Reducing the Digital Divide
Satellite broadband initiatives are plentiful in Asia, with companies such as Thaicom, Optus and BB Sat looking to use the latest satellite technology to reduce the digital divide in countries throughout the region.
Asia and Pacific — Broadband and Growing
With 39 percent of the world’s broadband subscribers located in the Asia-Pacific region according to the International Telecommunication Union, some interesting satellite broadband strategies are taking shape to bring broadband to rural areas and provide needed communications services. Operators are seeking a share of a market valued at more than $28 billion and growing, and with 27 million fiber-to-the-home subscribers, it is a wired market with many observers seeing huge growth prospects with 3G and WiMax technologies rapidly building out.
While the highest penetration of broadband households in the world exists in Asia’s top broadband countries such as Korea, in the have-nots such as India and Indonesia, penetration is less than 2 percent, and in underserved markets like Cambodia and Laos, maximum consumer speeds are less than minimum speeds in well-served countries. In most of the Asia-Pacific region, broadband access is limited to urban areas, leaving a huge digital divide between urban and rural access. Satellite probably accounts for less than 1 percent of Asia’s broadband market, but for rural areas without advanced communications infrastructure, mountainous regions, remote islands, and other locations not yet served by ground-based communication lines, satellite communications is helping to reduce the digital divide.
"The strengths of satellite communications for the delivery of broadband services to rural and remote areas over other technologies are significant, including ADSL2+ comparable speeds in future," says Paul Sheridan, director of satellite at Optus, which owns and operates four satellites with a fifth scheduled for launch in 2009. "We believe that due to the low population densities and the significant distances involved, satellite is an economical way to deliver broadband services to these areas."
While broadband services on satellite have been available for several years in the region, they mainly use Ku-band conventional bent-pipe satellite capacity and mainly have been a niche revenue stream to the satellite operator – with one exception. IPStar (also called Thaicom 4) launched in 2005, pioneered in Asia as the first satellite in the region designed specifically for high speed, two-way broadband communication over an IP platform. IPStar-1’s Ku-band and Ka-band beams cover 14 countries throughout the Asia-Pacific Rim, and services and terminals are sold through Thiacom’s network of Partners in ten Asia-Pacific countries and provided through 13 gateway systems. As of July, the company said it had delivered 150,000 user terminals.
Growth Prospects Prompt New Entrants
O3b Networks, an ambitious new satellite broadband player targeting the digital divide, entered the scene in mid-2008, backed by financial support from Google Inc., Liberty Global Inc., Allen & Company and HSBC Principal Investments to the tune of $60 million. Headquartered in Jersey, Channel Islands with offices in Denver, the start-up announced plans to build and launch a constellation of 16 Ka-band satellites in a medium Earth orbit designed to provide global broadband services for underserved regions of world, including the Asia-Pacific, beginning in late 2010. O3b is resurrecting in many ways satellite concepts put forth in the 1990s. Intelsat, ICO, Microsoft and others filed for Ka-band frequencies to launch broadband system ventures, but the systems never got off the ground.
The goal is to show how broadband satellite service can solve Japan’s digital divide and underserved problem of several million households and how this service can be a significant part of the government’s strategy to provide broadband service to all citizens.
— Beitchman, BB Sat.
O3b believes it has learned from those efforts. The constellation would carry 2,300 transponder equivalents, providing link capacity up to 10 gigabits per second (Gbps) and total system capacity of more than 160 Gbps, the company and its supplier says. Because of the low (65 millisecond one-way) link latency from its selected orbit, O3b Networks believes it can better address terrestrial wireless backhaul applications than competing geosynchronous systems. "The company’s low-cost, low-latency Internet backhaul and 3G cellular backhaul services will allow telcos and ISPs to offer affordable, high-speed Internet access services, effectively bridging the digital divide between developed and emerging markets," says Greg Wyler, O3b founder and CEO.
O3b has contracts with Thales Alenia Space for spacecraft, Sea Launch for launch services and with Gilat Satellite Networks for user and ground terminal technology. Although full financing for what some reports say is a $650 million-plus project has not been announced yet, the total system investment could prove to be significantly larger. Asian markets the company expects to target include the Indian subcontinent, home to about 300 million households, but only 4 percent have personal computers and only 1 percent are estimated to have some form of broadband connectivity.
San-Francisco-based ProtoStar Ltd. debuted in July as a new regional operator in the Asia-Pacific scene. The ProtoStar-1 satellite carries 16 Ku-band and 38 C-band transponders to provide direct-to-home, broadband Internet and GSM cellular backhaul service providers throughout South and Southeast Asia. While focused on DTH service, ProtoStar sees potential demand for its Ku-band India coverage capacity.
At the end of 2007, NewSat Ltd., a publicly traded Australian satellite service company providing VSAT, teleport and broadband services, announced its plans for a dedicated Ka-Band satellite covering Australia, New Zealand, Papua New Guinea and Timor. It sought government and private funding, and in a Sept. 30 letter to shareholders, Chairman John Walker reiterated that the company’s aim to launch a Ka-band satellite remains a key objective but indicated short-term conditions made it a difficult project in current conditions. The JabiruSat-1 satellite project, which will be managed through a private subsidiary, JabiruSat Ltd., has been rescheduled for 2012. A spacecraft vendor solicitation is in the works.
