VSATs �� the rural choice? In remote and rural areas, where there is little or no terrestrial communications infrastructure, can VSAT platforms prove their value despite market barriers? - Industry & Market Update - Very Small Aperture Terminals

Making a phone call, surfing the internet or receiving a fax are everyday functions of life token for granted -- by only 50 per cent of the world's population. For the other half, access to communication systems is far more elusive.

The cost and infrastructure build-out needed to link a remote field office of 20 people or a rural community with 100 inhabitants through terrestrial solutions is often too high for operators or governments to undertake. It is in these situations that VSAT platforms -- communication services delivered via satellite-based very small aperture terminals [VSATs] -- have the potential to take centre stage.

Rural opportunity

The UN has underlined VSATs as a pivotal technology for developing countries because they can use it to deliver on their promise of universal access. USOs (universal service obligations) are implemented by governments to ensure that operators undertake the development of communications infrastructure in rural areas.

"Many governments face an ongoing challenge to provide basic telephony services throughout their country. To meet this challenge, many have turned to VSAT networks for a low-cost, reliable public telephony solution," claims Barry Spiel-man, director of corporate marketing for satellite operator, Gilat.

"VSAT networks represent the most cost-effective solution for communities in areas where the PSTN is unavailable, overloaded or too expensive," he argues.

Access to telecoms provides not only the ability to interact on a personal level, but perhaps more importantly -- according to the Global VSAT Forum (GVF) -- allows remote and rural communities to deal directly with the marketplaces that traditionally resell their produce and products. The forum goes on to argue that the establishment of VSAT platforms has led to greater efficiencies and higher margins for these communities through closer coordination of what is in demand and what is produced.

When talking about rural and remote areas it is also important to note that this is not indicative solely of territories such as the Australian outback but can relate to places that fall just outside a metropolitan area, such as populated villages and semi-urban cities.

Operators can leverage their networks to provide internet services, such as e-mail, as well as telephony and fax because P is already integrated into the VSAT remote unit.

VSAT plus points

The antenna in the outside unit of the VSAT platform receives or sends a signal to a satellite. The satellite sends and receives signals from an earth station computer that acts as a hub for the system. Each end user is interconnected with the hub station via the satellite. For one end user to communicate with another, each transmission has to first go to the hub station, which retransmits it via the satellite to the other end user's VSAT unit.

Plus points of the VSATs solutions are ubiquity, quick deployment capability, voice and data communication functionality, and cost-control. Ran Livnat, product manger for interactive VSATs, Gilat, says one satellite can cover o whole continent.

The range of satellite coverage means that initial cost is relatively lower than the infrastructure build-out necessary for terrestrial solutions. With the satellite in place, all that is needed to extend a network is the installation of an outdoor unit with line of sight to it.

Jay Pultz, research and VP of analyst firm, Gartner, explains that the main cost of the VSAT solution is the earth station, which represents about 60 per cent of overall expenditure, while maintenance and space segment costs make up the remaining 40 per cent.

"Mass production [of components] will be one solution to reduce cost as well as getting more capacity and producing higher data rates from the earth station," says Pultz. "Progress has been made -- over the last 20 years the price [of the earth station] has fallen from around US$15,000 [[euro]17,250] to US$5,000 [[euro]5,750]."

The GVF also highlights space-segment savings made through advancing modulation schemes and coding techniques which permit digital information to be transmitted more efficiently from the satellite. As space segment becomes more abundant and affordable, that too aids the VSAT business case. In addition, because satellites are generally more powerful they enable the use of smaller, and therefore cheaper, antennas on the ground.

VSAT obstacles

The arguments in support of VSAT-based platforms are clear, but in practice, implementation has been difficult. Jostling with government policies and market conditions, VSAT solutions still face barriers to cost-effective, easy implementation. India is one example.

"The Indian VSAT market has been growing at a rate of 40 per cent [users] and although it is probably the ideal means to set up connectivity in the rural segment, the high cost of deployment and subsequent cost of service for the end user, coupled with market deterrents is hindering development," claims Kobita Desai, senior analyst, India Gartner Research.

She highlights the three main areas of concern as frequency cost, PSTN interconnectivity and transmission constraints.

Historically, the Indian government permitted the use of VSATs only on the INSAT constellation of satellites and primarily on India's extended C-band frequency. Recognising the ability to address the demand for internet services, the government implemented a telecoms policy permitting India-based ISP licensees to access any satellite in any frequency band for the provision of internet services.

Although permitting VSAT operators to use ku-band has helped to make more bandwidth available, Gartner's Desai says, "it is still an expensive proposition and elevates the cost of service to the end-user".

Regulatory conditions in India do not permit VSAT interconnectivity with the PSTN network which limits the means to expand into areas where there is little or no fibre.

Indian VSAT service providers are also constrained by the 64Kbps cap on transmission rate, although the Telecom Regulatory Authority of India (TRAI) has recommended increasing this limit to 512Kbps.

The VSAT market can ill-afford to have this potentially massive market constrained in any way, but there are signs that the situation is improving.

Two years ago the licence fee structure in India was based on a fixed fee of Rs.55,100 ([euro]1,300) per VSAT with a minimum obligation of Rs.10 m ([euro]0.2 m) for the first two years and Rs. 15 m ([euro]0.35 m) from the third year onwards.

The structure has now evolved to a one time entree fee of Rs.3.0 m ([euro] 7000) issued for a period of 20 years and extendable by ten years. The licence fee is in the form of revenue share at ten per cent inclusive of USO.

Evidence of change

One common obstacle slowing the provision of VSAT-based solutions is outdated regulation which supports monopolistic practices. Arguing in favour of competitive practices, the GVF believes revenue lost from ending a monopoly or from eliminating licensing fees is compensated by business growth that is stimulated by stripping away regulatory barriers.

Supporting this opinion there is widespread evidence of regulatory progress across the globe.

* APEC (Asia-Pacific Economic Co-operation) member nations have signed a mutual recognition agreement (MRA) that will speed up test and certification procedures, while various countries are deregulating.

* Around 40 member nations (as of February 2001) of the World Trade Organisation (WTO) have eliminated customs duties on VSATs under the terms of the 1997 Information Technology Agreement.

* Around 50 administrations have signed the GMPCS-MoU (global mobile personal communications by satellite -- memorandum of understanding), an international agreement designed to facilitate circulation of mobile satellite-based terminals, mutual recognition of type approvals and class licensing of fixed VSAT terminals.

Clearly, market barriers still exist, but the opportunities and benefits that VSAT platforms offer reflect its significance in rural communications and the pivotal role it has to play.

Sanjima DeZoysa, staff editor

(www.sdezoysa@horizonhouse.co.uk)

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