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Does Europe need satellite broadband to provide Internet access for everyone?

In November 2010, French telecommunications supplier Eutelsat will launch its latest satellite from Kazakhstan, attached to a Russian Proton rocket.

The KA-SAT is a multi-spot telecommunications satellite capable of transmitting 80 ‘spotbeams’ of broadband signal to the surface of the earth, each one spanning an area of around 500 km in diameter.

With a total throughput of 70 gigabits a second, the satellite will support Eutelsat’s Tooway consumer broadband service, offering customers in spotbeam areas across Europe download and upload speeds of up to 10Mb and 4Mb per second respectively.

The service, Eutelsat claims, will bring broadband-speed Internet connectivity to households that traditional, wired services cannot reach. According to US-based analyst Northern Sky Research, around 30 million Europeans live in areas too remote to access such services.

The company does not present its services as an alternative to mainstream broadband offerings. “It’s not our target to compete with the big telcos in this part of the world,” says Jean Francois-Fremaux, Eutelsat’s business development director.

Instead, he says it is simply closing the ‘digital divide’ in broadband access, something that governments across Europe have been keen to support. In Finland, for example, access to broadband speeds of at least 1Mb has been declared a legal right.

But are satellite Internet services really the answer? Mike Philpott, a telecommunications analyst at Ovum, is not convinced of their long-term viability. For one thing, current satellite technology does not offer the kind of economies of scale that appeal to major telcos. “They are going to want to use big-scale technologies that can drive the cost per user down,” he argues, “and that tends to be DSL and mobile networks.”  The cost for the user is also greater, he adds. Eutelsat’s customers, for example, must pay for their own satellite equipment as well as their service subscription fee.

That satellite broadband providers market themselves as a “last resort” – a solution when no others are available – reveals that their addressable market can only diminish in time, Philpott adds, something that Eutelsat itself appears to acknowledge. “The unserved market is reducing day by day in Europe,” admits Francois-Fremaux. “But it is still significant.”

Christopher Baugh, CEO of Northern Sky Research, believes that there will always be a market for satellite Internet services, as it is simply not economically viable to ensure ever-present broadband coverage through fixed-line and mobile services. “Even with all of this investment and money flowing into terrestrial coverage, there is still a gap,” he explains. The cost of extending fixed-line services to the “last 10% to 20%” of households is prohibitive, he adds.

Eutelsat, for one, is comfortable with being a niche provider and is developing technologies to serve other niches. “Mobility is one of the applications of KA-SAT,” Francois-Fremaux explains. “We’re working on mobile applications for trains, boats and aircrafts.”

This diversification is essential for providers like Eutelsat, says Ovum’s Philpott, as the digital divide – and therefore their current target market – is only likely to shrink as time goes on. “If they’re always going to be looking at [satellite broadband] as something that fills a gap, the problem they have is that the gap is always going to become smaller,” he says.