U.S. Broadband by Satellite Fared "Relatively Well" During Recession

U.S. providers of broadband access by satellite services did roughly as well as fixed-line providers during the recent recession, Northern Sky Research says. "After a year of uncertainty, the majority of signs indicate the sector made it through the worst economic crisis since the Great Depression relatively well," researchers at NSR say.

"North America set a milestone by becoming the first region to top one million subscribers, and Western Europe will likely exceed 100,000 subscribers well before the end of 2010, says NSR.

According to Hughes Network Systems November 2009, the company was adding about 17,000 gross subscribers a month. Wildblue, now part of ViaSat, added roughly 8,333 new customers a month in 2008, for a total gain of 100,000, and about the same number, it appears, in 2009.

Satellite broadband access providers saw that few consumers and businesses were willing to give up their broadband service in difficult times, NSR also says, as was the case in the fixed-line market as well.

Satellite services tend to get brutal complaints about speed, cost and customer service on some discussion boards and forums, but for many consumers, satellite broadband might be the only current option. Faster speed services are coming, though, as a new generation of high throughput satellites will provide higher-speed connections.

It seems unlikely the faster speeds will silence all complaints, but should help.

Globally, NSR projects that broadband VSAT networking, satellite broadband access, and broadband trunking and backhaul services will generate nearly $8.8 billion by 2019, which is a 135 percent increase over 2009.

Global satellite broadband access will add the most new revenues, some $4.1 billion between 2009 and 2019, to become the leading market segment and bypass traditional broadband VSAT networking in revenue terms as of 2013. Traditionally, commercial customers ordering up private satellite networks have been the revenue driver, so the switch to consumer services is a big change.

More Regulation Needed to Spur Broadband Competition? Really?

The U.S. Federal Communications Commission should consider regulations for broadband providers in an effort to increase competition, says Lawrence Strickling, National Telecommunications and Information Administrationassistant secretary, as reported by IDG News Service.

"We urge the Commission to examine what in many areas of the country is at best a duopoly market and to consider what, if any, level of regulation may be appropriate to govern the behavior of duopolists," Strickling says.

With all due respect for Strickling, who is a smart, experienced regulatory type who knows the terrain, and without disagreeing in full with the full content of his filing on behalf of NTIA, the notion that competition somehow is so stunted that new regulatiions are required likely would lead to greater harm, despite its good intentions.

Here's the argument. Consider, if you will, any large industry with critical implications for the entire U.S. economy. Now consider the following mandate: "you will be forced to replace 50 percent of your entire revenue in 10 years."

"During that time, for a variety of reasons, incumbents will be forced to surrender significant market share to competitors, so that in addition to replacing half of the industry's revenue, it also will have to do so with dramatically fewer customers."

"After that, in another decade, the industry will be required to replace, again, another 50 percent of its revenue. All together, the industry will required to relinquish at least 30 percent of its market share, in some cases as much as half, and also will be required to replace nearly 100 percent of its revenue, including the main drivers of its profitability."

Does that sound like the sort of industry that desperately needs additional competition? Really?

Nor is the argument theoretical. Over a 10-year period between 1997 and 2007, the U.S. telephone industry was so beset with new technology and competition that almost precisly half of its revenue (long distance), the revenue driver that provided nearly all its actual profit, was lost.

The good news is that the revenue was replaced by wireless voice. Then, because of the Internet, cable company entry into voice and the Telecommunications Act of 1996, market share began to wither. That, after all, is the point of deregulation: incumbents are supposed to lose market share to competitors.

Now we have the second decade's project, when mobile voice revenues similarly will have to be replaced, in turn, as IP-based voice undermines the high-margin voice services that have been the mainstay of the mobile business.

If you follow the telecom industry as a financial matter, you know that service providers have maintained their profitability only partly by growing topline revenues. They also have been downsizing workforces and slashing operating costs.

If you talk to ex-employees of the telecom industry, they will tell you the industry seems no longer to be a "growth" industry. That's why millions of people who used to work in telecom no longer do so.

