VSAT Nets

------------------------------------------------------------------------ Title: PENNIES FROM HEAVEN: VSAT NETS PAY OFF. (very small aperture terminals)

Author: Johnson, Amy H.

Abstract: Companies are switching from long-distance communications carriers to private satellite networks that use very small aperture terminals (VSATs). VSATs are distance-insensitive, so it costs the same to send information to different locations in the US. As a result, transmission costs are frozen and VSAT users can expect a payback on capital expenses in three to five years by avoiding increases in terrestrial line charges and by enjoying the benefits of videoconferencing and private TV over VSAT networks. Nine hundred Porsche, Audi, and Volkswagen dealerships in the US are using the V-Crest VSAT system, which is supplying them with video, disaster recovery and end-to-end control for the same price as its multidrop terrestrial lines. Although the reliability is excellent, the downside of VSAT is its price. Each VSAT costs about $10,000 installed and building a hub can cost $1 million.

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When you're connecting sites from coast to coast, telecommunications, is the one budget item you know is going to increase. That's why the smart money has been switching from long-distance carriers to private satellite networks that use very small aperture terminals (VSATs).

Named for the size of their receiving satellite dishes, VSATs are distance-insensitive; thus, it costs the same to send information to Boise or Baton Rouge, freezing transmission costs and allowing a payback on capital expenses in three to five years. That's based on the savings from avoided increases in terrestrial line charges and the business benefits of video-conferencing and private TV over VSAT networks.

What are VSAT users getting for their up-front investments? A long-term contract that fixes about 90 percent of their costs, and network availability of 99.5 percent or better.

Nine hundred Porsche, Audi, and Volkswagen dealerships throughout the United States have enjoyed fixed-price network service since V-Crest Systems, a member of the Volkswagen Group, installed a VSAT network in 1990. If you look at what we've done here, it's pretty amazing, brags Mike Glovis, network manager at V-Crest. We've got end-to-end control, we've got video, and we've got disaster recovery.

Charging dealerships the equivalent cost of its former multidrop terrestrial lines, $395 per month, V-Crest provides them with all their vital information-service needs. The hub in Auburn Hills, Mich., handles order placement, warranty processing, parts and vehicle location, customer tracking, financing, insurance, accounting, inventory control, and service management.

Overall, V-Crest's satellite network is available 99.9756 percent of the time, according to Glovis. But that kind of reliability comes at a price.

The capital investment in a VSAT network can be millions of dollars. Each VSAT costs approximately $10,000 installed. Building a hub can run you $1 million, although you can lease hub service from either a private company with extra capacity, like V-Crest, or a satellite-service vendor, such as Scientific-Atlanta or Hughes Network Systems.

Glovis expects his VSAT network to pay for itself in five years, based on projected increases in telecommunications charges. But, he happily points out, the equipment has an estimated life span of ten years, giving V-Crest a national network over the second five years for the price of its operating costs.

One major operating expense is leasing transponder capacity on a satellite, which can run from several thousand to tens of thousands of dollars a month, depending on the capacity you need. This fixed-price contract gives you guaranteed transmission; redundant systems automatically switch your data to a working channel in case of transmission problems.

The Farm Credit Bank of Austin, Texas, has branches in small towns where the phone service is run on baling wire, barbed wire, whatever they can nd, says Rodney Gilson, vice president of Computer Services. Without reliable land-based carriers, Gilson gladly abandoned his multidrop circuits in favor of a 70-site VSAT network from AT&T/Tridom. VSAT allowed the bank to stabilize costs, Gilson explains, eliminating concerns about increases in the carrier tariff. His payback for the network, installed in May 1989, was less than three years, he says.

Dial-up lines lost out to satellites when office furniture manufacturer Herman Miller Inc. decided in 1988 to link 100 of its dealers to its headquarters in Zeeland, Mich., says Ron Borgman, information programs manager. Each minute on a dial-up line costs money, and Herman Miller's dealers connect their terminals for periods ranging from two hours to all day. The network, which cost $3 million, uses shared-hub services, and has been so successful that the furniture company is putting its suppliers on a similar system, Borgman says.

Want to launch your own satellite? Think again. It'll run you about $150 million to build the satellite and another $115 million to launch it. With more than 100 satellites already circling the earth, there's plenty of transponder capacity available.

Overheard

Anyone who says overcoming cultural barriers is easy is either a consultant or hasn't done it before.

--EVAN WRIDE Manager, IS Division Nissan Motor USA

------------------------------------------------------------------------ Topic: Very Small Aperture Terminals Telecommunications Private Networks Telecommunications Services Satellite Communications Communications Satellites

Record#: 12 934 526. *** End ***