabilities can be used to seek marginal revenues in markets that would not have justified the initial investment. The broader set of tools and skill Hughes has acquired through its consumer-focused activities allow it to address a broader range of non-consumer markets.
This is second order effect of Hughes’ movement into the consumer arena and shows how satellites "getting personal" is not just about the consumer. The combined spending power of consumer-level broadband subscribers is larger than the small business market (at least for the moment) and certainly can be justified on its own, but we now are seeing the benefits of the broader palette of solutions that comes with servicing a broader range of markets.
|
Print This Page
Email This Page
Archives
Copyright Permissions