Will The Real Rural Broadband Solution please stand up!

Over the last 3 years or so there have been several consumer products and services claiming to be the end-all solution to a lack of high speed internet in rural and "off the grid" areas of the U.S. So far, nothing approaching a true broadband experience at prices competitive to traditional land based products has emerged. Let's take a look at the current and proposed products and what the current status of each approach is today:

1. Consumer Satellite Internet:
There are three companies offering a consumer satellite dish approach to reach rural areas - HughesNet, Wildblue and Starband. All three offer equipment that is bi-directional (send & receive), so you don't need a phone line to get the service. At the service levels that compete in price with terrestrial services like DSL & Cable, the results are pathetic: much slower speed for uploads, extremely high "lag" or latency, no voice over IP capability and severe bog down during a 4-8 hour period referred to as "prime time"- the after work to late evening hours generally. In order to get speeds that are remotely close to terrestrial counterparts you have to spend upwards of $2,000 for equipment and about $200 per month or more.

The satellite industry's answer to providing competitive priced broadband to rural areas was supposed to be the introduction of ka band satellite internet, and that still might be the answer; however, the results thus far by the two companies offering it - Wildblue and Telesat, are mixed at best and many are dropping the service in the U.S. after giving it a one year trial. Once again, overcrowding has been the greatest problem - not the satellite (as is the case in most ku band satellite approaches), but the equipment on the ground not capable of dealing with growth. Wildblue Communications is launching their own bird in December 2006 and that should be better able to handle the growth they anticipate.
HughesNet plans to launch a ka band satellite in early 2007 which is a more complex approach that doesn't require the regional ground station equipment required in the Wildblue/Telesat approach. It remains to be seen if this effort will result in better performance once the network is loaded with customers.

2. WiMax Internet:
Hailed by the inventors (mainly Intel) as the cost effective answer for Rural America, this technology has been bogged down in Standards differences, extremely high cost of implementation and all kinds of problems shooting the microwave signals through anything but VERY open spaces! The notion that WiMax could cover a 20+ mile area with a single tower has been smashed by the reality that this technology is 50% better than what has come before and 50% vaporware. I don't know if it will be improved by going to lower frequencies or not, but the WiMax craze has quieted down and many don't see it as more than a big city solution for cell operators.

3. Broadband over Powerlines (BPL):
Another one of the "ultimate" answers for Rural America, BPL has encountered many of the same cost issues that plague widespread WiMax deployment. To keep the speed up to broadband levels, this technology requires LOTS of equipment on the powerlines they carry the broadband over. Even with the recent ruling by the FCC to make BPL more competitive with other types of broadband by changing it's designation to "Information Service", FCC Commissioner, Michael Copps, suggested that even with a level playing field there hasn't been much effort to build infrastructure by the Utilities. That doesn't even include the pressure that the Ham Radio operators have and will bring to try to stop this technology dead in it's tracks.

So what does this really mean? Don't look for anything better than what the satellite internet operators will be offering for the foreseeable future. Ka band internet might improve things a bit next year with two new ka band satellites going up, but my bet for Rural America for the longer term is on cell operators eventually extending the EVDO network out to rural areas. The Enterprise satellite solutions will still be the fastest solutions available, but at a cost most consumers would choke on.

Wildblue Communications....Ka Band Chaos

The faithful early adopters of Wildblue Communications new ka band satellite internet service are trying their best to make the best of it these days. Seems the fledgling new satellite internet provider and first company to offer the long awaited ka band satellite internet service is having more than a bumpy “rollout” of new service – it’s downright chaotic right now.

Customer equipment is failing after only 1-2 months in service, Regional Network Operations Centers are replacing equipment that is only 6 months of age, the installers for Wildblue have not been adequately prepared for the issues they have encountered in the field and the new customer base of just under 15,000 is growing impatient about the job being done by the NRTC and Wildblue to fix it all.

With outages more frequent than the chief competitor DirecWay has seen in a good while, a good number of new users of the Wildblue ka band approach are second guessing themselves right now. There are a few folks who changed to Wildblue’s new service but kept their DirecWay dish setup (just in case)…well, those folks seem to be mighty glad they did right about now. I am seeing reports from dual users that although the older DirecWay (DW 4000 & 6000) is slower, at least it’s dependable.

One of the original master distributors not related to the NRTC effort, RS & I , decided to pull out of distribution of the Wildblue products back in September and the CEO (and co-founder) of Wildblue has been replaced with a operations oriented executive from Liberty Media. So far it hasn’t seemed to help…as problems are cropping up faster than the Wildblue staff can handle them. Customers are posting dismal upload speeds on the Wildblue user forums, reporting daily outages of 5 min to 5 hours and complaining of “clueless” tech support personnel and installers who don’t follow established procedures during installations.

