The winds of change are blowing in the vsat satellite internet industry...again! During the next six to twelve months I expect to see a good number of buyouts of companies who are not able to keep up with the rapid changes in technology and the costs associated with staying in the race for satellite internet customers. The area of greatest consolidation should come to the Small Business to Enterprise sector, where providers are repeatedly failing to meet customer expectations of value for cost.
At the present time, most of the traditional resellers to small business, government and commercial accounts are in deep financial trouble or at best breaking even ......which should come as no surprise considering nearly all satellite owners are losing money. Why? Space segment is very expensive... and I really mean it! Only a very small group of enterprise level companies and government entities are able to afford the true high speed offerings. The companies willing to pay $1,500 or more per month for a high end service package will be happy with their performance, but precious few can afford to pay that for broadband.
There isn't enough demand relative to the competition for commercial vsat broadband outside this group, so all types of pricing games are being offered right now to entice companies to buy equipment and service either as a replacement for dial up (believe it or not, some companies still use dial up!) or as a emergency backup. Some of these offers are flat out bait and switch schemes and the companies offering them are destroying the reputation of the industry. Fortunately, they are the companies I predict will fall by the wayside later this year. Buyer beware!
Internet providers keep clinging to the notion that if they water down the platform with subscribers somehow they can sell satellite internet service for a price that is palatable. The watering down is referred to as contention ratio in the industry. The balancing act has historically been a roller coaster customer service ride, in which things start out fine for customers.......provider adds too many new customers so performance goes down hill........customers start screaming about bad service.......provider adds a new transponder.....everyone is happy again and it starts all over. It's a joke of a business model, but unfortunately, the only way people will buy in mass is if service plans are priced between $50-$200 and the only way a provider has a chance to make any money is to keep the contention ratios too high for good performance unless you are doing internet things at 3 AM!
Well, I've identified the problem.....so what is the solution? Good question. The only hope I see for better service at affordable prices for small to midsized commercial users of vsat internet in the next year or so is the introduction of DVB S2 packet handling (which promises to improve speeds/performance by 30%) and the more widespread deployment of Ka band vsat internet (which still has it's share of hoops to jump through) coming at the end of 2006 into 2007. Beyond 2007, who knows....maybe someone will find a way to overcome the speed of light....
Randy Scott has been involved in the bi-directional satellite internet industry from it?s beginning as a Sr. Sales Engineer, consultant and business owner. Randy is the founder of VSAT a U.S., representing the most prestigious satellite internet providers in the America?s. You can reach Randy by email: randy@vsatus.com
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