Subject: [NEXTEL-1] Internet-over-satellite: Backbone or spare rib?

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Date: Fri, 06 Dec 2002 16:15:36 -0500

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Internet-over-satellite: Backbone or spare rib?

Source: Telecommunications - International Edition

Publication date: 2002-11-01

Arrival time: 2002-12-05

The bandwidth economy

Whether terrestrial competitors like it or not, satellites are
being used increasingly for internet access and applications.

To most telco operators, satellites are little more than one part
of the transmission jig-saw. Yes, they are extremely useful for
spanning oceans and backing up terrestrial links but to most
terrestrial operators they are just another router, repeater or
radiated power source.

To a small band of satellite operators, however, they are God's
gift to telecoms: they provide wide-area coverage and link disparate
communities far from major population centres.

But how do they perform in the broadband, high bit-rate world of
the internet? Ground-huggers' dogma would have it that signal delay
to satellites in geostationary orbit is just too great for a
practical and reliable service. Not surprisingly, satellite
operators dispute this.

The internet-over-satellite market

One of the better ways to assess whether internet-over-satellite
(IoS) is a viable business is to survey the existing market for
satellite services - a task helpfully undertaken by Euroconsult with
its 2002 edition of World Satellite Communications & Broadcasting
Markets Survey. It found that a relatively paltry 3.8 per cent of
satellite transponders (defined for comparison purposes as 36MHz
units) were used for internet trunking services, while another 0.8
per cent were allocated to internet direct access. The most
important applications for satellites were TV distribution (34.4 per
cent), voice and non-internet data (33.4 per cent) and video feeds
(8.7 per cent), while the remaining 18.9 per cent was classified as
'unused capacity`.

Although the percentages for IoS are relatively small, the
bandwidth in use is significant: 8.7GHz for trunking and 1.9GHz for
direct access. According to Euroconsult, 'internet traffic on
satellites slowed in 2000 but still hit 13.2Gbps'.

Moreover, the market is set to grow in both absolute and relative
terms. By 2010 Euroconsult expects the total number of transponders
used for internet services to have grown from 294 in 2000 to 2,390,
a rise from six per cent of all used transponders to some 28 per
cent. Now while six per cent of a company's income could be
considered a sideline, 28 per cent is a significant sector.

Certainly, satellite operators would welcome such a growth. The
failure of a number of global satellite telephone businesses and the
resulting 'Iridium effect' which made financiers wary of any
satellite technologies - along with the wider, global telecom slump -
have all taken their toll and most operators are less bullish than
they were in the mid-1990s. In fact, most avoid discussing financial
and business projections, leaving it to independent commentators to
draw conclusions.

The satellite advantage

What are satellite operators offering that their terrestrial
counterparts cannot? The short answer is coverage, which to the
financially aware means coverage of market and coverage of
consumers.

For example, a single satellite in geostationary orbit can cover
the entire continental US with a single antenna beam, as well as
providing spot beams for Hawaii and Alaska. Alternatively, today's
more complex satellites can lay down a network of much smaller,
overlapping beams (similar to terrestrial cell-phone coverage),
which allow frequencies to be reused in non-overlapping beams.

While the population of the US is significant, surely the
ultimate in population coverage is provided by AsiaSat, one of the
Asia-Pacific region's most experienced satellite operators. The
AsiaSat-2 satellite covers 53 countries and an estimated 3.3 billion
people, which is over 60 per cent of the world's population.

AsiaSat's chief executive officer, Peter Jackson, is well aware
that America and Asia have very different populations when it comes
to buying satellite services, but he is better informed than most on
the potential in the Asia-Pacific market. "Satellite has a great
advantage in distributing content to multiple locations, whether
it's video or internet," he says. "Satellite is also good at serving
remote and rural areas where communication infrastructure is
inadequate or non-existent."

In terms of applications or services, Jackson cites webcasting,
IP streaming and high-speed internet connectivity as ,examples of
broadband applications best suited to satellite'. However, he
readily admits that they cannot compete with fibre in point-to-
point, high bandwidth applications.

Carl Wu, vice president of internet services at New Skies
Satellites, is also keen to extol the benefits of satellite
transmission. "Internet-over-satellite is an excellent alternative
to fibre, especially in markets where fibre is not widely available
or not economical," he says. "Satellite benefits include instant
availability, affordability, large coverage and no distance
barrier."

In fact, he goes so far as to say that 'satellite will always
outperform fibre in a multicasting environment', which is why the
satellite delivery mechanism has been so successful in the world of
television. Indeed, as technologies continue to converge and much of
what we transmit is digital data, many see the delivery of internet
content by satellite as a natural extension of the TV broadcasting
model.

The principal disadvantage to satellite delivery, as Wu and
others would admit, is signal delay - or 'latency' as the jargon has
it - as radio signals take a finite time (about 250ms) to travel to
a satellite in geostationary orbit and back to Earth. This is the
joker played by terrestrial operators whenever they wish to demean
satellites, and it was even used by prospective operators of
satellite constellations based in low-altitude orbits when they
introduced their systems in the early 1990s.

It is worth remembering, however, that signal delay is not just
yesterday's news, but 1960s news. When Telstar and other satellites
were introduced for transatlantic communications, the British Post
Office (which handled UK telecoms at the time) declared that signal
delay would make satellite communications unworkable. Nearly 40
years of successful satellite communications has disproved this, but
signal delay - refashioned as latency - remains an issue.

Despite this apparent disadvantage, satellite operators believe
there is still plenty of scope. For example, Carl Wu's list of
`applications best suited` to satellites includes a number of non-
real time applications, such as large-file delivery, database
updating, web server mirroring and oneway video broadcasting;
examples of real time interactive applications include online
gaming, web browsing, video conferencing, distance learning, content
distribution and streaming.

