Guest Column: VSATs: The Road Ahead

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.

Inventory
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.

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
users.

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

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
years.

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 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.