Sunday, September 14, 2008

The “World’s Other Three Billion” People May Soon Have Broadband Internet


Financial Times 1
Financial Times 2
New York Times

An ambitious project headed by Greg Wyler, a U.S.-based technology entrepreneur, seeks to offer high-speed internet access to the world’s poorest regions, the majority of which are in Africa. The project is called O3b, which is a reference to the three billion people who still have no internet access, and is backed by Google, Liberty Global cable group, and HSBC’s private equity group. The investors have thus far contributed $65 million of the estimated $750 million needed to complete the project.

The goal of O3b is to launch 16 low-earth orbit satellites that will bring high-speed internet access to places in Africa and other emerging markets. This will be a new type of telecommunication method. The United States and other developed nations use underground fiber-optic cables to provide high-speed internet access, but this method is not commercially viable in Africa. The cost of high-speed access in Africa is almost 20 times more expensive than in the U.S.

O3b’s satellite system will sharply reduce the cost of high speed internet access. Instead of having to lay hundreds of thousands of miles of underground fiber-optic cables in Africa, computer and mobile phone users will send their data to local cell phone towers which will in turn send the data to O3b’s satellites. The satellites will receive the data and then send it to other cell phone towers or to established fiber-optic networks in the developed world. Because it is much cheaper to build cellular towers than it is to lay underground cables, the cost of internet access will be much lower. Additionally, cell phone towers are already being constructed in large numbers in many remote places throughout the world and mobile phone use in Africa is growing at a rate of 60 percent annually.

The O3b satellite system will only serve as an intermediary, however, and will not be the company to actually provide the internet access. Companies in Africa will be the ones to develop the local cellular tower networks and provide the access to the people. This offers opportunities for entrepreneurs to get involved early in an industry that has vast potential. The O3b satellite system is set to be up and running by 2010.

1) Will the advent of inexpensive internet access help provide political stability and increased government transparency to African countries?
2) In many emerging markets, consumers are skipping expensive personal computers and are instead purchasing mobile technology to access the internet. Will the O3b make this trend more likely in Africa? Is this a good trend?
3) Because O3b is not directly providing the high-speed access, the companies who invest in cellular towers will have a more direct impact on the price of the access. Should O3b be worried about the local providers charging high access fees or will competition between local providers help keep prices down?

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