On a separate but equally important front, Wildblue Communications is operating at a significant loss right now with so few customers and will need an influx of operating capital very soon to continue the introduction of services as well as handle the replacement of so much field equipment. I would expect an announcement soon about Telesat or Liberty Media injecting capital or perhaps merging the company into their own…….I would be surprised to see any more money coming from the NRTC – the membership Coop's are also losing a lot of money and are not likely to be happy with how this has gone so far.

Stay tuned….this is an emerging story.

Wildblue Communications....Ka Band Chaos

The faithful early adopters of Wildblue Communications new ka band satellite internet service are trying their best to make the best of it these days. Seems the fledgling new satellite internet provider and first company to offer the long awaited ka band satellite internet service is having more than a bumpy “rollout” of new service – it’s downright chaotic right now.

Customer equipment is failing after only 1-2 months in service, Regional Network Operations Centers are replacing equipment that is only 6 months of age, the installers for Wildblue have not been adequately prepared for the issues they have encountered in the field and the new customer base of just under 15,000 is growing impatient about the job being done by the NRTC and Wildblue to fix it all.

With outages more frequent than the chief competitor DirecWay has seen in a good while, a good number of new users of the Wildblue ka band approach are second guessing themselves right now. There are a few folks who changed to Wildblue’s new service but kept their DirecWay dish setup (just in case)…well, those folks seem to be mighty glad they did right about now. I am seeing reports from dual users that although the older DirecWay (DW 4000 & 6000) is slower, at least it’s dependable.

One of the original master distributors not related to the NRTC effort, RS & I , decided to pull out of distribution of the Wildblue products back in September and the CEO (and co-founder) of Wildblue has been replaced with a operations oriented executive from Liberty Media. So far it hasn’t seemed to help…as problems are cropping up faster than the Wildblue staff can handle them. Customers are posting dismal upload speeds on the Wildblue user forums, reporting daily outages of 5 min to 5 hours and complaining of “clueless” tech support personnel and installers who don’t follow established procedures during installations.

On a separate but equally important front, Wildblue Communications is operating at a significant loss right now with so few customers and will need an influx of operating capital very soon to continue the introduction of services as well as handle the replacement of so much field equipment. I would expect an announcement soon about Telesat or Liberty Media injecting capital or perhaps merging the company into their own…….I would be surprised to see any more money to come from the NRTC – they are not too happy with how this has gone so far.

Stay tuned….this is an emerging story.

Tom Moore Steps Down as CEO of Wildblue Communications

In a surprising move today, Tom Moore stepped down as the CEO of Wildblue Communications. The rollout of Wildblue has been very slow and many have said a bit too bumpy. There are only about 5-6,000 customers on the books since the first customer was brought on board in early June.
Here is what Tom Moore had to say: "My contribution has always been in formulating ambitious dreams and starting things from scratch...WildBlue now needs a world-class operating CEO to drive the company to the next level of success."

Here is what Bob Phillips, President of the NRTC (big investor in Wildblue) had to say: "I interviewed and voted for David Leonard for the position of chief executive officer. Leonard’s forte is business operations, and I am confident that he will provide the focus necessary for successful operation of the company."

Here's what I have to say: "The boys at Liberty Media (Another big investor in Wildblue) and the NRTC got together and decided the Wildblue Internet rollout was chaotic at best and a near disaster at worst. They wanted to try to stop Direcway from cleaning their clock with the DW 7000 and knew a change needed to be made quickly to get the momentum going again. David Leonard was a top executive of Liberty Media.

Stay tuned.....it's getting more interesting each week!

Direcway and Wildblue - Fall Showdown?

