Expert Says Satellite Operators Will Answer for Pricing Practices

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LONDON — Providers of data networks in regions where satellite capacity has been costly and hard to find are likely to take vengeance on satellite fleet operators that have used the supply shortage to maximum pricing advantage when the shortage ends by 2012, a satellite data networks expert said Sept. 16.

“There are going to be some scores that are going to be settled” when satellites now under construction reach orbit in the next couple of years, said Simon Bull, senior consultant with Comsys Ltd., which produces a biannual survey of global supply and demand for satellite ground networks.

Operators of very small aperture terminal (VSAT) networks have complained for years that some high-growth regions for their businesses have been held back by the cost of satellite capacity. One reaction has been to embrace new technologies to maximize the amount of capacity they can squeeze out of a given satellite transponder.

But amid continued strong demand for VSATs for corporate and government voice and data networks, VSAT operators say are still being stymied by the absence of satellite capacity. And when that capacity is available, Bull said, satellite operators have chosen to charge the highest possible price rather than to establish strategic partnerships with VSAT companies.

“Most VSAT operators’ biggest concern is: Where are we going to get the space segment?” Bull said here during Comsys’ VSAT 2009 conference. “There is a concern that satellite operators are not treating the data suppliers very well. These data suppliers are going to make future partner decisions based on their experience in the last couple of years, and some satellite operators are going to regret” having chosen short-term pricing advantage over longer-term partnerships.

In the high-demand regions, especially Africa, VSAT network operators have been comparing satellite fleet operators to banks in their short-term thinking, Bull said.

Bull acknowledged that one reason VSAT operators have been stuck with high prices is that they have declined to sign multiyear contract commitments with satellite owners, preferring to wait for an anticipated supply increase to bring down prices.

Numerous satellite operators are planning to launch new capacity serving Africa, and some VSAT network providers are counting down the days to when today’s seller’s market becomes a buyer’s market, Bull said.

Meanwhile, the lack of available satellite capacity in certain regions did not stop the global VSAT hardware industry from returning to growth in 2008 after a decline in shipments in 2007. Some 380,600 VSAT units for business networks were shipped in 2008, up 22 percent from the previous year.

Hughes Network Systems of Germantown, Md., maintains its dominant share of the corporate-VSAT market, at around 49 percent, according to Comsys. Gilat Satellite Networks of Israel, which is on the rebound after a couple of difficult years, was in second place, with 27.3 percent of shipments, followed by VT iDirect of Herndon, Va., with 10.9 percent. ViaSat Corp. of Carlsbad, Calif., which in the past couple of years has shifted focus away from the corporate-VSAT market toward the consumer broadband market, had a 4.7 percent share.