Cable operators should keep their eyes on the skies for emerging competition from broadband satellite operators, industry analysts warn.
According to recent forecasts, satellite broadband is expected to evolve into more than a niche player targeted to rural markets. U.S. broadband-satellite subscriber rolls are projected to balloon from a mere 490,000 this year to 8.6 million by 2008, according to satellite-industry research firm The Carmel Group.
Not only do satellite broadband players have the financial backing to match their competitors, but they also hold a natural footprint advantage over their grounded cable and digital-subscriber line rivals. That's because broadband-satellite service providers can "serve an entire continent or the entire globe with the flip of one switch," said Sean Badding, vice president of business development at The Carmel Group.
"That's fundamentally easier, as well as more cost-effective than terrestrial systems. And cable has higher costs than wireless in upgrading its local plant, region by region, as part of the larger national digital build-out," he noted.
Today, two companies lead the Ku-band satellite-data sector: Hughes Electronics Corp.'s DirecPC and StarBand Communications Inc. DirecPC remains the largest, with about 70,000 subscribers at the end of the first quarter.
StarBand Communications Inc. (formerly Gilat-To-Home) is next, with about 40,000 satellite modems installed. StarBand sells the service on its own and through a distribution pact with No. 2 DBS player EchoStar Communications Corp., which offers a dual dish for data and video services.
The rural markets that lie beyond the reach of cable, DSL and fixed-wireless providers remain satellite's most coveted point of first entry.
"We're starting with the low-hanging fruit of rural users unable to get broadband connections any other way," said EchoStar vice president of data services Jim Stratigos. "There are about 25,000 to 30,000 Dish Network sales outlets nationwide, like Radio Shack [Corp.], and now all these are opening up to the StarBand receivers.
"Things are going so well that we're struggling to keep up with the demand," Stratigos said.
That demand will build over the next five years, "as satellite helps bridge the digital divide between urban and rural markets," predicted Frost & Sullivan strategic analyst Jose del Rosario.
Once the rural base is established, he suggested, broadband-satellite data service will penetrate the urban and suburban markets, much in the same way DBS now competes head-to-head with cable for every new digital-video customer.
Though Ku-band satellite download speeds can rival those of DSL and cable, the upstream path can't keep up that pace. That's because, in current iterations, it relied on a relatively slow phone line for return traffic. That will change when satellite operators start to launch a series of two-way, high-speed Ka-band services as early as 2002.
Three of the most prominent players in the Ka-band space race are Hughes' Spaceway, AstroLink International LLC and WildBlue Communications Inc. (formerly iSky), which boasts financial backing from EchoStar, Liberty Media Group, Gemstar-TV Guide International Inc., Kleiner Perkins Caufield & Byers, Telesat Canada and TRW Inc. Astrolink, which is set to launch in 2003, also has backing from Liberty, as well as Lockheed Martin Corp.
At about 26-inches across, the barely oval Ka-band dishes are a bit wider than typical DBS video dishes and can "see" two colocated satellites at once. One bird bounces national content from the main uplink gateway, while the other grabs regional content from gateways within local spotbeams as narrow as 400 miles in diameter.
A single Ka-band satellite can manage between 100 to 200 spotbeams at once.
However, interference questions, such as "rain fade," continue to linger with respect to the more-advanced Ka-band technology. But WildBlue vice president of technology Bob Luly contends those reliability questions are blown out of proportion.
"The same performance questions were raised about C-band and Ku-band," he said. "If DBS customers are happy with 99.7-percent reliability today … and if we can achieve that same 99.7-percent reliability with Ka-band, we figure that if it's good enough for DBS, it's good enough for us."
While companies like WildBlue and Spaceway will operate their high-speed services from geostationary satellites in orbit at about 22,000 miles above the planet, another breed of low-earth-orbit (LEO) broadband satellite players have pruned their original plans quite substantially.
Teledesic LLC was originally the most ambitious of those that advocated LEO technology to deliver high-speed data. Under its initial $10-billion proposal — with backing from the likes of Boeing Corp. and Microsoft Corp.'s Bill Gates — it planned to launch about 288 LEOs, and offer high-speed services using Ka-band by 2004.
However, last October Teledesic parted ways with its prime equipment contractor, Motorola Inc. Due to escalating costs, the company will reportedly cut down its LEO constellation to about 50 satellites.
SkyBridge LP also started out with high aspirations, hoping to deploy 80 LEOs at a roughly 913-mile altitude and launch services sometime in 2002.
The company — which lists Alcatel Alsthom among its backers — has shifted gears a bit. While claiming that it's still 100 percent committed to its LEO strategy, the company said recently that it would develop a broadband access-system using geostationary birds and sell its content-distribution platform at wholesale to other service providers by year-end.