Satellite Broadband Start-Up Targets Pacific Islands

PARIS - Start-up satellite broadband providerO3b Networks expects to present an initial megabit-per-second pricing scheme toPacific Island nations during a Feb. 17-20 meeting of the InternationalTelecommunication Union (ITU) in Tonga, O3b Chief Executive Gregory Wyler said.

Wyler saidthe company?s preliminary assessment is that an island would pay around $600per megabit per second of throughput, plus an initial activation fee for theground equipment of about $350,000, for orders placed by May 2009.

O3b, basedin the British tax haven Jersey Channel Islands, has contracted withmanufacturer Thales Alenia Space of France and Italy to build an initial eight700-kilogram O3b satellites?to be launched together in late2010 aboard aSea Launch Co. rocket.

The satellites will operate from anequatorial orbit of 7,825 kilometers in altitude, offering high-speed broadbandaccess to a broad swath of territories in South America, Africa and Asia thatdo not have affordable broadband access.

Wyler saidin a Jan. 19 presentation to the Pacific Telecommunications Council in Honoluluthat O3b would offer customers a service-level agreement guaranteeing 99.5percent availability.

Eight O3bsatellites are under construction, for an average per-satellite cost of $22million, Wyler said. The company ultimately expects to build eight more to complete theconstellation. Wyler said the relatively low-altitude orbit ensures a lowlatency, positioning O3b?s service between fiber-optic cable and geostationarysatellites orbiting at 36,000 kilometers in altitude.

The 22island nations in the Pacific Ocean are seeking to extend broadband accessbeyond their principal cities to include rural populations and those on less-populatedislands.

Governmentsin South America, Africa and Asia are trying to offer the same universal accessguarantees to their populations through government-financed programs usingsatellites and terrestrial links.

But thePacific Ocean nations benefit from the fact that their location means the O3bsatellites will have a huge amount of available capacity when they pass overthe region.

?The systemhas 30 gigabits per second of capacity over the Pacific islands - a lot ofextra capacity as the satellites orbit over the island because of the lowpopulations,? Wyler said.?

O3b has wonthe backing of Internet searchgiant?Google, HSBC Principal Investments bank and Liberty Global Inc., butits main financing is expected to come from bank loans. Wyler said the company already has won support from thegovernments of France, Italy, Britain, Canada and the United States.

O3b said ithad signed more than $200 million in customer contracts in the last threemonths of 2008, which Wyler said amounted to bookings of more than 7 gigabitsper second of system capacity. The company unveiled its project in September.

In January,O3b announced what it described as a multimillion-dollar, multiyear contract with Internet serviceprovider Microcom DRC of the Democratic Republic of Congo and CongoBrazzaville. It announced a similar multimillion-dollar contract with QuarkCommunications Inc. of Guyana.

In hispresentation, Wyler stressed not only latency, but also the cost of satellitebroadband when delivered from geostationary satellites.

The biggestcurrent provider of satellite capacity to the Pacific Islands is Intelsat ofBermuda and Washington. Intelsat Chief Executive David McGlade, addressing theconference the same day, said Intelsat has been forced to raise prices in someregions, including the Pacific Ocean, because the alternative was to stopproviding service there.

With theprice of launch services and satellites increasing, McGlade said, Intelsat hadto increase prices or it would not have been able to afford to replace retiringspacecraft. Intelsat is owned by several private-equity investors. Much of thecompany?s current cash flow is being spent reducing the debt that theseinvestors loaded onto the company as part of a series of leveraged buyouts ofIntelsat?s previous owners.

McGladesaid that while the price of new satellite capacity in some regions, such asthe Pacific Ocean, has increased, Intelsat continues to sell reduced-pricecapacity on satellitesnearing retirement age.

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