Internet Insight: Satellites Hit New Orbit

New broadband IP services take data transfer a step up.

Beam it up, Scotty. Thats what a growing number of IT managers are saying as they turn to satellite communications to carry enterprise data traffic. These executives are discovering that broadband IP satellite services are easier to deploy and manage and more secure than terrestrial links.

Satellite data networks are hardly new; some large companies have relied on them for more than two decades. To date, satellite technology has been most widely used in niches such as POS (point-of-sale) systems, where hundreds—or even thousands—of remote locations exchange information with central servers.

Retail stores and restaurant chains have been key vertical markets. Best Western International Inc., Casual Male Corp., Sterling Jewelers Inc. and Wendys International Inc. all rely on satellite networks. Now, IP broadband services are motivating even more companies in those markets to look at satellites, and, analysts say, financial services, government agencies, manufacturers and other organizations are also expressing interest.

Dollar General Corp., in Goodlettsville, Tenn., had been relying on dial-up connections each business night to download 25 million transactions, such as new orders and sales tallies, from 5,500 stores in 25 states to its central data center, which processed the information on Hewlett-Packard Co. Unix servers and IBM AS/400s.

"Because of various communications problems, about 10 percent of our transactions were not completed each business night," said Bruce Ash, Dollar Generals vice president of information services. "To collect the information, we relied on manual procedures, which were time-consuming and inefficient, so it became obvious to management that we had to make a change."

In the fall of 2000, the company began looking at terrestrial alternatives such as frame relay and DSL (digital subscriber line) services but found they could not reach all the stores. "We have stores in cities and towns so small that carriers may never roll out broadband services there," Ash said.

Quick, comprehensive coverage has been a key attraction of satellite services. A company has only to connect a satellite dish to its enterprise network to send and receive data. Terrestrial service providers need to run copper wire or fiber-optic cable from their central offices to each customers site. This can be a complex process that requires checking the quality of a line and dealing with an Incumbent Local Exchange Carrier. In addition, sometimes, it does not make economic sense for these companies to take those steps in remote locations with few potential customers.

Since satellite providers dont have to run lines to customers, they can add subscribers much faster and update services more easily than land-based competitors. Whereas an enterprise often faces delays of weeks, sometimes months, with land-line services, satellite connections can be made in days.

"One customer installed 670 satellite links in 23 days," said Fritz Stolzenbach, director of marketing at Spacenet Inc., a subsidiary of Gilat Satellite Networks Ltd., in Petah Tikva, Israel.

Because of these benefits, Dollar General examined broadband IP satellite network services from Hughes Network Systems Inc. and Spacenet. The retailer chose Spacenets Skystar Advantage broadband IP satellite communications network in March of last year, has deployed the network services in 3,700 stores and expects to complete the installation in the summer.

The network has boosted Dollar Generals productivity. "With the satellite links in place, we no longer have to wait until the end of the day to poll our stores for sales and inventory information, and the availability of up-to-date information has enabled us to respond to changing market conditions more rapidly," said Dollar Generals Ash.

Now, Dollar General stores are polled several times a day and when major transactions occur.

However, outside the POS sphere, satellite services have not gained much traction over the years and carry less than 5 percent of all U.S. transmissions. The lack of penetration means many IT managers are unfamiliar with the technology.

"About six years ago, I examined satellite services for another company where I was working," Ash said. "In the end, we went with a terrestrial network because we felt more comfortable with it."

High initial prices have been another deterrent. "Often, companies wont look closely at satellite services because costs—especially upfront expenses—tend to be much more than with terrestrial lines," said Michael Massey, an analyst for Pioneer Consulting LLC, a Boston market research company.

Satellite network equipment typically uses proprietary technology to adapt data transmissions to the media. Not only does this result in higher-priced network equipment, but it also means complex systems integration work is needed to get all the pieces connected. This integration is one reason for the upfront cost hurdle in many cases. However, once the groundwork has been laid, its easy to add new locations at reasonable cost increments.

In contrast, wire-line carriers usually possess plenty of network capacity over which to spread their operating costs and have larger customer bases—and more revenue—than satellite service providers.

