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Thursday, June 2, 2016

Satellites Versus Fiber

A comparison between satellite communication and terrestrial communication is instructive. As recently as 25 years ago, a case could be made that the future of communication lay with communication satellites. After all, the telephone system had changed little in the previous 100 years and showed no signs of changing in the next 100 years. This glacial movement was caused in no small part by the regulatory environment in which the telephone companies were expected to provide good voice service at reasonable prices (which they did), and in return got a guaranteed profit on their investment. For people with data to transmit, 1200-bps modems were available. That was pretty much all there was.

The introduction of competition in 1984 in the United States and somewhat later in Europe changed all that radically. Telephone companies began replacing their long-haul networks with fiber and introduced high-bandwidth services like ADSL (Asymmetric Digital Subscriber Line). They also stopped their long-time practice of charging artificially high prices to long-distance users to subsidize local service. All of a sudden, terrestrial fiber connections looked like the winner.

Nevertheless, communication satellites have some major niche markets that fiber does not (and, sometimes, cannot) address. First, when rapid deployment is critical, satellites win easily. A quick response is useful for military communication systems in times of war and disaster response in times of peace. Following the massive December 2004 Sumatra earthquake and subsequent tsunami, for example, communications satellites were able to restore communications to first responders within 24 hours. This rapid response was possible because there is a developed satellite service provider market in which large players, such as Intelsat with over 50 satellites, can rent out capacity pretty much anywhere it is needed. For customers served by existing satellite networks, a VSAT can be set up easily and quickly to provide a megabit/sec link to elsewhere in the world.

A second niche is for communication in places where the terrestrial infrastructure is poorly developed. Many people nowadays want to communicate everywhere they go. Mobile phone networks cover those locations with good population density, but do not do an adequate job in other places (e.g., at sea or in the desert). Conversely, Iridium provides voice service everywhere on Earth, even at the South Pole. Terrestrial infrastructure can also be expensive to install, depending on the terrain and necessary rights of way. Indonesia, for example, has its own satellite for domestic telephone traffic. Launching one satellite was cheaper than stringing thousands of undersea cables among the 13,677 islands in the archipelago.

A third niche is when broadcasting is essential. A message sent by satellite can be received by thousands of ground stations at once. Satellites are used to distribute much network TV programming to local stations for this reason. There is now a large market for satellite broadcasts of digital TV and radio directly to end users with satellite receivers in their homes and cars. All sorts of other content can be broadcast too. For example, an organization transmitting a stream of stock, bond, or commodity prices to thousands of dealers might find a satellite system to be much cheaper than simulating broadcasting on the ground.

In short, it looks like the mainstream communication of the future will be terrestrial fiber optics combined with cellular radio, but for some specialized uses,satellites are better. However, there is one caveat that applies to all of this: economics. Although fiber offers more bandwidth, it is conceivable that terrestrial and satellite communication could compete aggressively on price. If advances in technology radically cut the cost of deploying a satellite (e.g., if some future space vehicle can toss out dozens of satellites on one launch) or low-orbit satellites catch on in a big way, it is not certain that fiber will win all markets.

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