In defining the market for IoS, Wu recognises two main sectors:
trunking, in which the service is sold mostly to ISPs and carriers;
and broadband access, where it is sold to businesses and consumers.
The key markets for trunking are Africa, the Middle East, India and
Southeast Asia, says Wu - Europe is currently key for broadband
access.

Customers on the ground...

Who are the main IoS customers? According to James Frownfelter,
executive vice president and chief technology officer of PanAmSat,
its IoS customers are businesses that provide direct-to-consumer
internet applications: entertainment content providers, ISPs,
educational organisations and telcos. "We provide these companies
with access to the internet backbone," he says, "allowing the
delivery of internet traffic both within the US and around the
world. Our three core markets are Africa and Latin America where we
have a strong market presence - and Asia."

A few years ago, it seemed that everyone in the satellite
industry was targeting the Asia-Pacific region, but a regional
recession and the cancellation of several key satellite projects put
that idea on hold. Interest is now returning, however, and AsiaSat's
Jackson is convinced that it is 'a potential and growing market'. It
has a huge population, he says, two-thirds of whom live in rural and
remote areas.

Current AsiaSat customers include ISPs, which provide internet
trunking and direct access services, and multinational corporations
which interconnect their offices with private networks and
intranets. In general, the region has a desire for the same telecom
facilities enjoyed by the rest of the developed world.

... and in the air

Although it is certainly a niche market, the provision of
internet services to consumers on board aircraft is a good example
of how satellites can offer something their terrestrial competitors
cannot. Leadership position in this nascent application is held by
Connexion by Boeing, which provides e-mail and other internet-based
services to suitably-equipped aircraft.

In addition to delivering internet and VPN access in a real-time
environment, the Connexion by Boeing service provides - according to
Scott - 'a host of real-time crew applications that provide
additional value to the airlines'. The company's key customers are
business travellers who want to be productive during their flight;
leisure travellers who want to be entertained; and airlines that
want to use broadband technology to enhance their day-to-day
operations. Will this prove to be a successful niche business for a
company better known for its aircraft manufacturing division? Noone
knows but, according to Scott, the company foresees a market for in-
flight satellite-based services reaching approx\imately US$70 bn
[70.7 bn] in about ten years' time, 10-12 per cent of which it hopes
to capture for itself. Taking into account that Boeing has, in
recent years, bought not only the world's leading satellite
manufacturer (Hughes) but also one of the most successful launch
providers, one should not underestimate its commitment to the space
sector.

Consumers rule

As with the direct-to-home TV model of satellite distribution,
the key to success for IoS is providing consumers with a service
they want and will pay for. One of the leading proponents of such
services is Hughes DirecWay (a name that reflects the heritage of
its sibling DirecTV), which offers a direct 400Kbps link between
satellite and user. The planned update, Spaceway, which will operate
in Kaband, will offer rates up to 2Mbps when it arrives in about two
years' time.

However, as Wu points out, the market needs more compelling
multicast applications to drive up demand and hence the value of
satellite. "Next-generation broadband must also incorporate
highperformance - in terms of protocol enhancement and reliability -
with affordable two-way terminals," he says

"As the business case becomes more attractive for organisations
providing direct-to-home internet services by satellite, and as the
range of services for consumers develops, the market will become
more of a viable investment," adds Frownfelter. "This development
should take place within three or four years."

So is loS an integral component of the internet backbone or just
a spare rib in its ephemeral infrastructure? Most satellite
operators, perhaps unsurprisingly, see it as an important component
in the same way that satellites have become integral to global
telecom in general. Likewise, they see broadband via satellite as
simply a matter of time and a financing issue.

Interestingly, the question of how important internet traffic is
to operators - satellite or terrestrial - may soon be academ ic. As
Euroconsult points out in its industry survey, internet traffic
flows are difficult to estimate even for the operators themselves
because they cannot easily distinguish it from other digital
traffic. As more ISPs carry voice, fax and streamed video, says
Euroconsult, and the telephone and TV industries adopt IP, 'the
internet' will be increasingly difficult to distinguish from other
communications markets.

By then, we shall be where we are now with telephone calls: few
of us control whether our call goes via landline or satellite - and
few of us care. * If this subject interests you, visit us online at
www.telecommagazine.com

The fibre threat to satellite

Satellites are continually threatened by deployment of
terrestrial fibre. For example, when political developments opened
up eastern Europe a decade or so ago, satellites were at the telecom
forefront. Once fibre routes were established, however, the economy
of 'bulk bandwidth' put pressure on the satellite systems.

The solution devised by satellite operators in the mid-1 990s was
the broadband satellite, specifically designed with internet and
multimedia services in mind. To increase the available
frequencyspace, a number of systems using Kaband frequencies - and
offering a potential 13GHz of bandwidth - were developed.
Unfortunately for the satellite community, most of them failed to
secure sufficient funding.

Even if the satellites were already in orbit, the cost of
upgrading groundbased receiving equipment could provide a
disincentive to potential customers. According to James Frownfelter,
executive vice president and chief technology officer of PanAmSat,
Ka-band is 50 per cent more expensive than the alternatives and the
installation of domestic antennas is 'prohibitively pricey'. "From a
business-to-consumer perspective," he says, "internet-over-
satellite is tremendously expensive and the market opportunity needs
to be large enough to outweigh the costs to create a viable business
case." Likewise, from a consumer perspective, it must offer more
than its competitors to warrant an investment in the technology.

Mark Williamson, independent space technology consultant and
writer. He is the author of `The Cambridge Dictionary of Space
Technology' and can be contacted at [email-masked]

Copyright Horizon House Publications, Inc. Nov 2002

Publication date: 2002-11-01

© 2002, YellowBrix, Inc.

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