With economic uncertainty continuing to influence activity around the globe, operators and equipment manufacturers need to identify the areas that will be healthy in the future and make smart investments.

Maury Mechanick, counsel at White & Case, likens the pursuit of a particular market to betting on a particular horse: “If you place a bet you want to make sure you win.” The best places to place bets today: enterprise video, mobility, broadband and emerging markets.

Video continues its pervasive march from our daily lives into the business world, and as this march continues, this shift toward video will be important for the satellite communications sector. “Historically, training has been instructor-led and it was broadcast live,” says Sampath Ramaswami, senior director, strategic development, Hughes Network Systems. “We have seen a shift to more asynchronous training, with more YouTube-like video clips which are played on demand.” Ramaswami also notes that more customers are requesting upstream video applications (remote location to headquarters) for surveillance, where in the past video exclusively was a downstream application (headquarters to remote locations).

In the past, video networks had their own equipment and were not thought of as being part of the communications network, says Brett Belinsky, strategy director for Arqiva Satellite & Media. “With the development of IP-based networks, that has all changed now.”

Greg Pelton, general manager of the Cisco IRIS (Internet Routing in Space) program, highlights video’s growing importance in enterprise networks and the effect it will have on carriers. “There is a huge demand for video in the enterprise, and this trend will continue as business people expect to see things remotely. Almost any business meeting you attend these days has a video component. The use of collaborative systems is growing quickly. The use of video basically changes how you interact with others in any organization,” he says. “Corporate networks have all shifted to IP but video is still difficult to support due to unpredictable demand. Architecting a network is very challenging. Cisco is trying to get ahead of these needs but is making sure you will meeting your security policies,” says Pelton.

On-the-Go Demands

Mobility applications are another hot topic, and customers are demanding mobility solutions anywhere on the globe. “End users now have an expectation of being able to move from place to place and have access to their [enterprise resource planning applications], regardless of their locations,” Pelton says.

David Myers, executive vice president and general manager, CapRock Government Solutions, echoes the growing demand for higher bandwidth mobility solutions, pointing out that many clients outgrow the limited bandwidth provided by MSS solutions. “Our clients have requested an upgrade path that provides a sustained data rate and an economical cost per bit transmitted. In addition to being mobile, our clients want to bring video from remote sites, and upstream video is becoming an important application. The military needs to send back high quality video from their UAVs. The energy industry wants the same sort of real-time video capabilities from [unmanned submersibles] which operate near the ocean floor thousands of feet below the surface,” he says.

Crew morale and retention also are important challenges in the maritime market, and Belinsky points out that digital rights management issues will become an increasingly important aspect of maritime mobility solutions. In-flight entertainment is another growing aspect within the greater discussion on mobility, and Belinsky predicts that fewer media-rich applications, such as featured movies, will be downloaded to airplanes. In-flight Internet access will lead to the decline in the number of movies downloaded by the airlines for in-cabin entertainment.

Koby Zontag, director of sales and business development for RRSat Global Communications Network Ltd., agrees with the importance of mobility applications, pointing out that his company recently invested in a new Inmarsat terminal. “Service providers will need to provide broadband mobility applications if you want to serve this market, especially military customers.”

Pelton summed up the potential inherent in the mobility market, “Wi-Fi and cell phones have ushered in an era of mobility, and, ultimately, customers want these types of services regardless whether it is cellular or satellite. The expectation is that when I move from place to place my ERP application will work the same no matter where I go.” 

Broadband Promise

Broadband continues to be the 800-pound gorilla of the communications world, and its importance was emphasized by all. Serge Van Herck, CEO of Newtec, notes that SES has rolled out more than 60,000 broadband terminals in Europe and the Middle East and says there are three keys to success in the broadband market: cost of the VSAT terminal, ease of installation and having access to important markets. “Terminal costs have dropped into the $400 range, but we may be able to deliver a terminal breaking the $100 threshold in the next six to 10 years,” he says. “The ease of installation lowers the cost of installation. Once the cost of hardware and quality installations are taken care of, you need to ensure you have access to your intended markets. You must pick partners with strong relationships with the consumer. Ka-band is the future.”

