With a vast geographical expanse and strong demand for reliable communications infrastructure, India is one of the biggest VSAT (very small aperture terminal) markets in the world. VSAT is an interactive data communications system that uses a satellite and is ideal for providing connectivity in remote regions.

Offered in the C, extended C and Ku frequency bands, VSAT deployments have been growing steadily across the country. The growth has largely been aided by the regulatory initiatives of the government. Reforms, including a revenue-sharing licence model and the decision to use the Ku-band from foreign satellites (instead of restricting the provision of the necessary frequencies only through the Indian Space Research Organisation [ISRO]), as well as allowing smaller customer terminals and higher bandwidth transmission have further driven VSAT growth. In addition to the regulatory reforms, the provision of a greater number of high-powered satellites across India has increased bandwidth availability, thereby lowering bandwidth costs.

The success of the government's eGram project has also established the reliability of VSATs in promoting broadband connectivity and helping the government achieve its target of providing 250 million broadband connections by 2012.

Further, the growing demand for higher speed services and new value-added applications such as two-way video-conferencing, voice over internet protocol services and other real-time applications that require higher bit rates and faster links have played a key role in increasing VSAT uptake. A key driver for VSAT in the country has been the enterprise segment, particularly the banking and financial sectors. The delicensing of ATM networks has resulted in a strong demand for VSATs since they provide a reliable medium for connecting ATMs to the central ATM switch.

Market size

The country currently has an installed base of approximately 100,000 VSAT terminals, which is poised to grow at 20 per cent to reach 120,000 terminals by end-2010. The industry has witnessed considerable growth over the past few years with its market value increasing at an average growth rate of 15.5 per cent from Rs 4.43 billion in 2005-06 to Rs 6.5 billion in 2008-09.

The subscriber numbers have also grown steadily, from 95,035 users in December 2008 to 116,666 in December 2009, an increase of 22.76 per cent.

 Key operators

The VSAT market in India comprises nine licensed service providers with Bharti Airtel accounting for the largest market share of around 30 per cent as of December 2009. The other prominent players in this segment include Hughes Communications (33,833 subscribers), HCL Comnet (27,567) and Tatanet Services (11,555).

The Bharti Group's VSAT division replaced Hughes Communications as the market leader in 2008-09, primarily on account of the large number of contracts the operator was awarded during the year, including the deployment of 13,716 VSAT stations in Gujarat for the state government's eGram initiative. This was further supported by the shutting down of about 2,850 of Hughes Communications' VSATs since most of these were owned by lottery agents who had to switch their businesses in the wake of falling profits on account of the global economic downturn.

 Emerging trends

With the opening up of the Ku-band by the government in 2001, VSAT providers' reliance on imported equipment has increased. This is because the Ku-band has helped increase the bandwidth limit to 512 kbps in line with global standards.

Over the years, there has been a gradual transformation in the role played by VSATs. They are increasingly being adopted by operators to support the traditional leased line networks as well as for providing backhaul to remote locations that are not accessible by fibre or microwave. While Bharat Sanchar Nigam Limited (BSNL) is the largest user of VSAT among Indian operators, Hughes Communications is also working with leading operators such as Reliance Communications, Vodafone Essar, Idea Cellular and Aircel for deploying VSATs.

VSAT is playing a complementary role in supporting the more prevalent terrestrial solutions. This has led to the emergence of hybrid networks, whereby the telecom operators provide a large part of the infrastructure while the VSAT providers offer a managed network service comprising satellites as a back-up for urban areas and as a primary medium in rural areas.

Satellite broadband is also being used to offer rural telephony, e-distance learning, telemedicine and other such services as a means of increasing broadband usage in the country. VSAT, which offers greater bandwidth efficiency, has enabled government and educational institutions to expand network applications and provide virtual private network access to students and teachers in remote locations who can benefit from videoconferencing and data-sharing applications. Many state governments have developed state-wide area networks, customised applications and data banks using VSATs.

The fall in prices of VSAT equipment as well as the reduced cost of VSAT site deployment has driven the uptake of this technology. VSAT equipment prices have fallen considerably as a result of the government's policy shift to a revenue-sharing agreement for VSAT service providers. This, in turn, has reduced the cost of satellite bandwidth, which has increased VSAT uptake significantly in the country. For instance, a demand assigned multiple access terminal, which earlier used to cost Rs 1.6 million, now costs Rs 0.8 million, whereas the prices for time division multiple access have fallen from Rs 0.8 million to Rs 0.125 million. However, despite being on a decline, the prices are still too high for home users.

Over the past decade, the cost of deploying a VSAT site has fallen at the rate of 20-30 per cent per annum. The decline has been particularly sharp since 2001, after broadband technology was introduced on VSATs. With an increase in volumes, this cost is expected to come down further from the current level of Rs 40,000.

With this trend likely to continue, industry analysts have predicted that the number of VSAT deployments is likely to double in the next few years, resulting in a rapid expansion of the VSAT market.

There is, meanwhile, a movement towards outsourcing of VSAT services. Currently, the number of shared hubs is over three times that of dedicated hubs. This is primarily on account of the huge overhead on account of licence fees in the dedicated hub model.

 Issues and concerns

While VSAT offers several advantages, especially in rural areas, there are a few issues that need to be addressed.The government needs to take a decision on issues such as the opening up of the Ka-band to lower bandwidth congestion and look into the long-standing industry demand for an open sky policy.

At present, VSAT providers are required to purchase transponder space only through ISRO for security reasons, and are not permitted to directly connect with foreign satellites. This is despite the fact that foreign satellites are more cost effective, both with regard to the transponder and throughput. Therefore, early implementation of the open sky policy is imperative.

The growth in the number of direct-to-home operators has put pressure on the existing bandwidth capacity. This bandwidth constraint, in turn, limits the utilisation of a VSAT link. For instance, at some places, the VSAT link availability is only 90 per cent, implying that the link may not be available for up to 72 hours in a month. In contrast, the multi-protocol label switching (MPLS) fibre optic link offers about 99.5 per cent availability.

In addition, the high cost of VSAT bandwidth makes the use of leased lines or MPLS connectivity much more economical for locations that are accessible via normal infrastructure such as optic fibre cable, copper or wireless. Moreover, bandwidth availability in the Ku-band is a major constraint and the industry is keenly awaiting the launch of more satellites to bridge this demand-supply gap.

VSATs also suffer a significant number of breakdowns during heavy rains, mostly on account of the seepage of moisture into the outdoor components. They are also subject to signal attenuation due to rains and storm or snow, either in the path of the signal or at the antenna.

 The way forward

The VSAT sector is projected to witness substantial, though not exponential, growth in the future. However, its use is likely to be restricted to meeting the demands of rural regions.