The original concept for the Internet service provider was relatively simple in concept — one or two T1 connections to the Internet backbone, a large number of telephone modem banks, and subscribers dialing in on 19.2 to 56 kbps telephone lines for Internet connectivity. While 56 kbps connects are sufficient for basic static Web page access, market demands and service offerings are becoming much more complicated as subscribers learn about broadband, expect to listen to their radio broadcasts, use video streaming, buy software or download large files off the Internet.
Now ISPs need to consider what their role is with respect to cable, DSL and satellite. ISPs will not be able to afford a brute force approach of just adding more backbone capacity. Satellite, especially as an overlay distribution media, is a key technology that demands consideration. It provides instant infrastructure with considerable bandwidth and is especially useful for streaming and multicasting content.
On a global basis, the Internet service provisioning business can be generalized into two basic models. In the more mature markets of North America and Europe, ISPs are facing the challenges of consolidation, market demands for service differentiation, and subscriber acquisition and retention. These ISPs have been in business for several years and want, not only to remain profitable, but also to move forward in market share and revenue growth.
The second model covers the rest of the world (ROW), where ISPs’ foremost concerns are providing basic connectivity and establishing services on the frontiers of Internet access. These ISPs are literally establishing the edge of the net over wide geographical areas of Asia, Latin America, and Africa.
The trend for Internet access across Asia is individuals sharing ISP accounts at their local cyber cafe — typically four to five users per account. As the demand for Internet access spreads across Asia, India, and other infrastructure poor countries, kiosks and cafes will be spreading like wildfire.
Some recent market studies show that satellite will overtake DSL in some markets as the access technology of choice. And this seems very plausible if the terminal economics change in the near future as they seem to be indicating.
BroadLogic’s (www.broadlogic.com) chief executive officer, Toby Farrand, recently stated, “We truly believe that satellite will surpass DSL in market penetration for Internet access in certain markets. BroadLogic is going to radically change the economics of the terminal equipment. It used to be that a 2-way satellite terminal capable was $5,000. We fully expect this price to drop below $1,000 in large OEM quantities and probably much less than $1,000. This, along with the new spot beam and Ka-band satellite technologies is significantly changing the economic model right under our (collective) feet.”
And BroadLogic is a key player in providing receiver technology to Gilat, who is in the midst of a 20,000 subscriber U.S.-based beta trial for its Gilat-to-Home service (www.gilat2home.com). It will take a number of months for them to roll out the service and make adjustments. Once MSN, Echostar and Gilat process the lessons learned it will be available instantly for consumers to purchase through every Radio Shack (Tandy) store, every Dish (Echostar) distribution channel and to existing MSN subscribers. There’s no need to wait for streets to be torn up. National service rollout is expected at the end of 2000. Unofficial pricing places the monthly service at $60 and equipment cost below $400, which is competitive when compared with the $40-$50 monthly fee for cable and DSL access.
As bandwidth hungry content and new applications become more in demand, the challenges facing ISPs grow — especially those located in the more mature markets. According to a recently released report on Satellite Mediacasting from Pioneering Consulting (www.pioneerconsulting.com), bandwidth requirements to support this new demand will rise exponentially over the next five years.
While it may not seem apparent, ISPs in the rest-of-world market (ROW) have the advantage.