WASHINGTON, D.C. – “Meet your milestones.” That was the message the Federal Communications Commission’s Thomas Tycz conveyed to executives from companies planning to offer Ka- band broadband satellite services at the recent Satellite 2003 conference here last month. The FCC will be watching them closely to make sure they meet their license deadlines for constructing satellites and deploying systems, said Tycz, chief of the Satellite Division in the FCC’s International Bureau.

In total, the FCC has assigned 86 Ka-band geostationary orbital slots to U.S. operators. In the first Ka-band licensing round, the FCC licensed 13 geostationary systems and one non-geostationary system. There are 26 active licenses from that round.

In the second round, the commission licensed 11 geostationary systems for the Ka-band, assigning another 36 orbital locations. There are 23 active licenses from that round.

The agency is looking closely at the licensees yet to launch systems to make sure these companies meet their deadlines. “We are currently reviewing all of the milestones for these satellite systems and our intention is to act on these the next quarter … We are going to continue to enforce milestones, looking at contracts,” Tycz said.

The FCC is reviewing applications for extensions for a number of systems with launch dates this month, Tycz told panelists. The scope of many systems has been reduced. “Considering the economic climate that we’re in, I’m sure many of these licensees look at their business plans to see which of these satellite systems are viable,” he said, adding, “I expect a number of these companies to return some of their licenses.”

The agency also will be looking at orbital reassignment and modification requests. “Anyone seeking a modification to their system should do so before their milestone is up. A modification is not by itself a justification for an extension,” Tycz said.

“The FCC has a lot of work to do on Ka-band systems and the operators have a lot of work to do in order to implement their system. Everyone must examine the business realities of these systems in light of the current market and in light of the applications that can be provided for these systems,” he added.

Operators’ Ka-band Plans

Robert Bednarek, executive vice president of corporate development at Paris-based SES Global, told the panel that there are two strategies for implementing a Ka-band system – greenfield and incremental. SES is using the incremental approach, which is “beginning to yield some dividends,” he said. Integration into existing business models has been “vital,” he said. “It’s difficult to reinvent a brand new model.”

SES is the only current operator of commercial Ka-band services, which it is doing under the Satlynx brand name. “The applications and the customers are there for these type of high-bandwidth services,” he said.

SES has two hybrid Ka-/Ku-band spacecraft under construction for the United States – AMC 15 and AMC 16 – going to 105 and 85 degrees West Longitude. They have high-frequency reuse of Ka-band spotbeams that can be used for both broadcasting and two-way broadband services.

Bednarek made an appeal to Tycz and his regulatory colleagues to make more frequencies available for satellite broadband services. There is a limited amount of spectrum available for uplink frequency for VSATs. Ka-band is “vital” to the growth of the fixed-satellite service (FSS) industry, he said.

Mike Cook, senior vice president and general manager of SpaceWay division at Hughes Network Systems (HNS), a unit of Hughes Electronics [NYSE: GMH], said HNS has been working on its Ka-band system for “many, many years.” The company has already spent $1.4 billion out of $1.8 billion budgeted for the SpaceWay system.

There is an upward trend in demand for enterprise broadband, he said. The current generation of deployed satellite platforms are not able to deliver the speed or flexibility that terrestrial networks can provide. “That’s what drove us to build a specialized, dedicated Ka-band platform,” he said.

The SpaceWay satellites will use new technology, including a phased-array antenna for downlink and an onboard processor that links antennas. The downlink will deliver speeds of 440 Mbps to the terminal, he said.

Cook noted that HNS is building three satellites, which together will have 30 Gbps of capacity. This compares to 24 Gbps for all Ku-band satellites in orbit. He added that SpaceWay will be able to complete with terrestrial broadband in terms of price and speeds. The first SpaceWay satellite is scheduled for launch by the end of this year.

Francesco Cataldo, director of resource management at Eutelsat, told the panel that the company will offer Ka-band services through Skyplex, which uses an onboard processor to couple the uplink and downlink segments. Skyplex uses “very small terminals,” which reduce costs and increase flexibility. Because of the low cost of the terminals, small broadcasters will be able to access this service, he said.

