Satellite Connectivity

Satellite companies are keen to expand their business into the enterprise space and convince IT managers that they can deliver the data backbones today’s businesses need. However, whether local users will migrate from more established network players and embrace satellite connectivity remains to be seen.

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By  Angela Prasad Published  August 26, 2004

|~|Samer_Halawi.gif|~|Samer Halawi, regional director for the Middle East, Africa & central Asia at Inmarsat. |~|80% of Middle East’s population lives in rural areas. For many, satellite presents the best means for carrying international traffic. However, the uptake of satellite connectivity among local businesses remains slow. This reflects global trends, which reveal that although revenues from satellite services have grown by 5.7% in 2003, according to Gartner Group, very little of this growth is reflected in the uptake of broadband connectivity in the enterprise sector. This is despite global satellite communications companies taking all the necessary steps to entice the enterprise sector. The satellite operators are investing heavily in technology — providing faster broadband connectivity. They are also becoming total communications solution providers — bringing together their satellite capacity with fiber capacity to provide a range of solutions. These ‘hybrid’ solutions are becoming part of their end-to-end customised market offerings. Businesses are not against using satellite, they are just not ready to make the shift from their fixed line connectivity and embrace something new and considerably more expensive, which may not be necessary in their day-to-day operation. Satellite broadband is still a niche product. It will only be used by businesses that are in remote areas where there is no fixed or terrestrial cellular network, those that need temporary connections or want to circumvent government censorships. Visa International is one of these companies. The credit card company uses its traditional fixed line connectivity to conduct millions of transactions around the world. However, its global processing network, VisaNet, has been using satellite connectivity from Inmarsat since 1992 to conduct business in the Middle East, Central Eastern Europe & Africa. “It is critical for VisaNet to be able to deliver high availability, so we deploy satellite connections in areas of the world where we are unable to provide terrestrial services of sufficient quality and availability to meet the high standards for VisaNet,” says Andy Wombell, head of corporate a& commercial infrastructure at Visa International, CEMEA region. The company has just secured a contract with the Central Bank of Iraq (CBI) in Baghdad for domestic money transfer, and all its transactions will be done exclusively via satellite. Twenty state and privately owned commercial banks in Iraq have activated a full interbank and intrabank payment system that will link not only the banks to each other, but also the entire Iraqi financial sector to the global banking industry. The automated system, which will be based on a reliable money transfer service using a transportation type called Original Credit, will allow funds transfer through VisaNet. Visa’s operations in Iraq will be coordinated from its office in Dubai, which currently supports 75 member banks and their 7.9 million cardholders throughout the Gulf & Levant region. In war-ravaged countries like Iraq, where there is no infrastructure, businesses prefer satellite connectivity. It provides more secure communications then terrestrial landlines, which are difficult to police against sabotage or theft. ||**|||~|YousefElSayed-Thuraya-3.gif|~|Thuraya chief executive officer, Yousuf Al Sayed|~|However, while Visa is comfortable conducting its business via satellite in Iraq and other parts of the world, it still prefers terrestrial networks, and has no plans to move away from its fixed line connectivity. “There is nothing wrong with satellite. It allows us to expand into areas of the world where we would not otherwise be able to deliver a service at the same level of services using terrestrial technology, However, fixed line connectivity is still a preferred technology for Visa where it is available,” says Wombell. Furthermore, like Visa, oil& gas companies also conduct a small part of their business via satellite, and again, not by choice. For example, Abu Dhabi for Onshore Oil Operation (ADCO) uses the services of the National Drilling Companies (NDC) to receive e-mail and data from its drilling rigs. NDC uses satellite connectivity to receive the data. However, ADCO does not use satellite to receive its operational data, which is considered crucial and confidential. “Sometimes there can be a half second delay in the delivery of data by satellite and organisations like ours canemergencies. If there is an accident at an oil rig, we have to attend to it at once, which means we can not have delayed information,” says Abdul Aziz, senior telecoms planning engineer at ADCO. “We are going to stay with our traditional fibre network. It gives us unlimited bandwidth [with] no delays. At one point we did consider using satellite as a carrier, but the problem was that half second delay,” he explains. Latency is an issue that has affected satellite operators since the very first international telephone call. A one-way transponder delay in excess of 400ms is not uncommon and despite substantial advances in technology, it remains a barrier for many customers using realtime applications. In addition, it has always been technically difficult to provide a high-speed symmetrical service to many subscribers due to poor physical transponder capacity. Carriers favour an asymmetrical access for this type of application and use fixed line connectivity as an “upstream” link and the satellite for the high speed download portion. However, satellite is considered to have advantages that fibre does not and satellite communications operators are leveraging these factors in an attempt to woo enterprise customers. Local satellite player Intelsat says Middle East businesses are slowly starting to see the benefits of transmitting data via satellite, which provides a secure, reliable and efficient way to communicate. It also offers the ability to connect multiple locations, even in terrestrially underserved areas. “Businesses have to realise the cost efficiencies of using satellite. For example, why should they pay money to fly their employees to one central location for training when they can save money by setting up a satellite network that allows them to train employees at a distance via videoconferencing,” says Flavien Bachabi, vice president, Africa & Middle East sales at Intelsat. The company remains buoyant in a market dominated by diverse