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Summary:

O3b Networks, a Google-backed satellite company aimed at providing Internet service to the emerging world, has raised $1.18 billion in financing to bring the service on line by 2013. The company plans on serving 150 countries in Africa, Asia, Latin America and the Middle East.

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O3b Networks, a Google-backed satellite company aimed at providing Internet service to the emerging world, announced today it has raised $1.18 billion in financing to finally bring the service on line by the first half of 2013. The company, based in St. John, Jersey, Channel Islands, had originally planned on launching 16 satellites by the end of 2010. But with the global credit crisis squeezing access to funding, O3b’s original plans were postponed as well as revised down. It will launch eight satellites by 2013, with more to come.

The name O3b comes from “the other three billion” a reference to the worldwide population of users who don’t have regular access to the Internet. The company plans on providing broadband to 150 countries in Africa, Asia, Latin America and the Middle East. Founded by Greg Wyler, a technology entrepreneur, the company has previously received funding from Google, satellite operator SES, HSBC, Liberty Global, North Bridge Venture Partners and Allen & Company. Private equity firm Satya Capital and the Development Bank of Southern Africa have signed on as new shareholders bringing the total equity investment to $410 million. O3b has secured a $510 million senior debt facility with HSBC, ING, Crédit Agricole and Dexia. HSBC Principal Investments along with a handful of international banks and developmental funding institutions have provided a $115 million Senior Debt Facility and a $145 million Mezzanine Facility. SES, the world’s second-largest satellite operator by revenue, will become the largest minority shareholder for O3b.

O3b said it has already signed deals worth between $500 and $600 million with companies that want to use the company’s planned network. O3b will primarily serve mobile operators and Internet service providers, providing backhaul for voice and data. The network will consist of eight Ka-band satellites orbiting at 8,000 kilometers, four times closer than regular geostationary satellites. The proximity of the satellites and their use of the Ka-band will mean better performance and extremely low latency. Service will begin by 2013 following the launch of the first eight satellites from French Guiana.

As Om mentioned a couple of years ago, this is an audacious effort. But it makes sense to try to provide connectivity to underserved areas where cellular network traffic is booming. How competitive will the pricing be on O3b service, however? Still, with fixed-line networks often missing or under developed in many countries, O3b may be well situated for some time to serve the needs of budding Internet users in rural areas.

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  1. Coconut Wireless Monday, November 29, 2010

    Don’t believe the hype. O3B has been touting that same sales figure for more than 2+ years now.

    They’re services are overpriced and by the time of their launch, terrestrial backhaul for LTE/cellular networks will have advanced to a point where they will not be able to compete.

    1. You may well be right. We still have a ways to go before these birds are actually up in the air.

  2. Satellite technology suffers from too many drawbacks to provide adequate, future proof super fast broadband, even as a solution of ‘last resort’.

    This is mainly due to:

    1. Lack of capacity

    The fact that satellite covers an entire territory leads to a limited total capacity as the spectrum of one single spot can’t be re-used. Even with multiple spots, once deployed, these are fully consumed and non reusable. With an increased number of satellites, the orbit is getting congested, the chance of collision increases, more coordination is required and there is more risk of satellite to satellite interference. The capacity required to provide high speed broadband to 1% of 30m households represents at least 150 Gbps, and it is doubtful that geo stationary satellites will be able to offer this kind of capacity for quite some time.

    2. Lack of bandwidth

    Satellite downlink speeds, even in the Ka band (such as those used in Hylas 1) will never exceed 10 Mbps. In fact, it is doubtful if most users will get a constant 10 Mbps with this recent announcement, given that typically, residential services are contended at a rate of 20:1 – 50:1. Even if capped at 10 Mbps, with a contention of 50:1, end users will only get about 256 kbps download and a very slow upload.

    3. Poor latency

    Others (e.g., Ian Fogg from Forrester) have already picked up on this. Geostationary Satellites are 35,000 km above the meridian. A signal travelling at the speed of light would take about 250 ms from the user to get to the satellite and to the ISP or another user (without factoring in signalling or routing/switching delays).

    In an IP world, this theoretical minimum doubles to 500ms before an answer is received.

    In the real world with delays of network sources, the normal latency with satellite services is expected to be in the range of 500-700ms, with a RTT (round trip time) of up to 1400 ms. This has a tremendous impact on the customer experience and services that can be consumed by subscribers:

    VoIP (Voice over IP):

    The latency is very irritating and debilitating with interactive applications, such as VoIP, or videoconferencing whilst free market applications such as Skype tend to behave unpredictably and fail.

