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The U.S. mass market is getting its first taste of two-way broadband satellite services this winter. And those serving up the new product are getting an education in what possibly could be some contentious usage management issues.
In this age of Napster and MP3, service providers such as StarBand Communications Corp. and Hughes Network Systems are plunging into uncharted territory, where a download-intensive operating environment is a certainty.
"If usage is the key, satellite broadband providers will have to vigorously monitor the voracious appetite of Internet users to make sure the models work today and tomorrow," says William Kidd, a vice president and analyst at New York-based investment firm C.E. Unterberg, Towbin. "We believe the increasing popularity of bandwidth intense applications, such as music and movies, could pose a risk to using today's usage assumptions as a guiding light and give a false confidence as to what level of service will be acceptable tomorrow."
The two major players leading off in this business are StarBand Communications Corp., which is a partnership of Gilat Satellite Networks, Microsoft and EchoStar Communications, and Maryland-based Hughes Network Systems with its newly upgraded DirecPC product.
RadioShack Corp., which is selling a bundled product with a PC, was the first to put StarBand in its stores under the banner of Microsoft's MSN HighSpeed Satellite Internet Access. It has rolled out StarBand only as integrated solution complete with a Compaq PC, which boosts the price well over $1,000. RadioShack did not respond to a request for its early sales results for StarBand.
Otherwise, announced prices are competitive with terrestrial broadband. Besides a $199 installation fee-self-installs are not permitted because satellite transmission is part of the mix-monthly service charges range from $60 to $80.
The StarBand 180, which is a $399 standalone device serving as a PC interface appliance, began shipping last month following a commercial launch in November. EchoStar is offering the StarBand 180 with and without a complement of Dish Network DBS services in its DISH Network retail locations nationwide. One bundle, for example, costs $99 a month for Internet access plus digital TV programming. Further differentiating it from the MSN product offered in RadioShack, the DISH version comes with StarBand e-mail and a StarBand home page with NBCi.
Using satellites to beam two-way Internet services into homes is going to require some innovative and relatively flexible usage management schemes.
Although Napster is no longer unique unto itself, it has been the first of many services in the large download category to pop up on the screen. Both DirecPC, by way of its so-called fair access policy, and StarBand are poised to ease the throttle back if traffic patterns at any single location warrants this response. Indeed, one participant in the StarBand pilot indicated that the company already has done this with respect to Napster.
Both DirecPC and StarBand have to manage their networks to ensure an optimal customer experience. Both will allow customers to download large files such as the Napster audio downloads, which tend to run in the 4 MB to 6 MB range, but only on a conditional basis.
One online StarBand advisory notes that in its service agreement the company reserves the right to limit "bandwidth hog" activities "such as audio and video streaming, and automatic file exchange applications (file-sharing)." DirecPC agrees that some restrictions are necessary to preserve an adequate level of service.
"Our fair access policy clearly states we will respond so that a very small percentage of users do not impact negatively on the vast majority of users," says Sam Baumel, HNS senior director of marketing.
While that might target people trying to do things like operate Web servers via their connection, marketing material from Bala Cynwyd, Pa.-based Pegasus Broadband, which will offer two-way DirecPC-based services next year under the name Pegasus Express, lists "super-fast MP3 music download" traffic as one of the product's benefits.
"All satellite operators will have to watch their packets carefully. How many Napsterites can you accommodate? The asymmetry of data traffic is changing, and peer-to-peer sharing is affecting this," says Chris Walczak, vice president of product development at Pegasus Development. "FTP transfers in general are well served by the DirecPC architecture. MP3 and other files can be downloaded as file structures from a number of sites, and we can achieve pretty high file transfer rates."
Joe Laszlo, a broadband industry analyst at New York-based Jupiter Research, says he believes StarBand already is controlling potential demand for the service in its early life to avoid service problems that might impact customer image of the brand.
