September 9, 2008
According to FT and other sources, Google has announced their support for a new initiative called O3B to “bring internet access to 3bn people in Africa and other emerging markets by launching at least 16 satellites to bring its services to the unconnected” in 2010.
“They will… order 16 low-earth orbit satellites… as the first stage in a $750m project to connect mobile masts in a swath of countries within 45 degrees of the equator to fast broadband networks… the project could bring the cost of bandwidth in such markets down by 95 per cent.“
This will probably be the largest single investment in developing country network infrastructure in history. The TEAMS submarine cable for East Africa (which is not yet active) will cost $82m to lay according to Wikipedia, while SAT-3 (West Africa) cost $280m. However, the comparable but larger Iridium satellite service, with 77 LEO satellites, was estimated to have cost US$6 billion and filed for bankruptcy in 1999.
According to the FT, “wireless spectrum required for the service had been secured through the ITU“, but this seems unlikely as the ITU works by consensus and not coercion, and it has no power to override local governments’ license demands.
In Kenya for example, a deregulated market, an international gateway operator must pay Ksh 15m ($210,000) for a 15-year license, plus up to $70,000 per year, and probably the same again for VSAT licenses. If this is scaled up from Kenya’s 37 million population to the whole of Africa’s 955 million, O3B might have to pay US$ 18m per year for licenses alone, adding $360m to the cost of the project over the 20-year lifespan of the satellites.
The technical model is interesting. By not dealing directly with end users, but being a bandwidth provider for communications providers, O3B enters a market with Intelsat, Iridium and other satellite operators, providing expensive bandwidth in places where none is available. Their service should have lower latency than the usual geostationary satellites, as their satellites orbit closer to the Earth in MEO (NYT claims only 120 milliseconds, compared to 500 for a geostationary satellite). However:
- latency will still be worse than land-based connections (I don’t buy NYT’s claim that 120 ms is “close to fiber”)
- bandwidth will still be limited by available frequency space
- bandwidth will have to be shared (to some extent) between users of a single satellite
- ground stations communicating with moving satellites have spectrum efficiency problems (due to the Doppler effect)
- ground stations with moving (tracking) antennae must switch from one satellite to another every 10 minutes, causing a short dropout
- satellite communications require more power than microwave links, and in this case are likely to be located in rural areas with no electricity grid
- the hidden node problem makes satellite more suitable for leased line substitution than Internet access
Latency is likely to remain a problem for voice customers, both mobile networks and Internet access, for which bandwidth demand is largely being driven by VoIP (estimated at 70% of bandwidth use in some African countries). Satellite VoIP providers apparently use different codecs with lower bitrates than standard VoIP, so popular services like Skype may not work well over satellite.
Google and other partners have so far invested $65m of the total $750m sought, and venture capital is being raised for the rest. This proves just how much this bottom of the pyramid Internet market is worth to Google.
Satellite bandwidth is already highly commoditised, and O3B’s plan to reduce this from US$4,000 per megabit per month to $500 requires compelling evidence. In any case this is wholesale bandwidth, not for end users, who will still pay whatever the telco wishes to charge.
I also think that their US$ 750 million investment in satellites will be useless within 20 years of launch due to degradation (NYT claims a 10-15 year life for MEO satellites), whereas building more land capacity in Africa would have much longer-lasting benefits.
Om Malik says: “I’m intrigued by this startup because it does make sense to offer connectivity in remote areas. It also makes sense because Africa is one of the booming cellular markets and one where there is a need for cellular backhaul infrastructure. In remote areas, voice is going to be the killer app for a long, long time. The problem is that this company will always compete with fiber networks in terms of pricing, and that might put them on the back foot.“
Google clearly wishes to use this project to enable broadband Internet access in developing regions, but many other things must be in place, including fixed power infrastructure, PCs or OLPCs, technical support and skills, and demand and useful content and services for areas with lower literacy, before that can happen.
Hopefully this will at least increase the spread of mobile and broadband networks by adding backhaul options (competition) and reducing the financial barriers that telcos have to overcome to deploy these networks, but this is far from certain, especially as the telcos would like to offer such services themselves, and may view O3B as a competitor more than a supplier.