There is a cat fight brewing between Direcway LLC, Starband and Wildblue Communications for the large number of people in the U.S. who can't get some type of broadband internet and are willing to pay $50 or more to get better speeds. The combatants are telling investors that there are 20-30 million "potential users" out there in rural or underserved America...true, but the historical fact of the matter is that up to now, only 500,000 or so have been willing to pay as much as $50-$100 a month for the "so called" high speed services offered by Direcway, Starband and now Wildblue.
What has changed to stir all the press and advertising hubub by the companies? The claim is that both the Wildblue ka band and new Direcway 7000 offerings will finally give consumers a more DSL/Cable-like internet experience...ie lower latency and higher upload speeds. They expect that tens of millions of rural Americans will flock to their doors to pay over $50 per month to be "connected". To a degree they are right. It has become virtually impossible to funcion as a business without broadband internet and it is more and more difficult as a consumer to do without it. Even retailers (who obviously target consumers) are building sites that are very difficult to navigate unless you have a fast connection to the net. Pictures chew up bandwidth.
More and more people have found it less expensive to buy over the net...after all, we are nearing $2.50 gas now and who knows where it will end up. Imagine the cost of going to a store in a rural area in a vehicle that is getting 12 mpg (pickup with a V8) with $2.50 gas? Quick math says it would run you about $16.00 for an 80 mile round trip.....do that three or four times a month and buying at home from your easy chair starts looking pretty good. And you have time left over to plow a few fields if you like. Pretty easy picture to get. The problem is that all too many rural Americans already figured that buying from home is a good thing...they just do it by the old reliable U.S. mail order system. No computer or internet required.
The marketing effort by the "combatants" needs to focus on how much better the experience will be over the net. Perhaps they can throw in some instructions on how to overcome the fear of computers and typing as well. This is what I beleive is hampering the efforts to reach rural America by satellite internet...fear of the potential user of new ways of doing things. This is a generational thing...younger rural folks are going to find the internet the only way to travel in the future, but by then WiMax should cover most of rural America with cable/dsl-like speeds and pricing. The point of this piece is to warn investors....don't make a long term bet on Wildblue or Direcway! They will provide a temporary bridge to up to 1,000,000 or so underserved rural consumers, but they will never reach the vaulted numbers they strive for and try to interest investors in, and thus, never make much money, if any.

Randy Scott

SatMex Woes Reflect State of Satellite Internet Industry

Mexican satellite operator SatMex filed for bankruptcy protection in its home country a few weeks ago even as its creditors continued to pressure the company to make a similar filing in the US. SatMex filed a voluntary "concurso mercantil", a type of bankruptcy filings in Mexican courts, citing a burden of over $500 million in debt. Whether the Mexican filing will preclude any Chapter 11 moves in the United States remains unclear. A bankruptcy in Mexico gives Satmex more protection because the company isn't liable for back interest payments. Under U.S. bankruptcy law, the company is liable for such interest payments.

Stories of satellite operators losing big money are common in the satellite internet industry these days, in fact, not a single satellite owner operating in the U.S. is making a profit other than SES Americom, a wholly owned subsidiary of SES Global, located in Luxembourg and possibly New Skies, another European operater with CONUS coverage. The other operators in the America's are spilling red ink all over the place.

There is a curious fight underway between Direcway LLC, Starband and Wildblue Communications for domination of the U.S. satellite internet consumer market. No company has ever been able to show a consistent profit in this sector and yet they keep coming with one new offering after another. Rupert Murdock and News Corp saw the writing on the wall and got out, selling 1/2 of their interest and gave up day to day management of HNS which owns Direcway. Starband has financial problems and no one seems to want to own it (Spacenet has it now). I believe Wildblue is on a very short string with investors and needs to show well this fall and winter in order to keep afloat. The break-even for ka band internet is said to be over 200,000 subscribers (Direcway has 250K ku band customers and has just turned a profit I'm told). It will be interesting to see who is standing this time next year in the Consumer marketplace.The Good News in this piece is that early tests of both Wildblue and Direcway 7000 series consumer satellite internet are very encouraging...very good speeds and much lower latency (the deal killer for vpn & voip). New adoptors have been able to do most anything they could do with a DSL or Cable connection with these new systems and if the speeds and low latency hold up over time, people will buy.

Randy Scott

Bleeding Edge or Expensive Enterprise?

For those businesses unable can't get T1, Cable or DSL service for less than half a year's Gross Profit, vsat (very small aperture terminal) satellite internet is about the only way to obtain decent internet speed. Over the last two years or so many companies have advertised about upcoming solutions to this issue...after all, the internet industry is huge and growing by giant leaps each year.

Let's take a look at what is currently available and what is on the way:

Available Ku Band Enterprise Systems
This is a "catch all" phrase covering the more expensive equipment and service offered by several large uplink comapnies. It is characterized by larger satellite dishes (typically 1.0 meter or larger), more powerful transmitters (at least 2 watts) and less populated transponders than the "residential" or "small business" setup's available from Direcway, Starband and Wildblue. The result is more consistent, faster service.....what most businesses expect.
There are two general avenues you can take regarding speed and throughput: Shared or dedicated bandwidth - and the difference in price is staggering. For most business applications, shared bandwidth (the less expensive choice) will work fine - giving a company 1.5 kbps downloads and 256 kbps uploads over 90% of the time for prices in the $400-$1500 range. The crucial element of ANY offering is the "contention ratio" - how much they oversell the product or the number of concurrent users they allow on a transponder. Any company that does not put the ratio in writing is not worth doing business with - period...and any company with a contention ratio above 20-1 is not offering you true Enterprise service. With dedicated service (Guaranteed speeds) you will spend over $1,900 per month (up to several thousand per month), but will have service that is nearly bulletproof.
The most tested and dependable Enterprise setup available today in N. America is centered around a modem designed by iDirect Technologies http://www.idirect.net. This is a proven system that will give you what you pay for.
Other systems are coming into the marketplace like the ViaSat Surfbeam DOCSIS setup, a DOCSIS product from Telnor and the Direcway DW 7700; however, this is very new technology and certainly qualifies as "Bleeding Edge". Only four companies have the equipment to make it work right now and there are bumps in the road. Surfbeam and Telnor's big promise is a better utilization of available ku bandwidth, but no field results have confirmed this yet to my knowledge. Direcway has some beta equipment in the field right now producing strong results on empty transponders - not a good indication of long term results.
If any of these solutions can produce competitive results over time, it will force iDirect to rethink modem pricing as the DOCSIS and Direcway setups can be installed for about $500-$1,000 less.

