With Google's backing will O3b reach the Other 3 Billion?

O3b, the brainchild of American entrepreneur Greg Wyler, who most recently rolled out fibre optic cable networks in Rwanda with his company Terracom, is a development with great potential. Standing for the "Other 3 Billion", the company aims to deliver high speed, low cost broadband internet to developing markets.

O3b has already succeeded in obtaining some heavyweight industry backing from none other than the mighty Google as well as banking giant HSBC and cable networks leader Liberty Global for tackling the problems of the digital divide.

US$60 million is no small sum to have raised, and used in the right way this could make a significant impact on some of the challenges we think about daily at Developing Telecoms. O3b is principally targeting the wireless and fixed line network operator backhaul market. This takes signals from base stations and local exchanges and sends them to the destination exchange or base stations. It is the 'behind the scenes' routing of bulk voice and data traffic which is essential to all networks.

Mostly backhaul networks are owned by the network operators and they can be expensive to install and operate. In high traffic density areas they are often fiber optical cable but in remoter locations they can run over wireless, microwave or satellite. This increases bandwidth cost and is seen as a key emerging market challenge.

O3b thinks it has the solution with an array of satellites. And if Google and other partners in the enterprise can, in addition to credibility and cash, bring innovation to the solution, it really could impact. For example, Space Data, a high altitude networking specialist recently purchased by Google, provides low cost platforms to the military and business for rural and remote data and voice communication applications via the SkySite network.

In addition to backhaul, O3b also appears to be targeting entrepreneurs in remote, unserviced communities looking to by-pass existing service providers and infrastructure networks. A Space Data type of technology solution could be idea for this, providing it is affordable.

But before we get carried away with the possibilities, it is right to sound a note of caution. Remember Iridium in 1998/9? Iridium's satellite constellation concept sounds disconcertingly similar to O3b's although its business model was different. Iridium was killed by a combination of high costs, technical and political and fund raising delays. But it also misjudged the market, failing to appreciate how rapidly GSM was developing and enabling low cost roaming. Cost is even more important now than in the late 1990s and markets are less regulated and more competitive.

Technologies such as 3G, HSPA, WiMAX and the emerging LTE standard are racing towards the same goals O3b has identified - the provision of low cost broadband access. These are, of course, more focussed on the last mile so it may be that O3b's technology will become part of the backhaul solution to these evolving technologies, producing a win-win situation. But any solution must be competitive on cost and O3b can't expect special favours from powerful regional network operators and service providers.

To say nothing of the fact that other satellite networks already exist - Globalstar, Intelsat and Thuyaya among others. There are technical differences in what O3b is proposing which may eventually enable it to deliver a superior service at lower cost. But we don't believe other satellite operators will stand idly by and watch O3b add to capacity without responding.

O3b has still to raise an eye watering US$700 million to get its satellites launched and operational. In these credit crunched, post Lehman Brothers times, this may not be as easy as its backers hope. Iridium struggled to raise finance for its satellites and it almost finished Motorola off. Google and the other O3b backers may well have deeper pockets. But if existing satellite operators who have already written down large parts of their capex decide to cut prices, this will be good for emerging markets but not so good for O3b.

At Developing Telecoms we are inevitably fans of new technological solutions to the challenges of the digital divide and we wish O3b well.

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