Stephen - an article from October issue of telecom-mag on Broadband Satellite Systems
Watch Out DSL: Broadband
Satellite Systems Are Coming
The need for speed is the driving force behind this space race, and the sky's
the limit for this new group of broadband suppliers that promises speeds of up
to 64 Mbps downlink and 2 Mbps uplink.
Susan O'Keefe
In the next few years, a dozen or so companies are proposing to
launch more than 500 satellites to provide broadband data services
throughout the world. The players are the who's who of the satellite
industry and include Hughes, Motorola, Boeing, Lockheed Martin,
Loral, Alcatel, Teledesic, and Orbital Sciences. The price tags of the
early systems total nearly a whopping $30 billion. Dozens of other
companies have recently filed plans for similar systems that could
shoot that total to $130 billion--if they all are built. Analysts said the
market will likely only support four or five main systems, but for those
that can survive the rewards appear to be great. Pioneer Consulting
aggressively estimated that the market for broadband satellite service
will be $11 billion by 2003, and close to $30 billion by 2005.
The need for speed is the driving force behind this space race. While
vendors supporting digital subscriber line (DSL), ISDN, and cable
modems are staying grounded in their efforts to provide high-speed
access, the sky's the limit for this new group of broadband suppliers
that promises speeds up to 64 Mbps downlink and 2 Mbps uplink.
The idea is to provide fat data pipes for Internet access,
videoconferencing, e-mail, virtual private networks, and numerous
other applications. But while the ground-based services could be seen
as a threat to the emerging technology, many of the companies also
see them as a market validation. “Satellite service would be more
economical in some situations, and services like DSL and cable
modems would be in others,” said Teledesic President Russell
Daggett, whose company plans to launch 288 low-Earth orbit (LEO)
satellites in a constellation that will provide service by 2003. “The
widespread deployment of other technologies helps validate us,
because the more high-speed access out there, the more ubiquitous
high-speed networking becomes. Without other technologies, you
could never get anything close to ubiquitous buildout.”
While many of the systems originally touted the notion of bringing
high-speed access to everyone, it appears corporations will form the
early market. But as computer prices fall and the economies of scale
appear, service will likely become popular with consumers, especially
in remote locations where DSL and cable modems are not
economical. “By the time the entire system is up, I think you'll see a
fairly broad cross-section of use,” said Peter Spencer, director of
marketing for SkyBridge, a project backed by Alcatel and Loral. “At
first our customer base will be all scales of businesses, but that will
broaden to the telecommuter market and then standard residential
service with time,” Spencer said. Daggett noted that businesses will
fuel Teledesic's early growth as well. “I think the killer app is going to
be networking computers, which is still an enterprise environment,” he
said. “But over time, the need for access to remote local area
networks will push residential use as well.”
So Long, Celestri
The biggest battle for market share seemed to be shaping up between
Celestri, a system backed by Motorola, and Teledesic, which has the
backing of wireless mogul Craig McCaw and Microsoft CEO Bill
Gates. In May, however, Motorola shocked many industry watchers
by scrapping the Celestri project and joining the Teledesic team in
exchange for a percentage of ownership. “Motorola and Teledesic
butted heads in discussions concerning spectrum and other issues, and
there appeared to be a lot of animosity between them,” said Scott
Clavenna, senior analyst with Pioneer Consulting. “I'm surprised they
were able to come up with a working relationship.”
Under the terms of the deal, Motorola acquired a 26-percent stake in
the system and becomes the lead contractor to design, build, and
launch the network. Boeing, which a month earlier had been named
the lead contractor, saw its role refocused to develop software and
system integration. Matra Marconi, which was working with Celestri
on the ground segment, will also join Teledesic. “I think this was a
great move in terms of getting the system going,” said Marco
Caceres, senior analyst with the Teal Group. “There was no way
Boeing was going to be able to build that number of satellites in that
short amount of time, particularly because Boeing doesn't have the
experience. In my mind, there is no other company that Teledesic
could have brought in that could give them a chance at meeting their
deadline.”
According to Teledesic spokesman Roger Nyhus, the two companies
are in discussions to determine what elements, if any, of the Celestri
system will be incorporated into Teledesic. Because changes have
already been made to the system with the reduction in the number of
satellites from 800 to 288 without Teledesic refiling its plans with the
FCC and ITU, it's unlikely the group would tempt fate by making
another major modification. Although Motorola's influence will be felt,
don't expect much of a change from the project Teledesic has been
touting, analysts said. “If Teledesic changes the system to make it
look more like Celestri, I think they would hear some complaints this
time around from their potential competitors,” Caceres said.