Ramaswami pointed to Hughes’s subscriber base, which now tops 500,000 and continues to grow, as evidence of the significant impact broadband services will make in the satellite market. “It is estimated that 10 percent of American households are underserved when it comes to Internet connectivity,” he says. “Historically, we targeted dial-up customers, but today’s customers are demanding more bandwidth — 1.5 megabits per second used to be enough; now 3 megabits per second isn’t enough. We will be announcing new service plans in the future which deliver up to 5 megabits per second. Our next-generation satellite, Jupiter, will be three to five times more powerful and will lower the cost per bit delivered. In addition to residential and small office customers, these higher speed services will be important to the [satellite newsgathering] market.”

Myers calls attention to legislation which has been proposed to modify the Universal Service Fund to expand funding to acquire spectrum for wireless broadband. The Universal Service Fund is supported by phone service surcharges and subsidies amounting to $7 billion a year. “There are initiatives to drive 100-megabit-per-second service to homes. If that is true, how do you keep satellite technology from being relegated to second class status — like dial-up? Operating in a hybrid environment will become important in the future, where we can take advantage of satellite’s multicast capabilities. Hybrid solutions will be very important in the future.”

Pelton cites the general desire of the population to have more access to information as another contributing factor, comparing high-speed broadband to public utility services such as water and electric. “Broadband is hard to live without. As broadband has been accepted, consumers are now expecting triple- or quad-play (television, Internet, telephone, and cellular) services in a single bundle from the broadband provider,” he says.

“We can’t think of broadband as just transport any more. We need to focus on applications and how they work over satellite,” Myers says. 

Emerging Markets

Emerging markets always have been a good fit for the satellite industry, and that trend remains strong. “Satellite technology can literally help a country transform itself,” Pelton says. “A robust telecommunication infrastructure will help a country achieve big gains in their GDP, which is the goal of a country’s leadership. You can cover an entire country with a single satellite and the cost per bit of satellite technology is coming down. Even well-developed countries, such as Australia, use satellite. These countries are great opportunities for the satellite industry.” Pelton notes the importance of converged networks in the future, stating: “In the future, there will be two-way interactive video mixed in with other traffic. New networks must be architected to support this type of traffic. In the past you had siloed networks, such as telecommunication, cable television and data storage. Now with multipurpose network platforms, everything is IP traffic. The initial challenge will be to bring satellite into converged networks.”

While traditional emerging markets, such as China, will continue to be business targets throughout the next decade, savvy business planners always are looking for new opportunities and a new list of smaller but profitable markets have been singled out for their potential. The group, collectively dubbed CIVETS, include: Columbia, Indonesia, Vietnam, Egypt, Turkey and South Africa. All six show significant potential for increasing their consumption of satellite products and services and also demonstrate the following desirable traits: resiliency in domestic demand, large populations, buoyant growth from a satellite perspective, telco deregulation, low teledensity, proliferation of DTH services and a growing GSM system. “You want to fish where the fish are,” says Belinsky. “It isn’t easy to guess right now which markets will be the hottest. Business plans have to use some assumptions right now, but these countries appear to hold much promise for the future,” he says.

Van Herck rates the potential for each of the CIVETS countries using market penetration of broadband and the number of people without broadband services. Of the group, he rates Egypt, Vietnam and Indonesia at the top, with potential subscribers ranging from 66 million to 210 unserved customers. Twenty six million consumers in Turkey, or 26 percent of the population have access to broadband, and yet there are still 50 million unserved. Columbia is last on the list for Van Herck because the penetration rate for broadband stands at 45 percent, with only 23 million people left unserved. Although South Africa has only a 9 percent market penetration, there are only 45 million left unserved. These penetration rates compare to 70 percent in France and 66 percent in Germany.

Zontag notes that Africa as a whole has been recognized for its potential, but the continent has lagged. “You must understand that Africa is a huge market. South Africa is moving forward and is helping pull the rest of the continent with it. We also see some movement in Asia, particularly Vietnam.” Zontag also sees a large increase in the demand for services in Turkey, pointing out that the Turkish transportation system is extremely well developed and is a prime candidate for mobility solutions.

Greg Berlocher has been active in the satellite industry for twenty five years and is the President of Transcendent Global Networks LLC.