While over 80 percent of Americans are online, broadband adoption is growing slower than expected. The problem stems from the fiber optics business. Buoyed by high demand and exuberance, fiber optic companies laid down high speed cables across the oceans to support the data demands of hungry 3G and cable internet networks.
After these cables were laid the demand slacked off predictably, leaving the fiber optic companies with little revenue and high debts. Many were bought up by larger companies and consolidated. In the aftermath, over 3 billion people were left without access to high speed networks and new installations reduced to a crawl. The only alternative was geosatellite, which costs a whopping $4,000 USD per megabit per month.
Now a new company is seeking to change that. The company, O3B, draws its name from the phrase "other 3 billion" to describe the world's population with no internet coverage. The company, located in U.K.'s Channel Islands, is building 16 satellites thanks to $65M USD in funding from HSBC Principal Investments, a private equity provider; Liberty Global, a service provider for phone and Internet access in 15 countries; and Google.
Greg Wyler, O3B's founder and CEO states, "Usage is growing and the demand is growing, but there isn't the infrastructure to support the demand."
Wireless operators spend up to 40 percent of their costs in developing networks, according to O3B. This is evident when problems play out, such as AT&Ts recent insufficient 3G coverage to meet bug-exacerbated demand from iPhones.
O3B's unique plan is to launch medium-earth orbit (MEO) satellites, which orbit at 5,000 miles and only have 120 millisecond latency and are less expensive compared to geosatellites which orbit at 22,500 miles, have a latency of up to 600 milliseconds, and cost more. The new satellites are predicted to cut costs down to around $500 USD per megabit per month, much more affordable.
The company still will have to take out a debt equity loan, as the total cost of the satellites will be $650M USD. Still, it’s making good progress towards this goal. O3B plans for its new service to go online in 2010 and provide internet at a data rate of 10G bps (bits per second) and provide service to Latin America, the Middle East, Africa and Asia. A GEO satellite stays in useful orbit for around 10 to 15 years.
Google says that it is supporting O3B as high speed internet access should be available to all. It says that its best programs, such as Gmail to Google Docs need such coverage to operate optimally. And of course, Google hopes that people will use its search engine and browse more pages, pulling in more revenue to its ever-growing advertising stream.