DSL, SATELLITE BROADBAND WON'T CATCH UP TO CABLE, PANEL SAYS

“Satellites do compete, they have competed and they will compete with terrestrial solutions,” said Michael Cook, senior vp-gen. mgr. Spaceway Business Group: “Satellite broadband is going to be a mainstream broadband technology… an essential part of the broadband landscape of North America and every other country in the world.”

Cable is doing so well that even DSL isn’t catching up, said Leichtman Research Group Pres. Bruce Leichtman. While DSL is steadily gaining subscribers, Leichtman said that’s merely a sign that DSL providers are just now getting serious: “Are they catching up? No, they're becoming a reality; they're really getting into a business which they basically ceded to cable operators.” In that case, Leichtman said if cable is McDonald’s and DSL is Burger King, “satellite isn’t Wendy’s, satellite is like Bob’s Burger Shop.”

But during the satellite panel, Cook said the “wow” factor is the main roadblock satellite operators will have to get over: “We have to get past wow and down to practical things. We have to show it’s an ordinary service, we have to demystify it. The end user doesn’t care whether it’s a satellite or terrestrial link.”

Cable consultant Steve Effros said the digital transition would determine which platform would come out on top: Right now, the buzzword is broadband, Effros said, but “what is happening here is that within the next 18 months, let’s say, you will start seeing very marked differences in our language because there isn’t much of a distinction between broadband, video, cable TV, TV, digital TV and HD.” Effros said once every application is using a digital transmission format, the question will be “what is the most efficient infrastructure to deliver all of that?”

Responding to a question on a cable-satellite alliance for broadband, American Cable Assn. Pres. Matthew Polka said attempts at widespread broadband deployment would create the opportunity once “satellite realizes it won’t be a ubiquitous broadband service across the country and our members realize they can’t serve every home with wire… But in our businesses, we've kept ourselves sort of separate.” Evie Haskell, co-founder of Media Business Corp., agreed: “The smart business model is a combination of cable’s unique capabilities with satellite… I do think that in the not too distant future there will be more and more alliances and [they] will start talking to each other.”

Meanwhile, neither Spaceway nor Shin Satellite executives specified launch dates for their respective broadband satellites. Both IPStar and the Spaceway bird are in the final manufacturing stages. “The most important thing we have to do is be ready when we say we're ready,” Cook said. Shin Satellite Exec. Chmn. Dumrong Kasemset said he couldn’t detail what types of pre-sales the company had made, but did say that the company had teamed up with distributors in several countries. Cook said Spaceway had gone out of its way not to sign orders because some enterprise customers have contracts which allow for technology upgrades one the bird is launched.

While the satellite panel agreed the corporate market is obvious for satellite broadband, they said the residential market would also be viable once costs go down. “I think the key drivers will be the cost of the equipment and standardization. Open standards have helped tremendously in driving down costs of terminals and of modems,” said John Roldan, Eutelsat vp-sales.

Several attorneys familiar with real estate law said it isn’t unusual to structure such a deal so a trade group or other organization is protected from direct liability in such deals by engineering them through the use of limited liability corporations. In this case, the lender to the groups for the deal, Wachovia, expressed a preference that LLCs be used, a source said. D.C. real estate records indicate that CM Land secured $5 million in debt for the deal from Wachovia. A CTIA spokesman said the group pays rent for the space it uses in the building on the land that’s part of the deal.

The transaction between RFF and the CTIA and Foundation- affiliated LLCs includes a “repurchase option” in which RFF can buy the land back from CM Land. The option expires April 15, 2005. The special warranty deed that RFF and CM Land signed in Aug. 2003 covers the land and the buildings on it. A change to the master purchase agreement finalized in Nov. notes that CM Land is the landlord under the ground lease arrangement and an RFF-affiliated LLC called Resources & Conservation Center Limited Partnership is the tenant. The document indicates CTIA has a partnership right to buy 1/2 of RFF’s partnership interest in this limited partnership and 1/2 of its capital stock. If CTIA fails to exercise this partnership purchase option, RFF has the right to buy the land from CM Land for $17.38 million. -- Jeanene Timberlake

Satellite 2004 Notes…

While the FCC can allocate more spectrum for satellite digital audio radio services (SDARS), it’s unlikely to do so, said Lon Levin, XM Regulatory Senior Vp. During an SDARS panel at the conference, Levin said if more spectrum were made available, the FCC would have to consider additional applicants, although he said he wasn’t aware of other applicants. Levin and Stan Kozlowski, senior vp-Retail & Special Markets Distribution for Sirius, said the focus now was to build their business and add subscribers, more than focusing on adding capabilities like GPS to enhance services. But SG Cowan analyst Tom Watts said the companies would do well to look at anything that could add subscribers: “So far we've seen a lot of new services with no change on pricing. The question is what does it do for subscribers?” Meanwhile, Kozlowski said Sirius was considering adding more exclusive sports programming, including college sports, to its program lineup. The company announced a deal with the NFL in Dec. (CD Dec 17 p12).