If all had gone according to plan, hundreds of advanced broadband satellites should have been orbiting the Earth by now, offering affordable, ultra-fast broadband services to consumers and businesses around the world.
Instead, the economy took a digger and investors stopped throwing money at planned Ka-band services like WildBlue Communications, leaving many of these ambitious ventures on the launch pad, without the financial fuel required for blast off.
Part of the problem affecting Ka-band is that there was a mad scramble to obtain licenses from the FCC in the late 1990s, but many companies that won them did not have a strong business plan to launch services, says Chris Baugh, principal analyst with Northern Sky Research.
That left existing Ku-band services like Direcway and StarBand to mop up, but the results, from a customer acquisition standpoint, have, thus far, been less than out-of-this-world, due in part to inhibitors such as high costs, installation problems and performance concerns.
In the most recent round of publicly released figures, Direcway disclosed it had about 100,000 subs, while StarBand was further behind, with just north of 40,000.
On the bandwidth issue, Ku-band residential service providers "haven't been able to load the transponders as they would've hoped," Baugh says. "They're worried about adding subscribers and compromising performance."
Even in rural areas that don't have access to high-speed over cable or DSL, broadband satellite, at about $70 per month plus hundreds of dollars for equipment and installation, prices many potential customers out of the market.
Pegasus Communications Corp., an independent reseller of DirecTV services in rural markets which sells Direcway under the Pegasus Express brand, is a case-in-point. Although the company did not provide specific high-speed subscriber numbers in its fourth quarter earnings statement, Pegasus, in its 10-Q SEC filing, disclosed that 96 percent of its revenues for the period were tied to multichannel DBS services.
Pegasus also acknowledged in the filing that it's faced with cost-of-entry barriers, and expects it will have to make "substantial" equipment subsidies to make it more affordable and attractive to potential customers.Satellite broadband a "disappointment" so far
The pending merger between EchoStar and DirecTV is partly to blame for satellite's suffering broadband efforts, says Sean Badding, vice president and senior analyst for The Carmel Group.
"Their resources have shifted because of that, and they've taken their eye off the ball," he says. "Video [satellite service] continues to pull out some solid numbers, but their [broadband] initiatives are kind of in a stall mode."
EchoStar, which has equity stakes in three broadband satellite service providers, has acknowledged that the progress so far has left much to be desired, so much so that the company wrote off its $50 million investment in Ka-band start-up WildBlue Communications.
"Broadband has probably been our biggest disappointment," EchoStar Chairman and CEO Charlie Ergen said during a Feb. 28 earnings call. EchoStar, in its SEC filing, also said that StarBand was notified by auditors concerned about the company's ability to continue growing. By press time, StarBand was still up and running and making announcements just the same.
Ergen also added that EchoStar would've re-evaluated its broadband satellite strategy, if not for its pending merger with DirecTV. He also reportedly indicated that he wants to invest at least $1 billion into Spaceway, Hughes' planned Ka-band satellite broadband service.
EchoStar spokesman Marc Lumpkin says the DBS provider continues to sell the StarBand service, but a merger with DirecTV will solidify the company's broadband plans.
"Using Spaceway and other means," he adds, "we plan to offer affordable Internet access across America that can compete with the prices of cable modems and DSL."
If the history of DBS video service is an indication, consumer broadband satellite up-front costs and monthly fees should come down and better challenge its terrestrial competitors.
"Satellite always has charged a premium early on, but brought prices down to compete with the terrestrial folks," says Frost & Sullivan Senior Analyst Jose Del Rosario. "It'll be the same with data."Then and now
With so many advanced broadband satellite companies retooling or pining for funding, the notion now is for providers to grow their sub numbers with current technology until demand for advanced services becomes apparent. Of course, that position wasn't as popular two or three years ago.
Some planned services are moving forward, "but not as quickly as once anticipated," Badding says.
And how. Here's a list of the more prominent planned satellite broadband ventures, what their original plans were, and where they are today.WildBlue
Then: Tapping the Ka-band frequency, WildBlue planned to launch spot-beam geosynchronous (GEO) satellites to offer services in the U.S., Canada and Latin America. Investors included EchoStar, Liberty Media, Kleiner Perkins Caufield & Byers, TV Guide and Space Systems/Loral. WildBlue originally slated a 2001 commercial deployment.
Now: Still stalled on the launch pad, WildBlue's future is in question unless it can muster more funding. If not, the company "might be marginalized or displaced completely," predicts Frost & Sullivan's Del Rosario.
"They need cash desperately," Badding adds. "That's their biggest hurdle."Spaceway
Then: In 1999, Hughes Electronics Corp. said it would front $1.4 billion to build the Ka-band, two-way service, and launch it in 2002 with upstream data rates as high as 6 Mbps.
