VSAT: Gaining Steam

As VSAT equipment prices have gone down, VSAT services are
becoming increasingly affordable. Also miniaturization of components and
increased economies of scale enabled service providers to offer a larger range
of VSAT-based solutions. These find applications in rural telecom, distance
learning, telemedicine, disaster recovery, offshore networks, and a host of
corporate and government activities.

The drop in VSAT prices fuelled further growth, with many
organizations finding it more economical than the other available media on a
total cost of ownership basis. It has also increased the affordability of VSAT
as a backup to high-speed terrestrial links or critical enterprise locations.
The VSAT services segment grew at the rate of 20% with revenue of Rs 443 crore.

The key achievement of service providers last year was the
breakthrough in some sunrise segments that have been high on importance
worldwide, and are seeing tremendous growth in India. The digital cinema
initiative was one such in the entertainment industry. The next breakthrough is
in the cellular backhaul segment, where satellite provides a backhaul to
locations that are not reachable by microwave or fiber. The third one is in the
retail sector, where VSAT provide connectivity for credit and debit card
authorization service. This is more cost-effective than the traditional dial-up
connection and saves significant amount of delay. The traditional segments that
include government and defense, BFSI, oil and gas and other enterprises
continued to be the growth drivers for VSAT service providers.

The GamePLAN

HCL Comnet emerged as a market leader and generated revenue to the tune of
Rs 136 crore. The company implemented VSAT based networks for SBI for its core
banking projects. It also got a large VSAT network order from Indian Army. Ernet,
Assam PWD, Peerless, Emami, Steel Authority of India, Federal Bank, and ABN Amro
Bank were some companies where from HCL Comnet got orders last year. The company
generated Rs 136 crore in FY 05-06.

The growth drivers for Hughes Communications were
e-learning, oil and gas, banking, digital cinema, retail, and telecom. The
company did projects for Kingfisher Airlines, Pantaloon, ISRO and Reliance
Petroleum. It generated revenue to the tune of Rs 96 crore. The company now
intends to be a complete managed network service provider. Hughes has also
supplied VSAT for backhaul to GSM and CDMA players.           

Similarly, Tata Indicom VSAT services generated revenue to
the tune of Rs 60 crore. The growth area was mainly the enterprise sector. The
company provided services in segments such as stock broking, extended enterprise
and banking. The major clients included Karnataka Bank, Suguna, Apeejay,
Parasram, ACC, and Almondz. The company is now seeing backhaul connectivity as
another area of growth.

Essel Shyam generated revenue of  Rs 54 crore. The company did projects for ONGC, defence and
stock brokers' networks.

The growth areas for VSAT services were mainly the
enterprise and the defense sector. Initiatives such as ISRO's Edusat and
HealthSat enabled literacy and tele-medicine to reach to the rural masses to
some extent. Robust buying by the financial segment-stock and commodity
markets and banking-were also the key drivers of growth. High availability
offering for business continuity was one of the key applications that witnessed
exemplary growth this year.

Bundled Strategy

There are several vendors that bundle their services with telecom service
providers' offerings. For some selected enterprise segments, Tata Indicom
offers services through the Tata Indicom Business Enterprise Unit (TIEBU), the
single window interface for meeting needs of large enterprises. By virtue of
being a delivery organization to TIEBU, Tatanet offers not only satcom solutions
but also hybrid solutions in association with other delivery organizations of
TIEBU.

Similarly, HCL Comnet works closely with telcos for
offering integrated, hybrid technology solutions to its customers. It is a
premier national system integrator for BSNL, for joint bidding of turnkey
projects that include networking equipment, bandwidth provisioning and network
operations and management.

Hughes Communications has a cross-selling arrangement with
Reliance wherein when the latter goes in for client implementation, it uses
Hughes' satellite technology in areas where fiber is unable to reach.

Technology Trends

VSAT, with its newer version, became more bandwidth efficient. Also, it now
incorporates many of the advanced features that allow more flexibility in terms
of bandwidth sharing and seamless standards-based integration with many other
terrestrial media.

VSAT today enables higher coding rates, better compression
ratio and thus better utilization of transponders. With advancement in
technology, the gap between satellite and terrestrial has been bridged, thus
bringing both these technologies at par.

Secondly, even smaller networks are going in for dedicated
infrastructure. Given the market need to be closer to the network and with
concerns of security being omnipotent, even customers with 100-200 locations are
setting up their own dedicated network.

With banks giving due importance to rural branch
connectivity, extended enterprise connectivity has become important. There is
also a huge potential for VSAT connectivity in the BTS as backhaul connectivity
has become the need of the hour.

The Challenges

In spite of high input costs in terms of transponder resource and absence of
an open sky policy, the industry has witnessed robust growth. Falling unit rates
put pressure on revenue growth, but this was offset by growth in volumes, which
eventually resulted in more revenue generation for service providers.

Another big challenge was the market perception about the
cost and the quality of satellite broadband services. There is a wide spread
perception that satellite based services are expensive and not relevant in
today's context of telecommunication. Additionally, there are question marks
on the service delivery capability of satellites. However, satellite
communication is extremely relevant in the distribution networks space and has
successfully complemented fiber in some of the most developed markets including
the US.

At an industry level, the VSAT players are straddled with
restrictive government policies. Getting approvals take a lot of time, and
delays the network provisioning process for a customer. Therefore, by reducing
the policy related issues and fiscal costs, volumes can grow. The industry and
the government need to take concrete steps to remove such hurdles.

Rahul Gupta

rahulg@cybermedia.co.in