BRIDGE OVER TROUBLED SKIES:
SATELLITE BROADBAND AND THE DIGITAL DIVIDE

By Phillip L. Spector
Partner
Paul, Weiss, Rifkind, Wharton & Garrison LLP
Washington, DC*

A few years ago, at the height of the Internet boom, pundits often spoke of “Internet time.” They meant many things by this reference, but certainly there was a recognition that a key strength of the Internet is the fast communications speeds involved. While the concept of “Internet time” has faded somewhat with the bloom on the Internet rose, it is still the case that ever-increasing numbers of Americans and others in the world have access to high-speed Internet services. Through this access, they are able to refer quickly to a myriad of resources that have made the Internet an essential part of all of our daily lives.

Virtually all of these high-speed Internet connections, at least in residences, are provided via one of two technologies: cable modem, or digital subscriber lines (“DSL”). For those in rural and remote areas, however, these two forms of wired Internet service are often not available. Thus, while there is a well-recognized “digital divide” along income lines -- with those who are better off generally receiving better, faster, cheaper Internet connections -- there is also a “digital divide” among those living in urban and rural areas. The obvious bridge for this latter divide is satellite technology, which is indifferent to the vast distances of rural areas.

Satellite delivery of high-speed Internet content, however, has lagged badly behind cable modem and DSL deployment. A survey completed in March 2003 concluded that, of the 31.4 million Americans with high-speed Internet access at home, 21 million receive such access via cable modem, 9 million via DSL, and just 1.4 million (or 4.5%) via satellite. The study also found that, among those who do not have access to high-speed cable modem and DSL options, interest in such services is high, with 61% stating they would subscribe to a high-speed service if it were available.

Three years ago, in April 2000 (an eternity in Internet time), the National Telecommunications and Information Administration of the Department of Commerce (“NTIA”) issued a report on “Advanced Telecommunications in Rural America.” At that time, the authors of the report wrote:

Satellite broadband service has particular potential for rural areas as the geographic location of the customer has virtually no effect on the cost of providing service. Several broadband satellite services are planned. Their actual deployment remains uncertain . . . .

Today, in May 2003, there is regrettably much less uncertainty about many of these new broadband satellite projects; it is now clear that most of them will never be built. There is simply not money available in the capital markets for hugely expensive satellite projects, often involving untested technology, with uncertain market potential, in two sectors (telecommunications and the Internet) that were once hot, but today clearly are not.

But expensive new satellite systems need not be launched in order to bring the benefits of broadband access to rural areas of the United States and elsewhere in the world. Much of the world’s landmass is today covered by conventional satellite systems, and most of these systems have capacity available that could be dedicated to broadband services. The challenge for the satellite industry has been to develop effective, affordable earth station and other ground-based technologies that use existing satellites’ capabilities to deliver two-way broadband to businesses and residences located in rural and remote areas.

Just over one year ago, the U.S. Federal Communications Commission (“FCC”) issued a report resulting from its inquiry “concerning the deployment of advanced telecommunications capability to all Americans.” This report expressed particular enthusiasm about the role of satellites, with the FCC stating that:
Because satellite services are widely available in most, if not all of the United States, the successful deployment of the new generation of satellite service has the potential to extend the availability of advanced services to almost all Americans.

But the FCC has no authority to take any actions that would have a meaningful impact on the hoped-for “successful deployment” of satellite broadband services, and in fact the examples of “the new generation of satellite services” cited by the FCC -- StarBand and Hughes’ DirecWay service -- are both widely regarded today as failures.