Google-backed LEOsat IP backhaul project is go

10 Sep 2008

Start-up O3b Networks has kicked off its ambitious plan to build a LEO satellite network offering "fiber-speed" Internet connectivity to emerging markets, with help from big-name investors like Google.

O3b aims to build a network of 16 LEOsats offer low latency Internet backhaul to emerging markets in Asia, Africa, Latin America and the Middle East, with each satellite carrying up to 10 Gbps of capacity. Service activation is scheduled for late 2010.

Several big names, including Google, subsea cable operator Liberty Global and HSBC Principal Investments, have initially invested $60 million in the network. According to the Wall Street Journal, the project is budgeted at around $650 million.

Thales Alenia Space, which has been designing the satellites under a 2007 contract, said Tuesday it has received authorization to proceed and had begun construction of the 16 LEOsats, with options for additional spacecraft that would be used to boost system capacity as demand escalates.

O3b founder Greg Wyler said 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 to link to the Internet.

"Access to the Internet backbone is still severely limited in emerging markets," Wyler said in a statement. "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 which reflect the true value of the Internet."

The project has been compared to the ill-fated Teledesic project of the late 90s, although the resemblance arguably ends at the non-geostationary orbit model and investment from a software company (Microsoft, which was a Teledesic investor). Teledesic was a far more ambitious project involving full global coverage via 30 medium-orbit satellites (scaled down from 840 LEOsats) and direct Internet connections to consumers.

O3b is far smaller in scope, and breaks down its proposed service offerings into three segments: wholesale transponder capacity, enterprise IP backhaul and cellular/Wimax backhaul.

A number of satellite operators already offer cellular backhaul services, but O3b claims it can do it at fiber-level speeds, and - because it operates from low-earth orbit - at much lower latency than geostationary satellites.

However, O3b has so far been vague on the pricing, saying only that it can offer "prices comparable to fiber in developed regions".

That will be a tall order, says TMF Associates founder Tim Farrar, who noted on the TMF blog that satellite-based Internet backhaul is "a fairly well established and highly competitive market", with FSS operators already competing on price.

It's also a gamble, he adds, because once fiber connectivity does become available in an emerging market, demand for satellite backhaul connectivity collapses dramatically within 12 to 18 months.

"There's absolutely no reason for O3b to change this equation," Farrar said. "Satellite is at least two and in some cases closer to three orders of magnitude more expensive than large fiber connections for this backhaul service, and fiber continues to decline rapidly in price."

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