Copyright 2000 eMediaMillWorks, Inc.
(f/k/a Federal
Document Clearing House, Inc.)
Federal Document Clearing House
Congressional Testimony
October 5, 2000, Thursday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 4494 words
COMMITTEE:
HOUSE SCIENCE
SUBCOMMITTEE: TECHNOLOGY
HEADLINE: TESTIMONY RURAL ACCESS TO TECHNOLOGY:
CONNECTING THE LAST AMERICAN FRONTIER
TESTIMONY-BY: GUY
T. CHRISTIANSEN , TESTIMONY OF GUY T. CHRISTIANSES
BODY:
October 5, 2000 STATEMENT OF GUY T.
CHRISTIANSEN DIRECTOR, REGULATORY AFFAIRS SKYBRIDGE LP BEFORE THE UNITED STATES
HOUSE OF REPRESENTATIVES COMMITTEE ON SCIENCE SUBCOMMITTEE ON TECHNOLOGY Rural
Access to Technology: Connecting the Last American Frontier Chairperson Morella,
Congressman Hall, thank you for the opportunity to provide SkyBridge s
perspective on the issue of broadband access in Rural America. My name is Guy
Christiansen and I am the Director of Regulatory Affairs for SkyBridge LP.
SkyBridge started out as a research project back in 1994 and has since evolved
into a new breed of telecommunications company whose market is precisely the one
being addressed by this Committee today. Starting in three short years,
SkyBridge will deploy a constellation of 80 low-earth orbit satellites with one
goal: to provide broadband access to areas that are either too remote or too
expensive to reach using terrestrial technologies. As a company based in the
Representative Morella s district of Bethesda, Maryland, I m glad to appear
before you not just to point out the increasingly urgent need for broadband
access, but also to provide what we believe will be a tremendous step forward in
addressing this need. We have all heard about the tremendous growth of the
Internet over the past few years and how it is changing our economy. That growth
is continuing, and is about to take on a new dimension: broadband access. Our
own company estimates predict that there will be over 400 million broadband
users worldwide in just four short years. Roughly a quarter of those users will
be beyond the reach of terrestrial technologies and will need to rely on
satellite technologies to fulfill their needs. As part of our research, we hired
Mercer Management to conduct a study of likely areas where terrestrial broadband
access solutions would be deployed over the next four years. The map that
follows shows the result of that study. The areas in purple are areas where
DSL and Cable are likely to be deployed. What is surprising
though, is the number of areas that will not see DSL or Cable
deployment in that time frame. These areas are indicated in grey. The problem of
access to broadband services is not confined to places like Wyoming or Alaska.
As this map shows, even broadband bastions like the New York - Washington
corridor are likely to have substantial areas with no broadband access in the
next 5 years. The problem is a simple one of subscriber density. An operator
must be able to serve a sufficient number of subscribers to pay for the cost of
deploying its network. In areas where subscriber density is low, this is a very
tough proposition. While the traditional telecommunications network has worked
well for simple telephony, it is not built to handle the demands of Internet
traffic. Tremendous strides have been made in backbone technology and fiber
optic networks, but few choices exist for extending that technology to rural
areas. SkyBridge is planning a constellation of satellites that will act as an
extension of the existing terrestrial backbone, allowing it to reach out to even
the most remote parts of the country. Using a constellation of 80 satellites, we
will provide a simple, two- way, high-speed connection from the end user to the
Internet backbone. The diagram below shows the system s architecture. On the
left side, you can see the current terrestrial infrastructure. Today,
high-capacity fiber carries the broadband backbone s traffic between cities. But
once that fiber terminates in a central office or hub, it then moves over a
simple phone line or cable to the end user. These lines are often difficult or
expensive to upgrade, and in some areas, may not be upgradable at all. SkyBridge
seeks to avoid this problem by replacing the central office or hub by a network
of 140 Gateways that extends the reach of the fiber backbone out over 200 miles
around each Gateway through a simple satellite link. Every user within each cell
gets the same access, with the same performance and at the same price, no matter
where they are. It doesn t matter if they are in the middle of a city or 100
miles away in a remote corner of the country. As long as they have a clear view
of the sky, they can be connected. Because we are able to aggregate users over
such a large area, the cost of providing the service is kept very reasonable. In
fact, a requirement of the system is that it provide broadband connectivity at a
cost similar to terrestrial technologies. Our business plan is based on an end
user cost of $30 per month for unlimited usage. For that price, users will have
access to the Internet at speeds of up to 20 Mbps download, and 2 Mbps upload,
as well as voice, videoconferencing and other data services. In short, anything
