By Peter J. Brown

Satellites have always enjoyed an advantage over terrestrial alternatives when it comes to beaming one-way transmissions over vast distances. Broadcasting the same signal to any number of receivers spread over thousands of square miles is one of the applications where satellites excel. However, when it comes to two-way services, the satellite industry continues to search for ways to compete with terrestrial offerings.

One way in which satellite service providers know that they can still prevail over terrestrial providers is either by offering connectivity to remote sites that terrestrial lines cannot reach or by offering the right service – reinforced by a well-refined business model – in areas where telecommunications infrastructure and the competitive forces it sustains come into play. The opportunities and revenues are there, but so is the challenge of establishing a profitable service.

"This is a very interesting marketplace that is increasingly characterized by niches where the principal value is defined by application-specific opportunities and asymmetric data flows," says Scott Calder, CEO of Utah-based Mainstream Data Inc. "The highest growth area for VSAT service providers will be in markets where terrestrial solutions are not a good fit. Additionally, geographic markets where low-cost terrestrial alternatives are not available will continue to provide opportunities for VSAT service providers."

Calder sees competition in this market for two-way data services becoming more aggressive due to a constant downward pricing trend and the steady expansion of wired and wireless terrestrial alternatives. "This will continue to have a dampening effect on the growth of VSAT networks generally," he says. "Ultimately, it is applications that drive industry growth, and the applications growing rapidly are typified by large outbound bandwidth requirements with moderate inbound needs. Interactive distance learning and digital signage are where the action is today."

Maintaining momentum in this market is a challenge, although the vast pool of potential customers with an insatiable appetite for data is unlikely to diminish anytime soon, says Jon Douglas, marketing director at Virginia-based iDirect Technologies. "We have seen a number of customers upgrading from narrowband applications to VSAT broadband Internet protocol (IP) networks, as well as upgrading existing VSAT platforms to take advantage of greater network efficiency and gain access to solutions such as voice over IP (VoIP), videoconferencing and other broadband IP applications," he says. "Two-way data transmission is being integrated into customers overall networking needs as part of a larger hybrid network solution. By enabling true broadband IP over satellite networks, our customers have the ability to utilize satellite access at each end of a network or integrate it into a network that utilizes satellite access points as well as landline termination, depending on the availability and economics."

In terms of overall operating costs, two-way data transmission via satellite is inherently more expensive than terrestrial two-way connectivity. This fundamental rule has been shaping strategic thinking in the VSAT sector for years, but satellite solutions remain appealing for a variety of reasons. "The true economies of scale with satellite come when the application is highly asymmetric, such as in the case of mostly one-way broadband IP multicasting with a thin-route return path," says Ron Clifton, president and CEO of Ottawa-based International Datacasting Corp. "The industry is still recovering from the recent recession and telco meltdown, and capex [capital expenditure] financing for needed upgrades is still tight. Customers we are talking to are saying they are tired of proprietary protocols and want open standards such as DVB-RCS [Digital Video Broadcasting- Return Channel via Satellite], but the first generation of DVB-RCS products have not met expectations. Customers are waiting for the next generation," he says.

At Gilat, there is a sense that the market for two-way data services via satellite is reawakening after a slowdown in 2002 and 2003. "We see a growing demand for high-bandwidth platforms, along with voice and retail applications. New needs are arising and there is a growing demand for a variety of applications. However, on the other side, the demand for lower prices is ever-present as well," says Gil Meyran, Gilat’s associate vice president of marketing. The company has been emphasizing the shared-hub concept as a cost-effective solution for two-way satellite transmissions. Gilat’s product family can combine various applications over the same hub, and by using advanced management and control schemes, multiple customers can share the same hub.

