Satellite Broadband Start-Up Targets Pacific Islands

by Peter B. de Selding, Space News Staff Writer

Date: 09 February 2009 Time: 08:01 AM ET

PARIS - Start-up satellite broadband provider O3b Networks expects to present an initial megabit-per-second pricing scheme to Pacific Island nations during a Feb. 17-20 meeting of the International Telecommunication Union (ITU) in Tonga, O3b Chief Executive Gregory Wyler said.

Wyler said the company?s preliminary assessment is that an island would pay around $600 per megabit per second of throughput, plus an initial activation fee for the ground equipment of about $350,000, for orders placed by May 2009.

O3b, based in the British tax haven Jersey Channel Islands, has contracted with manufacturer Thales Alenia Space of France and Italy to build an initial eight 700-kilogram O3b satellites?to be launched together in late 2010 aboard a Sea Launch Co. rocket.

The satellites will operate from an equatorial orbit of 7,825 kilometers in altitude, offering high-speed broadband access to a broad swath of territories in South America, Africa and Asia that do not have affordable broadband access.

Wyler said in a Jan. 19 presentation to the Pacific Telecommunications Council in Honolulu that O3b would offer customers a service-level agreement guaranteeing 99.5 percent availability.

Eight O3b satellites are under construction, for an average per-satellite cost of $22 million, Wyler said. The company ultimately expects to build eight more to complete the constellation. Wyler said the relatively low-altitude orbit ensures a low latency, positioning O3b?s service between fiber-optic cable and geostationary satellites orbiting at 36,000 kilometers in altitude.

The 22 island nations in the Pacific Ocean are seeking to extend broadband access beyond their principal cities to include rural populations and those on less-populated islands.

Governments in South America, Africa and Asia are trying to offer the same universal access guarantees to their populations through government-financed programs using satellites and terrestrial links.

But the Pacific Ocean nations benefit from the fact that their location means the O3b satellites will have a huge amount of available capacity when they pass over the region.

?The system has 30 gigabits per second of capacity over the Pacific islands - a lot of extra capacity as the satellites orbit over the island because of the low populations,? Wyler said.?

O3b has won the backing of Internet search giant?Google, HSBC Principal Investments bank and Liberty Global Inc., but its main financing is expected to come from bank loans. Wyler said the company already has won support from the governments of France, Italy, Britain, Canada and the United States.

O3b said it had signed more than $200 million in customer contracts in the last three months of 2008, which Wyler said amounted to bookings of more than 7 gigabits per second of system capacity. The company unveiled its project in September.

In January, O3b announced what it described as a multimillion-dollar, multiyear contract with Internet service provider Microcom DRC of the Democratic Republic of Congo and Congo Brazzaville. It announced a similar multimillion-dollar contract with Quark Communications Inc. of Guyana.

In his presentation, Wyler stressed not only latency, but also the cost of satellite broadband when delivered from geostationary satellites.

The biggest current provider of satellite capacity to the Pacific Islands is Intelsat of Bermuda and Washington. Intelsat Chief Executive David McGlade, addressing the conference the same day, said Intelsat has been forced to raise prices in some regions, including the Pacific Ocean, because the alternative was to stop providing service there.

With the price of launch services and satellites increasing, McGlade said, Intelsat had to increase prices or it would not have been able to afford to replace retiring spacecraft. Intelsat is owned by several private-equity investors. Much of the company?s current cash flow is being spent reducing the debt that these investors loaded onto the company as part of a series of leveraged buyouts of Intelsat?s previous owners.

McGlade said that while the price of new satellite capacity in some regions, such as the Pacific Ocean, has increased, Intelsat continues to sell reduced-price capacity on satellites nearing retirement age.