By Susan Trott

Broadband and business: in today’s corporate environment, it is a natural combination that more times than not spells increased profits and offers up a competitive advantage. In particular, broadband services give Small-to-medium enterprises (SMEs) and Small office/Home office (SoHo) setups a level of global reach that was previously reserved for only major multinationals.

Today, broadband solutions for these business sectors are still in high demand. Some of the top satellite analysts who monitor these developments reviewed where the future growth lies and which challenges remain for satellite-enabled services to SMEs and SoHo platforms. Providing their insights on SME/SoHo broadband sales opportunities are Christopher Baugh, president of Northern Sky Research; Stephen Blum, president of Tellus Venture Associates; Susan Brazer, president of LionShare Media International; and Roger Rusch, president of Telastra.

Via Satellite: What broadband applications are SMEs and SoHos demanding today?

Baugh: Internet access and VPNs [Virtual Private Networks] are still the mainstays of these market segments today. SoHos need high-speed access to the Internet and SMEs typically require a mix of both Internet and Intranet access. We do see an increasing demand for VoIP [Voice over Internet Protocol] in some markets, but the need is fairly low today.

Brazer: High-speed (Wireless) Internet and network access, large file transfer, VoIP and Web-based video-on-demand (streamed and downloaded).

Rusch: Almost everyone is interested in high-speed Internet access. Applications are typically the same as used by anyone, such as e-mail with clients and associates; research from the vast knowledge base available; and file access (regulatory filings from the Federal Communications Commission, U.S. Securities and Exchange Commission, annual reports).

Blum: We completed a comprehensive study of residential and small business customers in a California market. The answer was surprising in its simplicity. Small businesses want reliable access. It’s more important for it to be consistent than particularly fast or cheap. Once quality is assured, they’d rather have faster service than cheaper service.

That’s it. They’ll worry about applications and hardware. It’s their business to look after that end of things. Just give them reliable broadband service and they’ll worry about the rest.

Via Satellite: Is satellite broadband a part of this solution? If so, in which instances and regions of the world?

Baugh: Satellite is increasingly a part of the solution, especially as price of equipment and service are reduced. Using terrestrial DSL services as a reference point, many new satellite offerings are becoming quite competitive. Regionally, we see most deployments occurring in North America and Western Europe; however, each region will show growth in the next three-to-five years.

Brazer: Satellite can offer SoHos and SMEs strategic benefits in terms of cost-effectiveness, reliability and speed for applications such as large file delivery. Many companies are developing software that needs to be distributed to remote manufacturing locations and different operations centers, such as India and China.

Blum: In most cases no, but there are exceptions. Isolated small businesses are willing to pay a few hundred dollars a month for satellite Internet access. It’s a cost of doing business. You see that in parts of the United States and anywhere else in the world where terrestrial broadband infrastructure hasn’t reached.

Rusch: Satellites are typically the solution of last choice. If cable modems or DSL is not available, then satellite may be considered. Satellites are likely to be used in the developing regions. There is great interest in the Middle East and Africa. If satellites are cheaper than terrestrial alternatives they will be used.

Via Satellite: Which current satellite broadband solutions are making headway among SMEs and SoHos?

Blum: The Direcway type of solution: a shrunk-down VSAT [Very Small Aperture Terminal]-type system with a reasonably friendly user interface.

Baugh: HNS [Hughes Network Systems] and Gilat-enabled solutions still dominate this market, primarily because both vendors maintain the scale to reduce equipment costs and have vast distribution networks. Some headway has been made by both proprietary and standards-based vendors, but the volumes have not yet been significant.

Via Satellite: Which impending broadband solutions do you expect to do well among SMEs and SoHos?

Baugh: We expect next generation services from HNS/Spaceway, IPStar, and Wildblue to be lower-priced and high performance, thus making service addressable to a larger audience. We believe standards-based offerings, such as DVB-RCS and DOCSIS, will see an uptake in demand once price levels decrease. Lastly, a vital component of future growth in this segment is the combination of satellite trunking and wireless local loop access (Wi-Fi, WiMAX) for broadband access delivery.

Brazer: Increasing speed of access and the ability to handle heavier data are the most likely drivers for SMEs and SoHos. Throughout the next few years, VoIP applications promise substantial cost savings.

Rusch: Cable modems and DSL will continue to dominate. It appears the market for satellite-based solutions will be much smaller than originally expected. The best hope is a lower cost solution like Wildblue. We do not know if the financial endurance of systems like IPStar, Wildblue and Spaceway will be sufficient to weather a relatively slow buildup of subscribers.

Blum: Fiber to the premise. Within the next 10 years, expect most (90 percent plus) to have access to fiber capability. Once it’s installed, the economics and performance metrics can’t be beat. Wireless technologies, such as Wi-Fi, will have a place as well, but mostly as networking and remote access solutions.

Via Satellite: Conversely, which satellite broadband applications do you expect not to do well and why?

Baugh: Weak demand still persists for many specialized forms of video to the SME/SoHo segment. Despite efforts to penetrate these markets, applications such as training and entertainment will likely continue to lag.

Brazer: The asymmetrical nature of satellite broadband delivery allocates around 80 percent of bandwidth to download traffic. As such, applications that require high upload speeds such as Web or application hosting from remote sites or two-way videoconferencing will be somewhat limited. Latency affected applications, such as VoIP may be problematic as well.