Thanks to a combination of performance enhancing proxies (PEPs), header compression and other techniques, the satellite sector can drive efficiency while not sacrificing link performance at the same time, says Meyran. "We see these new technologies evolving, as well as header stripping and improvements in quality of service. These techniques will make the transmission of VoIP and video more efficient and are required for enhancing quality." The improvements in compression techniques will increase the amount of data transmitted while greatly reducing the need for added bandwidth, he says. "With more data flowing over existing space segment, the profitability of the service providers will grow and the penetration of VSAT networks may grow, too," Meyran says. Trying to grow VSAT networks in a world where IP-based services are the rule rather than the exception means that satellite operators and service providers can no longer keep up with the pack by simply offering an end-to-end solution. The offering must include a comprehensive and flexible menu for each customer.

According to Richard McPhaden, vice president of marketing at Quebec-based Polarsat Inc., vendors must incorporate additional features that benefit the service provider or end user, including acceleration, security, quality of service and compression. "Simple raw pipes are no longer sufficient in this market," he says. "There is a steady business in customers looking to upgrade their networks, and the market appears to be quite active at the moment." McPhaden says the Southeast Asian market is an area where competition is picking up. "Economies have rebounded and [companies] are now looking at new infrastructure investments," he says. Though the impact of new regional networks from companies such as Wildblue and IPStar, for example, remains to be seen, he says.

Eager Customers Are Out There

As the demand for voice services such as VoIP and IP-data networking increases, service providers and vendors alike can point to numerous success stories in the form of existing large-scale regional VSAT networks that have been deployed in many parts of the world. Houston-based Caprock Communications, for example, purchased two Infiniti hubs from iDirect, one in the United States and one in Europe. "These hubs, combined with an existing one in Asia, will allow Caprock to provide multiple two-way, pure IP networks over an enormous global coverage area, supporting a variety of requirements for frequencies, topologies or bandwidth," says Douglas.

An iDirect hub has been installed by Speedcast in Hong Kong to support multiple virtual network operators (VNO). "Each VNO rents network capacity from Speedcast," says Douglas. "This capacity is physically isolated from the resources rented by other service providers and can be managed in any manner the service provider sees fit, including using private IP addresses. The VNO model allows new operators to develop niche opportunities worldwide and provides them with state of the art network management tools, security and functionality to deliver the applications customers need without a significant up-front investment."

Douglas sees the proliferation of true broadband IP over satellite networks as empowering customers. "They have the ability to utilize satellite access at each end of a network or integrate it into a network that utilizes satellite access points, as well as landline termination depending on the availability and economics," Douglas says. "Additionally, we are seeing terrestrial wireless technologies like Wi-Fi and WiMax open new markets to broadband satellite networks." Douglas also looks forward to the positive impact of advanced forward error correction technologies that will improve the efficiency of two-way data satellite networks, he says.

Mainstream Data has received inquiries about its two-way data technology from a large provider of content distribution and point-of-sale connectivity that provides interactive distance learning to several thousand retail locations, as well as from an emerging regional digital signage provider, says Calder. "We can deliver a combination of broadcast DVB- S content distribution together with VSAT interactivity for those sites requiring two-way service," he says. "This is a virtual private IP network solution for clients who need content distribution and Internet connectivity that integrates seamlessly into a hybrid satellite/terrestrial network. We try to make it as simple as possible to get started, but often find that we must educate the customer on the nuances of satellite bandwidth versus terrestrial networks."

Gilat has installed a 600-site network for Posta Kenya linking postal offices across the country to provide a communications solution for more than 42 million people. Services include telephony, fax, Internet and money transfers. China Telecommunications Corp. selected Gilat to provide a large-scale, satellite-based rural telephony network for the Tibet region of China. The system is used mainly for providing public call offices with more than 4,000 lines, with services such as telephony, fax and data, says Meyran.

A pair of recent customers for International Datacasting, a syndicated television program distributor and a manufacturer of a digital cinema application, were both seeking large networks using satellite distribution and terrestrial return paths, Clifton said. "We currently offer a variety of terrestrial return path options that take advantage of the asymmetric nature of IP-multicasting applications and the growing availability of low-cost terrestrial connectivity," he adds.

