Scanning the high-speed heavens
Shoot, Luke! The sky's full of satellites! As most cable operators gaze into the dark, starry skies at night, they'll likely see competition rather than an opportunity staring back. Concurrently, when DirecTV, EchoStar, iSKY, Teledesic and other incoming two-way satellite data players peer into the heavens, they'll probably see dollar signs orbiting the horizon, not to mention another way to put a few more dents in cable's shrinking market share.
Obviously, the number of satellite players in the two-way, high-speed data game is growing. But that doesn't necessarily spell trouble for each and every cable operator. Indeed, rural cable operators, which would otherwise need to put up big bucks to upgrade their networks for cable modem services, could be looking to the skies for a helping hand. The reason? With fewer customers on the books, country cablers could stand to grab a better return on their investments if they offer their subs a satellite-based solution rather than its terrestrial cousin, which requires loads of expensive, new equipment and infrastructure.
"When you're serving many end users in many different locations," says Christopher Baugh, senior satellite analyst at Pioneer Consulting, "it pays to use a satellite, because it's one level of service for everybody, one cost to serve everybody. Anywhere you want the service, you can have it."
Although most cable operators have been conditioned to consider the birds in the sky to be competitive forces, new business conditions are causing some to think outside the box and meld satellite with traditional cable networks. What follows is a breakdown of cable's foes and potential friends.
Gilat Satellite Networks made a big splash in February when it took in a $50 million investment from Microsoft Corp. to build and develop Gilat-To-Home, a consumer-targeted two-way satellite Internet service slated to launch commercially in the fourth quarter of 2000. This summer, Gilat-To-Home's service trials will involve roughly 2,000 Microsoft and Gilat "friends and family." By 2005, Gilat-To-Home expects to have 2.7 million subscribers, but needs just "hundreds of thousands" of them to break even, the company says.
Its ducks in a row, Gilat quickly followed the Microsoft deal with a partnership with DBS heavyweight EchoStar Communications Corp. to distribute and sell a single dish solution that marries EchoStar's video service with Gilat-To-Home. (EchoStar then went on to forge a similar deal with iSKY, covered later.)
EchoStar, which has more than 3.4 million subs and a deeply-entrenched network of more than 20,000 retailers, "represents an excellent installed base that we can offer a great value proposition to in terms of upgrading to get two-way Internet," explains Dianne VanBeber, Gilat's vice president of investor relations. EchoStar's currently deployed data offering, DishPlayer, uses phone lines for the return path.
Once it's launched commercially, Gilat-To-Home is expected to carry a price comparable to data services offered by cable and Digital Subscriber Line (DSL) providers. Though unable to disclose specific price points, Gilat-To-Home's monthly fee should be in the range of between $40 and $70, says VanBeber.
Employing VSAT (Very Small Aperture Terminal) technology and the well-tested Ku-band, Gilat-To-Home is expected to offer data speeds up to 10 times faster than traditional narrowband connections, says the company.
"VSAT is a market that's been around for several years, and it's growing in strength," offers Baugh.
The service's return path capability and overall scalability for interactive Internet services remain question marks in the minds of some industry observers, however.
"I don't see the scalability in (Gilat-To-Home's) current architecture," says J. Mitchell Robinson, president and CEO of ViaCast, a company that is building a Satellite Interactive Terminal (SIT), and today offers end-to-end transmission of broadband content to terrestrial wireless, wireline, cable, Internet service and caching providers. "Certainly, they'll have to change their headend technology, which leaves a lot to be desired from our point-of-view."
If there are any scalability problems, Gilat hopes to catch them during the trial phase. "We're looking to load the transponders with about 20,000 users each," says VanBeber. "The scientific modeling and the simulation in our labs enable us to envision it. With testing, we'll see if those assumptions still hold, and assure us that we have a scalable model without any hitches."
Time will only tell whether Gilat attempts to craft alliances with cable operators.
"We're actively looking at a number of different types of partnerships," discloses VanBeber.Friendly foe: iSKY
"Keep the cost low. Keep the technology simple" is the operational mantra for satellite-based high-speeder iSKY (formerly KaSTAR Satellite Communications), which is going after the 25 to 35 million homes that don't have access to DSL and cable modems when it goes commercial in 2001, according to iSKY President and CEO Thomas Moore, who, before joining iSKY, played a key role in the creation of CableLabs' DOCSIS specification.
