The other 3bn
Last week Google announced that it, along with private equity group HSBC Principal Investments and broadband media company Liberty Global, would pump US$65m into a new constellation of 16 satellites to be built by O3b Networks (O3b stands for the “other 3bn” people).
Founded by US technology entrepreneur Greg Wyler, O3b plans to spend $650m on the project, with the additional money being raised in the form of a debt-equity loan. The idea is to deliver cheap broadband to people in countries where telecommunications infrastructure is poorly developed and expensive.
It’s a noble venture and one worth cheering on. But one wonders whether Wyler and his team have fully considered the regulatory and political difficulties of delivering these services in markets across Africa, the Middle East, Asia and Latin America. The vested political and economic interests and regulatory red tape O3b will have to overcome could prove to be its biggest challenge.
The idea, though, is laudable. O3b says the system will “reduce bandwidth costs for telecom operators and Internet service providers, enabling cost-effective voice and broadband services at speeds equivalent to those enjoyed in the developed world”.
The company wants to provide the backhaul — traditionally one of the most expensive parts of providing a telecom service — to and from operators’ 3G cellular and WiMax wireless broadband towers. Operators would build wireless infrastructure and use O3b’s satellites to carry communications traffic to the rest of the Internet.
The O3b network is slated for a late-2010 switch on. Because the satellites will be in medium-earth orbit (closer to earth than many other communication satellites), O3b says latency — the measure of delay on a telecom network — will be on a par with fibre-optic submarine cables. Low latency is important for delivering Web-based applications such as those being developed by Google.
The company’s plan comes at an interesting time for telecoms in Africa. The continent has always been poorly served by undersea cables. Some countries on the west coast have had access to the Sat-3 system, though the operators behind the cable have conspired to keep the cost of access to the system high. The east coast, on the other hand, has had no submarine link at all.
Now, though, at least three new high-capacity submarine cables are on the cards. Two of them are being built along Africa’s east coast with a third system to be constructed in the west.
So, in some respects, Africa’s demand for international connectivity will have been addressed before O3b even launches its satellites. But the project still has clear advantages for providing national backhaul, especially in landlocked countries that have no direct access to the submarine cables.
An advantage O3b has is it will be selling access through already licensed operators, so it’s unlikely to need to spend an inordinate amount of time dealing with badly run telecom regulators and governments. But some interaction will no doubt be necessary.
A bigger challenge may be convincing national operators to pass the savings on to consumers. International communication in many of the markets O3b is targeting is still controlled by monopolies that have little or no incentive to reduce prices.
O3b will have to be careful to ensure its project has a meaningful impact on the ground and doesn’t simply serve to swell the profit margins of incumbent telecom providers.
First published as the column Technology & You in the Financial Mail of September 19 2008
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