by James Careless

Everything comes with a price and that includes success. No one knows this better than the professionals in the satellite earth station market. It’s been experiencing explosive sales growth, particularly at the low end of the market. But with this growth have come falling prices, intensified competition, and an unprecedented shakeout among industry players. The problem is, with so much equipment being sold, earth stations are becoming a commodity to their customers.

Nowhere is this truer than in the TDMA VSAT sector, says Simon Bull, senior consultant at Comsys (which publishes the annual “VSAT Report”). For these manufacturers, producing TDMA VSAT equipment is like making TVs. “Their big issue is how many of these things can we sell,” explains Bull. “With prices falling due to competition, they’ve got to achieve economies of scale by selling as many units as possible. These days, that’s what it’s all about.”

Not all earth station manufacturers agree with the commodity label, however. “Yes, there is a price shift downward in the earth station market,” conceeds Richard Derrenbacher, vice president of business development at Channel Master, “and that is being driven primarily by volume, and also technology. But when you talk about a commodity, DBS dishes to me are a commodity. Today you get the DBS system for nothing, when, back in the days of the C-band backyard market, getting a system for $1,500 was considered a real bargain. When the revenue stream is so important that the equipment is being given away, to me that is a commodity. I see the commercial side of the business as being a very viable business. Providing a better product at lower prices does not categorize it as a commodity.” Regardless of the definitions used, a downward shift in earth station prices is a fact with which all manufacturers have to contend.

“There are many companies that either failed to see this coming, or couldn’t play in this new market,” says Bull. “The result has been a drastic shakeout in the earth station market.

“The shakeout was largely based on price,” continues Bull. “Price determined what deal you won, and the deal you won was determined by the price you had.”

The result? “A few years ago you had eight to 10 TDMA manufacturers,” he says. “Today, you’ve got a handful left. For instance, Viasat’s just bought Scientific-Atlanta’s VSAT business. Tridom sold out to GE. Comsat went. Contel ASC went. Equatorial went. GTE got out of it. Over the past 10 years the consolidation has been pretty dramatic.”

In fact, virtually the only companies avoiding this fate are those selling turnkey Standard A earth stations and other expensive products. As a result, their business “simply doesn’t have the volume that the TDMA VSAT sector does,” says Bull. “Because it doesn’t have the volume, prices are higher. Thus are high-end products becoming a commodity? Absolutely not!”

However, high-end equipment manufacturers have concerns of their own. Their big problem is that their customers–the earth station operators–are having problems signing long- term contracts with end users. “With prices falling, no one wants to commit,” says Bull.

The result is that high-end manufacturers are faced with a choice: either sign up customers for short-term contracts and risk being left holding the hardware when they’ve expired, or try to sell at fair market value and get clobbered by competitors willing to take the risk. Deciding which gamble to take “is the $64,000 question facing manufacturers today,” says Bull.

This is the background against which the earth station market should be viewed. Now that the stage has been set, let’s take a look at what some of the industry’s leading companies are up to.

The Consumer Market Beckons

When it comes to generating ink, no one’s doing better than Gilat. Small wonder: the Israel-based manufacturer recently shook up the industry by creating Gilat-To-Home, the first two-way broadband Internet service aimed at consumers.

Gilat-To-Home is a logical follow-on to Hughes’ one-way DirecPC product. DirecPC proved that consumers would pay to download Internet data by satellite. Gilat-To-Home takes this one step further, by making the traffic two-way. This means no more telephone return lines, and no slow uploads for customers. In a world where the Internet is rapidly becoming king, and landline Web access still isn’t available to everyone, Gilat-To-Home makes good sense.

As of yet Gilat-To-Home is in its trial phase, with service expected to be rolled out by the end of 2000. Still, the idea’s good enough to have attracted a $50 million investment from Microsoft, and a deal with Echostar’s Dish Network as well. In the Echostar deal, Gilat is supplying 24×36 inch oblong dishes that can handle two-way data transmissions and the Dish Network’s TV feed. When launched, Echostar will use its existing 20,000-retailer network to distribute the Gilat-To-Home product.

To say the least, everyone’s happy with the arrangement. “Echostar’s agreement with Gilat-To-Home is a win-win for customers,” says Charlie Ergen, Echostar’s chairman and CEO. “Gilat-To-Home addresses the need for a highly demanded, value-added service for Dish Network customers by combining high-speed Internet access along with the low prices and multiple entertainment television offerings from Dish Network, all onto a single, convenient dish.”

