In a country constantly on the lookout for reliable and economic communication mediums, the Indian VSAT industry is finally expecting great times ahead. Srikanth R P reports

The government’s decision to change the licensing model from a fixed license fee to a revenue-sharing model has given the much-needed fillip to the industry

VSAT service providers are no longer positioning the VSAT only as a connectivity medium, but are now innovating and developing new value-added applications

Joyjit Chatterji says VSATs provide the most cost-effective and reliable solution for connecting ATMs to the central ATM switch

In terms of market potential, India is seen as one of the biggest markets for VSAT service providers. Huge geographical spread, low teledensity, and a strong demand for reliable communication infrastructure (thanks to unreliable legacy communication infrastructure set up by government utilities), have meant that VSATs are a natural choice in India.

VSATs were first introduced in India in the mid-1980s when district headquarters’ and state capitals were connected with New Delhi using NICNET, India’s first network which used VSATs. The real growth came in 1995, when the industry was opened to private players. But a series of roadblocks resulted in the industry fighting for revenues, and it’s only now that things are on the upswing once again for VSAT players.

Positive policy changes
Some recent policy changes have been extremely beneficial for the industry. The government’s decision to change the licensing model from a fixed license fee to a revenue-sharing model has given the much-needed fillip to the industry. Earlier, for every installed VSAT, service providers had to pay a fixed license fee of Rs 50,000. But with the new policy, service providers have to fork out only 10 percent of their revenues as license fees.

In addition, the government’s decision to allow use of the KU band from foreign satellites has spurred further growth. The government has also lifted the 64 Kbps bandwidth barrier and has upped it to 512 Kbps. These positive changes came as a breath of fresh air for the beleaguered industry, which responded with a growth of 25 percent in 2001-02.

Agrees I V Rajesh, general manager, HCL Comnet, “The government’s transition from a license raj to revenue-sharing was a huge boon for the VSAT industry. Prior to this, the industry had performed dismally in the year before, registering a growth of less than one percent.”

I V Rajesh says that the transition from a licence raj to a revenue sharing model was a huge boon for the VSAT industry

Adds Joyjit Chatterji, general manager, sales and marketing, Comsat Max, “The VSAT scenario in India is very bullish today, with corporate houses investing on automating their supply chains and focusing on reaching out to consumers with a minimum number of layers. There is also an increased requirement for reliable and cost-effective connectivity solutions which are not restricted to geographic boundaries.”

This optimism is shared by Hughes Escorts Communication, which expects to double its total installed base of 10,000 VSATs (from 1995 till date) within this fiscal itself.

VSAT service providers have also welcomed the government’s decision regarding extension of KU band services. Previously, VSAT service providers could operate only on the 4-5 GHz and extended C band, which effectively meant that India was the only country where extended C band was used. This meant that equipment manufacturers had to make dishes specifically for India and were given no special incentive to do this. But with the government allowing KU band transponders in the country, global equipment manufacturers can ship cost-effective dishes, which can use the 11-14 GHz band. VSATs have also become cheaper, with terminals now available at around Rs 1.25 lakh. As prices come down, VSATs are increasingly being targeted at SMEs and dealer distribution networks.

While the policy changes have been extremely positive, more such changes are needed to help the industry grow faster. For instance, industry veterans want duties to be reduced to levels prevailing for IT equipment, and permission to allow service providers to directly negotiate with approved foreign satellite providers.

Are leased lines a threat?

Ashish Chowdhary expects retail segments such as bank ATMs, online lottery and education to drive VSAT adoption

While leased lines were once thought of as a threat to the VSAT industry in India when corporates like Reliance and Bharti began wiring up the country, the ability of VSATs to provide a quick, cost-effective solution to remote destinations has swung the tide in favour of this industry. For example, while a VSAT can be installed instantly, getting a leased line installed can take months. It is this factor that made the National Stock Exchange (NSE) opt for a VSATs to reach the length and breadth of the country in a quick time-frame. There was no better technology choice than VSATs, which allowed NSE to set up terminals even in remote towns. Today, NSE’s VSAT network has grown to a massive 3,000 sites, making it Asia’s largest VSAT network.