    VoIP callers usually notice roundtrip voice delays of 250ms or more. ITU-T G.114 recommends a maximum of a 150 ms one-way latency. Since this includes the entire voice path, the end users own network should have very low transit latencies. Most network SLAs specify maximum latency 45 – 65 ms. Hence, VoIP over satellite does not perform well.

    Mutiplayer online gaming:

    Satellite Internet Access latencies makes this path unusable for applications requiring real-time user input, such as online gaming.

    Most of these applications require ‘). I would go further and say that it’s about the ‘quality of service’ and the customer experience. What consumers are asking for is a green light to run HD videos on iPlayer, stutter and jitter free skype audio and video calls, etc. Not sure what the real bandwidth provided by OB3 will end up being, but if comparable to the recently launched Hylas 1 on Ka Band, then the promised 10 Mbps is misleading to consumers, as they will not be able to run any of the above use cases effectively via Satellite.

    4. Availability

    The availability of satellite is only 99.5% in the Ku band and only a mere 99% in the Ka band. Increasing modulation to obtain more capacity has a price tag of reduced availability. This leads to frequent reductions in available bandwidth, or even broadband disconnections during heavy rain.

    5. Poor economic value

    The initial investment for new satellite infrastructure and receiver technology is significant. Given the total low capacity, it will be difficult to achieve economies of scale for reduced pricing on customer equipment. Increasing capacity will require a continuous battery of satellite launches (costly) and increased congestion in the lower orbits where they operate.

    It is my opinion that satellite broadband is not efficient for next generation superfast broadband. Compared to *any* solution, the OPEX and CAPEX costs for the poor level of services offered associated with a typically and predictable low take-up rate will not offer a viable business case for carriers, ISPs, and enough value for consumers.

    The key to rapidly deploy high speed broadband to rural or ‘non fibred’ locations is to find a phased solution with very low initial financial investment.

    The future lies in leveraging extremely high frequency (EHF) terrestrial networks to deliver super fast fixed wireless services. Thanks to disruptive technology emanating from the military, equipment exists today to provide ultra wide band access in both the Ku (10.7-12.7 GHz) and Q (40.5-43.5 GHz) frequency bands.

    In front of this, satellite technology faces several technical challenges, with pipe dream capacity, and significant required CAPEX / OPEX investments.

    1. Shayan, you make some great points, but I don’t entirely agree with you. You are speaking of satellite technology in its current state. Satellite technology still has so possibilities for innovation. A great example of this is is Japan where they are running 100GB of bandwidth through their satellite network. Satellite internet technology is capable of doing much more than what it is utilized for here in the US. I actually have an entire blog on this subject at mybluedish.com/blog and would love for you to make a comment, as you seem to know this industry well.

      1. Hi Brent – nice blog :). RSS’d into my iPhone !

        In terms of the 100Gb network you are referring to, correct, I’m guessing this is an infrastructure network and not an access network to households. Here’s my reasoning:

        When links are satellite to hubs, those hubs have large antennas and good transmitters, with aggregated IP you may expect more than 2bits/hz, whereas it is totally different in large PTMP access to households where link budgets are lousy and access protocols inefficient, and you will often get less than that 1 useful bit/hz. My argument was mainly on the fact that satellite is not adapted to IP access.

        There is a lot of innovation going on in the EHF bands for terrestrial networks.

        The key to rapidly deploy high speed broadband to rural or ‘non fibred’ locations is to find a phased solution with very low initial financial investment.

        I believe the future lies in leveraging extremely high frequency (EHF) terrestrial networks to deliver super fast fixed wireless services. Thanks to disruptive technology emanating from the military, equipment exists today to provide ultra wide band access in both the Ku (10.7-12.7 GHz) and Q (40.5-43.5 GHz) frequency bands at a more efficient terrestrial level.

        The technology has demonstrated that the spectrum available in these frequencies enables high speed broadband and backhaul with virtually limitless capacity, due to frequency re-use. Latency issues are minimized, enabling consumers to play online video games *while* watching HD iPlayer and having a skype video call, with 99.99% availability, even in heavy rain conditions.

        From an economic stand point, these technologies can meet future super fast broadband requirements at 10-20x less that FTTH with equivalent performance in terms of capacity and bandwidth.

        In front of this, satellite technology faces several technical challenges, with pipe dream capacity, and significant required CAPEX / OPEX investments. But innovation can happen on many levels, and you’re right, this is definitely an exciting space both for VSAT or terrestrial networks…

        Will definitely take a look at your blog!

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