Rather than using giant, expensive ATM switches in the sky, or a "process payload technology" similar to the one that DirecTV will use for its Spaceway service, iSKY will use "bent pipe" satellites that act like very long cable plant or nodes, says Moore. Such an orchestration, he says, is less expensive and easier to upgrade, and will support data speeds as high as 1.5 million bits per second.
Eventually, iSKY's satellites will operate in the Ka-band frequency from geosynchronous earth orbits (GEOs) above the U.S., Canada and Latin America. Here at home, iSKY will employ spot beams to allow customers to "see" the service, instead of using a single continental U.S. (CONUS) beam. "It's analogous to fiber node sharing," explains Moore. "We'll keep a lot of our technology on the ground."
Under its current plan, iSKY's first satellite will launch next year armed with five to six gigabits of capacity at 109.2 West Longitude (WL), and follow-up with a second satellite that provides Latin American coverage. iSKY also has eyes for Europe and other areas of the Big Blue Marble. "We have aspirations for a global system," says Moore.
While still a start-up, iSKY has received financial backing from a host of heavy-hitters, including Liberty Media, Kleiner Perkins Caufield & Byers, TV Guide and Space Systems/Loral.
iSKY's most prominent coup to date, however, happened in March when it struck a distribution deal with EchoStar, and relinquished a 12 percent stake in iSKY (with an option to push that stake to 20.8 percent) in exchange for $50 million. Like EchoStar's deal with Gilat, the DBS mogul will market a single dish that combines iSKY's Internet access service with EchoStar's stable of video services.
Moore adds that iSKY would be interested in building a partnership with DBS market leader DirecTV. Though no such deal has been signed, it became technologically possible earlier this year when iSKY bought a license to tap the Ka-band capacity on Telesat's Anik F2 satellite for $200 million. Anik F2's orbit will settle in at 111.1 WL, a slot that would allow iSKY customers to receive two-way Internet access and satellite television from both DirecTV and EchoStar. Considering EchoStar's recent data deals with Gilat and iSKY, things could get interesting if DirecTV decides it doesn't want to lose first-to-market ground to its DBS rival.
In addition to planting seeds in the DBS space, iSKY, whose ranks include a number of former Bell Labs, Cisco Systems and Road Runner employees, also has an eagerness to collaborate with the cable industry using a hybrid, standards-based solution that couples cable's terrestrial endeavors with iSKY's orbital ones.
"I think there are synergies with cable operators on the fringes," says Moore, who doesn't consider himself a "satellite person." "We're talking to cable operators about doing something."Foe: Spaceway
More than a year ago, DirecTV parent Hughes Electronics Corp. said it would plunk down $1.4 billion to build Spaceway, a two-way, high-speed service set to take off in North America in 2002 using the Ka-band. Until Spaceway hits the consumer market, Hughes continues to market the much-maligned DirecPC service, which uses a telco return.
"Once Spaceway is launched, we expect that all of the DirecPC subscribers (will) migrate over to the Spaceway platform," forecasts Baugh. "It will provide more bandwidth, better quality for end users, and just a better service overall."
According to Hughes, Spaceway will provide uplink rates between 16 kbps and 6 Mbps.
Spaceway's North American network will consist of two Hughes-built GEO satellites located at 101 and 99 degrees WL, plus an in-orbit spare. On the global level, Hughes has acquired six additional orbital slots essential in creating a worldwide system that would cover Europe, the Middle East, Africa, Latin America and Asia.
Once Spaceway's GEOs are operational, Hughes next plans to handle scaling issues via a complementary system of nongeosynchronous Lower Earth Orbit (LEO) satellites that will provide additional interactive broadband multimedia communication services in high traffic markets.
Championing the cause of cable operators in rural areas, Bill Bauer, the president and CEO of InterTECH and WinDBreak Cable, says satellite solutions can help the smaller systems remain competitive in the cable modem world without the need for expensive system upgrades.
"Back in '94 and '95 when DirecTV was moving into the rural markets," he says, "I had to make a decision to survive or get out, and (determine how I could cost-effectively offer) high-speed data."