Teledesic is the most well-known system because of its high-profile
backers, but it's also considered by many to be the most elegant
system because it utilizes the LEO orbit and its satellites use on-board
processing and are linked to each other. Other proposed systems use
intersatellite links as well, although many use the “bent pipe” system in
which the satellite is only a relay mechanism from ground station to
ground station. Motorola is familiar with the logistics of intersatellite
links because they are used in its Iridium system to provide mobile
voice services via satellite. Celestri also planned to use intersatellite
links. Those links are risky because they are unproven in widespread
use, and as many industry insiders have noted, it's hard to send a
repairman into space. But Teledesic's Daggett said his company is
watching the progress of Iridium closely. “We will make our share of
mistakes, but we can look at theirs and make sure we don't make the
same ones,” he said. “We're really going to take advantage of their
learning curve.”
Nothing New Here
Many of the proposed systems plan to operate in the newly released
Ka-band. Newer filings are going beyond Ka-band to V-band and
up, and a rash of new systems has been filed for using the 40-GHz
range. However, SkyBridge, considered by many to be Teledesic's
largest competitor, is utilizing the tried-and-true Ku-band for its
80-satellite LEO constellation and expects to be the first broadband
system operating in that band when it launches service with 40
satellites (half of its planned constellation) in 2001. “We're going for
the simple approach. There are no new developments in the
Ku-band, so there are no new risks,” said Nicolas Brun, vice
president of communications for SkyBridge. The system is basically a
wireless broadband local loop system providing last-mile access to
customers via the terrestrial fiber network. According to analysts,
SkyBridge will be marketed alongside CyberStar, a GEO broadband
project backed by Loral and Alcatel. CyberStar will start service this
year using capacity leased from other Loral satellites and will
eventually build its own Ka-band constellation.
Because of time delays, geosynchronous orbit is not appealing for
interactive applications but several companies, such as CyberStar,
hope to make GEO work for applications that are not as
time-sensitive, including Internet access. GEO systems are attractive
because of their price: They require fewer satellites because each bird
is more than 25,000 miles above the Earth and can “see” more of the
Earth's surface than satellites in lower orbits. AstroLink from
Lockheed Martin plans to begin launching its nine-satellite
constellation in 2001, while Spaceway from Hughes will launch an
eight-satellite constellation.
Although the cost of some of the systems is breathtaking, there is little
doubt that there is a burgeoning market for broadband data services.
A study by Andersen Consulting estimates the total worldwide
broadband transport market will be $65 billion by 2002, with satellite
services accounting for $8 billion of the total. What's more, in
response to perceived customer demand, SkyBridge increased the
capacity of the system by 50 percent, adding 16 satellites to the
original 64. “We anticipate we'll be able to accommodate about 20
million users and we expect to cap out the capacity of the system,”
Brun said. Teledesic expects similar results, but unlike SkyBridge,
Daggett said Teledesic will add capacity if it is needed.
Analysts agree the demand for satellite services appears to be high
but caution that with the number of proposed systems out there, some
are bound to fail. “I think there is limited potential to the number of
systems the market can sustain,” Caceres said. “I think there can only
be three to five major players and a handful of smaller ones.” Greg
Caressi, a research manager in Frost & Sullivan's telecom group, said
the partnership between Motorola and Teledesic may be a harbinger
of things to come in the satellite industry. “I think we're going to see a
lot more consolidation between systems prior to launch,” Caressi
said. “Especially with the smaller systems that are still in the early
stages.”
Clavenna said he feels a lot is hinging on the success of these systems.
“The satellite industry is in a tough spot because if satellite data
services don't work or produce revenues for the industry, it is left
with this undefined mobile voice market and the traditional video
market, both of which are expected to grow at pretty modest rates.
The data market seems to have the most potential, but there is a lot of
risk there because all of the investment is up front. I think some of
these companies have set themselves up for failure.” But, he said, the
competition created by the number of proposed systems should have
a positive effect for consumers by helping drive down prices of all
broadband service offerings. “There's definitely enough will behind all
of the alternatives to satellites, and I think there will be a big enough
market for each of the technologies to exist,” he said.
Susan O'Keefe is staff editor at Telecommunications.
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