Washington— The eyes of both Lisa Shoenthaler and Matt Polka widened with surprise when a fellow panelist from Hughes Network Systems declared no interest in voice-over-Internet protocol telephony aboard his company's "SpaceWay" broadband service.
Both Shoenthaler — senior director of the National Cable & Telecommunications Association's Office of Rural/Small Systems — and Polka, the American Cable Association president, had just offered their competitive viewpoints during a "broadband outlook" session at the Satellite 2003 conference here.
Then, HNS service department chief Marc Newman, responding to a question about VoIP, insisted that the long-distance pricing structure and the laws of physics worked against satellite-delivered voice services.
Other panelists echoed Newman's views on the impracticality of satellite-delivered VoIP. StarBand Communications vice president of sales and marketing Howard Lossing also saw no opportunities there. And Kevin Mulloy, senior vice president of strategy and business development at Intelsat (speaking largely as a big investor in WildBlue Communications Inc., the nascent broadband satellite venture in which Liberty Media is also a stakeholder) agreed, but did not completely rule out VoIP.
Nonetheless, there goes the satellite triple play!
Broadband data delivery via satellite — still a tiny business — might become a supplement to airborne video. But voice won't be in the bundle.
During the revelatory panel, and in subsequent conversations with top executives at HNS and StarBand, two factors emerged.
The market for broadband via satellite — now barely 200,000 users, or less than 1.5 percent of the total U.S. broadband audience — will proceed in the near term as a battle amongst the satellite companies themselves, not against wired competitors.
The current quest for presence in the satellite broadband industry comes as all of the key players regroup.
StarBand, jilted from its alliance with EchoStar Communications Corp. last year, is emerging from bankruptcy proceedings. Starband, which now reaches about 40,000 customers, will move out of Chapter 11 status later this year, according to President Zur Feldman, and can reach profitability with only a few hundred thousand customers.
In talking to me, Feldman also pointed to a new dish and receiver on the terrace outside his office. The hybrid unit includes a second feedarm and receiver, which offers a hint about StarBand's double-play direction.
The unit, which can pick up EchoStar's Dish Network direct-broadcast satellite video service, is offered via StarBand's "Dealer Direct" program, which allows retailers to sell the dual service (video plus data) through a single StarBand antenna/receiver device. The deal is being offered despite last year's boisterous dissolution of the StarBand-EchoStar joint marketing agreement.
StarBand's emphasis on competing strictly against HNS and WildBlue — and not against wired broadband providers — is a convenient tactic that avoids comparison with the far larger land-based platforms.
Spaceway on tap
StarBand won't pursue content packaging —"a diversion of resources we cannot afford," said Feldman — but intends to optimize its local retail network of about 2,300 largely independent dealers, after StarBand cut its alliance with RadioShack Corp.
Meanwhile, HNS — already buffeted, along with parent Hughes Electronics Corp. and cousin DirecTV Inc., toward an uncertain ownership fate — presses on with its Ka-band SpaceWay project.
When HNS chairman and CEO Pradman Kaul first showed me the original SpaceWay plan in 1999, he envisioned a 2002 launch, which was later pushed back to 2003.
Now he insists that 2004 is a firm start date, and affirms that the satellites are in final production stages.
And a 15 percent spurt in the current DirecWay operation's customer base during 2002 — which brought the data service's subscriber total to 158,000 — is an indicator of the potential for satellite broadband service, said HNS executive vice president and general manager Paul Gaske, who runs the platform. That's especially true in the small office/home office (SoHo) market, he maintained.
StarBand, HNS and WildBlue face barriers, such as federal regulation requiring professional installation of uplink facilities — a competitive hurdle when compared to cable and DSL self-provisioning capability. The satellite companies must send an expensive installer to put up the two-way dish.
They are trying to change that requirement.
Satellite broadband providers also face numerous other hurdles, including price. With current basic services priced at $60 to $80 per month, their fees are 50 percent to 70 percent higher that cable or DSL high-speed service. And operating speeds are somewhat slower — another point of debate (via the usual "defining broadband" discussion) at the satellite conference.
The unanswered question for cable, and for the satellite data providers themselves: How significant a role can satellite can play in areas that DSL doesn't reach and where cable systems might not get upgraded?
That's another reason for cable operators to open their eyes wide to the data component of the continuing satellite onslaught — even if they don't have to keep their ears open to voice competition.
Contributing curmudgeon Gary Arlen opines regularly for Broadband Week.
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