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Global VSAT Forum - global coverage global voice

David Hartshorn, Secretary General of the Global VSAT Forum, talks to InterComms about how the market for VSAT is developing and the organisation that represents the industry.

Q: How is the market for VSAT changing?
A: We have had a difficult time as an industry. But in just the past few months our members – about 160 worldwide in over 60 countries in every major region of the world – are anecdotally telling me that things are looking better. Not just that they think they are going to get better but they are actually getting better. This rather unscientific survey leads us to believe that the industry is now coming back in strength from what was very possibly the most difficult period in its entire history. Having said that, there are corroborating indications from others that the industry has a solid foundation upon which it is recovering. Two weeks ago at the VSAT 2003 conference – held in London by Comsys – Simon Bull one of the founders and senior analysts for Comsys, showed that peer enterprise orders for VSAT systems increased by more than 35% in 2002 when the telecoms sector was close to, if not at, its lowest point. There was a contraction in 2001 by the VSAT industry, however, so it has not been completely immune. Nonetheless business has, by and large, year on year, gone steadily up. Last year there were about 90,000 units sold; of those broadband constituted about 30,000 and consumers were more than 90,000.

Q: What about progress in the consumer market?
A: For several years now there have been attempts to crack the consumer market with broadband satellite solutions. It has been fraught and has been well publicised. But I do not think we should be surprised or entirely dismayed; this is not the ultimate indication that broadband by satellite is not going to play well to the home. We saw similar difficulties, arguably even more catastrophic, when the satellite industry in the late 80s and 90s tried to roll out satellite TV. Initially it didn’t fly and the first attempts resulted in millions of dollars in losses and bankruptcy but we all know how the story ends, they got their ducks a row, they learned from their mistakes, they got the mix right and they rolled out successful services. I think the same thing is in process right now for the broadband satellite sector. By no coincidence, a number of the organisations that are most vigorously promoting broadband are satellite TV companies like Echostar and Hughes in the US and Astra in Europe to name a few. Between them you are talking about almost the entire US satellite TV market and in Europe the lion’s share. They know how to set up billing systems for satellite subscribers, they have the back office down, they have substantial distribution in place and are already operating. Does that make it a snap? No. It has been tough but they are regrouping, repackaging and they are going for it. We saw almost zero sales just two years ago yet we have gone to over 90,000 units in 2002. Also bear in mind that on average the global sales of VSAT in any given year have never exceeded 90,000 units, and this was in a year that will generally be remembered as a failure for the satellite industry. Was it successful? No. But, did they rack up some experience are they refining the business plan and technology? Yes. It’s just a matter of time now.

Q: And outside the consumer market?
A: Enterprise will continue to be the backbone for revenue generation for the industry. Not just the large enterprise as in the past, but for over a year, the industry has also been pushing down into the small and medium enterprises and increasing sales in the SOHO market.

Q: The common refrain from the developing world has traditionally been that VSAT is too expensive. You mention new markets but what about progress in the developing world?
A: Six years year ago that was certainly true. However, every year for the past ten years terminal prices have been in freefall to such an extent that finding any margin as manufacture is an excruciatingly difficult process. A C-Band TDMA terminal ten years ago would cost around $15,000, today it would be less that $2,000 and in some cases closer to $1,000 on global volumes of 80-90,000 per year. That is the coup de grace on terminal pricing and it drives it down to the level where the solution provider can eat the cost of the terminal and win back all their revenue on monthly subscription. I know that in some case companies are already doing that although I wouldn’t say it’s the general trend yet. The bigger variable in the equation is the bandwidth, that’s key and it often gets overlooked. To that we would say on any given day the bandwidth price is largely a function of supply and demand. While you may find that in the Asia Pacific region bandwidth is at a historical low because of the huge supply of capacity coming into Asia Pacific from the heady days of the early 1990s. If you look at European pricing where there has been consistently strong demand for capacity pricing it has been altogether different as you might expect. There are basic supply and demand aspects but also more efficient means of frequency usage that are being deployed, which bring costs down on the bandwidth. You also find that as industry moves more toward to the SME and SOHO markets they are being told again and again they are going to have to relax on terms and conditions on bandwidth i.e. shorter term, pay on use basis and with various enticements of the financing side. I know that major operators have begun to answer that demand. Bandwidth has been discussed for quite some time and has begun to be addressed. That has direct bearing on the regions. Africa is one of the more vibrant markets in the world right now and we can expect to see Africa firmly written into business plans for revenue generation for the satellite industry.

Q: Are you winning the argument against leased lines?
A: The most basic advantages are two fold. Firstly, you cannot assume there are leased lines available in all areas around the world and VSAT is the solution where there are no other means available. Even when there are leased lines available however, large and medium enterprises are opting for VSAT so that they have control over their network destiny. If they want to begin small and allow for growth, they can do that. If they can add to their data service a video conferencing capability, they can then expand the site gradually across the world – all the while having control over the network. That is not something that can be done with a leased line service.

Q: How has increasing deregulation benefited the VSAT community?
A: You can have the best technology in the world and best price and offer it in areas that have great demand. If the regulations say you cannot provide it, that is the end of the story. That was the case in a lot of countries around the world for a number of years. It was not that long ago that Western Europe was a non-starter for VSAT services. Seven years ago it had the second lowest usage of VSAT terminals in the world, second only to Africa. Driven to a significant extent by European policy makers interests – in creating a regional operating environment enabling cross border networks to be provided for enterprises – Europe is now the second largest user of VSAT in the world, second only to North America. There are now networks like that of Peugeot with 4000 sites across 19 countries with a single private network, providing a level of control over their own network destiny that is simply not possible by any other means. Five years ago if you went to Sub-Saharan Africa and you applied for a license against the local telecoms provider that was a short conversation. There was very little or no use of VSAT in the Sub-Saharan nations. Five years later every country has liberalized the provision of VSAT services at some level accept for Namibia and South Africa although South Africa has now begun to liberalize, moving from a monopoly to duopoly. In East Africa recently we have run a VSAT workshop for the regulators of Kenya, Uganda and Tanzania and Ethiopia. Those regulators explored with us a regional approach to VSAT regulation that will enable enterprises to provide cross border communication. Why? They want to be seen as an important region for trade, to attract foreign investment and want to expand access to communications.

Q: And that approach is common elsewhere in the world?
A: We will work with any country in the world and we work with almost every regional group in the world. We do it with global organizations like the ITU and WTO and branches of the UN, at the regional level with the EU and others and we also work on a national level across the world.

Q: So where next?
A: We are about five years old. We started with twenty-seven countries who launched the organisation. Today we are in the neighbourhood of 160 companies in more than 60 countries around the world. Most of them are large and fairly well known – at least within our industry and in many cases outside it. There are also scores of small companies who provide VSAT services and other forms of satellite services in the least developed and developing countries. They have been less evident in our membership list but are no less important than developed countries. They are arguably more important for the areas in which we need to provide assistance in smoothing the way for service provision. We have come up with a new membership fee structure that is calibrated along the same lines as the UN’s designations for country type – developed, developing and least developed. If you are a company in a least developed country you would pay a fraction of the fees paid by a company from a developed country. This is a new concept which we are jut unveiling. We hope to make the organisation more accessible world wide and in particular to smaller, less developed organisations in order that we can represent them more effectively on the ground at the local level.

For more information:
Please contact: David Hartshorn, david.hartshorn@gvf.org
Or visit: www.gvf.org

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