Satellite's High-Flying Expectations

As the ground war between digital subscriber line and the cable modem escalates on numerous fronts, their airborne rivals still think they have a role to play in the broadband battle.

Internet access via satellite has become a particularly lively segment — and that's curious, given its moribund progress so far.

Start-ups WildBlue Communications Inc. and Astrolink International LLC have imploded. StarBand Communications LLC (despite its relationship with EchoStar Communications Corp.) has plateaued at about 40,000 customers.

And Hughes Network Systems gloats about its 120,000 customer base — one that's very meager, after nearly five years of operation for DirecPC, even though that's been expanded into a two-way service and renamed "DirecWay."

Teledesic LLC — even with money from Bill Gates and Craig McCaw — appears comatose.

Nonetheless, satellite-based Internet-service providers still think they can compete in the high-speed race, and so do some fixed-wireless providers.

Spurring on the satellite contingent are technology providers who claim that their solutions will increase the capability of data-over-satellite — and decrease its price. But they face formidable hurdles.

At this month's Satellite 2002 conference in Washington, executives on a broadband panel agreed that satellite-based Internet service is likely to always cost more than delivery via cable modem or DSL. Today, the typical differential is at least 30 percent to 40 percent.


That's one reason why providers are have concentrated on the business sector and on non-urban targets — particularly "the 30 percent of U.S. homes that will never have access to DSL or cable," as described by HNS assistant vice president Allen McCabe.

These are market segments that, presumably, are less sensitive to the price differential — and might be happy to get any high-speed service they can find.

Satellite Internet delivery — the subject of much wishful thinking, and even more 10-by-10 booths, at the Washington satellite trade show — remains a weaker cousin to its landline competitors. It also walks a linguistic tightrope.

For example, StarBand promotes itself as a "high-speed" provider, but eschews the word "broadband" — its current maximum speed is about 500 kilobits per second, well below the controversial threshold for most terrestrial broadband delivery.

To bolster their near-term Internet presence, satellite providers are looking to enterprise opportunities, which explains StarBand's deals this month aimed at the small-office segment.

StarBand expanded its retail agreement with the National Rural Telecommunications Cooperative (NRTC), making the "StarBand Small Office" package available, first through DigiVision Satellite Services.

Later this spring, the NRTC will offer StarBand's service throughout its nationwide rural utility distribution channels. StarBand is also working with US Online, a nationwide ISP, for the Small Office project and hopes to sign up additional partners.

Separately, a new agribusiness Internet-service alliance that StarBand's parent Gilat Satellite Networks set up with BASF Corp. in Israel this month may migrate to the U.S., sources indicate.

For its part, DirecWay has teamed with such ISPs as EarthLink to offer bundled access packages, again aimed largely at small-business customers.


Further complicating the satellite providers' plans is the looming rearrangement in the DBS marketplace. Once EchoStar and DirecTV Inc. parent Hughes Electronics Corp. merge, both DBS companies will bring their Internet-access products along. But the future of those alliances is, well, up in the air.

For example, EchoStar says it will embrace Hughes Network Systems, the group that runs DirecWay — and its next generation, higher-powered version, called SpaceWay — even though EchoStar will divest other Hughes Electronics units.

Yet a proposed $300-million EchoStar pact with SES Global S.A., the European company that absorbed the former GE Americom satellite operation last year, could shift the balance of that deal –—possibly accelerating EchoStar's Internet capabilities. It certainly will affect EchoStar's current relationship with Gilat and StarBand, although all of the companies downplay the implications right now.

Meanwhile, Gilat has its own set of problems — most recently class-action lawsuits claiming that the company overstated the demand for StarBand.

Whatever the outcome of these diversions, the high-flying visions of satellite-delivered Internet access face significant barriers. Even bullish enthusiasts acknowledge that satellite delivery is not economical for point-to-point connections, the heart of today's Internet applications.

Satellite capacity limitations restrict their ability to scale high-volume usage. And, despite attempts to set up asynchronous connections — such as those provided by StarBand and DirecWay — the approach sullies the very nature of the Internet, which assumes that links are bidirectional

In that regard, one of the new efforts to make skyborne broadband delivery look like its earthly counterpart is something called the "UniDirectional Link Routing" (UDLR) protocol. The Europeans who are shepherding this technology claim it builds on "the convergence currently occurring at the edge of both broadcast and telco worlds."

UDcast — a French technology firm based in the Sophia-Antipolis science center — has quietly showed its approach, which establishes a "mediation layer" between the broadcast and interactive media on one side and the Internet Protocol layer on the other.

Although UDcast's hybrid solution is currently optimized for Europe's DVB, the company claims that the underlying UDLR technology can provide wireless connectivity by satellite to mobile or nomadic users.

Which bring us back to the question of whether satellite systems – using any technology – are primarily limited to remote, niche audiences.

If the big reach of Internet satellite service finds its way into urban or suburban areas — possibly as a replacement for business VSATs or home-office access — it will have an impact on the wired competitors who now think they have the battlefield to themselves.

Contributor Gary Arlen is known for his insights into the convergence of media, telecom, content and technology. Gary was founder/editor/publisher of Interactivity Report, TeleServices Report and other influential newsletters; he was the longtime “curmudgeon” columnist for Multichannel News as well as a regular contributor to AdMap, Washington Technology and Telecommunications Reports. He writes regularly about trends and media/marketing for the Consumer Technology Association's i3 magazine plus several blogs. Gary has taught media-focused courses on the adjunct faculties at George Mason University and American University and has guest-lectured at MIT, Harvard, UCLA, University of Southern California and Northwestern University and at countless media, marketing and technology industry events. As President of Arlen Communications LLC, he has provided analyses about the development of applications and services for entertainment, marketing and e-commerce.