The war over Internet access has gone cosmic. Even as local
carriers fight to bring Internet services to homes and offices via fiber, an increasing
number of companies are looking upward for a competitive edge in faster Internet access
and video streaming.
Companies such as iSKY, iBEAM Broadcasting Corp. and Loral
Space & Communications Ltd.'s "CyberStar" have all joined the game, and
the number of companies providing Internet access via satellite promises to grow at
breakneck speeds over the next three years.
Satellite "will continue to have its own dominant
niche," said Karl Wu, vice president of Internet Services for Loral CyberStar
Services. "That's why you're seeing so many players in building satellite
networks. There's plenty of room for both technologies to grow."
Currently, satellite makes up a tiny fraction of the
Internet market compared with fiber. But it is projected to have a 10 percent to 15
percent share by 2008, said Christopher Baugh, senior satellite analyst with Pioneer
Consulting of Cambridge, Mass. That will translate into some $38 billion in annual
revenue, including both business and residential use.
Satellite has several benefits over fiber, industry
analysts said. It is able to feed more information into more homes over a larger territory
at a lower cost. It can reach remote parts of the world, including areas in the United
States, where it is unprofitable to lay fiber. And it can often send large amounts of data
at much faster speeds than fiber can.
The downside has been limitations on sending data back to
the satellite, which these systems have worked around.
In one of the most highly anticipated launches in the world
of satellite, Denver-based iSKY plans to deliver two-way wireless and affordable broadband
Internet access via satellite to any home or small office in the United States, Canada and
Latin America in late 2001.
The company estimated that its largest customer segments
will comprise those homes and small businesses that do not have access to cable-modem or
digital-subscriber-line broadband services.
"We forecast that 25 million to 30 million U.S. homes
and 70 million to 80 million Latin American homes will not have access to other broadband
solutions when our service hits the market next year," iSKY president and CEO Thomas
Moore said. "Of those, we expect a significant number will choose a
satellite-broadband solution. Our high-speed, user-friendly and low-cost service will
contribute to our success."
The company will use Ka-band frequencies, which use a large
number of small "spot beams," rather than a single continental U.S. (CONUS)
Spot beams allow a large degree of frequency reuse, meaning
that one beam may be transmitted at the same frequency as long as it is aimed at different
parts of the country. The average system design affords between 10 and 12 times frequency
reuse, thus increasing communications capacity per satellite.
The geosynchronous-earth-orbit satellite that iSKY plans to
use will allow the company to begin service with just one satellite in place.
Customers will require an iSKY modem and 26-inch dish to
use the service. But clients with direct-broadcast satellite TV will be provided with a
"one-dish solution" by being offered one of the company's satellites in
place of the ones they have.
Moore estimated that iSKY will spend $750 million to build
and launch its first two satellites to serve North America and Latin America and for
operating expenses. To date, the company has secured financing for approximately one third
of that total.
Recently, iSKY announced that it had secured $50 million in
a second round of funding from blue-chip investors including Kleiner Perkins Caufield
& Byers, TV Guide Inc. and Liberty Media Group, the latter for its "@Home in the
Sky" broadband service. Kleiner Perkins and TV Guide participated in the first round
of iSKY funding, while Liberty is a new investor.
The company has retained Donaldson, Lufkin & Jenrette
Inc. and Morgan Stanley Dean Witter & Co. as investment bankers to help meet the
remainder of its financing needs over the next 18 months.
In addition, iSKY announced last Wednesday that Arianspace
of Evry, France, will launch the company's first two satellites, iSKY-1 and iSKY-2,
which will be built by Palo Alto, Calif.-based Space Systems/Loral, a leading designer and
manufacturer of both geostationary and low-earth-orbit satellites. Arianspace will also
provide more than $100 million of construction-period and long-term financing.
The service's launch is already generating excitement
among Internet providers. "They have a very good concept," said Dan
O'Brien, president and chief operating officer of Denver-based High Speed Access
Corp., which is in discussions with iSKY.
Another company eyeing the cosmos is iBEAM. Launched late
last year, the Sunnyvale, Calif.-based company wants to give media companies like MSNBC,
the British Broadcasting Corp. and Bloomberg L.P.'s "Bloomberg Interactive
TV" the ability to bypass congestion of fiber networks and beam video to its clients.
For that to happen, iBEAM is building a $250 million
network that bundles media traffic and bypasses the Internet's core by sending
information via satellite to the Internet's periphery.
Although the company remains "agnostic" to the
vehicle with which it provides Internet access, according to vice president of marketing
Tom Gillis, satellite allows video to get to its destination faster, particularly when it
goes out to thousands of users.
The idea is to send video over fiber to one of iBEAM's
two national centers, and then to beam it up to a satellite transponder that sends
pictures to some 12 regional data centers -- as well as thousands of servers that are
equipped with receivers -- then on to thousands of Internet providers that have local
connections to users. "Satellite makes sense for a certain class of traffic,"
However, he pointed out that satellite does have its
drawbacks. It is difficult to beam in some parts of the country where the company
can't get roof access to get a clear shot at the bird, as he put it. And bad weather
can hamper the clarity of a feed.
But satellite networks have low maintenance costs.
"Once you launch a satellite, 15 years is the typical life cycle," he added.
"That is very cost-effective."
Loral CyberStar remains a dominant player in the satellite
Internet business. The company allows for Internet-protocol global multicast,
Internet/Intranet and fully managed end-to-end private-network solutions.
In addition, its parent company, Space Systems/Loral,
builds satellites, including those of its competitors like iSKY.
Loral CyberStar's dominance in the marketplace,
however, is not keeping the company from moving ahead with plans to remain competitive. Wu
said the company is expected to have a two-way-satellite rollout to consumers at the end
of the year, and it will initially limit its trials to rural areas.
"It is our every intention to offer Internet access to
the consumer," he added.
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