“We believe one of the most important aspects for the success of Gilat-To-Home is working with a DBS partner with a strong brand image and well-established distribution channels,” adds Yoel Gat, Gilat Satellite Networks’ chairman and CEO. “Echostar’s Dish Network holds the enviable position of being recognized for the highest level of customer satisfaction. Their reputation and market savvy will accelerate our effort to build market share with a bundled broadband and entertainment service.”

What about Hughes? Well, sources say the company is developing a two-way version of DirecPC, which should be introduced later this year. (Hughes recently got a $1.5 billion cash injection from AOL to help it along. The money will aid Hughes in developing the high-speed ISP service “AOL Plus over DirecPC,” and development of DirecTV/AOL TV set-top boxes.)

The Traditional Vsat

Away from the allure of direct-to-consumer applications, all kinds of companies are making advances in the earth station equipment market, Hughes and Gilat among them.

Take Hughes Network Systems. It’s released an industry version of DirecPC called “DirecPC Enterprise Edition (DirecPC/EE).” This is a one-way satellite system designed to leverage businesses’ insatiable thirst for Internet/Intranet access by overlaying existing VSAT or terrestrial networks with a high-speed DirecPC/EE transport. It also can be used for one-way video or data broadcasts (the latter via IP multicasting).

The system works by linking a DirecPC/EE Gateway to a business’ internal network, then connecting it to a dedicated or shared uplink. Meanwhile, the remote sites are also equipped with DirecPC/EE equipment, with data flowing either into a single PC or LAN.

The result: a completely-enabled high-speed data network, capable of delivering data at rates up to 24 Mbps. For companies who prefer to create their own Intranets, and who want to avoid the uncertainty of landline networks–especially in developing countries–DirecPC/EE is one option. Moreover, this product can operate on existing VSAT networks, sharing bandwidth with other VSAT applications either dynamically or within pre-set ratios.

HNS’ Direcway Multimedia VSAT (DMV) provides the same two-way capability as the DirecPC/EE overlay in a traditional VSAT network, but integrates it into a single remote indoor unit. “It uses the same in-route technology used by our PES 5000 family of VSATs, but with much higher outbound bit rates,” explains Denny Mager, vice president of product development for HNS’ Enterprise Division. Furthermore, DMV and DirecPC/EE can operate on the same high-speed carrier. “The DMV removes the requirement for multiple carriers, one for the traditional VSAT and the other for the broadband DirecPC/EE carrier,” he adds.

As a result, HNS’ Direcway can help current VSAT users ramp up their transmission rates to support two-way multimedia communications, while allowing them to stick with their existing antennas and other related infrastructure. “It’s a way for corporate headquarters to push out and receive large amounts of data, be it Internet traffic, TV broadcasts, or video-based training,” says Mager, “while maximizing the value of their legacy earth stations. The Direcway Multimedia VSAT can help new customers, in addition to existing customers, build a broadband VSAT network with a single indoor unit and a single high-speed carrier.”

Braving The Elements

Meanwhile, at Gilat Florida (formerly Skydata), the efforts have been focused on the new “Skyway” family of C-band and Insat-band transceivers.

“This product has a very interesting history,” explains Glenn Katz, Gilat Florida’s vice president of network and microwave products. “It was born two to three years ago as a component in Gilat’s ‘Faraway’ DAMA VSAT rural telephony solution. With the success of Faraway–and seeing a big opportunity in the mature transceiver market–we decided to spin off the outdoor section of Faraway as a standalone SCPC product.”

The Skyway series aren’t just renamed products. In fact, they’ve been redesigned to make them less vulnerable to the elements.

The key is the Skyway’s use of Indoor Units (IDU) and Outdoor Units (ODU). The IDU contains the Skyway’s power supply and stable oscillator: the two components most prone to weather damage. These are housed in a standard 2U, 19-inch rack-mountable unit that also serves as a common network access point for monitoring and control. (The IDU is also equipped with an industry standard 70 MHz modem interface, to minimize chances of signal incompatibility.) Meanwhile, the ODU holds everything that can handle the outdoors. This includes the low noise amplifier, synthesizers, up/down converters, and a power amplifier.

So why did Gilat Florida go to all this trouble? One word: reliability. Gilat knows that–in a commodity market–quality stands out. If earth station operators can count on its products, chances are they’ll come back for more.

