by Douglas Graham

Small office/ home office (SOHO) and small-to-medium enterprise companies (SMEs) are potential growth sectors for satellite broadband. These days nearly every business is Internet-driven to at least some extent and, for all those businesses, fast and easy access is not a luxury but an absolute necessity. This applies to rural, family-owned operations lacking Intranets, as well as private televisions networks and sophisticated inventory control systems.

Residential satellite broadband already has its foot in the door of the rural United States where DSL and cable service is tough to get. Rural-based SOHOs and SMEs face the same problems as do their counterparts in Europe, Canada and the developing world. For these customers satellite broadband fills the gap, but according to industry experts that gap is closing fast.

"The U.S. represents the biggest SOHO market for satellite broadband," says Roger Rusch, president, Telastra Inc. in Palos Verde, CA. "For SME the market is in the Third World, with Brazil representing the largest potential growth area. Right now terrestrial broadband is underrepresented in these regions, but that won’t last forever. SOHO and SME promise to be a lucrative broadband market, and the terrestrial providers will want a bigger piece of the pie. For satellite the market will rise and fall within the next five to 10 years. Providers should jump on the bandwagon while they still have the opportunity to get onboard."

SOHO vs. SME

SOHO and SME, however, have little in common with each other. SOHO is the largest sector by far, and is most significantly present in North America, Europe and Japan. Satellite’s high price has limited the SOHO broadband market to the prosperous parts of the world. Sticker shock has made demand in smaller countries virtually insignificant, and it is unlikely that will change much in the years to come. Some analysts predict a peak in SOHO satellite broadband by 2005. Others believe the market is cresting right now, due mainly to creeping penetration on the part of terrestrial broadband providers.

SME represents an enterprise market for which satellite is far less less viable in the United States and other OECD (Organization for Economic Co-operation and Development) countries than terrestrial broadband. Businesses in the United States are prime targets for DSL and cable companies. Even some rural-based businesses can obtain terrestrial broadband if the deal is sweet enough to attract a provider. In other words, if you’ve got the loot, you will get the link, no matter where your company happens to be located.

"In the U.S., SOHO plus residential make up about 80 percent of the satellite broadband market," says Janice Starzyk, senior analyst, space and telecommunications for Futron Corp. in Bethesda, MD. "SOHO represents only 15 percent of the total, and SME far less. Very few U.S. companies lack terrestrial connectivity. Your company could be in the middle of the South Dakota Badlands, but if there’s enough money on the table Verizon or some other big terrestrial provider will build a network for you. In the United States and elsewhere in the developed world, the enterprise market for satellite broadband has been essentially squeezed out by DSL and cable. Most satellite broadband providers are looking outside the U.S. for enterprise customers."

New Lands

The U.S. enterprise market is saturated, and terrestrial providers pretty much own it. Satellite providers recognize this and have structured their marketing strategies accordingly. Currently the soon-to-be-launched Hughes Spaceway Network represents the only serious effort on the part of satellite broadband sector to reach the U.S. enterprise marketplace. Operating in globally assigned Ka-band spectrum, Spaceway will target SMEs, SOHOs, telecommuters and ultimately consumers.

In developing areas or those with substandard telecom infrastructures, it is a different story. Terrestrial providers have yet to explore many of these countries, and for the moment these areas are open game for satellite broadband. Latin America, China, India and the "Little Tigers" of the Pacific Rim all represent viable markets.

"There is a strong position for satellite broadband, which will clarify throughout the course of the next five years," Rusch adds. "For SOHO the largest potential market for satellite broadband is the United States, for SME it’s the developing world. Satellite has a good shot at both, and these windows of opportunity should be seized upon before terrestrial catches up, and the windows close. It will take a little time to get the ball rolling. High prices have impeded satellite so far, and made it less viable overall than DSL and cable. Hopefully, the providers have learned from their past mistakes, and will come out with future offerings that are more competitive."

Douglas Graham is a contributing writer to Via Satellite.