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From...
Industry Standard

Satellite Net access comes to Earth

by Alex Lash

(IDG) -- For years, consumers have been waiting for the magic of broadband access to the Web. But the rollout of cable modems and DSL phone lines – commonly viewed as the definitive solutions to providing consumers with the speed that many workers already enjoy in the office – has been slow. This delay has left an opening for a third alternative many people had already written off: satellites.

And it's not just pie-in-the-sky. There's been plenty of hype about upstart satellite companies' plans to build an "Internet in the sky." Teledesic, the grandest experiment, is planning a constellation of hundreds of low-earth-orbit satellites (LEOS) flying less than 1,000 miles above the Earth, promising anytime, anywhere voice and data services. Backed by billionaires Craig McCaw and Bill Gates, among others, Teledesic is still several years and at least $10 billion away from completion.

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A simpler form of Net-over-satellite access is already a reality, however. Subscribers to services like Hughes Electronics' DirecPC service can receive a thick stream of Web pages, Usenet groups and e-mail on their pizza-size satellite dishes. Sending data is another matter, requiring a phone line, a modem and an ISP account (see "Beam Me Down, Data," below).

This "hybrid" solution hasn't exactly set the world on fire. DirecPC has only sold between 80,000 and 90,000 dishes. Nonetheless, competitors are testing the waters. This spring, EchoStar will bundle Microsoft's WebTV with its Dish Network home service, although initially Net access will be delivered over phone lines. The same goes for Loral Space & Communications' upcoming Cyberstar service.

Consumer Internet access via satellites wouldn't even be on the horizon if cable and telephone companies had been faster to the punch. Digital subscriber lines (DSL) are still a trial technology in most areas of North America, with an estimated 40,000 paying lines installed. Cable companies are faring a little better, with about 530,000 subscribers signed up. In both cases, rollouts are slow. The Yankee Group estimates that 40 percent of the U.S. still won't have access to either technology in four years' time.

Thus, providers like DirecPC and Echostar-Microsoft have an opportunity to market to people who either aren't within the reach of cable or DSL, or beat those services on price.

As is so often the case with prospective consumer technologies, businesses are proving the potential of accessing the Net via satellite. Mail Boxes Etc., a business-center chain with 3,100 franchises, is replacing its intranet wires with VSAT, or very small aperture terminal, satellite dishes.

Using VSAT networks for such things as daily inventory updates is nothing new. There's a good chance that when you swipe your credit card at the pump of your local gas station, a dish on the roof zaps the details to a data center and completes the transaction within seconds.

Mail Boxes Etc., a San Diego-based subsidiary of U.S. Office Products, is adding a twist to this process. Its franchises will use VSATs to give walk-in customers Internet access. Along with word processing and desktop publishing, customers will get the Net with their $10- to $12-per-hour computer rental fee. That traffic will share the same two-way network with MBE's internal data – credit-card purchases, marketing material, company e-mail and the like.

"To go with a terrestrial solution, we'd have to deal with a bunch of telcos," says MBE executive VP Tom Herskowitz. "Now we have a single provider: Hughes."

Herskowitz says he'll keep costs down by making the satellite hookup mandatory for almost all MBE franchises, thereby guaranteeing Hughes hefty volume as the system rolls out. Herskowitz hopes to have at least 350 franchises looking skyward by the end of the year.

DirecTV's recent purchase of its troubled rival Primestar could enable it to further speed deployment of its services to both homes and businesses. The direct-to-home satellite market already reaches 30 million homes worldwide, and that's sure to pique the interest of Net content providers that can't get access to TCI's cable network.

Still, skeptics say that the need to use a phone line with satellite systems will limit their appeal. And Mitchell Berman, senior VP of marketing and operations at OpenTV, an interactive TV software vendor that competes with WebTV, wonders whether the satellite TV demographic is ready for the Net.

"On Saturday night in Iowa, I know who's sitting on a couch with a remote control in their hands," he says. "It's $40 to $50 a month just to watch TV over cable or satellite, and now you're asking them to reach in a second time [for the Internet]?"

The advent of two-way broadband services that use LEOSes promises to change the market dramatically. But when that will happen remains an open question.

Iridium, the first of the LEOS systems, is up and activated, with 66 satellites. For now, though, it's strictly a voice and paging service with a miniscule 2400 baud rate, and it requires expensive, bulky phones. Iridium's parent, Motorola, has floated the idea of upgrading the service for broadband data, but officials are mum about concrete plans and say they'll wait to gauge reaction to the initial voice and paging rollout.

Skybridge, a division of French telecommunications giant Alcatel, is shooting to deploy an 80-satellite LEOS system designed for broadband data communications by 2001; Teledesic plans to launch a whopping 288 by 2003. But getting huge fleets into orbit is rife with peril – exploding rockets and space debris, for example. Numerous technical challenges also remain.

"Investors will look to Iridium's success as a bellwether, even for [later] broadband projects," says Tom Watts, managing director of Merrill Lynch's satellite equity research. One good sign: Iridium's 66 birds emerged from November's Leonid meteor showers unscathed.

What the new LEOS projects and today's Net-satellite services have in common, though, is an enemy: cable-modem services and DSL. It would be ironic if exotic space-age technology turned out to be a more practical alternative to the lowly coaxial cable and the copper telephone line.

The state of high-speed access

Digital Subscriber Line Access (North America)
Subscribers at the end of 1998: 39,000
Projected subscribers by end of 1999: 248,000
Home DSL passes: 34.7 million
Source: TeleChoice

Cable-Modem Access (North America)
AtHome Subscribers: 330,000
Road Runner subscribers: 180,000
Subscribers to other services: 25,000
Projected subscribers by end of 1999: 1.5 million
Homes cable passses: 22 million
Source: Company Information and Kinetic Research

Satellite Access (Worldwide)
Home DirecPC dishes shipped: 80,000 to 90,000*
Business VSAT terminals installed: 220,000
Source: Company Information and Satellite Industry Association
* No subscriber numbers available.

Beam me down, data

Still a hybrid

Capable of speeds of up to 400Kbps incoming, DirecPC isn't as fast as other broadband services, but it's available almost anywhere. A phone line is needed for outbound traffic, which is routed through an ISP to DirecPC's Earth station and out to the Net. Incoming e-mail and Web pages are beamed from the Earth station to a satellite and back home. What seems roundabout can take less than a second – if there's no Net congestion.

chart

Two-way creativity

With a two-way VSAT network, Mail Boxes Etc. plans to beam company data from its headquarters in San Diego to a satellite and down to its 3,100 franchises (and vice versa). Net traffic will travel to the satellite through Hughes' Earth station near Los Angeles. Mail Boxes Etc. is opting for 512Kbps downstream and 128Kbps upstream, leaving enough bandwidth for walk-in customers who want to rent a computer and surf.

chart

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