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Satellite Broadband Internet Demand Increases Prompting Change in Hughes, ViaSat Business
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U.S. Department of Agriculture’s Food Safety and Inspection Services contracted with Hughes to deliver managed broadband services to 300 offices and inspection sites.
Image credit: Hughes
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[Satellite TODAY 07-19-13] Since the release of a U.S. Federal Communications Commission (FCC) report earlier this year, demand for satellite broadband service continues to increase exponentially, prompting service providers such as Hughes and ViaSat to change how they do business to meet this increased demand.
At Maryland-based Hughes, one of the largest satellite broadband service providers in the United States, the potential for increased revenue means a new business structure. "Fifteen years ago, we were 90 percent technology," said Arunas Slekys, vice president of corporate of marketing, Hughes. Today, Slekys noted, more than 75 percent of the company’s overall revenue comes from providing broadband via satellite.
The increased interest in satellite broadband services reflects a changing perception among consumers, who are often motivated to choose providers based on affordability and speed, and not by technological advancements within a particular industry.
ViaSat has also boosted its ability to build a solid satellite broadband service business. Lisa Scalpone, vice president of business development at ViaSat, said there is little doubt that "offering a great product was the most important thing in changing the perception of satellite. Our packages were designed to give speeds and service quality comparable to typical cable service," she said.
"We want to show that satellite is a good value for the money, so it was important to provide the service at a price comparable to what you’d see in urban areas," Scalpone said noting that their new basic package offers 12 Mbps for $50/month. "It’s is a good option in just about any market. Our service is even more cost competitive as part of an Internet-voice double play. We’ve just added a voice service that, at $20/month, is typically much less expensive than the comparable landline service from the telephone company," she added.
Slekys said Hughes also offers a satellite broadband package for $40 a month with downloads speeds up to 10 Mbps and notes that overall, satellite broadband has a huge advantage over terrestrial internet service providers (ISPs) such as cable and DSL. "Every other terrestrial provider has a cost based on distance. You pay for distance in terrestrial [wired] connection [and] in some point the cost of that connection exceeds the payback of the revenue you’d get back," he said.
But despite Hughes and ViaSat’s competitive broadband Internet pricing, Sleky contends satellite services are not yet at the point where they are competing with terrestrial ISPs. "Our market is the un-served and under-served, which represents about 10-15 percent of U.S. households," he said.
The FCC report notes how satellite broadband delivered 137 percent of advertised speeds, indicating that satellite has become a viable alternative to traditional ISPs.
In the past, "satellite has always been the last choice,” said Max Engel, founder of The North Star Consultancy firm. “If you could get anything else, you would. That seems to be changing with the latest generation of satellites." The data from the FCC report hints at a bright future for the satellite industry, Engel added.
Slekys notes that Hughes already has 700,000 private consumer satellite broadband subscribers in the U.S. That number does not include defense and intelligence community customers, or enterprise/commercial sector clients, which include businesses ranging from movie theaters and British Petroleum (BP) to McDonald’s and organizations such as Habitat for Humanity.
Users are also beginning to understand that the available applications of satellite broadband technology are not only affordable and ideal for consumers and businesses, they also provide an advantage when considering emergency preparedness, because service can be restored very quickly. "[In] many cases, in just hours [after a storm or event] broadband, voice, data and video are available," he said.
Practical applications aside, Scalpone believes that positive independent reviews, most notably the recent FCC 2013 broadband report, have also helped to enhance satellite’s perception. The report recognized that the new generation of satellites, which offer enhanced performance, marked a major transition point for the entire industry. ViaSat, along with its competitors, appreciate the FCC taking notice.
"We thought it was great that the FCC recognized the huge change our industry has undertaken. We’ve seen that consumers are quick to respond to our improvements in the service, but we also know that to continue to attract consumers who have a choice for broadband, we’ve got to keep responding to their needs and improving the service," Scalpone said.
ViaSat’s Exede broadband service landed in the top spot among all Internet providers for delivering at or above advertised speeds, the FCC report states. According to Scalpone, ViaSat is one of the fastest growing Internet service providers in the United States, seeing more than a 20 percent increase in just one year. During that year, ViaSat added an overnight-unlimited period and increased the data cap on the basic plan at no additional cost. And in announcing ViaSat 2, it would appear the trend is likely to continue, she said.
Focused on residential, consumer based broadband services, "we went from 400,000 to 512,000 total subscribers in about one year," Scalpone said. However, she noted that the attractive bandwidth economics of ViaSat 1 also are applicable to commercial enterprise applications. ViaSat hopes to attract more commercial entities that require services including satellite newsgathering, video streaming of live events and in-flight Internet.
As far as advertised speeds registering at about 40 percent better than advertised, ViaSat was not surprised. "We knew from our own measurements that our actual service speeds far exceeded the advertised speeds of 12 Mbps, but we couldn’t be sure exactly what results the FCC would have using a third party measurement tool. We were glad to see the results validated our technology in a public report that ranked us against cable and DSL technology. I don’t think anyone expected that we could go head to head against those technologies and come out ahead, but we always enjoy surprising people a little bit," Scalpone added.
While satellite saw impressive results from the report, challenges such as latency remain a top concern, according to the FCC. "Satellite systems involve the transmission of information over long distances and have correspondingly higher latencies than for terrestrial technologies. ViaSat had a measured latency of 638 ms for this report, approximately 20 times that for the terrestrial average," the report states.
But Slekys notes that what the FCC report failed to clearly articulate is that "latency can be overcome," he said noting that Hughes has ways to combat latency challenges.
"Hughes has implemented web acceleration technology and spoofing on satellite channels. We have eliminated a lot of TCP overhead. When a customer clicks on a website we have a proxy server that hosts the content in Germantown [Maryland]. Satellites bring the content to proxy server and can be downloaded to the customer’s location in a way that the experience for the customer is virtually instantaneous," he said.
"There are a number of other techniques that in the end create a very fast experience, If you just look at latency alone you don’t understand the whole picture," Slekys said, noting that "no technology serves all needs, but this [FCC] report clearly validates the importance of satellites."
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