Networking ventures using satellites as their main platform for delivering content are foundering, suggesting the companies need to find terrestrial partners, or go down in flames.
Cidera, the pioneer of satellite-based distribution of cached content, laid off 75 people in its latest round of firings, and will run out of investor cash in mid-2002. Executives of Williams Communications, which recently bought all of iBeam Broadcasting, describe the task of supplementing the subsidiarys satellite system as "building a real network."
Satellite-based content distribution network Edgix shut down before dipping into $50 million in venture capital. Orblynx, a private satellite CDN company built on the technology and business connections of "satellite Politburo" Intelsat, was abruptly shut down, too. Even PanAmSat has reportedly slowed funding of its Net-36 CDN unit.
Pundits such as Jupiter Media Metrix research fellow Peter Christy, who is generally bullish on the part satellites might play in the Internet, say that in these difficult times, companies betting on birds in the sky need a lot of faith and very deep pockets. Other industry insiders say better business models are warranted.
"The solutions that were developed for CDNs still make sense," says Susan Irwin, president of Irwin Communications. "Its how they are integrated into business that has not been done successfully." In May, Irwin published a report, Broadband Content Distribution: The Internet and Satellites.
Satellite operators have long been fascinated by Internet ventures, which sounded the siren call of ubiquitous intelligent services on a satellite platform. The Internet could provide the technology that could help them develop a set of fat-margin services that would be cheap to provision — the equivalent of caller ID in the telephony world. Content distribution was the first service to fit that bill. But so far, the experiment appears to have been a convincing failure.
"The primary revenue realized by satellite operators continues to be the revenue for connecting the Internet backbone, primarily from the outside of the U.S.," Irwin says. "Forays into multicasting, edge distribution, using satellites for streaming and so on — they are making some strides. There are companies that are using satellites for something other than a point-to-point fiber substitute, but its got a long way to go."
After buying 49 percent of iBeam, with which it already had a long-term fiber deal, Williams found itself rebuilding the satellite companys infrastructure.
"They have done a tremendous job getting into this space, with Merrill Lynches and MTVs as customers," says Randy Tucker, vice president of operations and engineering of Williams Vyvx Broadband Media unit. "Not so much on the architecture side."
IBeam and other satellite-based companies lack the bandwidth to adequately participate in production environment-type services or to handle peak volumes, Tucker says. With iBeam, this problem has been corrected with Williams fiber assets. Satellites, though an important part of Williams network, have been relegated to the role of offering connectivity where there is no fiber, he says.