that can be carried over ADSL lines or cable can be carried over SkyBridge. The
consumer should never notice that his or her service is being provided via
satellite. SkyBridge is already well on its way to reaching its goal of
beginning operations in the year 2003. Our industrial investors are some of the
biggest names in the telecommunications and aerospace industry. With backers
such as Alcatel, Loral, Boeing Litton, Toshiba and Sharp, we have already raised
over $1 billion in equity. We plan on beginning construction of the satellites
in the next few months. SkyBridge is proud to be working towards providing a
solution to broadband connectivity in Rural America, and we look forward to
working with this Congress to do our part in making sure this last frontier has
access to all the advantages and opportunities as their urban counterparts. I
have attached some additional information to my written statement for the
record. Thank you again for the opportunity to appear before you today. An
Overview of the SkyBridge IP Network SkyBridge: A Global Broadband Access
Network SkyBridge is building a network of 140 gateways around the world, which
will be able to deliver broadband services to any user s home or office,
anywhere in the world. SkyBridge will deliver these services via a constellation
of 80 low-earth orbit satellites, which are used to bridge the last few hundred
miles from a gateway to the end-user to deliver high-speed (20+ Mbps) two-way
services to customers. Each SkyBridge gateway will provide services to a
surrounding cell of 700-km in diameter in high-traffic areas, or multiple such
cells in lower-traffic areas. Each SkyBridge gateway will be interconnected with
high-speed fiber backbone networks. As a result, the long-distance component of
a communication path will transit over low-cost fiber networks, and the
SkyBridge satellites will provide low-cost last-mile delivery to the end-user s
roof-top. Value-added service providers will transparently interconnect their
PoPs with SkyBridge gateways, allowing the delivery of their services (VPNs,
corporate services, e-commerce, web- hosting, caching, shared applications,
etc.) to customers. SkyBridge within the portfolio of access solutions Alcatel,
as a leading supplier of broadband access solutions, developed the SkyBridge
system to complement other access technologies. For a given environment, choice
of the best access technology will depend on such criteria as investment cost,
performance, time to market, regulatory conditions, and target market. Broadband
satellite solutions provide significant advantages due to their inherent
flexibility of deployment, a cost structure which is independent of user
density, and their ability to service users anywhere in their footprint.
SkyBridge was developed to leverage these strengths, while overcoming some
inherent limitations associated with traditional geostationary satellite
systems: high up-front investment, a high cost per Mbps of capacity, limited
capacity, as well as latency associated with a high orbital position. SkyBridge
offers the crucial advantage of the low-latency (30 ms) associated with LEO
satellites orbiting at only 1,500 km. This allows for high-speed, two-way
services using standard TCP/IP protocols, whereas GEO satellites orbiting at
36,000 km are more appropriately positioned for applications less sensitive to
latency. SkyBridge system capabilities SkyBridge capacity is shared between
operators, based on their equity participation, in a very similar model to that
developed for submarine cables. That capacity can then be deployed rapidly, from
2003 on, as demand builds. The advantage of 700-km cells for operators is that a
small number of PoPs, with a limited backbone infrastructure, can allow Service
Provides to serve customers in a very large geographic region. SkyBridge
Capacity SkyBridge will provide wholesale capacity to Service Providers in
various regions of the world. Service providers will handle all sales to
end-users. Since all of the capacity over a given region can be made available
on an instantaneous basis to any client in the coverage area, each client can
obtain a bandwidth-on-demand service. SkyBridge multiplexes many types of
traffic from many different users in a service area, which is particularly
effective for the bursty traffic associated with Internet usage. A given cell
can be dimensioned to provide up to 3 Gbps to the users in its coverage area, in
small incremental steps. SkyBridge expects that each gateway will be able to
usefully serve up to 330,000 individual users. With the very large amount of
spectrum available to SkyBridge, as well as very efficient frequency re-use,
SkyBridge will offer a useful capacity of over 250 Gbps, divided over each of
the regions of the world. This capacity is available to service providers in
quantities they choose, depending on their service deployment plans. Within each
region, the capacity can be reallocated on demand between cells, enabling
service providers to meet their evolving demand. End-user terminals SkyBridge
will deploy two kinds of terminals: small 50-cm antennas designed for the
consumer market, and larger 100-cm antennas for the professional market. Peak