Wireless and Satellite Internet Technology On The Horizon

The Satellite Internet world could be turned on it's head in the coming years as WIMAX emerges. It is a grand plan by Intel and others to cover very large areas of the world with a brand of microwave technology capable of sending data extremely fast to small antennas at homes and businesses. The big difference between WIFI and WIMAX is the distance covered by the main antenna.....the claim is 15-30 miles! Talk about bleeding edge....many of the "Big Boys" including Nokia and Cisco have abandoned plans to invest in it and speak of it as a bad business model to try to replace DSL. They point out that there are currently over 15 "standards" for the technology, not exactly a harmoneous start!
Ka band satellite internet for Enterprise has some real promise. The ability to "reuse" bandwidth, if the concept works, will enable companies to have T1 speeds or greater at any business location for much less than a T1 cost. A unit of SkyTerra Communications - the company managing Hughes Network Systems now, is working on advanced ka band spot beam technology to that end.
The greatest challange facing the satellite internet industry during the next 24 months is figuring out how to make profit.....in the absence of someone finding a business model that can show consistant profit, all of the transponder space allocated to internet will quickly be redeployed to HDTV or other types of profitable communication....bet on it!

Randy Scott
Owner VSAT U.S.
"Providing proven satellite internet solutions to business and consumers"
http://www.vsatus.com

Summer Update - VSAT Internet

As the summer of 2005 arrives, several new vsat internet companies have launched products and made promises that are frankly too optimistic and in some cases just plain untrue. In other cases, they have backed off initial upload speed predictions, downgraded the capabilities (such as voip & vpn) and pushed back program launch dates. What started as a very optimistic year for the deployment of faster and less expensive satellite broadband for underserved parts of the U.S. has begun to fizzle.
On the Consumer front, the product offering this year with the most publicity, long anticipated Ka Band spot beam internet, has started to roll out in Canadian markets and will soon begin limited installs in the U.S. by Wildblue Communications. The early users of Ka band in Canada are reporting acceptable download speeds, but the upload speeds are pedestrian by any standard...not very encouraging. The saving grace is that the service is less expensive than offerings like Direcway and Starband. The early tests of Wildblue customers in the U.S. have not been verified or widely published, so we will have to wait a bit; however, the service is coming from the same satellite used for Canadian customers, athough it is a different set of spot beams.
The greatest problem for the consumer sector is the inability of providers to earn a profit. This must change in 2005 or providers will abandon the market. SatMex, the Mexico based satellite owner and provider of a good deal of the consumer ku band service in North, Central and South America, was forced into Chapter 11 Bankruptcy court last week by creditors.
On the commercial front, there have been two new types of "Enterprise" priced services emerge this year. Ku Band Surfbeam internet (a ViaSat product- very similiar to the ka band modem but for Ku satellites) and a DVB-RCS product from Telnor out of Norway. Both offerings promise faster speeds for less money than their rivals. There haven't been any reliable test results offered by these companies yet to validate the claims. I've seen limited speed test results and nothing earth shattering has come to my attention thus far. There seems to be one thing missing from all of these less expensive commercial products - low contention ratios* - the key to consistent fast service.
*the number of concurrent users on a transponder, put in it's simplist terms.
For those who can't get terrestrial service, whether consumer or commercial, the equation hasn't changed - it still costs money to be guaranteed fast service! The kinds of things many people and companies want to do on an internet connection - connect to home office, use the internet for telephone calls, send or receive large files or stream video and transact business over the internet - remain difficult to do without a $2,500 + setup and monthly cost in the hundreds, when all the dust settles. I don't see that changing too much for two years or more... but I sure hope I'm wrong on this one!

Randy Scott
VSAT U.S.
1-866-978-4613
http://www.vsatus.com