Robert Hedinger, executive vice president for business and product development at Loral Skynet, a unit of Loral Space and Communications [NYSE: LOR] told the panel that the satellite industry needs to have “cost affordable systems and networks” if it expects to compete with terrestrial alternatives. He said that “low-cost bandwidth requires low cost spotbeams.” The issue isn’t Ka-band, but affordable bandwidth. “Without new technology, the VSAT industry will stagnate,” he warned.

Loral Skynet is taking the “incremental approach,” as opposed to the greenfield approach of the SpaceWay system. Referring to SpaceWay, Hedinger said, “That’s a big challenge and wish them lots of luck.” Loral Skynet’s first step will be with the Telstar 8 satellite that will use a Ka-band transponder in-bound from the user to the gateway and Ku-band out from the gateway to the user. “This allows us to judiciously offer service with a truly broadband return channel,” he said. “This conservative approach has enabled us to continue to invest in this technology while a lot of the others have fallen by the wayside,” he said.

Analysts’ Views

Greg Caressi, research director for telecom services at consulting firm Frost & Sullivan, said the company sees the Ka-band services market taking an “evolutionary,” rather than a “revolutionary,” track. So far, broadband satellite services haven’t taken off, but Ka-band “should allow new technology to impact this market and change the dynamics and the economics.” Ka-band changes the economics by reducing space segment cost, he said.

One thing slowing the Ka-band rollout is the reluctance of the capital markets to fund systems in the aftermath of the telecom sector meltdown, Caressi said. “A lot of projects have died and a lot of licenses have been returned to the FCC because companies just couldn’t get the funds. And that’s going to continue to be an issue,” he added.

Caressi said that the business and military markets are the most promising markets for Ka-band services. Ka-band offers two big advantages to the military market – one is portable antennas and the other is better resistance to jamming. However, rain attenuation is a problem with Ka-band.

The price points aren’t particularly positive for the consumer markets, he said. “Generally satellite broadband services haven’t been able to compete with terrestrial broadband services on price or performance for the consumer market, which is quite price sensitive.”

Nihar Shah, senior analyst for space and telecommunications markets at Futron Corp., was pessimistic about future demand for Ka-band broadband services. He identified three “drivers” that would impact demand for Ka-band services – competitive environment, customer expectations and marketing.

Shah noted that it has been “six years since the first Ka-band licenses were awarded by the FCC and still there is no commercial Ka-band payloads serving North America.” The window of opportunity for satellite operators to serve the market is “closing,” he said. “A lot of the market will be gone by the time they begin offering Ka-band services.”

It will be difficult to get customers that have already chosen a terrestrial broadband service, such as cable and DSL, to switch to satellite broadband. It’s a “sticky market,” Shah said. There needs to be a “significant price difference.” Satellite broadband is not competitive with terrestrial alternatives regarding price, speeds, or reliability, he said.

Leslie Taylor, president of Leslie Taylor Associates, was more optimistic, particularly about the consumer demand for Ka-band services. “The take up of broadband has been much slower than expected, for terrestrial as well as satellite delivery,” she said. She “believes” in the consumer market for Ka-band services.

Taylor agreed that there is a “limited window of opportunity” for Ka-band services. “We are going to have a lot of difficulty going head to head with terrestrial alternatives. We need to get in there,” she said. She supports the call for additional spectrum for Ka-band broadband services. She recommends opening the spectrum that has been reserved for nongeostationary satellite use, since the only nongeostationary Ka-band system appears not to be going forward.

The satellite industry should be able to make up some lost ground in serving the broadband markets outside North America, Taylor said. In the U.S., piggybacking off of satellite TV is the best way for Ka-band to get started in the U.S. market, she said. “They’ve got the customers many of whom don’t have terrestrial broadband alternatives.” She projected that there will be 12 million Ka-band satellite subscribers worldwide by 2010.

–Fred Donovan

(Greg Caressi, Frost & Sullivan, [email protected]; Nihar Shah, Futron, [email protected]; Tom Tycz, FCC, [email protected]; Michael Cooke, HNS, [email protected]; Robert Bednarek, SES Global, [email protected]; Leslie Taylor, Leslie Taylor Associates, [email protected]; Robert Hedinger, Loral Skynet, [email protected]; Francesco Cataldo, Eutelsat, [email protected])