speeds of up to 20 Mbps can be obtained through the smaller terminal, and speeds
several times as fast can be obtained through the larger terminal. Typical
speeds for return traffic (from the user) will be 2 Mbps for the smaller
terminal, and up to 6 Mbps for the larger terminal. The consumer terminals will
cost $700, while the professional terminals will cost $2500. Key System Design
Characteristics The satellites use simple, bent-pipe technology, bouncing all
communications to/from a user to the gateway in the cell. This reduces the
complexity and the cost of the constellation, as all intelligence remains on the
ground. Costs and technical risks are further reduced through the use of the Ku
band, which has been in commercial operation for over 20 years. The SkyBridge
Market End-user demand SkyBridge has undertaken extensive market studies to
estimate potential demand both globally and in the United States. Major
consulting firms utilized include The Boston Consulting Group, A.D. Little, and
Mercer Management. These studies confirm that SkyBridge revenues could
significantly exceed those projected in the SkyBridge business plan. It is
expected that 2/3 of SkyBridge s customers will be businesses, and 1/3 will be
consumers. Substantial demand will come from home-workers, SOHOs, and small
businesses for whom broadband access is critical, yet will not have such service
available from their local operator. Demand from the small sites of major
corporations, both within a country and internationally, will be driven by the
need to access the corporate information resource as if they were close to
headquarters. Market forecast It is estimated that of the 400 million users
around the world who are expected to be willing and able to pay for broadband
services by the year 2005, approximately one quarter will not have access to
terrestrial services, and will therefore seek service via satellite. Worldwide,
SkyBridge expects to achieve a 25% market share among satellite-based services
in areas where there are no terrestrial alternatives, and a smaller share in
those markets having alternatives available to them. Financial Highlights
End-user pricing It is expected that consumers will pay $30 per month for
SkyBridge services, and that business will pay $310 per month. Business sites
are expected to have an average of approximately 10 users per site, though the
SkyBridge system could support up to 50 users per site. Traffic modeling assumes
that each user will use 1 GByte per month of data, derived from a number of
studies of expected future applications. This projected pricing equates to
approximately 3 cents per MB of data, although final end-user pricing will be
entirely in the hands of service providers. Business plan economics SkyBridge
will be serving a total of 21M customers in 2010, of which 5.8M will be
consumers, and 17M will be professionals (1.7M sites). Revenues generated by
SkyBridge for the wholesale services sold to the Service Providers will rise
from $700M in 2004 to $6.2B in 2010. The company will be EBIDTA-positive after
the 1st year of commercial operations, and it is expected to generate an IRR of
33%. Financial break-even can be achieved at a 30% utilization level. Funding
plan Total funding to be raised will be $7B, which will be used to finance the
deployment of both the constellation and the associated gateways around the
world. The company has already raised over $1B to date, and is currently raising
a further $1.8B of strategic equity from telecommunications operators and
service providers. This will be then supplemented by funds raised from public
and private financial investors, and an additional $2.7B to be raised through
various debt instruments. Company Structure Partnership SkyBridge is a Limited
Partnership based in the United States, with a number of major international
partners reflecting the truly global nature of the business SkyBridge is
building. These world-class companies are particularly well-positioned to ensure
that the SkyBridge system is delivered on time and on budget. A leading role is
being played by Alcatel as Skybridge s General Partner, leveraging its
extensively skills in both the telecommunications equipment industry and in the
space industry. Fourteen other investors have also joined Skybridge, including
major companies such as Boeing, Litton, and Loral (USA), Sharp, Toshiba, and
Mitsubishi (Japan), and Thomson, Snecma, and CNES (Europe). Program Development
and Timeline SkyBridge has already established a firm, fixed price contract with
Alcatel for the in-orbit delivery of the constellation. The timing and the cost
of this contract are set, thereby ensuring that the industrial risk associated
with the project is minimized. A similar contract is defined for the delivery of
the gateways. Alcatel will also ensure the system integration and testing,
including service delivered at the gateway and through the terminals. The first
40 satellites will be in operation in mid-2003, providing initial service to
North America, Europe and Japan. The follow-on 40 satellites will be operational
in 2004, when full global coverage will be achieved.
LOAD-DATE: October 11, 2000, Wednesday