Smaller, Faster, Cheaper

Communications and Power Industries (CPI) is also working to give customers what they want. In this case, what they want from CPI’s Satcom division–maker of Klystron, travelling wave tube (TWTA) and solid state power amplifiers (SSPA)–are products that are “smaller, faster, better, and cheaper,” says Julian Thomas, CPI Satcom’s director of marketing.

When it comes to klystron power amplifiers (KPAs), “we’ve been trying to reduce costs for the user,” says Thomas, “not just at purchase time, but also throughout the life cycle of the product.”

A case in point is CPI’s Gen 4 KPA. Designed to provide continuous operation in the C-, Ku-, and DBS-bands at power levels up to 3 kW, the Gen 4 nevertheless uses 25 percent less power than traditional KPAs, according to the company. As a result, a single Gen 4 can save earth station operators up to $8,000 in annual electricity costs, Thomas says. He adds, “this figure doesn’t take into account how much more they can save through reduced UPS sizing, less air conditioning, and everything else involved in building and running an earth station.” Certainly the Gen 4 KPA isn’t a “space hog”: it’s only 15 rack units high, and doesn’t require any extra panels or attachments to make it work.

However, even with products like the Gen 4 KPA, Julian Thomas is still very concerned about the future direction of the earth station market. Like Comsys’ Simon Bull, he says that earth station components are in danger of becoming commodities.

It’s not just a matter of declining prices that worries Thomas. It’s also the fact the customers want TWTAs, KPAs, and SSPAs exactly when they want them, with no time margins built in for manufacturing.

“Our products are made up of certain components that typically require four-month building cycles,” he explains. “Typically customers want them off the shelf or with 30, 60, or 90 day lead times. Trouble is, it can sometimes take 120 to 150 days to get the parts we need in stock. This means we have to balance our parts inventory with our customers’ demands. That’s not easy.”

As for the future? Thomas is looking forward to Ka-band, and the new orders it might bring. “We’re already getting RFQs from customers, asking what we’ve got that’s capable of handling Ka-band,” he says. To answer these queries, Thomas points customers to CPI’s Extended Interaction Klystrons (EIKs). These EIKs are capable of expanding the klystron’s typically narrow bandwidth. In fact, they can deliver 500 MHz of bandwidth at 400 to 500 watts in the 28 to 30 Gigahertz range. That’s TWTA-like performance, but at a lower price tag.

Strength In Numbers

Another strategy that earth station manufacturers have turned to is the strategic alliance. Channel Master and Andrew Corp. present a very recent example. At the Satellite 2000 conference in February, both companies announced that they were formalizing a relationship that had been evolving as a natural course of business for some time.

“Our product line starts at 2.4-meter and goes downward,” explains Channel Master’s Derrenbacher, “and the Andrew line hovers around that size but basically dominates the ‘hub’ sizes of antennas, 3.9-meter and up.” An alliance offers both companies the opportunity to offer a “one-stop shop” for earth station networks, satisfying the needs for both remote terminals and hub equipment. Derrenbacher observes that Channel Master is often called upon to supply integration services in the execution of a contract, which frequently includes a hub facility. “With this arrangement, the customer can now handle all their needs with a single phone call.” Channel Master also benefits from having Andrew as an original equipment manufacturer (OEM) customer, where Channel Master products end up as components in Andrew’s turnkey projects as well.

Andrew’s Gene Hammond, vice president of satellite communications, further adds that both companies’ sales channels and customer bases are very complementary, with very little overlap. “Andrew does a lot of business with large carriers and OEMs around the world that may be purchasing Channel Master products indirectly, but we have a direct relationship with them. Likewise, Channel Master deals with some of the networking providers that we have had a limited relationship with in the past.” On the OEM front, Andrew has two products, the Gostation and the FreedomIP lines, that are based on Channel Master antennas for sizes below 2.4 meters.

This arrangement provides clear benefits for both companies, allowing each to offer extended capabilities to broader markets by working together rather than in parallel, Hammond says. “There had been an informal, co-marketing relationship for some time, but this has taken it to the next step,” Hammond concludes.

Satellite Internet In A Box

Through its subsidiary VertexRSI, Tripoint Global Communications has been making great strides to keep up with the earth station market

Take “Interkit2.” It’s a complete two-way earth station aimed at Internet service providers (ISPs) and businesses wanting IP (Internet Protocol) connectivity.

“We’re targeting customers who want to be able to tie into a reliable high speed Internet backbone,” says John Sciberras, Tripoint Global’s vice president of marketing. “They don’t care how they get to the Internet; they just want to get there, and do so with a minimum of fuss and hassle.”

