UK-based provider O3b plans to launch a satellite-based backhaul in 2010 allowing for internet costs to be cut in emerging markets. However, analysts are skeptical, saying that a slew of similar projects have emerged in recent years and never gotten off the ground.
THE PROJECT
Satellite communications for telephony and internet has always been considered expensive and marketed mainly to corporations such as mining and energy companies that operate in remote areas and have the money to pay for satellite connections.
O3b believes it can bring down the price of internet for several reasons. For one, the project will be cheaper than many satellite projects, a company spokesperson told BNamericas.
Unlike geostationary satellites, the project will not try to cover the whole earth but just a ribbon running along the equator from 45º North to 45º South, taking in most of the developing regions - including Latin America, Africa, India, the Middle East, as well as developed countries like Australia and New Zealand.
With an initial 16 satellites, the company believes it has demand covered. This compares to some 66 satellites needed for world coverage and which would drive costs into the billions. O3b has estimated an initial outlay of only 500mn euros (US$712mn).
The project is also different as it does not propose to provide services to the end-user but rather act as backhaul from the cell towers to the node. This eliminates the need for expensive satellite receiving devices and means that ISPs or cellular companies can in turn offer the bandwidth using whatever technology they choose.
The satellites will also be located in a low-medium orbit range, some 8,000km above Earth, compared to 36,000km for the geostationary satellites.
The satellite will be high enough above the ground to view all the points of contact but low enough to ensure that latency in communications is significantly reduced, therefore reducing the chance of dropped calls.
O3b CEO Greg Wyler believes the technology can provide communication speeds comparable to fiber.
"O3b Networks can deliver fiber-like latency and capacity at prices that are, in many cases, less than fiber. Of course, fiber pricing around the world varies greatly at each point of access," Wyler told BNamericas.
"Historically, satellites have been more expensive. However, the O3b network system uses an advanced architecture which substantially reduces the cost of providing high-speed, low-latency capacity at virtually any place within the coverage area," Wyler added.
O3b will target ISPs and telcos that are trying to provide cost efficient coverage of 3G or WiMax services in underserved areas with a lack of fiber backhaul.
Wyler admits that the high investment in engineering and design, which itself has required an investment from O3b of over US$100mn, has impeded projects such as this from working in the past.
However, with the company's partners - HSBC, Google and Liberty Global - Wyler believes the project has the financial backing and operational expertise to be able to sell the product and make for a profitable business model.
THE CRITICS
Carlos Blanco, analyst with consultancy Signals Telecom, is skeptical of the project, saying that he has seen a dozen similar projects come and go in recent years, even one that had the backing of Bill Gates but failed to get off the ground.
According to the analyst, the initial investment required combined with the segment that will be targeted - remote areas of emerging markets - raises many doubts about how economically viable the project can be.
"These projects have appeared periodically since 1995, promising global coverage with low prices. Unfortunately, very few progress," Blanco told BNamericas.
"They can build the satellites and put them into orbit. But if you want to get money from that, that is an issue of resources, and we're talking about the neediest areas in Latin America and Africa with low resources."
"If those areas still don't have traditional mobile telephony using CDMA450 or WiMax, I don't believe that any satellite technology, as advanced as it might be, can be as good [cost efficient] as any land technology," Blanco said.
Enrique Carrier, director of consultancy Carrier y Asociados also believes there are many details about the project that are unclear, such as the technology itself and the amount of potential additional investment that may have to be made.
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