So what about the other big incumbent industry, cable TV operators. As you clearly can see, and can read about nearly every day, there are huge questions about the future business model for what used to be known as "cable TV." Many observers already predict that such services will move to Internet delivery, weakening or destroying the profitability of the U.S. cable industry.

Industry executives, no dummies they, already have moved into consumer voice and data communications, and now are ramping up their assault on business communications. Why? They are going in reverse for the core video business.

Imposing regulatory burdens on incumbents--either telco or cable--that are losing their core revenue drivers on such a scale might not be wise. Few industries would survive back-to-back decades where the core revenue drivers must be replaced by "something else."

Imagine the U.S. Treasury being asked to replace virtually 100 percent of its revenue with "something else" in about 20 years. Imagine virtually any other industry being asked to do the same.

The point is that industries asked to confront such challenges and surmount them are not typically the sort of industries that need to have additional serious obstacles placed in their way.

Granted, they are niche suppliers, but Strickling also is well aware there are two satellite broadband providers battling for customers, plus five mobile broadband providers, and then hundreds of independent providers providing terrestrial fixed wireless access or packaging wholesale capacity to provide retail services.

Granted, only cable, satellite, telcos and several mobile providers have anything like ubiquitous footprints, but that is a function of the capital intensity of the business. Most markets will not support more than several suppliers in either fixed or wireless segments of the business.

One can argue there is not more facilities-based competition because regulation is inadequate, or one can argue investment capital no longer can be raised to build a third ubiquitous wired network.

The point is that wired network scarcity might be a functional of rational assessments of likely payback. Cable TV franchises are not a monopoly in any U.S. community. But only rarely have third providers other than the cable TV or incumbent phone companies attempted to build city-wide third networks. Regulatory barriers are not the issue: capital and business potential are the problems.

Also I would grant that mobile broadband is not a full product substitute for fixed broadband. But where we might be in five to 10 years cannot yet be ascertained. And we certainly do not want to make the same mistake we made last time.

The Telecommunications Act of 1996, the first major revamping of U.S. telecom regulation since 1934, was supposed to shake up the sleepy phone business. But the Telecom Act of 1996 occurred just as landline voice was fading, and the Internet was rising.

If you wonder why virtually every human being with a long enough memory would say their access to applications, services, features and reasonable prices is much better now than before the Telecom Act of 1996, even assuming it has completely failed, the answer is that the technology and the market moved too fast for regulators to keep up.

The Telecom Act tried to remedy a problem that fast is becoming irrelevant: namely competition for voice services. In fact, voice services rapidly are becoming largely irrelevant, or marginal, as the key revenue drivers for most providers in the business.

Yes, there are only a few ubiquitous wired or wireless networks able to provider broadband. But that might be a function of the capital required to build such networks, the nature of payback in a fiercely-competitive market and a shift of potential revenue away from "network access" suppliers and towards application providers.

It always sounds good to call for more competition. Sometimes it even is the right thing to do. But there are other times when markets actually cannot support much more competition than already exists. Two to three fixed broadband networks in a market, plus two satellite broadband providers, plus four to five mobile providers, plus many smaller fixed wireless or reseller providers does not sound much like a "market" that needs to stimulate more competition.

There's another line of reasoning one might take, but would make for a very-long post. That argument would be that, judged simply on its own merits, the availability and quality of broadband services, in a continent-sized country such as the United States, with its varigated population density, is about what one would expect.

Even proponents of better broadband service in the United States are beginning to recognize that "availability" is not the problem: "demand" for the product is the key issue.

Is Broadband "Satisfaction" Directly Related to "Bundle" Savings?

The conventional wisdom is that high-speed broadband access is becoming a commodity bought by consumers primarily on the basis of speed and price.

A recent survey by Parks Associates also showed that there is not all that much difference between consumer satisfaction with any of the broadband network types.

With cable modem service and digital subscriber line as the baseline, consumers said they were a bit more happy with fiber to the home, and a bit less happy with either satellite broadband or fixed wireless broadband.

So the differences are a matter of performance, or speed or price, right? Well, maybe, and maybe not.

