O3b pits MEOsats against fiber for IP backhaul

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Medium earth orbit (MEO) satellite projects have a history of drama, from the hyped launch and subsequent bankruptcy and rebirth of Iridium to ambitious projects like Teledesic, which initially promised global internet connectivity via a massive fleet of 840 LEOsats, but ultimately - and literally - never got off the ground.

Now the concept of MEOsat-based internet connectivity is back in the form of start-up O3b Networks, which has kicked off a plan to build a network of 16 MEOsats offering 'fiber-speed' low-latency internet connectivity to emerging markets that contain the 'other 3 billion' (a.k.a. O3b) people who are offline.

The equatorial fleet, with an estimated price tag of $650 million, would cover markets in Asia, Africa, Latin America and the Middle East, with each satellite carrying up to 10 Gbps of capacity. Thales Alenia Space has begun building the MEOsats, and service activation is scheduled for late 2010.

Google is the sexiest brand name to invest in the project, not least because the search engine giant has been active in a number of network-related projects lately. O3b also has subsea cable operator Liberty Global at its back, as well as HSBC Principal Investments. The three have initially invested $60 million in the network.

O3b founder Greg Wyler says the network is targeting the emerging market space because developed markets are well served by subsea fiber, but developing markets need a cost-effective option.

'Only when emerging markets achieve affordable and ubiquitous access to the rest of the world will we observe locally generated content, widespread e-learning, telemedicine and many more enablers to social and economic growth.'

Betting against fiber

For those tempted to compare O3b to Teledesic (which had Microsoft as an investor), one key difference - apart from the smaller scope - is that it's not targeting consumers. O3b is a backbone play with three categories of services on offer: wholesale transponder capacity, enterprise IP backhaul and cellular/Wimax backhaul.

The catch, says TMF Associates founder Tim Farrar, is that satellite-based IP backhaul is 'a fairly well established and highly competitive market' that is fought mainly on price. 

O3b has said it can offer 'prices comparable to fiber in developed regions', but has been vague on the details. The company also cites at least two advantages over the competition: fiber-level speeds, and - because the satellites operate from low-earth orbit - much lower latency than geostationary satellites, which will enable better performance for apps like VoIP and streaming video.

Farrar says that while the latency issue is important for VoIP, 'the reality is that few people will pay a premium for it.'