Tachyon Targets Enterprise Private Network Market
By Jeanie Stokes
from the June 4, 2001 issue of Broadband Week
For the company needing to connect offices in remote locations to its network via the Internet, Tachyon Inc. thinks it has the answer in the sky.
The four-year old San Diego company has reshaped its business to focus on using Ku-band satellite links to provide two-way Internet solutions at speeds comparable to a switched T1 circuit. After a change in its management this year, Tachyon is focusing on delivering private data networks to enterprise customers, says Mark Gercenstein, the company's new president and CEO.
The company can deploy a site in half a day, using a dish that's less than a meter (3.3 feet) wide. Tachyon is leasing transponders on existing satellites, and currently has one transponder serving North America and another over Western Europe.
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Satellite Technology ... and Where It's Going
Satellite broadband services are forecast to have nearly 500,000 subscribers and generate more than $400 million in revenue by year-end, according to a recent report from industry consultant The Carmel Group. Carmel also projects that the total satellite broadband subscribers will grow to more than 8.5 million subscribers in 2008, generating more than $3.5 billion in revenue.
The widespread availability of satellite broadband over the continental U.S., combined with the prohibitive cost of rolling out cable and DSL in rural areas makes satellite broadband service "particularly appealing" to the 30 million-plus rural consumers whose options for high-speed access are limited, Carmel says. Obstacles for the satellite operators to overcome include the up-front cost of equipment, a slightly larger dish than the traditional 18-inch DBS dish, and the ability of both cable and DSL to bundle subscription television, telephony and high-speed Internet access.
"One potential solution may be for DBS providers to seek telecom partners to find the shared enemy that is cable," Carmel says. "A united front against cable may be the thing both industries need in this coming broadband age."
The three current services--one at StarBand and the two at DirecPC are Ku-band. Two Ka-band players, Hughes' Spaceway project and Wild Blue Communications, are likely to launch in 2002 and StarBand is considering a Ka-band service as well. Ka-band services operate at a higher frequency and include the ability to spot-beam information, which should result in a more robust service than Ku-band, Carmel says.
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For an installation price of about $4,000, Tachyon can connect a site, providing Internet download speeds of up to 2 Mbps while uploading at 256 kbps. The upload speed "is going to double by the end of next month," says Gercenstein, who worked for failed mobile satellite voice provider Iridium LLC and its key backer, Motorola Corp. before joining Tachyon this May.
Tachyon initially worked with ISPs to provide Internet connections, but has revamped its business plan to target direct sales of selling private data networks to enterprise class customers. Its target customers are businesses that require between 200 and 1,000 points of presence.
Tachyon's not the first to offer broadband Internet connectivity via satellite, although it sees its differentiation in going after the business market.
DirectPC, a service of Hughes Electronic's DirecTV, and StarBand Communications Inc. last year began offering two-way broadband data services with upstream speeds of about 440 kilobits per second, primarily to consumers.
McLean, Va.-based StarBand, whose partners include Gilat Satellite Networks Ltd., Microsoft Corp. and EchoStar Communications Corp., had signed up more than 25,000 customers in the continental United States by the end of the first quarter.
The residential market is "not our focus. We think other people have solutions that are cheaper," Gercenstein says. "We're providing broadband data networks. Our competition is the other satellite providers and T1, fiber, or cable-type solutions."
While targeting Fortune 2000 companies and governmental agencies in North America and Europe, Tachyon's satellite solution can cover areas where a terrestrial solution doesn't reach or regions where infrastructure is less developed.
"We are cost competitive with terrestrial solutions, and we provide certain features of security that make this a good choice for a private network. Many companies that have multiple locations in diverse geographic areas are the companies that will be looking at our kind of service," Gercenstein says.
Tachyon holds 30 patents on technology it says reduces the problem of latency, or the lag caused by bouncing a signal off a satellite. Still, it admits there's an unavoidable 500-millisecond, roundtrip delay.
And there's the cost. Tachyon's service costs from $399 to $1,299 per month, which it says is comparable with the cost of business-type T1 service.
Tachyon has deployed about 210 Tachyon Access Points, or TAPs, so far. The industrial dishes installed on a rooftop are linked by coax cable to a PC size, all-in-one-receiver, transmitter, router and Web cache unit inside a customer's location.
"We think we can put between 2,000 and 4,000 TAPs per transponder. Obviously it depends on level of service each TAP is providing, but that's a pretty good range," Gercenstein says.
Availability of transponders on Ku-band satellites shouldn't be an issue. Tachyon is currently negotiating to place option calls for more than one transponder, and is working closely with major satellite operators. It has contracts so far with Loral SatMex for North America and EutelSat for Europe.
"We think we can pick up a transponder every three to four months," so handling a growing customer base should not be a problem, Gercenstein says.
Backers of the privately held company include venture capitalists Cornerstone Ventures and Centennial Funds, both of Denver, Matthew G. Norton Co. of Seattle, BancBoston, BV Group Ventures LLC, CEA Capital Partners and Technologies for Information & Entertainment.
Tachyon's investors have provided funding that should be enough to carry the company into early 2002, Gercenstein says. The company expects to be cash flow positive by the end of next year, with a breakeven point coming with the installation of around 4,000 sites.
Tachyon currently is seeking an undisclosed amount of additional funding to accelerate its marketing activities.
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