UK to receive satellite broadband boost

Netherlands-based company, Aramiska, has announced that it will launch a satellite broadband service for small businesses in the UK from March 2002 - one of only three satellite companies to enter the market. Any company will be able to access the service provided they have a clear line of sight to the satellite.

The company says that prices will start at €160 per month for a 256Kbps downstream and 64Kbps upstream link, while installation costs would be €640. Those needing a higher capacity link can receive a 2Mbps downstream and 320kbps upstream for €885 per month.

Aramiska is also positioning itself as an ISP (Internet Service Provider) - customers receive Web caching, Web space, as well as a network appliance that connects to an Ethernet port and an email server. The two other companies in the market are Bridge Broadband, whose prices start from €256 per month, and BT whose service will be launched in the Spring of 2002 at a price of €112 per month, but with a connection charge of almost €1500.

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Aramiska has entered the market with a twofold strategy:

• To offer a viable alternative to DSL in the UK, which is almost totally based on BT Ignite's wholesale ADSL offering; the company says that its pricing is on a par with the BT service when serving under 10 PCs, and cheaper when the network is expanded to 100 PCs

• To capture those customers that cannot - for 'technical reasons' - purchase a DSL connection; the UK is currently a wasteland when it comes to affordable and accessible alternatives to broadband DSL. DSL is generally only available to metropolitan customers within 3.5km of a central office, and then only from BT. The promised competition in the DSL market from competitive local exchange carriers has not materialised and, considering how many firms have dropped out of the process, is unlikely to.

On this evidence, therefore, its would appear that Aramiska's business case was cut and dried; the company is certainly confident and says it is receiving over 100 requests for information a day. "Our main target is high-end SOHOs and SMEs and those working at remote sites. The majority of businesses said they needed a service they could get within a reasonable amount of time and would reach them anywhere in the country," says Steve Petrie, chief marketing officer for Aramiska.

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Demand?

However, although the figures would suggest there is a yawning gap in the market, some analysts are sceptical that small businesses want broadband at all. "It's certainly true that there's no solution aimed at the very small businesses and more remote organisations, but many of them don't see the justification for spending the cash," says Caroline Sceats, analyst with Forrester Research.

Sceats believes that part of the reason for this is the lack of broadband-specific applications. "Broadband isn't a revolution, it only offers more of the same if you already have the Internet. If a very small firm is attached to a larger company in some way, for example, a farmer selling to a big grocery chain, and has to use that company's e-business system, then there is a reason to get broadband. But most don't fall into this category," she says.

And, even without taking into account the initial infrastructure investment, Sceats believes it will be hard to make a profit selling satellite broadband to SMEs. "We recently asked small businesses what they'd be willing to pay per month for a broadband service and they said only €25. Plus, the SME market is very distributed, which makes it difficult to work within profit margins. The satellite broadband business needs to become commoditised in order to gain a significant number of customers," she says.

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Markets

While questions remain over the commercial viability of a SME-targeted satellite broadband service, at least Aramiska is giving itself the best chance by launching in the UK. Of the other major European markets: while France has as few broadband opportunities as the UK, its Internet usage is less advanced; and in Germany, although Internet penetration is on par with the UK, it has a far more developed DSL market.

However, even if Aramiska has judged the market correctly, any broadband undertaking carries huge risks - and satellite is no exception. Satellite services have been very slow to market, indicating problems with setting up the infrastructure, including the manufacture of the VSAT receivers.

Aramiska's explanation for the delay is that satellite infrastructure providers have been unwilling to let mass-market services flourish. "Gilat and Hughes have really had the market sewn up," says Petrie. "They've kept it very niche."

Aramiska, which has built its own infrastructure with investment from Whitney and Co, says that the adoption of a new standard based on a digital TV standard - DVB-RSC - will help open up the market. "Europe's leading the way with the new two-way standard. We expect other firms to start rolling out satellite once the standard is established, and then offerings will be judged on service and reliability," Petrie adds. Aramiska believes it is possible to be in profit by 2003 and is aiming for 3,000 new customers a year.

With the imminent arrival of a number of reasonably priced broadband satellite services, one question that has been nagging Europe's broadband community can finally be answered: Is the relative lack of broadband penetration in Europe a factor of low demand or merely a bottleneck in supply? While the answer will obviously be of critical importance to Aramiska and its ilk, the answer will also shed new light on the, as yet unknown, future of the industry.
We will see.

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