VSAT services are finding new customers

Very Small Aperture Terminal satellite services have been a staple among retail businesses for more than 15 years, but now the technology that once served only vertical markets is spreading its wings.

VSATs have long been attractive to organizations that needed to reach hundreds or thousands of locations with low-bandwidth data connectivity. Businesses in North America spent $775 million on VSAT services in 2000, according to Comsys.

VSAT services are attracting new customers for two reasons: the dominance of IP and the abundance of bidirectional services. VSAT offerings for small businesses are a relatively new development and are also an affordable alternative.

"The VSAT market has changed so much," says Chris Baugh, principal analyst with Northern Sky Research. "Traditional VSATs were in gas stations and retail chains with only one-way support. IP is now the de-facto network standard, which has allowed a lot of satellite companies to reduce their costs and decrease the complexity of their networks."

While VSAT users have supported IP traffic over their networks for several years, it typically has been one of several protocols. IP-only VSAT services are relatively new.

IP the driving force

The move to IP has been the result of customer demand and the ability of service providers to lower costs, says Simon Bull, an analyst with Comsys. VSAT providers are seeing 90% of their new customers requesting IP support, Bull says. When a service provider standardizes on IP they can reduce their internal network infrastructure costs because they can buy equipment and software off the shelf.

"By supporting IP and standardizing certain parts of the technology, [service providers] can deploy two-way VSAT networks with [customer-premises equipment] that costs $500 to $600," Baugh says. He says this would be the floor of the market with users paying about $70 to $200 per month, per site for service for perhaps 128K bit/sec worth of bandwidth.

IP-only support lets service providers such as Spacenet, a wholly owned subsidiary of Gilat Satellite Networks, offer bidirectional or two-way services to businesses with 250 or fewer sites. This service, called Connexstar, costs $119 per month for 128K bit/sec upstream and 500K bit/sec downstream with a one-time equipment cost of $1,000.

Hughes Network Services, the leading provider of VSAT services in North America (see graphic), offers small-business users Directway, a VSAT Internet access service. Starband and Tacyon also sell VSAT Internet access services to individual users. These offerings let a greater variety of businesses, such as real estate agencies and veterinarian offices, use VSAT services, Bull says.

In the past, most VSAT service providers were interested only in deployments that reached thousands of sites, but there has been a change of philosophy within the industry. While several VSAT services for single sites are available, not all providers are sold on the concept.

Traditional VSAT networks are built based on the amount of bandwidth a company needs and the number of sites that will share that bandwidth, says Mike Massey, an analyst with Pioneer Consulting. Selling individual Internet access over the same satellites to thousands of customers is presenting some problems.

"The downside is now you're trying to develop a service offering based on an anticipated profile of a given customer," Massey says. "You're not designing a whole network based on one company's usage patterns."

So while a company such as Hughes promotes that it has more than 100,000 customers using its DirectWay service, some users are dealing with frustrating bandwidth constraints, he says. Providers of these services are going through a lot of growing pains trying to figure out how to offer individual access, yet allocating enough bandwidth so users get high-quality service, while keeping costs in check, he says.

While VSAT Internet access options open up broadband services to users in areas where DSL or cable modem services are not found easily, the industry is still working out kinks with this offering. However, analysts say it's just a matter of time before service providers fine-tune bandwidth allocations to make individual VSAT offerings a success.

The real benefit with these offerings is you can get VSAT anywhere, Bull says, unlike DSL and cable modem services. And the next high-speed network option for users would be a fractional T-1 line or a frame relay connection, both of which cost hundreds or even a thousand dollars per month more than a VSAT, DSL or cable modem service.

The geographical reach of VSAT technology was a prime reason why Bob Evans Farms deployed a 481-site network about 16 months ago. The national restaurant chain teamed with Spacenet to link its retail stores and corporate headquarters to an always-on IP VSAT service, says Larry Beckwith, vice president of IS in Columbus, Ohio. And the network was up and running in five weeks, he says.

While Beckwith looked into frame relay, DSL and ISDN service options, he chose a VSAT network because it was the only technology that could reach all locations and was the most cost-effective, he says.

"Initially we were looking to reduce the amount of time credit card authorization took at our stores," Beckwith says. "We reduced that from 15 seconds down to 3 seconds."

Since replacing Bob Evan's dial-up network, Beckwith says he has added e-mail, has streamlined the company's inventory process by creating a browser-based invoice application, and will soon add human resource applications to his VSAT network.

Another recent development that's bringing VSATs into more businesses is that providers have struck deals with terrestrial carriers. Hughes signed a deal that lets users buy Hughes VSAT services through WorldCom. Baugh says users likely will see similar deals not only with terrestrial service providers, but also with hardware vendors.

VSATs are considered an add-on service rather than a full-fledged alternative to terrestrial networks, he says. VSATs are attractive for businesses that want to support specific content such as corporate training and e-learning to multiple locations, but don't want to add more bandwidth throughout their terrestrial networks to support such applications, Baugh says.

SLAs more common

Service-level agreements also are becoming more common as VSAT service providers realize enterprise requirements. Users should expect at least two service guarantees: one for throughput and one for uptime, Baugh says. Because harsh weather will impact satellite services, Baugh says users have to be prepared for some downtime. Realistically, most VSAT providers can guarantee 99.9% availability, but users should only put applications over a VSAT network that could tolerate eight to 10 hours per year of downtime.

While developments in VSAT technology will continue, the traditional VSAT network that's based on a star topology is still a solid choice for many business users, Massey says. "Depending on the type of network, a VSAT setup could be cheaper per location than a voice line in some cases," he says.

In the case of a chain of retail stores that use their VSAT networks for credit card authorizations, not much bandwidth is needed. A group of 500 stores could share a 128K bit/sec satellite channel and not experience any delays because of the small amount of traffic that's being sent over the network, even though it's regularly used.

A company with 4,000 locations might pay about $60 per month, per VSAT site. Businesses with a few hundred sites probably will pay about $100 per month, per site for the same amount of bandwidth.

"Trying to build an alternative ISDN network or a 56K bit/sec frame relay network is much more expensive," Massey says.