Another new player with designs on broadband is BB Sat LLC, a privately held U.S. firm founded in 2005. BB Sat’s Japan subsidiary plans to start broadband service in Japan in the second quarter of 2009. According to James Beitchman, president of BB Sat, "Very successful satellite broadband services aimed at consumer markets have been established in the United States, and BB Sat will bring those same systems and services to the Japanese people." BB Sat is conducting consumer broadband trials with a trade group organized and sponsored by the Japanese government. The pilot uses ViaSat’s SurfBeam technology and Ka-Band satellite capacity from Sky Perfect JSAT Group on its Superbird B2 spacecraft. "The goal is to show how broadband satellite service can solve Japan’s digital divide and underserved problem of several million households and how this service can be a significant part of the government’s strategy to provide broadband service to all citizens," says Beitchman. BB Sat will begin commercial service in the first half of 2009 using Superbird B2 and plans to add additional capacity in 2011 through a condominium package carried on a third-party satellite. "We have system design for this package and several candidates to carry it," says Beitchman.
Is There Demand for Rural Service?
Satellite solutions are a proven technology for the delivery of television, broadband and mobile services to rural and remote locations, but is rural a sufficient growth market in Asia? Beitchman acknowledges that optical fiber and VDSL are widely deployed in a country such as Japan, but BB Sat does not need to compete with those services. "Japan, a country with 51 million households, still has digital divide problem of about 1.5 million households, and with our high speed service, we can also provide high quality service to rural ADSL customers who are far from the D-SLAM and consequently receive slow, low-quality service. That is an additional market of more than 2 million households," he says.
Patompob Suwansiri, IPStar’s head of marketing, has a similar view but also sees more demand closer to urban regions. "The natural market for us is the rural market, but more accurately, we target the unserved and underserved markets nationwide. From our deployments, we see that the majority of the customers are concentrated in the suburban areas surrounding the central business districts," he says. "… In Asia, the rural market is an important target market for us due to the fact that, in most countries, terrestrial infrastructure is quite limited. We distribute our services through multiple local service providers in the country. The IPStar satellite can potentially serve up to 2 million retail broadband subscribers, which may sound like a lot, but in actual fact is only approximate 1 percent of the broadband market in Asia."
IPStar’s Australian entity announced a goal for 60,000 total subscribers and 60 percent subscriber growth in Australia. "There are still up to 1 million households in Australia that do not have access to terrestrial broadband services, therefore, we will continue to expand into this retail market by working closely with our local service providers," says Park Boonyubol, general manager of IPStar Australia.
Does the Price Point Make Sense?
But with rural incomes still low in many parts of Asia, is there a price that makes sense for consumers? "In determining price points for our services, our goal is to benchmark with existing terrestrial services in the market," says Suwansiri. "Even though satellite-based broadband is relatively more costly to provide services compared to DSL, it is important that we try and get as close as possible their price points. This is the key if you want to get any sort of economies of scale as consumers are very sensitive to prices, even in remote areas where they may have limited choices."
Beitchman has no qualms about the purchasing power in rural Japan for satellite broadband services. "Like the United States, the customers have both the need for the service and the ability to pay for it," he says. "We can price our service at or slightly above the ADSL market because in the digital divide, other remedies are not available and we can offer better service in some rural ADSL markets. Our plan shows that at this level of pricing we have a good business with a good return."
On-orbit satellite capacity economics constrain service offerings available, as does competition from other technologies in the region. For example, using conventional Ku-band, Optus Broadband Satellite service offers service with maximum data rates starting at 256 kilobits per second (kbps) down and 64 kbps up, but there is a maximum 1 gigabyte per month download at prices of 39.95 Australian dollars ($26.72). More download capacity is available at higher prices. In Japan, BB Sat’s basic service will be 2.5 Mbps download and 512 kbps upload. "These rates are higher than those of consumer networks in the United States because of the high-speed, high-quality requirements of the Japanese market," says Beitchman.
Economic development studies have shown links between Internet and telecoms access and economic development in a community. For this reason and others, government-backed projects for rural Internet connectivity are supporting rural broadband growth in markets in Asia. "Many governments have some sort of Universal Service Obligation funds in place to bring telecommunications infrastructure into the rural areas and bridge the digital divide. We believe that satellite-based services are the most cost effective and efficient means to do this," says Suwansiri.
Australian government support for subsidizing rural communications through the Australian Broadband Guarantee program, also plays a role. The program, managed by the Department of Broadband Communications and the Digital Economy, grants subsidies to qualified service providers to provide broadband services to areas in Australia that are unable to access metro-comparable broadband services. Optus is an accredited member of the program. "We have recently watched the popularity of our direct-to-home satellite broadband service grow within our consumer customer market since the introduction of the Australian government’s subsidy schemes in 2004, where eligible customers are offered an attractive financial subsidy towards their Optus Broadband Satellite charges," says Sheridan. In December 2007, Optus ordered a pair of SkyEdge satellite hub stations and thousands of VSATs from Gilat Satellite Networks to support the expansion of the program. Optus deployed one of the first SkyEdge networks and this latest expansion brings the number of Gilat VSATs operated by Optus to more than 20,000.
Thaicom also has beefed up operations in Australia and New Zealand, adding distributors qualified for Australian subsidies. "The best model that we have seen is from the Australian government with their Australian Broadband Guarantee program," says Suwansiri.
In Japan, too, "the government may assist with subsidization of the consumer satellite broadband market and, though our business will succeed without such funds, there is no doubt that such subsidization would increase demand for and speed deployment of our network," says Beitchman. "We are working the national and local government on this matter. We are a member of government-organized committees studying this problem."
While only a tiny piece of Asia’s rapidly expanding broadband market, satellite is now a proven and growing solution for addressing the digital divide in many parts of Asia. New ventures are targeting Asia for broadband satellite investments from inside and outside the region, and with financial backing from outside of the satellite sector, business prospects look promising.