VSAT systems have established themselves as a technology ideally suited to corporate networking, enabling a new tier of users to take advantage of the enhanced flexibility the platforms offer. But the industry has had to respond to a growing competitive threat from terrestrial services, which are expanding their offerings and geographic reach. VSAT operators who best respond to the changing marketplace will take advantage of new opportunities developing in this market.

VSATs’ numbers have been growing steadily, according to a February report from Frost & Sullivan, benefiting from traditional applications including corporate networks, point-of-sale and Internet access plus new applications and target markets such as rural telephony, telemedicine and disaster recovery networks, according to "World VSAT Markets."

Yet growth appears to be limited, according to industry executives, and the future for many traditional VSAT companies most likely lies with embracing terrestrial providers and forming hybrid network offerings, says Max Engel, satellite analyst with Frost & Sullivan.

"It used to be that satellite was special, and the industry still has occasional problems in regard to thinking it [remains so]," Engel says. "It has a certain set of very useful characteristics, and those characteristics make it a powerful tool where appropriate, but if you look at the old VSAT model… it was very much a matter of ‘we will take care of everything’.

Yet "terrestrial generally has more capacity and is cheaper in many applications," Engel adds, "so why spend more to do what you can do cheaply and easily on the ground?"

Many VSAT providers have realized and embraced the change, says Jorge Vespoli, vice president of global sales and marketing for San Diego-based ViaSat Inc. "Why would you call [hybrid networks] the future? It’s been happening for a while, especially in North America," he says. "In the market sectors that we focus on, we provide managed [virtual private networks] that use satellite as the core technology. Sometimes we use DSL or other terrestrial technology because there’s no satellite or no direct view to a satellite, and we want to offer a fully integrated solution. If satellite is only 1 percent of the system and terrestrial is 99 percent, that’s bad, but if it’s the other way around, that’s good."

Embracing hybrid networks does not mean the end of VSATs, Engel says, just that operators will adjust their expectations about private networks. "Hybrid does not mean satellite loses. It means satellite occupies smaller niches in a broader firmament. It’s not at all clear that this means [fewer] dollars; it might mean more dollars and more satellites, but we are moving toward a satellite role being more broadly spread and less a complete solution."

Embracing Hybrid Solutions

In March, Hughes unveiled its Hughesnet brand, replacing its Direcway brand. The change is to unify the company’s range of broadband solutions and services, going beyond Direcway’s "broadband by satellite" offering to enterprise, government, small business and consumer segments. It also allows Hughes to provide services using both satellite and terrestrial links, depending on customer preference.

Complete rollout of Hughesnet services will take place throughout 2006, the new division starting off with about 275,000 U.S. customers. The company’s Spaceway platform remains on schedule to begin operations in early 2007.

The most appealing aspect of using a VSAT provider is a single point of contact and network management, Cook says. "It is easy to get sites deployed and/or moved around," he says. "DSL is a fact of life and cost effective in certain environments, but today there is no reason why we still can’t offer our customers the same quality of service."

While Hughes will remain independent, other VSAT providers are looking to outside partnerships to extend their reach. Gilat Satellite Networks Ltd. may have the biggest deal to date: Its Skyedge system was selected by Cisco as the platform to support Cisco’s new VSAT Network Module, providing a broadband satellite network service for data and voice to integrate directly into a Cisco router so it can be configured to automatically take over if the location’s primary connection fails. Such interoperability enables VSAT service providers operating the Skyedge system to become members of Cisco’s global network of Certified Hub Operators, allowing service providers to collaborate with Cisco and help its new and existing customers deploy a range of broadband satellite networking solutions.

"This is the first time that Cisco has satellite communications as part of their offering," says Tal Meirzon, Gilat’s vice president of marketing and business development, says. Doing so adds additional addressable markets for satellite communications; for Gilat specifically, it affords Gilat Skyedge hub operators an additional revenue stream. With about 1 million routers already deployed, there exists an addressable market.

For customers to receive satellite service via the Cisco router, they need a contract with a VSAT service provider. Gilat subsidiary Spacenet launched Connexstar CI broadband services designed specifically for the Cisco VSAT Network Module. Spacenet will provide to the United States, Satlynx to Europe, the Middle East and North Africa.

The prime target market for the offering is the business continuity and backup, emergency and disaster recovery arena, Jeff Carl, Spacenet’s director of marketing, says. "We think this will really light a fire under people looking for VSAT backup networks," Carl said. "Spacenet could knock on a door for years and not get noticed, but when Cisco walks in, people will talk to us. We think once you put in a VSAT for a backup the customers will see it is useful for a lot more than that."

Tim Street, an analyst with Frost & Sullivan, sees Gilat with a leg up in the race to bring satellite services to a wider audience. "I think it’s a great partnership that should definitely result in growth as VSAT is used as a backup and in recovery situations," he says. "The big challenge is getting it within the scope of what the IT manager will consider."

The move toward hybrid networks also will be a boon for iDirect Technologies, says Dave Bettinger, chief technology officer for the company which provides turnkey communications equipment for networks using Internet Protocol (IP) technology. "Everything is headed toward a simple IP platform."

All Satellite Network Still In Demand

Vespoli is among several executives who do not believe that embracing hybrid offerings means the end of VSAT-only networks. "There are still opportunities for 100 percent satellite" virtual private networks, he says. "In many cases, you still have requirements that only a satellite can provide effectively, such as restoration services, multicasting and general content push. There are areas where the broadcast nature of satellite is the differentiator. The centralized, homogenous and ubiquitous network still has significant value. The problem is that people have the expectation of the functionality of a satellite for the price of the cheapest terrestrial offering."

Demand remains strong for satellite where terrestrial infrastructure cannot meet it. Hughes has about 160 major enterprise customers — representing hundreds of thousands of sites — in North America with the majority using all satellite links, says Cook. "VSAT has survived and continues to thrive in various market segments, with growth rates depending on where we are in product development and performance cycle, and where the market is," he says. "Our current enterprise grade platform is capable of delivering up to T1 speeds in upload, and multiple megabits in download.

"We have the capability to give enterprise customers the bandwidth and performance they are looking for," he adds. "At the same time, we have become very sophisticated with data compression and acceleration techniques, and when you look at the performance of VSAT versus DSL for Web browsing or Web-based applications, there is no discernable difference in refresh time."

According to Frost & Sullivan, opportunities for VSAT providers in developed regions include digital signage, business TV networks and business continuity and disaster recovery applications. Within less-developed regions, cellular backhaul and rural telephony still provide markets.

"The perception that VSAT is dying is not backed up by the numbers," Engel says. "It may actually be experiencing something of a rebirth. If you want to send out digital video content to stores you don’t need two-way, so set up a one-way VSAT for the video distribution network, and the electronic communications network is terrestrial. It is worth your while to do video distribution network as satellite.

"There will always be people that want satellite only," he adds. "It’s fabulous for broadcast. You send content once and it’s received all over the place. For a one-way network, satellite is unsurpassed."

Bettinger also doubts the end of VSAT. "Where we’re heading is bringing better bandwidth efficiency," he says. "Satellite still gets crushed on cost, but the lower [we drive] cost, the lower the cost of transport for our customers. Satellite IP is not going to lead the world in determining which direction IP goes. It has to be the other way around. The big service providers have other connections and they can extend all of those services across satellite to anywhere. That’s the vision of where we’re headed. … The large global providers still can’t touch 15 percent of their enterprises because of connectivity issues. That’s where satellite will play."

–Jason Bates