IT managers should be cautious about signing over-long contracts for satellite internet services, an analyst has warned.
The advice comes after Brighton-based satellite internet provider Isonetric Broadband went into voluntary liquidation.
Satellite broadband has been touted as an alternative to landline broadband access in areas where businesses are too far from a digital subscriber line (DSL) enabled exchange or have poor quality phone lines and cabling.
Andrew Harris, senior consultant at Analysys Consulting, predicted that satellite providers would find it hard to compete in populated areas.
"Satellite broadband is inherently limited by the underlying cost structure of the service; competing successfully with DSL and cable in populated areas is extremely difficult," he said.
IT managers should consider their choice of service provider carefully, Harris advised. He warned of "a level of risk in taking service with a new entrant operator who is reselling a service.
"A trade-off between risk and cost should be done for individual circumstances."
As with any service, customers should investigate the ongoing viability of the service providers.
And IT directors should be careful not to sign contracts that are too long, Harris added. "Service contracts can be lengthy and expensive to break when compared to terrestrial solutions if high upfront costs need to be recovered by the operator."
Satellite internet is a specialist market that needs to be approached carefully and realistically by operators. "It can provide a niche service to users where terrestrial service is not economical," Harris said.
A former director of Isonetric Broadband, Joe Anderson, explained the company decided to go into voluntary liquidation after financiers withdrew their £20m funding.
"We have eight people in Brighton and two in Scotland and we needed to use that money to expand," he said.
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