Posted by: Neal Lachman | October 30, 2008

O3b Networks: The Other 3 Billion – Good cause, but will be Dead on Arrival

After reading our white paper, FTTH & BWA Consortium group member Tawanda Mutukwa asked what the difference is between my former satellite broadband venture InternetHypergate (1999) and the recently announced O3b Networks’ plans. This blog, by IT specialists Chris Wilson and Jim Jepps, hits the nail quite well on its head.

I basically agree with their observations. We are now almost 10 years further than when I launched IHG (which cost my brother and me almost $2.5M in marketing/hyping it up), and when Teledesic was going strong (qua planning), and when Iridium was nearing bankruptcy. So, there is of course some progress made in transponder technology, but I highly doubt the business model will work or make a great difference. O3b Networks will be a bakchaul service provider, and not able to reach the end-users, so the customers are still subject to the local service providers. 

This project is not financed as of yet, except an initial $60M, which is less than 10% of the projected cost, and maybe 5% of the real cost (as it will be more expensive than the executives at O3 think). There are several powerful consortiums trying to bring REAL fiber optic capacity to Africa, and the likes of Google should be investing in that kind of projects rather than some wishful thinking of some “visionaries”. 

In an oversimplified fashion, I’d dare to recommend the following:

  1. The cost to bring fiber optic cables to certain landings in Africa would not exceed $250M 
  2. From there, the governments and private companies (in a public/private endeavor) could invest in proven long term terrestrial technologies such as LMDS and MMDS to reach (new to be developed) POPs and co-location centers/hubs/hotels. This could be done with $100-150M.
  3. The local operators could then buy capacity from the public/private entiry. 

Of course, the issue is that O3 promises to have their birds (satellites) hop and link all continents, not just Africa, and that is their USP. However, I think it’s hot air and wishful thinking. There will be no one-size fits all, one-solution-for-everyone answer to the problem of lack of bandwidth. One way or the other, there would be approximately $350M left (if the 03 satellite plan would be replaced with a fiber optic cabling plan) to bring true fiber optic capacity to other regions. 

I am sure O3 makes lots of sense, and the vast geographic reach of satellites (esp. when they would work as proposed in O3′s configuration/constellation) is tremendously attractive, but we should not lose reality out of sight. The fact is, at the end of the day, that O3 would be a “somewhat interesting” solution if its plans are 100% successful and actually executed as theorized on paper. However, the risks of a $650M failure is too high. The O3 concept has too many “whats and ifs” and there are too many “hooks and crooks” in satellite technology to make it a safe and sound bet or attractive investment as O3′s team wants to make it look like. As a plain-thinking, black-and-white thinking and risk-calculating investor, I’d recommend NOT to proceed with the O3 plan and instead focus on fiber cable landings, which is a future proof solution, and for the same money as 03 needs, the future could be had sooner rather than later.

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Responses

  1. I know the CEO and Founder of AfSat … Africa’s largest satellite operator … based in Kenya. I have asked him to comment on the Google Press release and share his views on “connecting Africa” … I am sure he would prefer to buy fibre backhaul as opposed to space segments.

    Tony.


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