Thursday, April 17, 2014

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O3b Finds Financing, Preps Launch
 
The newest satellite operator in the business got US$1.18 billion to fund its ambitious future operations. One of its goals: take Internet access to the entire emerging world.
 
By OMAR MÉNDEZ
 
It is estimated that half of the world's population lacks broadband Internet access, largely due to economic and social conditions. The worst off in the digital divide is Africa, followed by a great part of Asia. Latin America still has several locations where the Internet is nothing but a distant phenomenon. The people from all these regions are part of the "other 3 billion," a phrase used to describe population groups that fall under the "objective 1" category: people with no access to optical fiber or satellite resources. Now these three billion people are part of one of the most inclusive satellite projects in the world  -O3b (Other 3 billion)- that is set to launch in 2013.
 
Started in 2007, this satellite corporation is expected to be financially sustainable. Companies such as Google, SES, HSBC Principal, Liberty Global, Investments, North Bridge Venture Partners, Allen & Company, the South Africa Development Bank, Sofina and Satya Capital are part of the O3b society and responsible for its funding. With such deep pockets, a quick and determined route toward a launch would be expected. But that's not been the case. Not until this week has the group finally secured the capital it needs to start the project.
 
O3b's basic operations obtained between US$1.18 billion and US$1.2 billion in funding, ending its funding stage. Of this, US$770 million comes from banks and international financial institutions such as HSBC, one of the company's leading shareholders. The remaining US$410 million comes from partners including SES, Google, Liberty Global, North Bridge Venture Partners, Allen & Company, Development Bank of Southern Africa, Sofina and Satya Capital. Of the funding from the original shareholders, US$230 million is new equity. This has made SES the company's largest minority shareholder.
 
Its first medium earth orbit (MEO) fleet, composed of 8 Ka-band satellites, is being built by Thales Alenia Space. The satellites will be launched from French Guyana by Ariane Space in 2013 and will operate eight billion kilometers from the earth, four times closer to its coverage-objective than geostationary orbit satellites. Ob3's aim is to provide high-speed satellite backhaul to emerging countries that lack fiber optics infrastructure.

The company will grant satellite access with fiber optics speed through partnerships with telecommunications operators and Internet service providers. This coverage will, for the first time, provide access to Internet to 100% of the emerging world’s population.

Challenges and Risks
O3b's formal announcement sets its target as emerging markets (Africa, most of Asia and part of Latin America) -territories lacking fiber optics and populations with no possibility of communications. Africa will provide the most demand. The lack of fiber optics and the million-dollar investment required to lay the cables puts O3b in an enormous territory with practically no competition.
 
That is one aspect. Another is the challenge of launching a new technology. The entire project is expensive. It involves launching risks and needs to ensure an exact coordination between satellites for it to be effective. These medium earth orbit satellites only cover 40 degrees north and 40 degrees south of the equator. The company that hires or operates the O3b service -with an investment close to US$400,000- will have a field of parabolic antennae. For instance, two are needed to follow the rotating satellites that will alternately cover different spaces in the same way that cells from mobile telephony do.
 
If everything works out, O3b will create a new market with new telecommunications clients. It will become a huge benefactor in worldwide digital inclusion, granting Internet access to populations forsaken by the communications establishment. Poor people in Africa, for instance, have never captured the attention of great telcos or world powers because of their lack of profitability. If everything goes well, O3b will create a critical mass of millions of high-speed Internet consumers. Once this is accomplished, the company must be ready for a critical second stage. With a new mass of consumers, it's probable that the big telecommunications groups will be just around the corner with fiber optics in their hands and ready to take their share of the harvest.
 
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