Now: Still fully-funded, alive and kicking, but the service isn't expected to launch for another 18 to 24 months, Baugh says.
Spaceway "has some life to it," Badding says. "[Hughes] is still investing time and money into that program, because they think there are opportunities in the enterprise market; and I believe that will happen."SkyBridge
Then: Backed by Alcatel, SkyBridge planned originally to deploy a constellation of 80 low-earth-orbit (LEO) birds in the Ku-band by 2002, giving it an aggregate system capacity of 215 Gbps for enterprise and small-office customers.
Now: Thanks to a crummy economic climate, Skybridge reevaluated its LEO strategy, shelved it, and is now plotting plans for a GEO-based service.Teledesic
Then: Ambitious but expensive, Teledesic's original plan called for 288 LEOs and a 2004 service launch. Expected to cost $10 billion, the Teledesic project touted big name investors such as Bill Gates, Craig McCaw and Boeing.
Now: Teledesic has retooled its strategy, and tapped Italian satellite vendor Alenia Spazio SpA to build the first two satellites for the company's global network. Plans now call for a constellation of 30 medium-Earth-orbit satellites, and a 2005 service launch.Astrolink
Then: With funding from Lockheed Martin, Liberty Media, TRW and Telespazio, AstroLink planned to launch nine Ka-band GEO satellites to create service footprints in the Americas, the Atlantic, East Asia and Australia, Europe, Africa and West Asia and Oceania. Original plans called for a 2003 launch in the Americas, Europe and the Middle East.
Now: Lockheed Martin pulled out of the game, essentially leaving Liberty to sort through what to do with it. AstroLink reportedly needs $2.4 billion to execute on its plans, but has slated a launch of its first four satellites in early 2003.Satellite means business
Back to what's real.
Although StarBand and DirecWay haven't enjoyed loads of success with residential services, both companies have turned to the commercial sector for a financial booster rocket.
Tachyon is going after the enterprise sector with a broadband satellite service comparable with T-1s
and frame relays.
Hughes Network Systems, in concert with Hewlett-Packard, is focusing on the larger enterprise sector with a new service called Direcway Content Delivery Services (CDS). Launched last month, Direcway CDS features business applications such as virtual classrooms for corporate training and shared, digital "whiteboarding."
To avoid public Internet congestion, the service leverages Direcway's satellite infrastructure, but content is sent directly to an HP media cache box loaded with Inktomi software at each customer site.
"Overall connectivity is not the only name of the game," says Steve Hanney, worldwide director for HP's service provider program. "Content delivery is the key. [Businesses] want bundled applications and solutions on top of that."
Direcway also markets to small businesses, but the CDS service focuses on large corporations and government agencies. Direcway CDS has conducted some early trials, but has yet to announce any customers.
Tachyon, another satellite-based broadband provider, is tackling the enterprise sector in the United States, Mexico and Europe with a service comparable to T-1s and frame relays.
Tachyon markets guaranteed service level agreements via the Ku-band, and can change bandwidth capacity on the fly. "If you want to do 256 kbps service, and later want to do 1 Mbps, it's just a phone call to the NOC (network operating center) and we turn up the dial," says Tachyon Chief Scientist Jeremy Guralnick.
Using a hub-spoke architecture, Tachyon provides a gateway that links directly to a customer's main network. Because it's done via satellite, customers get ubiquitous coverage and are billed the same whether they are accessing the network from the Mojave Desert or downtown Manhattan, Guralnick says.
In addition to commercial customers, Tachyon also markets the service to the U.S. Armed Forces. Hotel entertainment firm On Command also uses Tachyon to provide Internet access to guest rooms and resort hotels that are out of reach of terrestrial T-1 lines.That pie in the sky
Even with all the course changes for advanced satellite broadband systems, a lucrative market does await broadband satellite services...but it will take time.
According to a forecast from The Carmel Group, U.S. satellite broadband subs will number 1.4 million by the end of 2003, and jump to 5.6 million by the start of 2007.
Pioneer Consulting, meanwhile, predicts that the worldwide market for broadband service providers will reach nearly $27 billion by 2008 as price and performance for equipment and services gradually improve. For equipment manufacturers, the satellite broadband market will grow from $0.6 billion in 2001 to $1.6 billion by 2008.
The market appears to be there, but the execution by service operators has been lacking thus far, says Baugh of Northern Sky Research.
"2003 should be a key year for [broadband satellite]," he adds. "We've always said that satellite has been constrained by execution and supply. If they don't have the solution and the wherewithal, ultimately, that's their demise."