The Parks Associates survey also found that consumers were more satisfied with any broadband service purchased as part of a bundle, less happy when broadband was purchased a la carte. Since the primary end user benefit from buying any bundle is the cost savings, one might conclude that consumer satisfaction has less to do with the technical parameters (speed and reliability) and mostly to do with "saving money."

Since satellite broadband and fixed wireless services rarely are purchased as part of a multi-service bundle, that fact alone would explain lower satisfaction with either satellite or fixed wireless services.

New U.K. Satellite Broadband Service Launches

Eutelsat Communications has launched "Tooway" consumer Internet access service in the U..K, offering 2 Mbps downstream access for £29.99 per month. Company executives say 14 to 20 percent of U.K. homes cannot today get service at 2 Mbps. Service had been launched in France earlier in the year. Service providers in Italy and Spain also use Tooway.

But more is coming. In 2010, Eutelsat will launch a new Ka-band satellite that will offer downstream speeds of 10 Mbps. By way of comparison, the new bird will have the capacity of 40 traditional satellites and will offer service comparable to terrestrial ADSL2 networks.

Eutelsat says video services will be available using a single receiver and antenna once the Ka-band satellite is operational. It is possible that VoIP services might also be possible, though some latency issues will remain for online gaming.

Voice support would be key, as it would allow Tooway to offer an actual triple-play service over a single network, much as terrestrial competitors do.

Satellite Broadband: What Will Reviewers Do?

There is little doubt but that satellite broadband providers will try to secure broadband stimulus funds to subsidize the cost of customer premises equipment, a move that Hughes Network Systems SVP Mike Cook believes could increase its subscriber base by an order of magnitude.

WildBlue presumably also would see customer lift if such subsidies were possible.

There also is some speculation that funds could be sought for new satellite construction to offer customers much-higher access speeds.

Anything is possible, of course. But if I were reviewing grant applications, I'd be looking for projects that get broadband services to people as fast as possible, to as many people as possible, creating new jobs now, are sustainable after grant funds are gone and can get services to the most-isolated locations, across the United States, now.

Anything is possible. But looking at funding for new satellites that might not be launched for years, and consuming lots of program cash, compared to spending lots less and serving lots of rural customers now, would rank a lot higher.

Politically, I'd also (for better or worse) be looking in advance for evidence to justify why I made my decision. Enabling new broadband services to rural residents in all 50 states, within months, is safer than defending a relatively signficant capital investment that won't result in new services for some years.

Also, as a reviewer, I would be looking to get the biggest bang for the buck, spreading the money as widely as possible. On that score, subsidizing CPE would seem a more defensible choice that building satellites.

Satellite Broadband Gets Eutelsat, ViaSat Boost

French satellite operators Eutelsat SA and U.S.-based ViaSat want to leapfrog current and emerging generations of satellite-based broadband, and are putting money behind the effort, according to the Wall Street Journal.

To put the effort into perspective, the ViaSat satellite will have bandwidth exceeding the combined signal capacity of nearly all the two-way commercial communications satellites serving North America, ViaSat calculates. Basically, the two new satellites will offer price-per-bit performance an order of magnitude better than the advanced satellites in orbit today.

For its part, Eutelsat's one new advanced satellite will have a capacity equal to Eutelsat's entire 24-satellite existing fleet.

Each company has committed to separately build and launch a satellite with 10 to 15 times greater capacity than the most-advanced birds already in orbit. The companies say they plan to share some marketing and capital expenditures in securing wholesale customers.

Eutelsat hopes to launch its satellite in 2010, with ViaSat scheduled about a year later. In the U.S., the Internet connections are expected to cost between $49 and $79 a month.

Wal-Mart to Sell HughesNet Services

Need a little satellite broadband with your order? Wal-Mart customers will be able to buy HughesNet satellite broadband services soon. Sure, it is a niche. But there are lots of big niches in the communications business. About 10 percent of all U.S. end users live places where the local telephone company is not one of the big brand names. Also, for some of us, wireless is a good way to back up a primary wired broadband connection. In my case, Covad as a primary for primary in-home business and personal use, plus 3G wireless primarily for mobility, but also as the backup in case the primary service fails for any reason.