Depending on an enterprises network requirements, a satellite link may cost up to 10 times as much as a terrestrial line. Typically, one needs to have a large network, with hundreds or thousands of locations, to drive pricing down so that satellite service costs are comparable to terrestrial lines costs.

But recently, with broadband services, satellite carriers have made progress on pricing.

"Broadband satellite services are now competitive with business-grade DSL services, which are in the [range of] $100 to $150 per site per month," said Spacenets Stolzenbach. At the end of last year, Spacenet announced Connexstar, services geared to companies with 250 or fewer locations. After customers pay an installation fee of $999, the service costs $119 per site per month.

Security is one area where proprietary satellite equipment can carry advantages. Suppliers say their networks are more secure than typical Internet links: A transmission never leaves a satellite network and therefore is not susceptible to intrusion. Also, carriers are able to track transmissions to the device level, which offers a higher degree of authentication than that usually found with Internet connections.

One satellite drawback is transmission overhead. To handle latency, vendors have developed proprietary algorithms, which are layered on top of network transmissions and reduce network throughput.

Throughput is an issue because satellite networks operate like DSLs: Users get much more bandwidth when downloading information—a maximum speed of 40M bps—than when uploading it, where a top speed of 153K bps is possible. Thats because satellite networks were optimized for video broadcasting, where information is distributed from a central system to a multitude of locations.

However, this design meshes well with IP multicasting features, which enable a company to upload one video transmission and download it to a number of remote offices.

So satellite carriers have been focusing on a number of emerging broadband IP applications, such as content delivery networks, distance learning, streaming media and video transmissions to help spur adoption.

In certain cases, satellite services may be preferable to terrestrial networks for these applications. Terrestrial video transmissions can encounter delays or dropped packets, which diminish transmission quality.

In addition, because enterprises find it difficult to ensure that sufficient bandwidth will be available during entire transmissions, they have sometimes been hesitant to deploy these applications.

Because satellite providers control the data traveling over their networks, they can deliver quality-of-service guarantees more readily than terrestrial carriers. Satellite providers can give customers specific network speeds, response times and network availability for a set price per month per site, but terrestrial carriers can guarantee only transmissions on their network segments.

Network backup has been another area of increased interest, thanks in large part to the Sept. 11 terrorist attacks. "Companies ... need to come up with contingency plans where the terrestrial network is knocked out and satellite is the only option," said Steve Salamoff, assistant vice president of business services at Hughes Network Systems, in Germantown, Md.

As potential customers scrutinize satellite data services, they find a market in flux.

Until recently, satellite suppliers, like terrestrial carriers, were building out their networks with the expectation of never-ending double- or triple-digit increases in network bandwidth.

The dot-com bust quashed such expectations, so there is an excess of satellite bandwidth. Satellite bandwidth use rates are in the 60 percent to 80 percent range, so there is no immediate need to expand capacity.

Nevertheless, a handful of satellite launches are scheduled for the next few years. Backed by Microsoft Corp.s Bill Gates and Craig McCaw, chairman and co-CEO of Teledesic LLC, in Bellevue, Wash., Teledesic plans to deliver IP, ISDN and asynchronous transfer mode services next year and broadband IP services in 2004.

Astrolink International LLC, a multibillion-dollar joint development of Lockheed Martin Global Telecommunications Inc.; Telespazio (Telecom Italia Group, of Rome); and TRW Inc., in Cleveland, plans to launch satellites next year to support its international broadband wireless services.

These services are based on the Ka band, which promises to deliver faster, more reliable transmissions than the Ku and C band frequencies traditionally used for satellite services.

Whether or not vendors make good on such promises, Dollar General said it expects to expand its use of satellite services. The company now relies on Spacenets Skystar Advantage service for interactive data applications, such as store polling, inventory management, supply chain management and check authorization.

"Once our data applications are completely installed, we will take a closer look at using the network for additional applications like voice services," Ash said. "Eventually, we expect satellite links to carry the bulk of our data, voice and video traffic."

Paul Korzeniowski, a free-lance writer living in Sudbury, Mass., specializes in networking issues. He can be contacted at