They are being very careful, and they are avoiding excessive demand for the service at this stage," Laszlo says. "At RadioShack, the bundling with the PC is being done deliberately by StarBand to choke off demand. They want to prove that the systems are reliable, robust and can scale, before they open the floodgates."
While StarBand has ballparked proposed download or inbound speeds to the StarBand terminals in the 150 kbps to 500 kbps range, far higher speeds well in excess of 1 Mbps were reported during the pilot test. But at one test participant reports that when Napster files flow, they do so at a mere trickle, and that earlier last fall they vanished altogether for a short period.
"Our feelings here are that in the worst case, we might have to look to transponder repurchase and usage, since that might be easier to gather than squeezing out a true utilization rate from management" Kidd says. StarBand has purchased an estimated 20 transponders already.
"The only problem with that method is that it doesn't really become useful until Gilat has somewhere between 70,000 and 125,000 users," Kidd continues. "In other words, with the level of transponder capacity they purchased up front their user base should have adequate capacity for at least that load if not far more (assuming they're right)."
StarBand's outbound or return channel speeds may attain speeds of 150 kbps, but this will average 50 to 100 kbps during peak usage hours. DirecPC already advertises a 400 kbps inbound service for its existing one-way or hybrid product, and that is relatively unchanged in the two-way format with a 150 kbps return path.
As for the hybrid version of DirecPC, which has been around for five years or so, AOL Plus Powered by DirecPC is using this model launched in late October and not the newer two-way version. AOL has not yet released any subscriber figures.
How does two-way satellite rate in comparison to cable modems or DSL?
EchoStar went on record with the FCC last November as being cautionary-if not outright gloomy-about its ability to compete with cable on the data front. In comments filed in response to the FCC's inquiry concerning high-speed access to the Internet over cable and other facilities, EchoStar stated, "In contrast with the finite bandwidth available to wireless and satellite systems, the terrestrial broadband pipe technologies available to cable systems offer bandwidth that is virtually limitless for almost all current practical purposes."
"Duplication of this pipe requires an investment of tens of billions of dollars, and would therefore be impractical-another component of the 'essential facilities' analysis," EchoStar wrote.
"DBS companies are technologically disadvantaged in offering truly inter-active products. DBS services (which use the DBS downlink spectrum) do not have a return link from the home to the satellite and cannot at this point in time practically or reasonably duplicate the two-way cable pipe that is being deployed by AT&T and other cable operators. EchoStar has tried to respond to consumer demands through its participation in the StarBand joint venture with Gilat, but this service is provided through a platform that is relatively cumbersome to consumers. EchoStar's next-generation broadband solution (which involves use of the Ka-band) is likewise significantly spectrum-constrained."
Retailers, who ask not to be named, are as conscious as anyone of the importance of a robust return path.
"These two-way satellite Internet systems are going nowhere fast if they are unable to provide more than 150 kbps on the return path. If that speed gets closer to a dial-up modem, it is going to be a very tough sell given the price," says one West Coast satellite TV dealer.
Adds one East Coast dealer, "If there is no advantage on the return path, why spend $70 per month for the two-way when you can get the one-way DirecPC with 25 hours of usage for $19.99. Not many people are going to exceed 25 hours in any one month."
By the same token, the number of potential customers is huge. According to the Yankee Group's Mike Goodman, 46 percent of U.S. households have no access to terrestrial broadband services, and by 2005 approximately 18 percent of these households will still be off the network.
"By bringing residential broadband to markets that will not see this type of service soon or otherwise not at all, broadband satellite is an important category," says Goodman.
But while satellite hungrily is eyeing the broadband pie, providers may be taking steps to be sure that the first bites they take don't end up choking them.
"What has become very evident is that consumers are using the upstream path much more aggressively for sending Napster, video clips and other things. This is not just a satellite phenomenon, but it is happening on the ground, too," says Jupiter's Laszlo. "As far as managing upstream bandwidth is concerned, it is going to be hard to take it away from consumers especially as the market becomes more competitive."
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