Hughes Network Systems Gets Down to Earth with Its Application Optimization Capabilities

| Feb 25, 2008 | Business Network Services - U.S. | Competitive Intelligence Report

| Analyst: Brian Washburn

Current Perspective: Positive
Vendor Importance: High
Market Impact: Moderate

Event Summary

February 25, 2008 – Hughes Network Systems has added WAN optimization and application acceleration capabilities to its HughesNet managed network services portfolio. Hughes combines techniques such as TCP optimization, content pre-fetching, compression and prioritization. The service is delivered through Hughes' access routers, which the service provider deploys across all types of customer access – wired, wireless and satellite.

Analytical Summary

• Current Perspective: Positive on Hughes Network Systems’ move to add scalable bandwidth and applications optimization features to its enterprise managed IP services, because the new options provide greater bandwidth control and more flexibility over all access types of access circuits to its customers. Hughes delivers the new features through functions built into the router CPE that it ships with its service, so the customer faces no added costs of specialized optimization gear.

• Vendor Importance: High to Hughes Network Systems because, as terrestrial services become more sophisticated, the service provider needs to show compelling reasons to customers how the satellite segment – and its overall array of services – can provide greater value than managed services from providers grounded in terrestrial services. Hughes can deliver these differentiators through its managed CPE routers: It simply re-applied techniques developed to optimize satellite links, and built additional functionality on top.

• Market Impact: Moderate on the IP VPN market and competitors serving distributed enterprise customers with broadband and T-carrier services, because Hughes' new features use its managed routers to employ bandwidth from two disparate access links, letting customers prioritize traffic in a way resembling class of service (CoS) differentiation, and accelerating overall throughput – all without major additional CPE investment. Hughes remains a satellite provider, though, and enterprises that are not interested in tapping the satellite segment are not likely to tap Hughes for contracts that are exclusively wireline.

Recommended Competitor Actions

• Competitors can point to the Hughes' routers as being a closed black box that Hughes will only supply as part of a managed service. They can point out that their IP VPN and managed network services use standard routers from Cisco and/or other vendors: Customers can choose to own the routers or supply their own, or they can choose at any time to purchase routers on the open market that are just like those used by their managed services.

• Large managed services competitors can position Hughes as a company that is still primarily a satellite provider. They can contrast themselves as primarily terrestrial providers, but can show off abilities to incorporate satellite broadband into their landline networks as customers need them. These competitors can point to evolving 3G wireless and WiMAX deployments to claim that terrestrial wireless is in the process of supplanting satellite for many hard-to-reach locations, and that it's the wrong time to bet heavily on satellite networks.

• Even though their functionality overlaps, New Edge Networks should tout Hughes Network Systems publicly as a validator of its model to introduce differentiated QoS for ADSL services. New Edge Networks can claim it has an edge because it can differentiate traffic across the network. The service provider can contrast Hughes' approach as only being able to control traffic between endpoints, whether those be other sites or Hughes' own gateways.

• Competitors of sophisticated IP VPN services can point out that Hughes Network Systems' managed IP services are limited to hub-and-spoke configurations, while they are able to provide more flexible full-mesh networking. For applications such as internal VoIP, they can say, a hub-and-spoke architecture introduces multiple hops that increases latency and degrades quality.

Recommended End User Actions

• For businesses that already use satellite communications or are considering them, Hughes Network Systems' Scalable Bandwidth feature will provide additional value for the HughesNet High Availability service, while the company's Applications Optimization feature will benefit customers of both HughesNet High Availability and HughesNet Optimized VPN services.

• Enterprises that want to mix of broadband and/or T-carrier wireline services to increase reliability or lower costs, but that have little or no satellite communications in their enterprise network mix, can still contact Hughes Network Systems for a price quote. Hughes Network Systems is increasingly taking on a role as a provider of managed network services, which can benefit from (but are not beholden to) satellite communications.

• Enterprise customers need to be fully comfortable with managed network services where the service provider owns and operates the access equipment in order to benefit from Hughes Network Systems' new features. The service provider can also manage Cisco routers, but the Scalable Bandwidth and Applications Optimization features can only be supplied through the company's own routers.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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