Regulatory Review: Give It Away?

by Peter J. Brown

The sun is shining, and Space- ShipOne has just returned safely to earth, touching down in California after its historic suborbital flight. So, it is a great time to be talking about soaring imaginations and down-to-earth business models. As satellite broadband ventures start easing to the launch pad, the time has come to take a hard look at what exactly lies ahead for the courageous Ka-band crowd.

For starters, the satellite applications surrounding digital TV in general and High Definition Television (HDTV) in particular have given the broadband satellite sector a bit of breathing room. Nobody seems to be too focused on Ka-band, especially in North America. After all, when is the last time anyone asked you for an update on Ka-band satellites now in orbit such as Nimiq 2 or Echostar 9, for example?

As for Spaceway, the operative word from News Corp. seems to be flexibility, as in maybe the capacity in question will be used for broadband, or maybe it will be applied to video in order to meet the rising appetite for HDTV services.

Will Wildblue emerge a winner? We think so, but we say this with some reservation.

Back on the ground, broadband bundling is the name of the game, and how far the competition is willing to go to retain old customers let alone win over new customers remains to be seen. Cablevision Systems Corp. attracted considerable attention, for example, by rolling out a discounted version of its digital cable, high-speed Internet and unlimited phone service known as Optimum Triple Play, in and around New York City for a monthly fee of $90.

While this offer is for new customers only, and while it is a bit premature to label this as the start of an aggressive industrywide trend, this pricing curve cannot bode well for the satellite broadband sector. Granted cable modems are not available in every neighborhood, not yet anyway. Still, what strikes many observers here is that Cablevision appears to be easing up to the magical threshold where it is offering free phone service, and doing so has far less to do with what the DBS companies are or are not doing, and has more to do with what Verizon Communications may be up to.

Understand that Burt Rutan is not the only one celebrating the fact that old rules may no longer apply. The phone companies have something to be mildly joyous about, too, in the form of a Bush Administration decision to put an end, in effect, to one of the most controversial provisions of the Telecommunications Act of 1996. The days of providing competitors with low-cost access to networks may be over, just as the public sector lock on space flight may be coming to an end. This could bring a renewed energy to the DSL recruitment drive.

What does this mean to the broadband satellite entrepreneurs? Well, come out to my island here off the coast of Maine for a quick lesson. As you wind your way past the firehouse, look quick. You may or may not spot the little brown shed on the side of the road. The shed itself is not impressive, but the fiber node inside is certainly worth noting. Here in Hancock County, not far from the old telephone museum, I can now determine that the distance between my desk and DSL is well under two miles.

What is it going to take before this rural household, not passed by cable by the way, is propelled into the broadband mainstream? Not much. How much of rural America suddenly finds itself in a similar situation? Dark fiber is abundant, I am told. After begging for more bandwidth, is rural America about to experience a surge in supply? Are phone company executives feeling any heat either from the FCC or from the marketplace?

We can only speculate about what forces are at work. What we do know is that while the satellite broadband companies may have finally put together the right mix of technologies in order to offer a compelling product, they must now take stock of the new bundling dilemma that confronts them. And this means perhaps recalculating what constitutes the right subsidy, and the right business model.

What adds to the complexity of the situation is the limited partnering options in 2004 as well. Phone company executives have already tied the knot with DBS firms, letting DirecTV and Echostar control the video pipe and dissolving for now any dreams of a massive IPTV deployment in the United States. Will the promises of a single bill with its advantages of reducing churn perhaps modify the enthusiasm of the DBS companies to inject what might be deemed an unwelcome element into their relationship with the phone companies? After all, the RBOC’s with their DSL agendas have very little or no incentive to promote satellite broadband.

Developments in late June indicating that SBC Communications Inc. may now invest $4 billion to $6 billion throughout the next five years to deploy an advanced IP network will make the DBS companies think twice, especially as SBC is testing switched TV service using the Microsoft TV IPTV platform. These developments may be a sure sign of what is to come in the form of a massive IPTV deployment.

Given these limited options, would a partnering of cellular phone firms and satellite broadband companies make sense? Where is the win-win? Alas, if any wedding plans are there, the secret is well kept indeed.

Peter J. Brown is Via Satellite’s Senior Multimedia & Homeland Security Editor. He also volunteers as a satellite technology and communications advisor to the Maine Emergency Management Agency.

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