Guest Column: VSATs: The Road Ahead

VoicenData Bureau
New Update

In earlier years, practically all the blue-chips companies in India had

either installed their own VSAT networks or hired services from the commercial

service providers. Today, the user base is spread across various sectors such as

banking and financial, fast moving consumer goods, consumer goods, industrial

goods and services sectors. The list of VSAT users includes many state

governments, TATA, SAIL, Reliance and many other big players.


New Growth Markets

The market share of VSAT services in the urbanized fraternity of customers

is on the point of saturation. We envisage only about 10-15% growth in these

areas. However, new markets in semi-urban, rural and remote areas can propel and

sustain a healthy growth in the coming years. For example:

Wg Cdr BG Bhalla (Retd),

secretary general, VSAT Services Association of India (VSAI)

Distance education: This sector

has been growing steadily over the last two years and has great potential. More

so because of the EduSat program of the Department of Space which envisages

providing distance education to schools and colleges with a projected VSAT base

of 35,000 in the next three years.

control of consumables:
Oil companies like BPCL and IoC are using

VSATs to update their inventory for bulk storage and highway outlets. HLL is

using VSATs in a big way to update inventories in the remote consumer markets.

eCommerce: A successful example is
the use of around 6,000 VSATs by ITC Chaupal.

eGovernance: The central government,
and many state governments have embarked upon the use of VSATs for eGovernance.

eFinance: Use of more VSATs for ATMs
and other banking activities.

Tele-medicine: High potential market
but the high cost of service is a barrier at present.

Internet-broadband penetration: A
recent policy change has cleared the way for commercial service providers to

deploy VSATs for proliferation of Internet and broadband services in rural and

remote areas.


Unfriendly Government Policies

Compared to the growth rate of other telecom services like cellular and

basic telephony, the VSAT annual growth rate of around 35% is nothing. The

satellite technology is time-tested, and a viable and speedy solution for

shrinking the digital divide. This does not take into account the population in

5,161 cities and towns, which are part of the expansion plans of major telcos in

the next three years, using technologies other than VSATs. While wireless and

terrestrial infrastructure in areas outside the 5,161 towns will take many years

to come up, VSATs can play a vital role in the initial years. The biggest

constrain is the cost factor, much of which is attributable to artificial costs

incurred due to government policies. Here are a few examples.

List of VSAT Service


To date, government has

issued 15 commercial licenses, of which five have been surrendered or

cancelled. The current service providers are:

  • Bharti Broadband

  • Comsat-Max

  • Essel-Shyam


  • Gujarat Narmada

    Valley Fertilizers

  • HCL-Comnet Systems

    & Services

  • Hughes Escorts


  • ITI



  • TVC India

  • Software Technology

    Park of India (STPI)

Note: Comsat Max has

been bought over by Bharti, and TVC India by Essel Shyam.

Basis of calculation of license fee: There is a dispute over the definition

of adjusted gross revenue (AGR) which is taken as the basis of calculating the

license fee for all telecom service providers. The result-the end user is the

worst affected.


NOCC fee: An exorbitant amount of

Rs 20 lakh per transponder is payable for the NOCC activities, for monitoring

only the transponder traffic. Result-this cost is borne by the end user.

WPC Fee: According to the current
policy, the highest data rate of a VSAT in the network determines the rate

applicable to the entire network. Thus, a user working at a lower data rate ends

up paying at a higher rate. TRAI has suggested a reduction in the WPC free from

4% to 1%. Result-VSAT services will become more affordable for the rural



services are on the point of saturation in urban markets. New markets in

semi-urban, rural and remote areas can propel and sustain a healthy growth

in the coming years

In its recommendations on the growth of telecom services in rural India

(October 03, 2005), TRAI has discussed in great detail the subject of narrowing

down the urban-rural digital-divide. It recognizes the VSAT technology as the

most viable.


The incentives offered for the VSATs installed in rural areas, that is,

outside the 5,161 towns/cities, include (Para 7.9):

  • WPC fee @1% of AGR
  • Concession in license fee for VSATs in rural areas
  • Satellite transponder space at a nominal rate as has been done for EDUSAT
  • Alternatively, offer discount linked with roll-out of VSATs in these

    areas, which may be financed from the USO Fund
Down Memory Lane

From 5,000

installations in 1998 to 64,000 in end-2005, VSATs have come a long way

Under the National

Telecom Policy 1994 (NTP 1994), the government allowed VSAT services in

the private sector. Two types of networks were permitted: Captive networks

set up by individual enterprises for own use, and commercial networks to

provide VSAT services to general public and enterprises at large. In those

days, this technology, even though most reliable with a 99.9% uptime, was

an expensive connectivity option. Typically, a VSAT terminal was priced at

Rs 0.5-to 1 mn. In spite of this, connectivity-hungry users-ill serviced

by the incumbent telco-opted for VSATs. The annual tariff of leased

lines at that point in time was around Rs 1.2 mn. 

Growth rate in the

first 3 to 4 years was upwards of 50%. It dropped to 10-15% between 1998

and 2001, not because of lack of market but due to the non-availability of

Extended C-band transponder space on INSAT satellites. This frequency band

was unique to India.

The NTP 1999 envisaged

the use of universally popular KU-band on INSAT, as well as, on foreign

satellites for VSAT services in India. While formulating the policy in

October 2000, the government, however, opened up the use of KU-band only

on INSAT satellites. The growth rate picked up in 2001 and stayed at 35 to

40%  in the service sector in

the last four years.

The overall installed

base--service plus captive-which was around 5,000 in 1998 at the time of

transponder crunch, stands at 64,000 by the end of 2005. Of this 47,000

are in the commercial sector and the balance in the captive sector.


It is ironical that the VSAT service providers who contribute 5% of AGR

towards the USO Fund, are not entitled to any support from this fund. It is also

paradoxical that the government refuses to recognize that a VSAT installed in a

notified rural area for the use of a corporate customer is actually helping in

narrowing the digital-divide (and also indirectly helping in creating rural

employment). After all, why will such a customer opt for a VSAT service if it

had access to other means of reliable telecom service? 

The handicap-other than TRAI and ISRO, not many in the government recognize

the inherent advantage of using the satellite technology for rural connectivity.

More so, for meeting the national objectives and targets set for the next four


Future can be Bright

At present, VSAT services are tied to INSAT satellites. Allow the operators

to use any satellite, and see how the services become affordable in a

competitive environment.


TRAI has repeatedly said that VSAT technology is a viable solution not only

for rural connectivity but also for penetration of Internet and broadband in

these areas. The government will not be able to meet its broadband targets for

2010 unless it takes bold and radical steps such as the use of satellite

technology which is most suitable for short-term results.

The biggest

constraint to growth in rural areas is high artificial cost incurred due


government policies

The greatest obstacles to rural development-large distances and inadequate

infrastructure--can be overcome by access to virtual institutions that provide

banking, education, health care, neonatal information, agriculture advice, and

so forth. VSATs can play a major role in this.


The VSAT services in urban areas are taking a beating from alternate

technologies. Its future market lies in the rural areas where VSATs can be

deployed effectively for Internet and broadband services such as eEducation,

eGovernance, eCommerce, eFinance, telecom, tele-medicine and entertainment.

VSAT services have to become more affordable in rural areas. It can be used

to meet the national objectives for rural upliftment. Any half-hearted approach

will stagnate the industry. Strong government support is necessary for its

healthy growth.

While the Internet is and should remain global in nature, its beauty lies in

keeping the traffic local. Let us join hands in developing the Indian Internet

with this perspective.