Bauer's solution was to build a high-speed, satellite-based, two-way system that beams information to cable headends and then distributes data via cable modems for the uplink, and VSAT technology in the return path (see diagram).
During its early days of high-speed data, InterTECH used equipment from Hughes, but that arrangement was altered in late 1997 when InterTECH assembled the funding for a new Network Operations Center (NOC). Unfortun-ately for InterTECH, Hughes was committed to using the technology for the DirecPC service.
"We wanted to buy a DirecPC NOC, but the cost was too high for us," says Bauer. "So we built it from the ground up and jumped in with both feet."
InterTECH's approach is starting to bear some fruit. Today, the service is deployed in 16 systems with two more set to launch soon. "We range in size from 79 subs, my smallest system, to 21,000 subs in Ft. Lauderdale (Fla.)," he says. InterTECH also is preparing for some deployments in Canada, and has bids out in the Caribbean, Alaska and Hawaii.
Data speeds for the service, Bauer says, can grow to 54 Mbps outbound and multiple 500 kilobits in the return path. The speed issue has been difficult because it's an area that InterTECH doesn't always control. "That all depends on the server and the subscriber's computer," he adds.
Flexibility, meanwhile, is a key to the service, which can handle proprietary or standards-based cable modems. "We've got DOCSIS, Zenith and LANcity modems out in the field. It really doesn't matter with the system we're using," explains Bauer.
Looking beyond data, InterTECH is also working on solutions for video-on-demand and IP telephony for small system operators. "We have the parts and pieces for that in our labs. The challenge is not whether I can do it, but if I can afford to do it," says Bauer.
SoftNet Systems subsidiary Intellicom offers high-speed, two-way, satellite-based Internet access for small- to mid-sized companies, educational institutions and government agencies. Additionally, Intellicom operates 18 sites with ISP Channel, another SoftNet division, where it supplies Internet service to headends for cable modem services. Overall, Intellicom supports 65 operational sites in 29 states, and more than 17,000 subscribers.
Though Intellicom doesn't provide DTH satellite data services today, it might not be too long before it does.
"We're working on that as we speak," says Carol Sorrick, Intellicom's president. "Wireless and end-to-end is where I'd like the company to be positioned."
Rather than nailing a satellite dish on every home, Sorrick's vision includes a satellite/wireless combination using something on the order of a three-foot cellular antenna. "Currently, dishes have to be installed by someone," she says. "If you put a different kind of antenna on the roof that will provide two-way connectivity to a larger dish somewhere else, now you've got something along the lines of rooftop technologies."
Intellicom is testing that service in a number of undisclosed U.S. markets, and is less than a year away from commercial deployment.
Today, Intellicom offers 2 Mbps in the downstream and as much as 128 kbps in the upstream, much faster than a standard narrowband modem. Those speeds are expected to grow as Intellicom moves caching services closer and closer to the consumer. "We can actually be proactive in our caching capability," adds Sorrick. "We like to call it 'adaptive caching,' which doesn't just push the top 100 Web sites down somebody's throat."
Another service that Intellicom has on the drawing board for cable operators involves installing a VSAT and combining it with a dial or wireless return. "It's not through a cable modem necessarily, but it can be considered a cable offering," explains Sorrick.Friend: High Speed Access Corp.
The platform agnostic High Speed Access Corp. (HSA) has a few things brewing with data via satellite that could eventually aid cable operators in rural areas that want to offer high-speed Internet services.
"We've been doing different tests with satellites, looking at the differences, and determining what might make sense in a number of different scenarios," says Thad Mazurczk, HSA's vice president of business development. "Some models we're looking at deliver broadband to the home and to the headend. It all depends on the economics of it and the size of the market you're serving."
If and when HSA adds satellite to its menu, it won't be the first time the company has stepped outside the cable modem world. HSA also has plotted plans to enable cable operators to offer DSL in their respective markets, and get a cut on those subscribers without making a DSL infrastructure investment.
