[Satellite News 01-24-11] Microsat Systems Canada’s (MSCI’s) CommStellation, a 78-satellite constellation to target the North American backhaul market, surprised satellite industry analysts, as the value of its potential growth and profit generation has yet to be determined.
    MSCI President and CEO David Cooper told Satellite News that the company plans to build the system for less than $1 billion and that it would use either Ku-band or Ka-band capacity. Cooper spoke enthusiastically about the potential growth for MSCI, stating that the combined capacity of his company and its medium-Earth orbit peer, O3b, would only be able to scratch the surface of the market.
    Futron Technical Director Andrea Maleter told Satellite News said there are a number of challenges ahead for MSCI. “In order to be successful, they will have to address a series of major challenges beyond the construction and launch of the satellite fleet. These challenges include a range of regulatory issues in space and on the ground — obtaining frequency spectrum rights, getting landing rights and operating authority for the teleports as well as the establishment of partnerships with local operators. These issues can take as long or longer than the actual satellite construction,” she said.
    MSCI’s will operate 1,000 kilometers above the Earth, which MSCI describes as “being closer to the customer” than O3b. An industry source, who asked not to be named for this story, questioned how much of a competitive advantage the low-Earth orbit factor would provide.  “It seems to me the latency issue is a bit of a red herring. Round-trip geo latency time is a bit under 0.25 seconds. For O3b, round trip latency would be about 0.05 seconds and for this new system about 0.006 seconds. While technically MSCI is ‘eight times closer,’ hence eight times less latency, the reality in a network architecture is that any latency under a 10th of a second is essentially unperceivable to an end user. It makes no difference to quality of service and there are other network congestion issues that far outweigh the speed of light delay,” the source said.
    Maleter said the wireless backhaul market does have the potential to benefit satellite players. “The success for satellite operators in this market will be dependent on their relationships with the terrestrial wireless operators and their ability to develop integrated solutions that ultimately meet the wireless network needs,” she said. “… The dynamics of the backhaul market are changing as a result of evolving user behavior, such as the expansion of data-intensive applications overtaking voice service and initiatives like O3b and CommStellation are responses to those changing dynamics. Innovative satellite technology will not change the market if the benefits of that innovation are not pulled through the full service value-chain,” she said.
    The source said the total size of the market depends on total cost to the end user, and neither O3b nor MSCI have addressed these issues in any substantial form. “Any speculation on potential market size is just that, pure speculation. We don’t know how the backhaul market will change yet until we have the full picture of total cost to end user. If either O3b or MSCI can offer a total cost — capacity plus equipment — with an acceptable service level that is substantially better than FSS, then yes, the market is real. If total cost is only marginally better than FSS and service levels are no better than or worse than FSS, then they will both have problems.”