L&T’s Engineering and Construction Divis-ion is another organisation that uses VSATs in an innovative way. Most of L&T’s projects are in remote locations where there are no telephone connections. VSATs come to the rescue and have helped in establishing connectivity with various business partners. VSATs are installed on a project basis, and are taken off once the project is over.

And contrary to expectations that falling prices of leased lines would pose a threat to the VSAT industry, more and more VSATs are being added as redundancy links. Agrees Ashish Chowdhary, vice president, DirecWay Enterprise Services, Hughes Escorts Communica-tions, “Internationally, VSATs have been used to complement enterprise networks, where the core of the network comprises terrestrial networks and the periphery includes extended enterprise suppliers, distribution channels and retail outlets which are connected via satellite. India too is moving towards such a scenario.” Chowdhary expects retail segments such as bank ATMs, online lottery and education to drive adoption.

Key user sectors
Banks: While enterprise usage will remain a key driver for VSATs in India, sectors like banks are triggering a boom. Both private and public sector banks are rapidly expanding their ATM networks and are relying on VSATs for providing connectivity. Explains Chatterji, “Banks over the last three years have installed more and more ATM machines. This has allowed them to come closer to their customers without having to open branches everywhere. VSATs provide the most cost-effective and reliable solution for connecting ATMs to the central ATM switch.” One of the biggest orders for deployment of ATMs using VSATs was completed by HCL Comnet when it implemented a 600-site broadband satellite communications network for State Bank of India.

Distance education: This is another big sector that could benefit from the usage of VSATs. Rajesh of HCL Comnet believes that interactive distance learning will be a key driver of VSAT usage in the country. Geographically restrained and rigid classrooms could be replaced by the concept of virtual classrooms providing cost-effective information dissemination, besides significant improvement in quality of content. The bullishness in this sector is seen by the fact that two major players in the

VSAT space HCL Comnet and Hughes Escorts Communications, have already launched their interactive distance education programmes.

The Indian Institute of Management, Kozhikode, recently launched India’s first interactive management education programme through Hughes Escorts Communications’ (HECL) DirecWay broadband satellite-based education and training service. The Executive Manag-ement Educ-ation Programme (eMEP) is a year-long post-graduate certificate programme being delivered in nine Indian cities. The 240-hour course will be held twice a week, and students can interact with experts during class through voice or e-mail. HECL has also collaborated with Apollo International to offer MBA degrees from Apollo University Global Education for working professionals in India.

Competitor HCL Comnet has launched SpaceTeach, a VSAT-based interactive two-way distance education application for enabling connectivity for distance education. This project has been implemented in association with IIT-Bombay. Currently, lectures are being flashed from IIT-Bombay to three centres one in Mumbai, Indore and Nagpur. Adds Rajesh, “SpaceTeach, through the usage of VSATs, provides the flexibility for institutions to implement virtual training programmes. The satellite video multicast facilitates creation of a national virtual classroom. This means that a good instructor need not be restricted to a region and can reach out to the entire nation through this medium. Also, a centralised instruction resource can bring about the best quality and content for the audience.”

One more noticeable trend is the fact that all the key players are no longer positioning the VSAT only as a connectivity medium. The concept of selling VSATs as a medium has given way to value-added applications offered over VSAT. All the major players are constantly innovating and developing new applications on VSAT. For example, Hughes Escorts Communications through its DirecWay Satellite broadband platform will offer value-added services like managed network services, data centre services, global education and telemedicine. Such services would play a key role in the future and the company expects value-added services to contribute 10 percent of revenue by the next fiscal.

• Rural telephony: is another sector that can power the growth of VSATs. Private basic operators are under tremendous pressure from the government to fulfil their Universal Service Obligations. And VSATs are the most cost-effective medium to address this issue.

A case in point is the installation of solar-powered VSATs by HCL Comnet for Tata Teleservices in around 1,000 villages in Andhra Pradesh. Explains Rajesh, “VSATs are the most cost-effective medium to connect extremely rural and hilly areas without proper transportation. HCL Comnet’s project is the first of its kind in India based on Gilat’s DialAway technology, which uses solar panels capable of giving a 72-hour backup without recharging the battery.” In future, this same network can be used by Tata Teleservices to provide high-speed Internet connectivity.

With the average cost of VSATs coming down and the number of applications rapidly increasing, the VSAT industry is definitely beaming the right signal