SATELLITE INTERNET HASN'T CAUGHT ON IN RURAL AREAS, EXPERTS SAY
Satellite Internet service may not be “savior for broadband service in rural areas that it’s made out to be,” analysts and industry officials told us, because high costs of equipment and service don’t make it that attractive to users. Rural areas haven’t provided financial windfall that many companies had anticipated when they started advocating satellites as best way to provide rural and remote areas with broadband service, analysts and industry officials agreed. High cost of launching satellites, tedious and cumbersome licensing process at FCC and lack of available bandwidth have made satellite Internet less attractive as solution or business. Dial-up service remains most popular form of connectivity in rural areas, research shows. Satellite Internet service “isn’t something a lot of rural Americans care about,” Yankee Group analyst Michael Goodman said: “Right now, it just doesn’t make economic sense.”
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EchoStar, Northpoint, NRTC, Pegasus and Skybridge are among growing number of companies that have pushed FCC for access to rural markets using satellites. However, few have moved past planning stage. Telecom slump and slow rollout of service seem to have stymied interest in Wall St., another analyst said. EchoStar and DirecTV “own all of the satellites and they are embroiled in a merger,” an industry executive said. “Is it in their best business interests to deploy broadband service to rural areas? It takes a lot longer to set up something with a computer than with a TV. They have most of the spectrum, but they have been dragging their feet because they want everyone to believe they need more spectrum” to provide broadband service.
Satellite Internet has changed from its early days when it was delivered with satellite downlinks and landline uplinks that were costly, Meta Group analyst David Willis said: “Satellite is the Internet service of last resort,” but technology is advancing, even though it lags far behind other forms of broadband service, including DSL, which is cheaper and more efficient. Installations, branding and product marketing still are major problems for satellite carriers, Willis said: “It’s not that DSL has been blinding successful. Satellite players are just far behind.” As a result, satellite broadband is “where DSL was 2 years ago,” Willis said. “They aren’t ready to be a competitive alternative to DSL or cable modem.
Willis said satellite companies had “low penetration market” because of “a lack of awareness” and service is concentrated primarily in remote areas. Traditional “word of mouth” advertising hasn’t taken hold because “there aren’t as many neighbors to talk to.” Satellite companies “have a much bigger hurdle than AT&T or Verizon, which has a fully integrated operation,” Willis said. Industry source cited problems of DirecWay and Starband, which have had difficulty attracting subscribers. EchoStar acquisition of DirecTV probably wouldn’t help either, Willis said. “They are just saying what the FCC wants to hear.”
Launch of Ka-band service may drop costs for operators and consumers, Goodman said, resulting in many subscribers’ being connected to Internet via dishes. Satellite Internet now costs $60-$70 monthly for service plus $400 for receivers. Analyst said Ka-band service would attract 3-4 million users by 2007 if it were launched next year as scheduled. Currently, high cost of 2-way service impinges on quality of connection. “You can’t stream as efficiently,” analyst said. “You run into bandwidth issues” using satellites. Number of satellite Internet users may increase, but “they're never going to supplant wireline broadband,” he said.