Broadband Beat: Ka-band–The Impossible Dream?

By | October 10, 2001 | Via Satellite

Theresa Foley

With first generation Ka-band satellite systems still on the ground and far from being a sure thing, the action by the Federal Communications Commission (FCC) in August to hand out new Ka-band licenses to 11 operators to occupy nearly three dozen slots isn’t drawing much excitement.

It’s been roughly a decade since Teledesic first stirred up excitement with its vision of a huge system of low earth orbiting Ka-band satellites. Teledesic originally was supposed to connect millions of computers into the Internet, but the dream never matched the reality. Or maybe it was just bad timing. A decade later, another legion of licensees prepares for the long journey.

Until some of the early Ka-band systems–Spaceway, Astrolink and Wildblue–launch and sign on customers, these second generation systems are in for a hard time finding money and the necessary partners to move ahead. The 11 new licensees went to CAI Data Systems Inc., Lockheed Martin Corp., Celsat America Inc., Loral Cyberstar Inc., Directcom Networks Inc., Pacific Century Group Inc., Hughes Communications Inc., Panamsat Corp., KastarCom World Satellite LLC, Pegasus Development Corp. and TRW Inc.

If history is any lesson, the long list will be whittled down to two or three by 2006 when the game is over. With a one-year deadline for the licensees to sign construction contracts (and system launch by 2006), the pressure is on for the new license holders to treat their newly acquired regulatory assets as something more than just place holders for a futuristic business. In the tech and telecom climate of 2001, this is a seemingly impossible task.

In the old days of the 1980s and even into the 1990s for some, an entrepreneur could crank out the legal paperwork needed to secure an orbital slot and then wheel and deal his or her way through the financing and contracting labyrinth. Visionaries like Clifford Laughton and Charlie Ergan of Echostar were able to bring their companies to an operational point, or in the case of Columbia to a stage where it could be “flipped” in an acquisition by a bigger player. In the current climate, even the largest, best-financed and most conservative satellite companies are struggling against huge odds to get the Ka-band systems they’ve been working on for years into space.

“Just having a license and a good set of salesmen to raise money is not sufficient anymore,” says Roger Rusch, the consultant and analyst who has made a career out of tracking Ka-band and other futuristic satellite projects. Of the licenses, he says, “It’s not enough of a trigger to get things rolling.”

Rusch notes the many years it takes to build momentum for a new satellite system and the strong tendency licensees have of overestimating their customers. “It will be difficult to get these systems rolling. Astrolink, Spaceway and Wildblue I suspect will go on, but the new ones will have a hard time.”

Countering the gloom of slow market development and a tough financing climate is confirmation that broadband use climbed by 158 percent in the United States last year. By year’s end, 7.1 million U.S. homes and businesses had high-speed lines, which translated to a growth rate of 63 percent during the second half of the year and 158 percent for the full year. Small homes and businesses had 5.2 million of the broadband lines, with enterprises having the rest. DSL ended the year with two million lines, a 435 percent growth rate for the year. Cable reached a 3.6 million line figure, which translates into 153 percent growth. Ready for the discouraging part? Satellite and fixed wireless technology went from a paltry 50,000 at the start of 2000 to 112,000 at year end.

Interactive capabilities are up too. The FCC found that 4.3 million of the lines were going at speeds of over 200 kbps in both directions, an increase of 118 percent for the full year.

Another plus is that the FCC appears to have a strong commitment to get broadband services into all regions of the United States. For rural areas, satellite has a well- recognized advantage over fiber and cable, which can be difficult and expensive to install beyond urban areas. At this point, it isn’t clear, nor does it much matter whether the proposed Ka-band systems are for content distribution or direct Internet access.

Broadband content owners also are an important part of the demand puzzle, and the announcement in August that five major Hollywood studios would band together to deliver movies-on-demand over the Internet also should encourage broadband entrepreneurs. Theoretically this is a high-bandwidth application but terrestrial broadband also will have some ability to deliver the movies, as those of us who have DSL or some other early broadband technology realize. Digital film delivery into theaters and other broadband applications also advanced during the last year, but much of the new uses need a few more years of development before a tidal wave of demand spills over into the satellite sector.

With the new Ka-band licenses, the age-old formula of regulate first, finance second and grow the market third, may produce a few more satellite millionaires. But overall, the pursuit of business plans to follow the license awards has a distinctly quixotic air to it.

Theresa Foley is Via Satellite’s Senior Contributing Editor.


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