Polarsat installed a full-mesh VSAT network for Civil Aviation in China. The system supports a variety of services and data rates using the Polarsat VSATPlus 2 product, which provides services based on a combination of circuit-switched voice and data with packet-switched data in particular. A national telco in North Africa also has deployed a network using Polarsat’s Flexidama/SkyIP to serve multiple oil companies. "Under centralized management and control, each oil company has its own dedicated traffic hub and associated remote terminals. The telco can assure and maintain VLAN support to these competing companies, while maintaining a single satellite network," says McPhaden.

Two-Way Services Must Fit To Win

This pattern of technology development is definitely a situation where a rising tide lifts all ships. As each of the satellite solution providers tries to outgun the competition, the result is a dazzling array of choices for customers.

"Because connectivity is a critical application to the vast majority of enterprises we serve and has become so important to most companies – especially content providers or contributors – we say that it is survival-dependent," says Calder. "Or customers receive high-end service in return for very high availabilities, custom applications, simplicity of implementation and better throughput. Buyers are looking for a solution to a specific problem. For example, if you need dial-tone and Web access five-hours driving time from the nearest town, a VSAT with integrated VoIP equipment might just be the most cost-effective solution available. Likewise, if you need to distribute multi-gigabyte video files to thousands of movie screens, as we are doing for Technicolor, Internet solutions will not cut it. But satellite will," he adds.

PEPs, better acceleration techniques and more efficient use of the bandwidth provided by satellite are always welcome, but these alone will not increase VSAT penetration, says Calder. "These are primarily needed for Internet browsing-type applications and inherently not relevant for asymmetric IP multicasting, where IP-level [forward error correction] and proxy servers for backlink correction at the packet level are more important," says Clifton. "The roll-out of WiMax will start to challenge the traditional markets for two-way VSAT solutions. In addition, the new DVB-S2 standard, especially when married with DVB-RCS for the return path, with its throughput improvement and dynamic optimization of throughput is expected to have a significant impact."

McPhaden credits the de facto standardization to IP for making it much easier to sell two-way VSAT networks in particular. "The customers are more interested in reliable service and service level agreements and less on the details of the coding/modulation schemes used to accomplish this," he says. PEPs, header compression and other techniques also are having an impact "PEPs, IPSec and other IP enhancements are being demanded by the customers to improve the user experience and provide fast, reliable communication links," he says. "As corporations fully embrace VoIP, the demands for true [quality of service] on satellite links will become more pronounced. Best-efforts services will not be acceptable to a corporate customer or perhaps even to a consumer."

Other new technologies that should emerge in the 2007-2008 time frame and help satellite compete in the two-way marketplace are streaming IPTV and other video-related applications, as well as the convergence of video-data-voice services, Meyran says.

The Competition Only Increases Throughout Time

As the satellite industry awaits second generation DVB-RCS, along with other enhancements such as improved forward error correction and the widespread adoption of advanced compression techniques like MPEG-4, the terrestrial wireless data services sector marches on. Ku-band solutions dominate this market right now, but one cannot rule out Ka-band possibilities taking off in the near future.

For the satellite industry to keep pace with terrestrial providers, mature mobile services, or so-called coms-on-the-move, need to emerge, propelled primarily by the availability of lower-cost satellite antennas and the right mix of services.

"Two-way data transmission has been available to maritime industry for a while. They are finally solving the issues for vehicles. Practical coms-on-the-move solutions will present a number of new opportunities for two-way data transmission," says Douglas.

The satellite industry has no intention of simply folding up its tent and walking away from the lucrative and fast-changing two-way marketplace. If anything, the satellite service providers will continue to bear down and focus on what customers really need at the right price. Not every door will open, but satellite footprints will be everywhere in case anyone needs them.

Peter J. Brown is Via Satellite’s Senior Multimedia & Homeland Security Editor.