Rusch: I am skeptical if picturephone- type applications and videoconferencing will ever become a major satellite application. Because: (1) Meetings involve people and require personal contact. They want to smell the floorwax and shake hands; (2) Normal direct meetings involve multiple interactions between the participants, but a videoconference is a binary type of process with only two people engaged at a time; (3) Typical meetings involve informal discussions with candid comments that are suppressed by a formal briefing; and (4) People like to travel.

Blum: Satellite is an interim gap filler. It’ll peak in the next couple of years, then slowly taper off as fiber is deployed.

Via Satellite: Is cost the only barrier to SMEs and SoHos buying satellite broadband? Or are there other considerations?

Blum: Not at all. Cost is the least important consideration. Number one is reliability, number two is speed and satellite has issues on both counts. It’s the choice of last resort.

Baugh: While it may be one of the largest problems to solve, cost is only one consideration. Distribution channels, licensing and performance are also critically important issues for companies serving the SME/SoHo markets.

Brazer: Service factors such as end-to-end service, the ability to purchase bandwidth in smaller increments on an as-needed basis (i.e., for burst mode requirements) and international licenses to receive data are among other considerations.

Rusch: The two factors are cost and quality of service. Both must be addressed. Broadband satellite solutions developed a tarnished reputation over the past decade because the installations were difficult and time consuming. Perceived service quality did not compare favorably to the experience of DBS.

Via Satellite: What SME and SoHo markets or businesses are good targets for companies offering satellite broadband?

Baugh: In both the SME and SoHo spaces, we see most traction in verticals that have long been targets of the VSAT players. For example, the retail, financial and hospitality markets are all important elements of demand.

Blum: Small knowledge-based businesses in isolated areas. Make sure that a fiber build isn’t a couple of years away.

Brazer: While entertainment, gaming, content and e-commerce companies are good targets, there are also a considerable number of software and manufacturing companies that can take advantage of the cost-effective distribution capabilities for multilocation delivery of large files.

Rusch: My guess is that the best hope is VPNs for large international corporations. Broadband satellites could support networking capabilities that are not possible with conventional wired or wireless solutions.

Via Satellite: What can satellite service providers do to make satellite broadband more attractive to SMEs and SoHos?

Baugh: It is important for satellite service providers to use the successful terrestrial broadband world as a guide for new offerings. DSL, in particular, has carved out impressive growth in the SME and SoHo markets. Satellite companies must therefore offer a satellite service with the look and feel of a terrestrial DSL service, even if the SME/SoHo has no other option for access.

Rusch: The product must be priced to be comparable with or lower than cable modems and DSL and the installation must be straightforward. If it takes several days to work it will not be used. After it is installed, the availability must be high. If it is not available 99 percent of the time, users will complain and get rid of it.

Blum: Not a lot. The biggest constraints on satellite broadband service are physical: it’s expensive bandwidth, so in order to make the economics work you have to press back on quality of service parameters. Terrestrial technologies don’t–fiber especially.

Via Satellite: Are hybrid network carriers (satellite-terrestrial) in the best position to sell broadband to SMEs and SoHos?

Blum: Absolutely. Sell a terrestrial solution where you can and a satellite solution where you have to, and you’ll meet the needs of the market. That’s absolutely the best way to go.

Baugh: Hybrid networks are certainly at an advantage since they harness the efficiencies of both terrestrial and satellite capacity. Large telcos and carriers such as MCI, BT and Tiscali also see the benefit of using satellites to fill gaps in terrestrial coverage. Such strategies are essential to the growth of the SME/SoHo market given the presence and selling ability of large terrestrial players.

Rusch: This solution has not been very satisfactory to the end user. The uplink speeds are too slow. In some cases a terrestrial return link is not available.

Via Satellite: How do you expect the SME/SoHo broadband market to develop in the next few years, both overall and with respect to satellite broadband?

Baugh: Success or failure in the SME/SoHo segments will essentially determine the fate of the broadband satellite market. Large enterprises are still the primary growth driver in the access/VPN business today, but growth in this segment is fairly flat. Forecasts of market growth in the enterprise satellite space are predicated on increased penetration of the SME/SoHo markets. We contend that, as prices decrease and solutions become more available, volume should pick up in these segments.

Rusch: I remain convinced that there is a small, but important role for satellite broadband communications. The key for service operators is to scale the business plan to the marketplace. This might mean relatively high prices for a small but critical market segment. Certainly the military is willing to pay a premium price for commercial services if the service is skillfully packaged.

Blum: Within 10 years, 90 percent of SME/SoHos in North America, Europe and much of Asia will have access to fiber- optic grade broadband service, within 20 years it will be virtually worldwide. Satellite will continue to have a role to play, perhaps even a bit larger in absolute terms than today, but much smaller relatively. As overall broadband traffic grows, the opportunities for satellite to act as a gap filler will increase.

Opportunities Exist, But Keep Terrestrial In Mind

Based on what the experts have said, there are opportunities out there for satellite broadband. Savvy operators, however, will bear in the mind the satellite-to-terrestrial life cycle, and position themselves to provide terrestrial services when they become available. Otherwise, all the time and money spent to attract new clients to broadband will end up benefiting someone else, rather than the satellite operator who pioneered this service locally.

Susan Trott is a freelance writer and contributing editor to Via Satellite. As an educator, writer, and consultant, she works in a variety of technology industries from computers to satellites.