That’s where Interkit2 comes in. Available for both C- and Ku-band operation, the customer terminal consists of an antenna ranging from .95 to 3 meters in size, a transceiver, and a satellite modem equipped with an integrated link accelerator, simple router, and direct Ethernet interface for connecting to the customer’s LAN. Interkit2 also offers optional caching/proxy servers, advanced routers, and full Web servers that provide both-e-mail and news services. In short, Tripoint Global has come up with what could only be called “satellite Internet in a box.”

“Many customers have expressed interest in this type of an approach,” says Sciberras. “Teleport operators are looking to expand their service offerings and become more diversified. ISPs are looking to extend the Internet to multiple remote locations. Multi-national corporations increasingly want to provide Internet service to remote offices around the world. In addition, small office/home office (SOHO) users who want to connect to their home office via the Internet or Extranet to their work office will find the Interkit2 ideally suited to their needs.”

Modular Methodology

VertexRSI has released a new family of C-band SSPAs called the “Maxtech Modumax.” “The Modumax’s claim to fame is that it’s completely modular,” says Mark Wharton, VertexRSI State College Facility’s vice president of R&D. This means the Modumax’s eight RF modules and eight cooling fans are “hot-swappable.” In plain English, they can be removed and replaced while the SSPA is in operation, without having to take it off-line. Best yet, “if one of the RF modules is removed, all we lose is 1.2 dB of signal strength,” says Wharton. “That amount of loss is usually insignificant to most satellite links.”

Modumax is designed for cost-conscious earth station operators. No longer do they have to maintain two power amplifiers–one main and one backup–to ensure uninterrupted service. Instead, one Modumax is all they need to do the job. The result: less money spent on equipment purchasing, lower utility bills, and less floor space to build. The Modumax is available in 350, 500, 700, and 1,000 watt configurations.

Cost is also a driving force behind Globecomm Systems’ current plans. For instance, the company’s taking the commodity trend in stride by building modular earth stations, says David Hershberg, Globecomm’s chairman and CEO.

“We’re taking the modular approach for everything from flyaways to 16 meter Standard A earth stations,” he explains. This “building block” strategy means that Globecomm has had to standardize its designs, so that its components can be used in a wide variety of products. Still, the work has paid off, says Hershberg. “This has really simplified the amount of engineering we have to do per project. It means that we can now provide any type of earth station we need for less money, and in less time.”

Building Out The Third World

Globecomm subsidiary Netsat Express is also pushing the earth station envelope. Specializing in satellite-Internet access, Netsat has recently signed a deal with Cisco Systems to help build ISPs in under-developed countries. Under the contract, Netsat will use Cisco’s 7500/7200 series switchers, 3600 series modular access multiservice platforms, and Catalyst 6500 series switches. Previous to this, Netsat signed a deal with IBM to use Big Blue’s newest servers in Netsat’s earth station installations.

“Like the IBM agreement, the Cisco business partnership allows us to offer broad-range, value-added services,” says Netsat Express CEO Marni Ehrlich. “But, possibly even more important, it brings us one step closer to ensuring that all parts of the world develop an economy supported by e-commerce and become a part of the Internet revolution.”

And finally, Andrew Corp., in addition to its alliance with Channel Master, has just released its first 6.5-meter dual-reflector earth station antenna (ESA). It’s designed to handle high-density data, voice, and broadcast transmissions in C-band. The 6.5-meter ESA features variable speed motors and enhanced APC300 step track controllers to reduce field installation time and costs.

“This product fills a niche in our product offering,” says Dave Neubauer, Andrew’s ESA product line manager. Although newly released, Andrew’s already shipped 6.5-meter ESAs to GS Telecom, a West African satellite and wireless systems integrator. “The dual-reflector Gregorian optics system on the antennas supplied to GS Telecom ensures that meter-for- meter, these antennas will give GS Telecom the highest gain and superior pattern performance,” adds Alan Jones, director of Andrew Satcom Africa.

The Meaning Of It All

If there’s a moral to this story, it’s that smart earth station vendors are responding to the market, and keeping up with its demands. Granted, having to cope with continued price pressures and commodity volumes isn’t easy. As Comsys’ Simon Bull says, many companies have already fallen by the wayside because they failed to do so.

However, such is the price of success in any industry. As sales go up, prices come down, and consolidation occurs. Given the changes that have happened in the past few years– who would have ever guessed that Gilat would challenge Hughes?–more of the same can be predicted for the future.

James Careless is a contributing writer to Via Satellite.

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