New Two-Way Satellite Internet Services Battle for Rural Market

The streaming world is holding its breath waiting for broadband to become the norm for at-home Internet access. According to a Dataquest, a unit of Gartner Group, 6 million U.S. customers will sign up for high-speed access in the year 2000, with that number expected to grow to over 28 million by 2004. While the majority of this market will be served by DSL and cable modem providers, there is a significant number of households outside the reach of those networks. Hughes Network Systems (HNS) (www.hns.com) and StarBand Communications ( www.starband.com) are competing to provide satellite-based broadband connectivity to the country's vast rural market. The services use a satellite dish and a satellite modem, usually connected to the user's PC via USB, offering downloads of up to 500 Kbps.

HNS and Starband estimate 55 million households are unable to have DSL and cable connections. The ability to offer broadband connectivity to these households could represent a major step forward in the proliferation of broadband access. However, the satellite services to be provided in the near future are more expensive than the landlocked broadband services, and currently offer lower speeds. The high price of the two-way satellite services -- at least $60 a month on top of the cost of installation and hardware -- could be a limiting factor for widespread adoption any time soon.

"Seventy-two percent of narrowband customers -- today's mainstream consumers -- aren't willing to pay more than $25 per month for high-speed Internet service," wrote Gregory J. Scaffidi, in a report published by Forrester Research.

Still, the same report predicts that by 2005, 46.7 million households will be broadband enabled, and that many of those may be connected via satellite. "Other access technologies will play a supporting role, as fixed wireless and satellite, target suburban and rural areas to capture 13 percent of households by 2005."

Although these satellite services are not likely to bring about instant saturation of broadband usage, broadband providers can see the potential benefits of offering them. Several major broadband providers, including AOL, Earthlink, and Juno, have recently announced agreements to use HNS's DirecPC satellites to transport high-speed Internet service to their out-of-reach customers. "Up to now, two-way broadband coverage has only been possible where local cable and telephone companies have upgraded their equipment. Now we'll be able to offer two-way EarthLink broadband to people, regardless of where they live," said Tom Andrus, vice president of emerging technologies at EarthLink.

StarBand is working with MSN HighSpeed (through bundling with Compaq computers) and EchoStar to deliver satellite services. However, according to Sandy Colony, vice president of corporate communications, Starband is looking to expand its market reach, stating "our contract with Microsoft is not exclusive".

The Contenders

Hughes Network Systems, a subsidiary of Hughes Electronics, which is a unit of General Motors Corp., has been a pioneer in one-way consumer satellite Internet connections with its DirecPC offering. DirecPC's current satellite Internet service supports download speeds of up to 400Kbps, but employs a low-bandwidth phone line for upload transmission. While most Internet bandwidth is used for downloading, this one-way satellite service is not a true broadband connection.

HNS plans to release a two-way DirecPC satellite dish and service in the first quarter of 2001 that will transmit as well as receive data. "With the launch of the new two-way DirecPC Service, consumers throughout the United States will now have access to broadband Internet services," said Pradman Kaul, chairman and chief executive officer of HNS.

On November 6, 2000, StarBand Communications launched its own two-way satellite Internet service. StarBand (formerly known as Gilat-To-Home Inc.) is a joint venture of Gilat Satellite Networks Ltd., Microsoft Corp., EchoStar Communications Corp., and ING Furman Selz Investments. Boasting download speeds of up to 500Kbps and upload speeds of up to 150Kbps, StarBand is the first consumer two-way satellite connection available in the U.S.

Although StarBand was the first to market with a true two-way satellite broadband system, DirecPC has made a name for itself with Internet satellites and has already signed on major broadband service providers.

"While other companies may have announced plans to launch two-way satellite services for the consumer, only HNS has the track record. Through DirecPC services, HNS has years of experience meeting the needs of consumers," said Paul Gaske, executive vice president of the consumer division at HNS. "In addition, HNS has unrivalled experience in the mass manufacture of consumer products, having built four million DirectTV System receivers and DirecPC terminals."

When asked about the differences between StarBand's and DirecPC's services, Yossi Gal, StarBand's chief engineer said, "Because I don't know that much about DirecPC's system, I can't comment on that, but a lot of work went into (StarBand's) software and hardware…. to reduce latency."

Streaming Pros and Cons

The lopsided nature of even two-way satellite Internet services, may make them less appropriate for peer-to-peer file sharing, two-way interactive games, and other interactive applications. "Broadband is currently provisioned primarily as a downstream service. But by 2005, consumers will demand greater upstream throughput to distribute bandwidth-hungry content like video greeting cards and MPEG videos," said Forrester's Scaffidi.

