A tiny Northern Virginia company hopes to turn a profit this year selling satellite broadband services by the megabyte rather than for a flat monthly fee as is the standard industry practice.
On-Band of Vienna, Va., is targeting organizations needing a backup for terrestrial connections and businesses that experience periodic spikes in data transmission requirements. The company has two full-time employees supported by 10 contractors and is in its second year of operation.
On-Band customers pay a basic monthly charge of $99 and $15 per megabyte of data used. Though customers can choose an unlimited bandwidth option with a dedicated network at the rate of about $18,000 a month, the service is not designed for organizations that routinely need to move large amounts of data.
“It’s a business model similar to that of a mobile phone user,” said Vince Walisko, founder and chief executive officer of On-Band. He likened On-Band’s by-the-megabyte fees to additional minutes and roaming charges associated with cellular telephone service contracts.
Walisko said the inspiration for On-Band came partly from previous jobs selling transponder capacity to broadcasters, some of whom inquired about on-demand services. “Everything came together for me when I ran the numbers and saw how much more revenue could be derived by this business model … while still giving many customers more value for their money,” he said.
On-Band services are marketed through arrangements with satellite operators and solutions providers. “We are a small, independent company that can sit between the various resellers and satellite capacity providers without competing with them on their primary service offerings,” Walisko said.
One On-Band reseller is Arrowhead Global Solutions, a Falls Church, Va., firm that provides communications solutions primarily for U.S. Defense Department customers. Abdul Rana, Arrowhead’s chief technical officer and senior vice president , said his customers have been seeking a satellite broadband-on-demand service for years.
“I believe there are several of our customers that need the true on-demand broadband service,” Rana said. “The tradition has before this been — whether or not they have been using the service — they’ve had to pay full-time charges for the bandwidth. Almost every one of our customers has expressed a desire to use this kind of system, if it was available.”
Rana declined to predict how much business On-Band might bring in for Arrowhead this year.
In addition to providing backup capabilities, On-Band is a good fit for applications that typically require a small amount of bandwidth but occasionally need to transmit large chunks of data. Pipeline monitoring is an example, he said. Such a system might transmit only a tiny amount of data every hour or so to show that a pipeline is in service, but during periodic inspections or in the event of a rupture , the system could transmit much larger volumes of data, he said.
Max Engel, a broadband and satellite industry analyst for the market research firm Frost & Sullivan of San Jose, Calif., is nonetheless skeptical of On-Band’s market appeal. “When you look at broadband access in general, that’s the way we used to do it, and you don’t see anyone clamoring to go back to the old way,” he said.
Engel said terrestrial services backed by satellite already are available in single packages from other providers. “Just offering satellite seems less compelling because someone else can give you the whole package,” he said. “I can see the niche they’re aiming for, and it seems a perfectly reasonable product, but my initial inclination is to say that it’s probably too late in the cycle to be tremendously successful.”
On-Band’s current geographical coverage area includes North America, Europe and the Middle East, and the company is working to secure coverage in Africa and Asia through revenue-sharing agreements with various satellite firms , Walisko said.
Though Walisko declined to identify his customers by name, he said they have included companies doing logistical work, aerospace and insurance companies using the service for data archiving , government agencies and news organizations .
Although unusual, On-Band’s business model is not unique. Microspace Communications Corp. of Raleigh, N.C., has offered usage-based satellite broadband access as an option since around 1998, said Joe Amor, the company’s vice president and general manager. That service, called Velocity File Forward, is used by eight to 12 networks with thousands of end users, but makes up a small portion of Microspace’s overall business.
It is popular with operators of small networks and for applications such as broadcasting advertising to retailers , Amor said. “We’ve been happy with it because it allows start-up ventures to gain the benefit of satellite broadcasting without huge capital expenditures,” he said.
Walisko said he expects On-Band to see its first profit in 2006, as it is adding resellers continuously and is close to signing a major U.S. -based insurance company as a client.
On-Band got a boost during Hurricane Katrina last September, working with companies like Cisco Systems of San Jose, Calif., and SWE-DISH Satellite Systems of Sweden to provide broadband services to disaster-relief workers. One On-Band system was used to assist the Mississippi Highway Patrol in Gulfport and another aided volunteers stationed at the Charles B. Murphy Elementary School in Parlington, Miss., Walisko said.