What it means
A VSAT system consists of a small antenna, typically between about 75 centimetres and 3 metres across, and an indoor unit that connects to the organisation's computers or tills. The dish communicates with a satellite in orbit, which relays the signal to a central hub or to other terminals.
The hub links to the company's head office or the wider internet. The main attraction is reach.
Where ground networks are expensive, unreliable or non-existent, a satellite link can be installed in days. Retail chains have used VSAT to process card payments at remote outlets, banks to connect cash machines, and energy firms to monitor equipment in remote fields.
The costs fall into three groups. There is an upfront cost for the equipment and installation, a recurring service fee for the satellite capacity and hub, and maintenance.
Bandwidth, meaning the amount of data that can be sent per second, drives the monthly fee, and a faster link costs more. There are trade-offs.
Satellite links add a delay, known as latency, because signals travel a long distance to orbit and back, which can affect real-time applications. Heavy rain can weaken the signal, and capacity is often shared among customers, so speeds can slow at busy times.
For finance teams, the main questions are total cost of ownership and reliability. They must compare the cost of the satellite service with alternatives such as leased lines, mobile networks or fibre, and weigh the lost sales if a site goes offline.
Contracts usually include service levels, so uptime guarantees and penalties should be checked. The equipment is generally treated as a fixed asset and depreciated over its useful life, while monthly service charges are expensed as incurred.
Large rollouts across many sites deserve a clear business case.
In practice
Real-world examples.
Example
A fuel retailer with 200 rural petrol stations installs VSAT so that every pump can authorise card payments in seconds. Management accepts the satellite cost because the lost sales from downtime in remote locations would be higher. The link also carries stock data to head office.
Example
A mining company uses VSAT to connect a remote site to its head office. Engineers upload equipment data every hour, and managers hold video meetings with the site team. The company avoids building a cable line that would have cost millions.
Example
A shipping company fits VSAT on its vessels so crews can access navigation updates and email while at sea. It charges the monthly fee per vessel to operating costs and negotiates a higher bandwidth for ships with larger crews.
Formula
Calculation
Annual cost per site = (Equipment and installation cost / Years of useful life) + (Monthly service fee x 12)
A fuel retailer installs VSAT at each of its sites. Equipment and installation cost $6,000 per site with a useful life of 5 years, and the monthly service fee is $150. Annual cost per site = ($6,000 / 5) + ($150 x 12) = $1,200 + $1,800 = $3,000. Across 200 sites, the total annual cost is 200 x $3,000 = $600,000.Case study
Seen in the real world.
Redstone Convenience Stores is an illustrative, fictional chain with 120 outlets, of which 30 are in remote areas with poor mobile coverage. These outlets often lost card payment connectivity, costing an estimated $2,500 in missed sales per site each month.
The finance director compared two options: a leased line costing $400 a month per site, and VSAT with equipment and installation of $5,000 per site and a fee of $180 a month. Over five years, the leased line cost $24,000 per site while VSAT cost $5,000 + ($180 x 60) = $15,800, although the leased line was not available at some sites.
Redstone installed VSAT at the 30 remote outlets. The illustrative result was that payment outages almost disappeared, and the missed sales fell sharply, paying back the investment within a year. The finance director also negotiated a service level that credited the monthly fee if availability dropped below an agreed level, and she added the equipment to the fixed asset register with a five-year depreciation schedule.
Watch out
Common mistakes.
- Comparing only the monthly fee with other options, and ignoring the equipment, installation and maintenance costs.
- Ignoring latency, which can make real-time applications such as video calls or interactive trading systems frustrating.
- Skipping the service level terms, which set uptime guarantees and the remedies when the link fails.
Questions
People also ask.
What does VSAT stand for?
It stands for Very Small Aperture Terminal, which refers to the compact size of the satellite dish.
Who uses VSAT?
Organisations with remote or widely spread sites, such as retailers, banks, energy companies, shipping lines and governments.
Is the equipment an asset or an expense?
The dish and indoor unit are normally capitalised and depreciated, while the monthly service charges are expensed.
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