Broadband Beat: Broadband Strives To Make Its Mark In 2002
Dec 01, 2001 (VIA Satellite/PBI Media via COMTEX) -- For the broadband satellite sector, "it is unlikely that 2002 will experience the same level of negative trends faced in 2001," says consultant Christopher Baugh. "The market is much smarter, and the focus is now rightfully placed on revenue generation and execution." In addition, Baugh believes that 2001 may have been the bottoming-out year in a cyclical business.
With many of the business models used in 2001 for broadband satellite now in the dumpster, the list of companies and applications to monitor for broadband progress has changed substantially. No longer is attention focused on ambitious ventures like iBeam, Panamsat's Net 36, Teledesic and Skybridge. Instead it is redirected at startups and smaller suppliers like Wildblue, Viasat, Skystream, Harmonic and iDirect. DeTeSat, Globecast and BTSat--the middlemen between the operators and broadband users--also are worth watching.
The term broadband satellite covers a lot of territory, but the foundation beneath it all is the number of users. Fortunately, those figures climbed steadily in 2001, particularly in the United States, which leads the world in broadband use. On the other hand, satellite companies did not get more than the tiniest sliver of the pie. Users overwhelmingly chose traditional terrestrial access methods like cable or telco DSL broadband access technology. about 9 percent of online households, according to Jupiter Media Metrix, but only 300,000 of those connections were provided by satellite--and Jupiter's satellite numbers appear to be on the high end. By 2006, the penetration rate will be 41 percent or 35 million households, Jupiter says. By then, satellite broadband will have 900,000 users, still a low figure. Both satellite and fixed wireless missed their chance to get residential market share, Jupiter says: "Expensive equipment and unsatisfactory early results of early commercial deployments--Starband and Direcway--make those technologies non-competitive in areas served by either cable or DSL."
Wildblue Communications, based in Denver, CO, will set out to prove Jupiter wrong in 2002 as it works to start Internet access services to U.S. consumers by mid-year using its first Ka-band satellite, scheduled to launch in the second quarter. Roger Rusch, a consultant who heads Telastra, says Wildblue has a credible shot at achieving its milestones but expects all Ka-band satellite projects to have problems getting financed in 2002 due to the shaky start of digital satellite radio services in 2001. The volatility in satellite radio investment came directly behind the disastrous mobile satellite investor losses of 1999-2000, proving to many potential broadband investors that technical achievements like building solar arrays or payloads are hardly enough to remove the risk from a business plan.
The effort of Wildblue and others to add financing in 2002 will be a key indicator of how satellite broadband is doing, Rusch says. The apparent demise of the Lockheed Martin/TRW-sponsored Astrolink Ka-band satellite project in late October, after its initial sponsors declined to put any more money into the venture, had an immediate ripple effect on other companies. The stock of Viasat, for example, which had anticipated a $500-million-value terminal contract for Astrolink, sank 20 percent in the days following. "Lockheed's action forewarned us that other potential broadband ventures will be delayed," William Pitken, Merrill Lynch analyst says in pushing out his brokerage's projections for other broadband initiatives as well.
While many of the big satellite operators have deferred their big broadband projects as they wait for the market to catch up, the smaller companies that sell broadband equipment for use with current satellites may be the best indicator of actual progress.
For example, iDirect, in Reston, VA, entered the scene in late 2000, selling a high-speed, two-way satellite router to enterprise customers with a need for fast Internet access in locations not reached by fiber. The startup, which has financial backing from Rupert Murdoch's News Corp., has announced winning $150 million in multi-year contracts to put its routers into corporate networks. In addition, iDirect says Eutelsat, New Skies, Verestar and Telesat were evaluating the routers. These are remarkable numbers in a market that otherwise has failed to shine. The company predicts a huge burst in its sales next year.
"We are looking at a five-time increase in sales and installations between this year and next," says Ian Dix, iDirect CEO. Much of the growth will be in international markets. In the United States, Dix says satellite will be accepted in 2002 as a viable medium for IP access by businesses, leading the rest down the path of satellite.
Another key supplier with at least a few more years in the business is Skystream Networks, which sells broadband satellite edge routers and software to its 150 customers. Broadcasters will put broadband overlays on their networks in 2002, predicts Chandy Nilakantan, CTO of Skystream. He too looks for healthy non-U.S. sales in the year ahead, pointing to India and China as good broadband markets due to their changing regulatory regimes.
If anything, satellite broadband appears to be a riskier bet in 2002 than it was a year ago. However, industry officials and investors both are far savvier about the technologies and business approaches today, as a result of the difficulties of the past year. A smarter industry combined with a better- developed user community for broadband could help satellite broadband projects make their mark in the months ahead.
Theresa Foley is Via Satellite's Senior Contributing Editor
AI
