If numbers were to be the only indicators of growth in an industry then nobody would beat the VSAT services business. Just consider these: the number of shared hub VSATs installed in 2002–03 was more than the total number installed till 2002.

There was a 382 percent growth in the number of shared hub installations over the previous year, with one of the service providers registering a whopping 2,041 percent growth. Overall, the shared hub installation base grew by around 115 percent.

However, what was ironical that these numbers did not mean much for the financial health of the shared hub business. Except for a couple of VSAT service provider companies, most of them registered either flat or only a marginal increase in revenues, and that too because of their forays in sectors other than VSATs. This was largely because hardware equipment, sales of which have always accounted for a major portion of service providers’ revenues, witnessed a steep drop in prices. On the other hand, there was only a marginal increase of 9.75 percent in the service revenue. VOICE&DATA estimates that revenues from services were around Rs 225 crore in FY 2002–03 as against Rs 205 crore in FY 2001–02.

The growing ubiquity of terrestrial connectivity options like leased lines and VPNs and the drop in their prices affected the growth of VSATs in areas like manufacturing, where VSATs, in many cases, were relegated to the role of a back-up medium. Applications like ERP, which even VSAT vendors accept are not suited for running on VSATs, began to be shifted to terrestrial lines. The fact that not many new enterprises were adopting VSATs, because of better availability of leased lines, was worrying for VSAT operators. In fact, to make matters worse, more than 1,000 VSATs were surrendered during the year. Also, the much-hyped segments like rural telephony and broadband Internet access failed to take off.

However, VSATs found a growing market in the retail (banking and lottery) space and also made a beginning in the area of distance education. The single biggest deployment of VSATs in FY 2002–03 was for the lottery operator Playwin, which got 3,506 VSATs deployed (1,867 by HECL and 1,639 by Essel Shyam). Also, like in many previous years, VSATs remained the preferred mode of connecting bank ATMs and also their biggest market. Banks like SBI and ICICI took the lead in deployments. Even though education did not bring in volumes, it surely emerged as a promising sector for VSAT usage.

Moreover, as large telecom operators like Bharti began selling hybrid connectivity solutions, of which the VSAT was just a component, operators like HECL and HCL Comnet too began changing their business models. VSAT service providers began exploring new business opportunities in network security, network management, VPN, Internet data centers, and even leased lines and IPLCs. For example, the market leader HECL is no more a pure-play VSAT operator; it now offers solutions in network management, VPN, Internet data centers, leased lines and IPLCs. HECL tied up with Data Access last year in order to bring IPLCs to its corporate customers. Similarly, HCL Comnet is focusing a lot on network management and network security services and has already emerged as a leader in these areas. In other words, the hitherto unbending posture of VSAT operators that there was nothing better than VSATs started eroding, with many of them finding virtues in the terrestrial medium.

Even as hardware costs saw a decline of 25–30 percent, there was no let up in the cost of input bandwidth, which remained prohibitive. For users, at 10,000 Rs per kbps per annum, bandwidth costs were certainly not on the lower side.

VOICE&DATA estimates that in the year 2002–03, service providers would have earned around Rs 75 crore in terms of revenue from bandwidth.

Even though there was no scarcity of transponders, their costs remained high. VSAT operators on the whole were using some 12 transponders including C band, extended C band and KU band on Insat 3A, 3B and 3C.

Outlook
The days of pure-play VSAT service providers are over. While leading VSAT operators like HECL and HCL Comnet are aggressively engaging themselves in other pursuits, including hybrid connectivity solutions, large telecom operators like Bharti and Tata are including VSATs in their total connectivity solutions. In other words, the emphasis is on offering a comprehensive connectivity solution made up various technologies and services and not on any particular medium. The drive is not just from service providers but also from customers who want the best of both, technology and price. In such a scenario, the argument that a VSAT service provider would know the satellite communication better than the likes of Bharti and Tata doesn’t hold good.

As for the future of VSAT services, only skeptics can write it off. The growth of terrestrial connectivity does not mean a doomsday for the technology. However, a few things must work in the favor of the sector for a healthier growth. For example, as of today, satellite bandwidth is too expensive and cannot compete with terrestrial bandwidth in terms of cost. Things can only change for the VSAT service providers on the cost front if satellite companies show interest in the data business. At present, they are content serving television broadcasters. Moreover, commercialization of KA-band satellites can further change things for the better as the band offers higher throughput and switchable- on-demand bandwidth. All this can open up new markets (like home Internet access) for VSAT service providers.

In the current scenario, ATM would continue to be the biggest market for VSAT services, followed by lottery. Even though some people would like to term the lottery market No. 1, VOICE&DATA believes that things in the lottery market are still uncertain because of bans (or demands of ban) on lotteries in several states. Last year, Playwin had to dismantle around 1,048 lottery terminals (not all of which would be VSATs) after they were found to be operating in places where lottery is banned.

Besides, in urban areas, GPRS is emerging as an alternative to VSATs for online lotteries. The biggest lottery player Playwin has 750 of its total 4,452 lottery terminals on GPRS. VSAT operators are also likely to get into new areas like mobile satellite services, reporting services, disaster recovery and GPS-based fleet management.

Ravi Shekhar Pandey