Major Software Companies: Friend and Foe of Satellite?

Throughout the past few years, the names of major software companies quietly have crept into more and more satellite-related business developments. Google, Microsoft, Cisco Systems and Apple are just a few of the powerful software firms that have been partnering with satellite companies on a variety of projects.

Whether it is to provide enhancements to interactive TV platforms, imagery software or the global expansion of broadband coverage, there is clearly a vested interest in the success of satellite on behalf of Nasdaq’s blue chip giants. While the financial antes of these major players often pale in comparison to the figures put up by the satellite industry’s leading companies, the celebrity of universally recognized brand names has often rendered the small and private satellite fraternity starstruck.

The Google Constellation

In September, Google, the largest global online software company with a value of about $31 billion, made waves in the satellite sector by investing in a small startup with an ambitious Ka-band constellation project intended to bring high-speed Internet to underserved regions around the globe. O3b, which stands for "the other 3 billion," referring to what it believes to be the number of potential customers in can reach, was the surprising recipient of a 43 million euro ($57.8 million) investment from Google. While this could be considered a small investment from a company of Google’s size to a constellation that has been projected to cost $650 million, the fact that Google single-handedly put O3b on the map, overshadowing the manufacturing contract won with Thales Alenia Space to build the satellites, caught the attention of analysts and executives industry-wide. "For Google, the more Web traffic there is, the better it impacts the global economy," says O3b CEO and founder Greg Wyler. "There are 3 billion people who are currently not able to be economically integrated with the rest of the world due to lack of communications. This constellation will level the playing field of the world economy."

Wyler’s startup also received fiscal backing from Sirius XM’s savior, Liberty Global Inc., as well as HSBC Principal Investments, and has taken off since. Not even a month after O3b was brought into the satellite spotlight, it landed its first major satellite partner, Gilat Satellite Networks. The Israel-based satellite solution developer contracted with O3b to design a line of VSAT terminals and gateway components, based on its SkyEdge platform, to support the ground segment of O3b’s constellation. This partnering with Gilat enables O3b to leverage automatic tracking and handoff between its satellites. Plans for the terminals will support an array of high-speed applications including 3G cellular/WiMax backhaul, IP trunking, and broadband connectivity for small and medium enterprises, and ISP backhaul.

And despite criticism from some analysts, the deals kept rolling in for the Google-backed project. As recently as March, Satconsult, based in Ghana, signed a multi-year, multi-million dollar contract for high-speed, low-latency IP trunking with O3b, which will provide its managed carrier service, Quick Start, to help Satconsult expand their services throughout East and West sub-Sahara Africa. "While I certainly think that in this economic climate, it is the worst time for an expensive broadband infrastructure development, I have to say that Wyler’s aggressive drive and long list of partners and supports is getting the attention it deserves," says Steve Rago, principal analyst for the electronic market research firm, iSuppli.

Wyler believes that the payoff for his company’s $650 million vision is justified in his market research. "There are two bellwethers that are very clear indications of the potential of our target markets," says Wyler. "The first is the growth of the GDP [gross domestic product] in 150 emerging market economies around the world. Some of these emerging markets have GDPs that are growing phenomenally fast, between 2 and 10 percent GDP growth per year. That means they have more cash in their pocket to spend. The second bellwether is the investments being made in cellular and mobile infrastructure... in these emerging markets. That gives a good indication of what communication pipes are being laid that need to be filled. If billions are being spent on these pipeline infrastructures then you know that these pipes will need something flowing through them and that is where our network comes in," he says.

Wyler says the demand for broadband connectivity in emerging markets is tremendous and if his customers can get affordable access to the service, it will only continue to grow. "Telecenters with shared computers all around the world are jam-packed. Customers pay a fee and get their 10 minutes of online time. These customers are just like customers in developed markets. They want YouTube, MySpace and Facebook. The problem is, you have 10 computers sharing a single 56k connection, and there is no way to adequately feed this demand," he says.

O3b’s conquest now brings Wyler to overlooked corners of the world, such as the island of Fiji, where he is presenting regional customers with a preliminary assessment they 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. After a May meeting with information and communication technology ministers from Tonga, Wyler says the reactions he receives reveal a measure of enthusiasm and anticipation for the O3b project. "It is a pretty cool system," he says. "However, there is really no new technology. It uses the best existing technologies in a way they have not been used before."

While it is true that O3b is not necessarily a pioneering project or next-generation development, the Google stamp of approval definitely has separated O3b from the pack.