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Satellite services are getting a lot of press these days.
Grand projects such as Teledesic, with hundreds of low-earth orbiting (LEO)
satellites and funding from the likes of Bill Gates and Craig McCaw, can’t
help but generate attention. Of course, not all the press is good. Iridium
LLC (Washington, D.C.), the first LEO system, turned on service only last
year and has already filed for bankruptcy. But satellites do represent
a multi-billion-dollar industry and are currently being used in a wide
variety of voice and data applications.
The question is, do they make sense for typical data communications
applications? Should a network manager have a satellite link in his or
her Swiss army knife of network solutions?
The answer: No. They cover vast regions of the planet and cost huge
sums of money to deploy—billions of dollars in the case of newer systems
like Iridium. For point-to-point connections, satellites are almost always
more expensive than terrestrial options.
Premium Pipes
Let’s compare two scenarios. In the first, frame relay is deployed at 10
sites spread across the U.S., each requiring a 128-kbit/s connection with
every other site. In the second, a VSAT (very small aperture terminal)
satellite is deployed in the same configuration. Using distance-insensitive
pricing from a nationwide frame relay provider, the port cost per site
is $500 per month and the PVC (permanent virtual circuit) cost is nine
times $180, or $1,620, for a fully meshed configuration. Add $500 for the
local access charge and you have a total of $2,620 per site per month from
a premium provider. (You could get a lower price from a more aggressive
service provider.) In contrast, the same setup would cost just over $3,000
per month from a satellite provider.
VSATs could come in handy—but only under the right circumstances. For
companies that are establishing connections to remote oil fields, the depths
of the rain forest, or locations at sea, terrestrial options simply do
not exist. In such cases, there are service providers such as Gilat Satellite
Networks Ltd. (Petah Tikva, Israel) or Panamsat Corp. (Greenwich, Conn.)
that can quickly set up satellite links at rates from 9.6 kbit/s all the
way to DS-3 (45 Mbit/s).
Ever wondered how some gas stations can authenticate your credit card
so quickly? A satellite connection eliminates a traditional dial-up modem
connection. In this instance, ground stations at many hundreds of gas stations
can share the same slice of expensive satellite spectrum using a TDMA (time-division
multiple access) approach. Since the duty cycle for any one station is
very low, this approach is extremely efficient. The net result is that
rather than paying five cents to complete the transaction with a long-distance
call, the company only pays a few pennies to do so via satellite. And in
a busy gas station, the resulting savings can pay for the $3,000 satellite
terminal in just 18 months.
Wal-Mart Stores Inc. (Bentonville, Ark.) uses VSATs to link hundreds
of their facilities together. Paging networks use VSATs to send paging
messages to transmitters. Nationwide newspaper companies use satellites
to send contents to multiple printing locations. Why? Because the same
message is sent out to multiple transmitters for time-synchronized transmission.
VSATs are also useful as redundant connections. For critical operations,
companies may prefer two circuits to the outside world. But in regions
where only one LEC (local exchange carrier) is available, both circuits
are likely to go through the same central office. This is not true redundancy,
so a satellite backup connection may be a good option. Note also that the
$500 LEC access charge mentioned above might actually be as high as $2,000
per month in some less developed areas. The cost of a satellite connection
then becomes competitive.
Still, given the special business case for fixed-satellite services,
one has to wonder about the $20 billion that will be spent for new broadband
LEO satellites from outfits such as Teledesic LLC (Kirkland, Wash.) over
the next five years. Where is the market? The stock answer: all those areas
that do not have good terrestrial coverage.
The problem is that those areas of the world are shrinking rapidly.
Not only is fiber being deployed at a ferocious rate, but terrestrial broadband
wireless systems such as LMDS (local multipoint distribution service) are
already coming online. So the market is shrinking.
Meanwhile, if there is one constant in the satellite industry, it’s
delay. Satellite systems are almost always years late to market. Three
years ago, Teledesic was projected to be deployed in five years. Today,
Teledesic is projected to be deployed in five years. What market will be
left then?
Satellite Similarity
Just like their terrestrial wireless counterparts, satellite systems come
in mobile as well as fixed varieties. Services such as American Mobile
Satellite Corp. (Reston, Va.), Iridium, and Ominitracs from Qualcomm Inc.
(San Diego) offer voice and data to mobile users. End-user devices have
traditionally been at least the size of a briefcase, but with new LEO constellations
such as Iridium and Globalstar, handheld devices are possible for the first
time. Data rates for these systems are relatively slow, ranging from 2.4
to 9.6 kbit/s. Prices are high. With per-minute charges ranging from $2
to $10, depending on the service and location, pricing is up to 100 times
higher than cellular.
As with VSATs, mobile satellite data usage tends to be specialized.
The biggest customer in the U.S. is the transportation industry, because
optimizing truck routes and loads can save a ton of money. Even services
such as Iridium that originally hoped to serve business users worldwide
are reluctantly changing their emphasis to vertical markets such as the
oil industry.
One area to watch is the consumer front. Hughes Network Systems Inc.
(Germantown, Md.) offers Internet service via satellite with rates to 400
kbit/s; it plans two-way service for the future. And with America Online
(Vienna, Va.) investing in this operation, and Microsoft Corp. (Redmond,
Wash.) mulling an investment in Gilat, aggressive pricing could produce
enough users to improve the economies of these services. But unless you’re
in the middle of nowhere or have a special need, stick to planet Earth.
Peter Rysavy is president of Rysavy Research, a consulting firm that helps
companies research, develop, and deploy communications technologies.
Rysavy Research home page
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