Net access via satellite a tough sell

Satellite-based broadband Internet access has yet to make much of a splash, attracting fewer than 2 percent of US broadband users.

But despite a slow start, a sister company of the DirecTV satellite-television operation is this week cranking up a big marketing push for an enhanced version of its "DirecWay" broadband operation.

With recent technological upgrades -- and more enhancements planned by September -- Hughes Network Systems Inc. hopes to persuade big US companies and institutions that satellite can be a viable, though premium-priced, alternative to cable modems and telephone digital subscriber lines for telecommuting employees who need secure access to office networks.

The latest improvements, Hughes executives say, offset or eliminate the quarter- to half-second delays for telecommuters using a "virtual private network" connection. It's caused by the fact that data packets must travel to and from a satellite orbiting 24,000 miles above Earth.

"We've come up with a software patch that ensures that it's a broadband-quality experience," said Emil Regard, vice president of marketing. "Once you get it in your house, it's just like cable or DSL."

The Hughes system now works with network-security systems made by Nortel Networks Ltd. Versions for two other big office virtual private network system makers, Cisco Systems Inc. and Check Point Software Technologies Ltd., will be coming by September, Regard said.

The big drawback: DirecWay charges $99 a month, triple the price of Verizon Communications Inc.'s DSL service and more than double what Comcast Corp. charges for cable modem service when combined with cable TV.

At 1 megabit per second for Internet downloads and 128 kilobits per second for users sending e-mails and files to the Net, DirecWay is also considerably slower than DSL and cable.

DirecWay also charges $600 or more for the satellite dish and installation.

Satellite broadband service is available virtually everywhere, however, and even at a higher cost per user per month, some organizations might find it cost-effective to use just a single type of telecommuting access instead of having to weave together systems serving people who are connecting by dial-up modem, DSL, and cable modems.

Analysts said Hughes is likely to get some market traction with the new offer, but will struggle to be more than a niche player.

Robert Whiteley, an associate analyst with Forrester Research, said that despite the higher prices, Hughes's satellite broadband service could appeal to "companies with a global reach, or those who have decided they want to standardize on a single access technology as much as possible."

"It's very hard to guarantee that DSL or cable will be available for all your employees," Whiteley said.

"As long as you can get a view of the southern sky, you can get satellite service. It's sort of like the lowest common denominator. It's not the best technology, but it's the one most guaranteed to work for the largest number of people."

But Judy Reed Smith, president of Atlantic-ACM, a Boston consulting firm that advises telecommunications carriers and big telecom customers, said: "You would want to model out all the cost trade-offs, including the costs of having several different types of signals coming into your network and all the different security issues. I think that would be a pretty easy thing to do, and I would guess it would tip on the side of having your IT person keep tuning for three different signals rather than paying the huge premium for the monthly service and for buying the satellite equipment."

Regard said Hughes hopes that some of its big retail, financial-services, and other customers who use its heavy-duty satellite data networking systems for functions like processing credit card transactions will be open to using Hughes for enabling their employees to telecommute. More than 23 million Americans who work for an employer telecommute some or all of the time, according to the International Telework Association and Council.

At the end of 2003, just 367,000 US homes and businesses got broadband Internet service through satellite or high-speed wireless data services, according to the Federal Communications Commission and Leichtman Research Group, a Durham, N.H., consulting and market-analysis firm.

Hughes said that it has about 200,000 residential and small-business broadband Internet subscribers. That compares with more than 26 million subscribers to cable modems or DSL.

More than 80 percent of US residents can get DSL, cable broadband, or both.

"Availability may be an issue in some parts of rural America, but it is not an issue in any large way in urban or suburban America," said Bruce Leichtman, president of the research group.

"There may be a few pockets here and there that don't have cable or DSL, but they are few and far between."

Peter J. Howe can be reached at howe@globe.com.