VSAT operators angry with satellite operators poaching their customers

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WASHINGTON — Network service providers are fed up with satellite operators going around them to sell capacity straight to their customers.

“There are certain satellite operators that are coming down the value chain and there are other satellite operators that are true to just being an operator,” Jason Juranek, chief executive of telecom network solutions provider Globecomm, said Nov. 15 at the VSAT Congress here.

VSATs, or Very Small Aperture Terminals, are two-way satellite ground stations commonly used to transmit data, voice and video to and from remote sites via dish antennas typically ranging from less than a meter to a few meters in diameter.

Juranek was among more than half a dozen private network operators expressing concern that a capacity glut is making stressful market conditions that turn satellite operators into direct competitors.

Many of those VSAT network operators have already expanded into managed services, offering additional telecom services such as fiber and wireless, but even with that diversification, are feeling pressure from satellite operators intruding into their business.

Fixed satellite services operators often sell capacity directly to broadcasters and governments, but frequently rely on satellite network operators to reach other connectivity markets. Those network operators blamed price erosion from an oversupply of capacity as the reason some satellite operators are seeking to bypass them and go straight to end users in markets like mining, oil and gas, and construction, among others.

“The whole satellite operator market is in a state of panic,” said Alan Afrasiab, CEO of U.K.-based teleport operator Talia, pointing to lower prices and the demands of shareholders on publicly traded satellite operators. “The only thing they think of is going down [the value chain], but soon they realize, and some of them already have — it’s not that easy.”

Sagenet executive director Daniel Levi said satellite operators need to decide on how they approach different markets, rather than confusing managed services providers as to whether they are friend or foe.

“Satellite operators need to understand their business models and how they want to engage us,” added George Knizewski, CEO of Knight Sky, a company whose business is around 90 percent government customers. “I haven’t heard from a lot of satellite operators how they want to engage us as either resellers or value added [re]sellers.”

Satellite network operators said they are investing in greater specialization so that the services they provide will add meaningfully more value to customers who chose to go with them instead of buying capacity directly from satellite operators.

“A complete network for mining companies in different countries with licenses, with customs issues, with installation, with local service 24/7 in the country … it becomes more complex and that is the value of all of us here,” said Guido Neumann, CEO of CETel, a German teleport operator with business across Africa and the Middle East.

Neumann argued that the complexity of new technologies such as low-Earth orbit satellites and flat-panel antennas plays to the strengths of service providers that have expertise with establishing networks. In countries where it is difficult for satellite operators to do business or have dedicated staff on the ground, network operators can act as partners, he said.

Hank Zbierski, chief catalyst of IsoTropic Networks, said his company has its own private aircraft that it will use to fly out to customers immediately whenever a challenge arises. That level of service builds trust that keeps customers from defecting, he said.

“As a managed service provider we do treat the satellite capacity as a commodity, as a raw ingredient to our end solution, but what we are spending a lot of time in is the value added applications as it relates to our products,” said Juranek. “We have a software development team, and so we develop proprietary applications that make us much more sticky with our customers. It definitely sets us apart as it relates to the satellite operators coming down.”

Some network operators doubted satellite operators will have success in reaching over them to get downstream customers.

“We don’t think satellite operators would be successful moving down market without working with us,” said Mauricio Segovia, CEO of Colombia-based Axesat, a company with business throughout much of Latin America. “ What satellite operators do if they move down is not our primary concern.”

Talia’s Afrasiab said he’s seen a “huge change” within the last three to four months alone where satellite operators are reverting back to previous business models.

Speedcast CEO PJ Beylier, argued that it is high-time for consolidation among satellite operators in order to cut down on capacity oversupply.

“They are all throwing the same capex at the same satellites over the same regions, and that’s driving oversupply more and more,” he said. “I think it’s time for the satellite operators industry to consolidate and I think it’s going to happen. You need one deal among the big seven large operators — Intelsat, SES, Eutelsat, Telesat, Inmarsat, ViaSat, EchoStar — you need one deal to happen between two of them and I think things will accelerate quite quickly.”