But satellite Internet services may be well-suited for the direct delivery of streaming media. Typically, with a two-way satellite Internet system, data requests from the user, most often in the form of a Web page request, get uploaded from the satellite dish to the satellite and then are sent to a ground station. The ground station is connected to the Internet via T1 or faster lines. The requested data from the Internet is sent by the ground station to the satellite and downloaded from the satellite to the user via the satellite dish. Broadband content providers could store media files directly on or close to the ground station, giving satellite Internet subscribers quick access to large media files and bypassing terrestrial network congestion.

In fact, HNS announced on Tuesday, a strategic relationship with Inktomi Corp. Under the argreement, HNS will integrate Inktomi Traffic Server network caches, at its ground stations. The companies will cooperate on the development of satellite-optimized caching and content distribution software for HNS satellite receivers that will operate as remote extensions to the Traffic Server caches located at the ground station. HNS has plans to bundle Inktomi Traffic Server caching software with its DirecPC satellite platform.

StarBand and DirecPC also have plans to provide multicasting services and are interested in licensing their satellites to content providers.

The Costs

The DirecPC satellite Internet system is available throughout the continental United States, Canada, Europe and Northern Asia. The current one-way satellite service is priced at $29.99 per month, with additional hourly fees for usage above 25 hours a week, or $49.99 per month for unlimited access. (Note: These prices include ISP service through DirecPC; users can retain their own ISP and still use DirecPC at a lower cost. Phone charges for the upload line are not included). The satellite dish and mount, satellite modem and satellite access software cost roughly $149.99. Pricing for the two-way service is not yet available.

Starband is available in the continental United States, with expanded service to Alaska, Puerto Rico and Hawaii, to be available in the future. MSN HighSpeed Internet powered by StarBand, is available to consumers through select Radioshack stores as a bundle with a specially configured Compaq computer, at $59.95 per month for unlimited Internet access. Satellite dish hardware costs are extra. In addition, StarBand is available through EchoStar's DISH Network of retailers for $69.99 per month for unlimited Internet access, plus $399.99 for the modem and satellite dish. At both Radioshack and the DISH Network, a one-year service commitment is required, along with a $199 installation charge (although at Radioshack the installation charge is being waived for a limited-time promotion).

Fly High, Fly Low

Both StarBand and DirecPC employ geostationary satellites. Geostationary satellites orbit the earth at the same rate the earth rotates, so they remain in a fixed position relative to locations on earth, 22,000 miles above the equator. To add bandwidth, satellite Internet service providers can transmit at a higher frequency. "The higher the frequency, the more bandwidth you can have, and more bandwidth means more users," said Akbar Sayeed, assistant professor of electrical and computer engineering at the University of Wisconsin-Madison, and a wireless communications consultant.

However, a large amount of power is required to transmit data to the satellites, and an increase in transmission rates brings an increase in power consumption, raising the cost. For instance, StarBand's two-way satellite Internet service supports download speeds of up to 500Kbps (150Kbps during peak times) but upload speeds of up to 150Kbps (50Kbps during peak times). In order to offer higher upload speeds, StarBand would have to provide a higher-powered -- and more expensive -- transmitter on its satellite dishes.

Thus, the future of satellite Internet connections may not be in geostationary satellites, but in low earth orbit satellites. Low earth orbit satellites circle at a few hundred miles above the earth. A well-coordinated fleet of low earth orbit satellites can ensure that every place on earth is covered. "[Satellite transmissions] require less power because low earth orbit satellites are closer to the earth. There is more room [in lower orbits], whereas the geostationary orbit is practically full, and in principal because they are constantly orbiting the earth they facilitate a more global connection," Sayeed said.

Low earth orbit systems also have disadvantages, though. "[Low earth orbit satellites] require a lot more networking coordination because they are constantly moving relative to locations on Earth. They are risky because there is a lot of overhead," Sayeed said.

Teledesic, a company formed by Craig McCaw, has plans to launch global Internet services via low earth orbit satellites by 2005. Teledesic claims that its service will provide ultra-high bandwidths and be accessible everywhere on the planet. However, Sayeed warns of past satellite communications follies. "Iridium was a low earth orbit system started by Motorola that completely flopped," he said. "They didn't have the consumer base at all to offset the costs."