Jidaw Systems

$/Mbps - via satellite should be the same everywhere, or?

In terms of IP-data a 1Mbps (Mega or million bit per second) or 1 data signal is the same in all places, on all continents and through all mediums be it, copper, fiber or satellite. Yet, when considering IP data delivery via satellite, we have seen significant price differences in terms of the market $/Mbps price. The question now is: “Why the price
difference between different providers, what are the reasons for this and is it justified?”

This article provides an insight to the answer of these questions and discusses the different technology, business and industry parameters and factors that influence the final $/Mbps price to the market. Once we understand the cost model of delivering IP-services via satellite we will be better equipped to make buying and selling decisions with
regards to IP-based satellite services.

As a reference, and at the risk of some over simplification, the $/Mbps cost model for IP-services can be defined as; the cost of the Internet, plus the hub equipment, plus the teleport plus the satellite and network operational cost.
These components all contribute to the final price of the 1Mbps of IP bandwidth. A closer analyses of these different cost components will reveal that the cost and service criteria of different networks greatly differ which leads to understanding the reasons why the market price of 1Mbps will be different for different networks.

The Internet source is the basis of all Internet VSAT delivery services and is critical to the final experience of the enduser.
Although the price of first tier Internet in the global market is almost
constant the cost components are the infrastructure relating to the management and service-level-agreements associated with the Internet access. Aspects such as the availability of a public IP number to all users, core network redundancy and ensuring an unsaturated supply of bandwidth at the lowest possible latencies are all aspects that translates into infrastructure, equipment and cost.

The VSAT Network Hub is the next critical cost factor that has a direct
impact on the price per Mbps, and this does not only mean the capital cost of the equipment.
In very brief terms the function of the hub equipment can be defined as the “central controller” of the VSAT network that manages, defines, controls and monitors all communication from the central point to all the thousands of remotes in the field. Although the capital costs of a hub is now a small number and the cost thereof must be recovered in the price per Mbps, the more important aspect is that hub equipment also determines the characteristics and performance of the networks and that this has an significant impact on the final $/Mbps price.

The Teleport facilities and services are by far the aspect that is mostly underestimated. Normally marketing and sales material will focus on the satellite and equipment but very seldom will the actual teleport services be defined or even mentioned.

The simple reality is, no matter how good the equipment or satellites, if the people who manage and operate these networks do not provide an excellent service then the network will simply not perform. Given the investment required to ensure the continued availability of engineering resources it is only logical that this will impact on the final $/Mbps price.

The Satellite cost parameters is very complex and actually deserves a
complete detailed analysis, which cannot be accommodated in the scope of this article. However, apart from factors such as market demand, availability, coverage area, life-cycle period, time to market etc.
one aspect that must specifically be noted, is that the cost for satellite capacity is determined by energy and not bandwidth.

Yes that is correct, in satellite systems the cost is directly linked to energy that relates to the bandwidth as well as the power level of the signal. Further more, since the power level of the signal is determined by reliability requirements, associated ground station antenna sizes
and transmit power it follows directly that to operate reliable networks the network designer must either use more power on the satellite, or bigger ground station equipment - both items which will directly impact on the price to market. All of this simply means, more reliability, more power, higher cost of either the satellite bandwidth, the remote equipment, or both.

Network Operations is the final, but most critical, cost component of
provisioning of satellite network services.
As in the case of teleport operations it's about providing the engineering and operational expertise that is required to service customer trouble tickets, provide field support for remote implementation etc. All of these items require highly skilled and experienced engineering teams supported by an organization, which has the capability and process to
provide the service required to ensure the final successful delivery.
In summary it should be noted that satellite networks comprise of a number of very definite subsystems and operations, all of which contribute to the final $/Mbps price to the market.

Since each organization will address these aspects differently, it should be clear that the $/Mbps price cannot be the same for all service providers. In the final analyses, like with all other products in a free market, quality and demand will determine price and availability.

Contributed by Q-KON. Q-KON is a South African based turn-key
solutions provider who specializes in the supply of VSAT and Wireless
connectivity solutions for ISP's, Internet Cafe's, Corporate Networks & Telco Providers in the emerging African market.



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