A similar set-up could come into play with an HSA-sponsored, satellite-based service, says Mazurczk.Foe: SkyBridge
Fueled by capital from Alcatel, SkyBridge plans to deploy 80 LEOs to create a constellation of 80 "bent pipe" satellites in the Ku-band that will zoom about at an altitude of 913 miles. Launching in 2002, SkyBridge plans to create a direct-to-subscriber footprint that covers every corner of the globe, save the north and south poles. Meanwhile, SkyBridge's 200 gateway stations worldwide will center the company's tightly-focused, 435-mile diameter spot beams. In total, SkyBridge will house 215 Gbps of system capacity, and target 20 million users.
By playing in the LEO space, SkyBridge's forecasted 30 millisecond round trip will be well below the 100 millisecond latency threshold required to offer local phone service. "SkyBridge's service is all about having true, real-time connectivity so that the service you get over the satellite is equivalent to high-speed terrestrial connections," says David Finklestein, SkyBridge's vice president of marketing and business development. "We can provide an equivalent service as terrestrial, which is not the case with GEOs. Spoofing is a Band-Aid to heal the problem."
Without spoofing, high-latency IP transmissions have a tendency to "time out" a given session.
In addition to offering bundled data and voice services, SkyBridge also believes its LEO arrangement will lower customer costs. "We can be very price-competitive to terrestrial technologies because of our global coverage and very efficient use of bandwidth, allowing us to spread the costs of the system over a very large number of users," explains Finklestein.
Of course, LEOs can't be discussed without bringing in the Iridium debacle. After filing for bankruptcy last August, the Motorola-backed company's 88 satellites could be "de-orbited" and reduced to charcoal as they burn up in the Earth's atmosphere.
SkyBridge won't meet a similar, fiery fate, says Finklestein, because most of SkyBridge's intelligence will be on the ground, and its satellites will be much less complex than Iridium's fleet, which uses on-board processing.Foe: Teledesic
Like SkyBridge, Teledesic plans to send score upon score of LEO satellites (288 of them, actually) into space and launch its Internet-in-the-Sky service in 2004 using the Ka-band. Price tag: more than $10 billion.
Though it will cost a bundle to get Teledesic off the ground, its backers, which include some guy named Bill Gates, Saudi Prince Alwaleed Bin Talal, the Abu Dhabi Investment Company and Boeing, have deep, well-lined pockets. Motorola is leading the development and deployment team for Teledesic's LEO network.
"Teledesic is probably the most ambitious of all of the satellite projects out there," says Baugh. "They say they'll be able to serve any application, because of the service's high capacity. I wouldn't go as high as a terabit, but you're talking many gigabits of capacity. Traditionally, satellite is known not to support those rates."
According to Teledesic, the service's "standard" user equipment will be able to support up to 64 Mbps down and 2 Mbps up. Higher-end terminals will offer 64 Mbps or greater of two-way capacity, according to Teledesic.Undecided: AstroLink
Originally funded by Lockheed Martin, but helped in part late last year by a $425 million investment from Liberty Media, AstroLink LLC plans to deploy nine GEO satellites in five orbital positions that will create service footprints in the Americas, the Atlantic, East Asia and Australia, Europe, Africa and West Asia, and Oceania, which includes islands like Fiji, Guam, Tahiti and Tuvalu. AstroLink's other backers include TRW and Telespazio, a division of Telecom Italia Group.
AstroLink will launch commercial service in 2003 in the Americas, Europe and the Middle East.
Though it will offer a direct-to-home data solution, AstroLink's strategy is to target rural areas around the world, and complement other broadband services like fiber optic transmission and fixed wireless.A ray of hope
While there would appear to be enough hardware on its way into space to block out the Sun, as well as cable's desire to reclaim market share, all of the news isn't gloom and doom for operators in larger markets.
Despite some dire predictions, cable will continue to hold its own against DBS, according to a new study by Allied Business Intelligence (ABI), entitled, "CATV Infrastructure 2000: U.S. Equipment Markets and System Trends." The study says U.S. MSOs added two million subs in 1999 and will add another two million this year. In comparison, ABI says DBS added 2.7 million last year and will gain 4.5 million in 2000.
Speaking strictly on the data side of the business, Pioneer Consulting's latest 10-year projection predicts that satellite will own between 10 percent to 15 percent of the direct Internet access market by 2008. If those numbers hold up, cable still has an opportunity to make a more significant impact and maintain its first-to-market advantage