Satellite users in South Asia, Central Asia

and Africa, plus those

with maritime operations, will have to live with a shortage of capacity and rising prices for the little capacity that comes onto the market for another two years or so, according to satellite operators and satellite network operators.

It will take that long for spacecraft now on order to be put into service, or for satellite-fleet operators to reshuffle their current businesses to free up space on existing satellites, they said here Sept. 25-26 at the VSAT 2007 conference organized by the Comsys telecommunications consultancy.

In the meantime, demand for C-band and, in some cases, Ku-band will outstrip supply, forcing satellite-service providers to sell the idea of higher transmission

costs to customers accustomed to prices going in the other direction.

“Increasing prices is very unusual for the buyer of IT services,” said Cem Dogrusoz, general manager of Comsat Turkey, a unit of Comsat International. “These customers are used to prices going down. Now we are faced with increased space-segment costs, and the per-megabit gap between the cost of satellite and the cost of terrestrial communications is increasing.”

The January failure at launch of the large NSS-8 satellite has added to a tightening of supply that was visible before then and has only worsened since.

Serge Van Herck, chief executive of Newtec of Belgium, a manufacturer of satellite ground terminals, said some of the company’s customers have been forced to delay introduction of voice-over-IP services that employ satellite capacity because of a capacity shortage.

As is the case with other companies, Newtec has adopted new transmission data-coding standards that make more-efficient use of a given amount of satellite capacity, enabling some customers to fit more capacity into a given amount of leased satellite megahertz.

For operators deploying satellite terminals for the maritime market, the situation is even worse. Tommy K. Dybvad, commercial director at Vizada of France, the result of the merger of the former France Telecom and Telenor mobile-satellite divisions, said Vizada’s maritime customer base could grow faster if more satellite capacity were available.

Vizada delivers satellite bandwidth to 1,000 offshore energy platforms, ferries and commercial freighters. Dybvad said for commercial shipping and offshore energy companies to retain personnel they now must offer video and Internet service in addition to basic telephone and ship-to-shore telecommunications.

“There is no new satellite capacity increase seen in the short term,” Dybvad said. “In many markets it is difficult to get crew to stay without regular access to e-mail and the Internet. The problem with using Inmarsat is that it is a pay-as-you-go service, meaning companies cannot predict their costs. They want a fixed monthly charge permitting them to use all they want.”

London-based Inmarsat is introducing a higher-speed satellite service, called BGAN, for maritime use this year, but Dybvad said the appeal of a flat fee is such that even short-haul ferry operators are using C- and Ku-band terminals that connect to conventional telecommunications satellites.

Inmarsat operates in L-band and its fleet is tailored to provide coverage over mid-ocean regions where most telecommunications satellites do not train their beams because of insufficient demand.

The demise of Boeing’s Connexion program to provide satellite service to commercial airliners – and thus place satellite beams over the ocean flight routes – has dashed the hopes of some maritime users that new capacity would be available over the oceans.

Gerald M. Nagler, director of strategic planning and marketing at satellite-fleet operator Loral Skynet, said it remains uneconomic for a satellite operator to operate a satellite for ocean coverage despite the sharp growth in maritime satellite use.

Even over the heavily trafficked North Atlantic region, Nagler said, the economics of satellite manufacturing would make it difficult to justify a satellite for maritime users.

Bedminster, N.J.-based Loral Skynet, which is being merged into Telesat Canada, is one of the companies that suffered most from the decision by Boeing to cancel its Connexion service. Loral’s Estrela do Sul satellite, whose primary market is South America, included a beam specially designed for Connexion to serve the North Atlantic mid-ocean region.

“Martime VSAT could be a $100 million-per-year business,” Nagler said. “You could see it growing further into a nice, high-margin addition for a satellite operator. But it would be difficult to launch a satellite by itself over an ocean region. The business equation doesn’t work.”