While the insiders of the satellite industry talk the talk about the power of broadband services via satellite, equipment manufactures remain in a holding pattern.

“The satellite broadband end user terminal equipment market has sputtered to date,” reports Frost & Sullivan in its recent World Broadband Satellite Equipment Market study. “As a competing platform, to T1, ISDN, DSL and cable modems, the satellite platform has severely lagged behind its terrestrial counterparts in terms of penetrating business and residential markets worldwide. The satellite solution for broadband applications can be considered as a niche solution, and is likely to remain so until the end of [2006].”

But the Mountain View, Calif.-based consultancy is not writing off the satellite broadband markets just yet.

“Within the niche markets that the satellite industry serves, the market is expected to grow at moderate-to-high levels as technological improvements and price decreases lead to end user appeal worldwide,” Frost & Sullivan reports.

…What’s Going On Now

The satellite market is going through a lot of changes. Historically, it has served one-way broadband markets extremely well, if you consider the broadcast television industry.

But in the era of two-way interactive communications brought on by the growth of the Internet, there is a need for broadband satellite services to evolve to meet the demands of the ever-growing market.

In the two-way communications market, the industry has seen some limited success and some spectacular failure. For example, Inmarsat has experienced success with its two-way services. But on the flip side, the Iridium experience has many terrestrial folks hesitant to look to space to meet their broadband needs.

“The satellite industry has undergone a complete revolution since the time when service operators began to deploy Ku- frequency bands for direct-to-consumer market. Direct broadcast satellite operators like SES/Astra of Luxembourg created a satellite-based platform for video entertainment that later helped to popularize the use of small dish systems for TV reception in Europe,” the consultancy reported.

“In much the same way, the emergence of new service platforms used for the delivery of data and Internet services will help spur the use of new broadband satellite user terminals, especially if the price and service quality of satellite-delivered multimedia services becomes competitive with landline technologies.

…The Equipment Market: A $1 Billion Industry by 2005

Even though Frost & Sullivan is not predicting huge horizontal growth anytime soon, there is still a healthy market for manufacturers in which to operate.

“The prospect of instant global coverage and the wide area reach of satellite technology is a major asset for the industry, and deployment of broadband satellites will provide an instant infrastructure effect to end users,” reports Frost & Sullivan. “Broadband satellite is thus well positioned to service high-bandwidth requirements of developed countries as well as developing countries, where there is a severe inadequacy of landline alternatives.

The report highlights four major sources of demand for satellite-based broadband services.

First is areas where cable modems, xDSL, ISDN and other broadband solutions are not available, or are difficult to deploy, such as rugged or remote areas.

Demand also will be generated by VSAT networks, serving as an overlay to existing two-way VSAT networks, and “swap-outs” of traditional VSAT equipment for the newer broadband terminals, as well as replacement and new demand for one-way VSAT networks.

Finally, the consultancy identifies end users such as Internet service providers that take advantages presented by the satellite solution for point-to-multipoint, caching, streaming, and multicasting applications.

“Virtually every company in the satellite industry is developing products and services aimed at tapping the Internet market,” reports Frost & Sullivan. “In 1996, less than 10 companies were involved in the marketplace offering Internet via satellite services. By January 2000, the number of companies grew substantially, which included operators as well as companies involved in Internet access services, caching, multicasting and specialized distribution services.” The report says that number of equipment and system vendors and software developers exceeds 75 companies and is growing.

“The satellite broadband market is still a very new market. A healthy market is expected to continue for many decades, growing in acceptance similar to how traditional VSATs and DTH systems have increased shipments on an annualized basis,” the consultancy reports.

The 225 page World Broadband Satellite Equipment Markets report is available for $3,450. For ordering information, please contact Kristi Grier, public relations specialist at Frost & Sullivan, at 210/247-2403; by fax at 210/348-1003; or via e-mail at [email protected].

Primary Market Drivers

• Internet usage growth
• Growing importance of e-commerce and
• Growing importance of e-commerce and e-business
• Growing prevalence of bandwidth-heavy applications
• Deregulation of developing country markets with inadequate telecommunications infrastructure

Source: Frost & Sullivan

Primary Market Restraints

• Limited financial capacity of the customer base
• Low PC penetration in key markets
• Improving landline infrastructure
• Local loop technology improvements
• Competing terrestrial-based wireless platforms

Source: Frost & Sullivan