competition and lower prices, due to a lack of regional submarine fibre optic cable. Bachabi says very small aperture terminals (VSATs) and internet are the most widely used and requested satellite services in the Middle East. VSATs came into play in the early 1980s to service the telecommunications requirements of corporate data networks. Inmarsat says there will be a slow but steady growth for satellite technology. Industries besides the media will use satellite connectivity. The global mobile satellite communications operator is extremely bullish about its market prospects in the Middle East, forecasting that the total market for mobile satellite services will grow to US$571 million by 2006. Furthermore, it predicts that more than 90% of the growth will come from data rather than voice. “This region is still not well connected with fibre to the rest of the world, and it is big in terms of geography. We have a lot of rural areas versus urban areas, so what you find is that the fiber connectivity reaches the urban areas, but not the rural areas because of the cost element. This is where mobile satellite providers like ourselves come into play,” says Samer Halawi, regional director for the Middle East, Africa & central Asia at Inmarsat. Satellite connection does not come cheap, and the enterprise sector is aware of this fact. However, Thuraya, GVF (formerly known as Global VSAT Forum), and Intelsat say businesses need to see their return on investment (ROI) when it comes to deploying satellite, rather than the cost. Services from a single provider offers a more cost effective solution than attempting to link up the offerings of different terrestrial providers, which offer a small part of the total solution. “It may be expensive now, but the price will drop and the gap between fixed line connectivity and satellite connectivity will certainly narrow down, but in areas where cable is already laid, fibre will always be a more cost effective option. Alternatively, there are areas where fibre will never reach, or it would be too costly to lay fiber. When that is the case, satellite will always be a more cost-effective and reliable option,” says Bachabi. Thuraya chief executive officer, Yousuf Al Sayed, shares Bachabi’s sentiments. Al Sayed agrees that the initial investment in satellite technology is large, but says it delivers a stunning reach from day one. Satellites are becoming larger and more sophisticated and their prices will remain the same or increase marginally, but their capability will continue to increase. It is these additional capabilities that will keep satellites attractive to businesses. “Cheap or not cheap is a relevant term that normally enters into a feasibility study where market share and product positioning are tested against investment cost. Therefore, there are several cases where this technology becomes profitable, especially in areas where telecom infrastructure is limited. Fibre gives more bandwidth at lower cost, however it fails to provide customers point-to-point access,” says Al Sayed. The satellite industry is like any other high-tech and increasingly service-oriented sector and there is a constant flow of advances — more powerful satellites, improved efficiencies in the use of bandwidth, more sophisticated and feature-rich equipment. There is also a lot of competition in the market place and this will drive prices down. “For example, an average priced C-band VSAT terminal cost US$16,00 in 1990 and in 2002 it cost US$2000. An average price Ku-band VSAT terminal cost $US8000 in 1990, and around US$1000 two years ago,” explains Martin Jarrold, chief of international programme development, GVF. The organisation remains convinced that businesses would use satellite despite the deployment of fibre connections. Businesses these days are mission-critical dependent on IP-based communications applications, and this constitutes an important driver for the satellite product and service vending community. “Fibre is great for connecting coastal cities or urban centers. However, fibre is not the best option to connect areas separated by difficult and inhospitable geography. It can be quite expensive. A company that has decided to deploy satellite technology will always say that the combination of total networks solutions and unrivalled cost effectiveness won the day,” Jarrold adds. While satellite operators want local businesses to consider the ROI on satellite connectivity, rather than the cost, IDC says the high upfront costs will always be an issue with local businesses. “Then there is also the ongoing subscription costs, which are high compared to broadband, and there is not enough demand to justify the high price for the average business user,” says Mohsen Malaki, program and consulting manager MEA region at IDC. On the other hand, the only sector in the Middle East that has seen growth in satellite connectivity is the military. There appears to be an immediate and significant demand for capacity on existing commercial satellites for military broadband requirements. According to research firm Spotbeam, the Gulf region, including Iraq, is politically unstable but an essential part of the global economy. Countries such as Saudi Arabia and the UAE have, and will continue to, procure advanced and sophisticated weapons and defence systems that are increasingly dependent on advanced command, communications and control network. The demand for satellite connectivity will experience a slow growth over time in the Middle East enterprise sector. However, this growth will not be straightforward, and definitely not across-the-board. Satellite is a technology that is looking for a market. Until a ‘killer application’ becomes available to satellite operators, the demand for their products and services is going to be specific to industries such as military and marine, but not to the business sector. Currently, the industry is experiencing the lowest communications cost ever in the fixed line market with increasing performance and improved latency, so unless a business has a requirement for data on the move, it will stay away from satellite connectivity. Research company Futron says the challenge facing the satellite industry as a whole — operators and manufacturers of space and ground hardware — is to seek out opportunities in the business to maximise the value of the short term markets, without committing to those that will decline in the long term. Continued development is needed of satellites and ground terminals that can serve not just today’s last-mile growth business, but also tomorrow’s steady private network. Success of satellite connectivity in the enterprise sector will require careful timing to catch windows of opportunity as they appear in different regions in the Middle East. ||**||

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