Looking to the Sky for Internet Access

by Thomas Caldwell

PanAmSat Corporation, with a global network of state-of-the-art satellites and technical ground facilities, is the world's leading commercial provider of satellite-based communications services. The company provides programming distribution, broadcast, and telecommunications services for hundreds of customers worldwide. For more information about PanAmSat, access http://www.panamsat.com

John Chesen is manager, broadcast sales, Northeast Asia, for PanAmSat.

First, could you give us a bit of history about PanAmSat?

John Chesen: PanAmSat was founded in 1984. After four years of lobbying for the right to provide services from a separate systems satellite - other than the Intelsat system - PanAmSat launched its first satellite in 1988. We now have 17 satellites in our fleet, most of them over the continental United States. There is one satellite (PanAmSat 2, or PAS2) serving the Pacific Ocean region, located at 169 degrees west latitude.

PAS2 was launched in 1994. About a year later, PanAmSat set up an office here in Tokyo to service Japanese customers. Our customers are primarily the large TV networks: NHK, Fuji TV, and TBS, to name a few. Many other broadcasters use PanAmSat on an ad-hoc basis.

PanAmSat has a Type 1 carrier license in Japan, which puts your company in the same class as KDD. Given how much foreign governments complain about restricted market access in Japan, how was PanAmSat able to win government approval to operate?

Chesen: PanAmSat drew the interest of the Ministry of Posts and Telecommunications (MPT), as well as of the telecomm community in Japan, when NHK became a large-scale customer. NHK is an establishment player, as well as a company that demands quality and is willing to pay for it. It is also a quintessential Japanese entity.

When NHK went outside of the Intelsat family and insisted on using PanAmSat, Japan took notice. Shortly thereafter, conversations began between PanAmSat and the MPT about coming to Japan and becoming a Type 1 carrier.

Why did NHK settle on your company?

Chesen: PanAmSat started an opportunity in the 1980s that Intelsat had not started: international television distribution. Intelsat is still primarily a telephone services company, and that was the mindset they operated in. It was a mindset our founder, Rene Anselmo, found so frustrating to try and change. So he left Intelsat, took his own money, and started his own company and launched his own satellite. Today, the company he started has grown to 17 satellites.

In short, PanAmSat was founded by a broadcaster for broadcasters.

The current popular broadcast medium is, of course, the Internet. My understanding is that there will be no new cables laid across the Pacific and coming online until the turn of the century. Does this present you with a business opportunity?

Chesen: Yes. There are some technical innovations that will allow more use of bandwidth, but there is, at this time, a finite amount of capacity. And, in many ways [there is] a bandwidth shortage, especially for companies that are not lucky enough to be part of the fiber-owning consortium. The owners, who are often service providers, have dropped their capacity to cost and can release capacity into the market.

But for those who are not lucky enough to own the fiber, the situation is extremely constrained. Because of the shortage, many are both looking for ways to buy [cable] bandwidth and looking to satellites. Bandwidth needs are being driven by the exploding demand for Internet access.

One service that PanAmSat can provide for business users is connectivity to the Internet at high speed. With our Pacific Ocean satellite, PanAmSat 2, we can offer direct connectivity between California and Japan.

When most people think of the Internet, they don't think about satellites; they think of hard lines... being "wired," as it were. Satellites traditionally have had problems with transmission delays. Is this still an issue?

Chesen: There may be slight propagation delay problems. But current satellite architecture and modulation schemes, as well as other sorts of engineering workarounds, can minimize that. Also, when we examine most Internet traffic, we find that 90% or more is World Wide Web browsing, file transfer (FTP), and news services. For these, which are not highly delay-sensitive, satellite transmission is an ideal environment for supplementing a new or existing network.

How does satellite Internet compare to traditional cable in terms of pricing?

Chesen: PanAmSat is [priced] somewhat lower than fiber. However there is a great deal of pricing flexibility. Where the economics of using a satellite for the Internet come in is from the usage patterns between the US and Japan. The traffic is highly asymmetrical: demand for US Internet content from Japan and other countries far outweighs US demand for Internet content from the rest of the world.

Could you elaborate?

Chesen: If there is abundant and cheap cable, then cable is actually a preferred transmission method. But where cable is neither abundant nor cheap, then there is an opportunity for satellite. There is also an opportunity for the broadcast type of Internet services. Satellites are ideally suited for broadcast applications.

For example, when you contact a French homepage, or even an Indonesian homepage, from Japan, more likely than not you are going to be routed over some aspect of the United States Internet infrastructure. That's just the way the Internet has grown up. The switchers, the routers, and much of the content is there. Even when you are going between third countries, much of the infrastructure of the Internet is in the United States.

Now, fiber can only be bought duplex: say 256-kilobits x 2. However, for every 5 bits sent to the United States or other country out of Japan, there are 25 bits coming back to Japan. That's an asymmetry of 5 to 1. This is typical if you study the usage patterns of the Internet. An Internet service provider (ISP) that purchased 45MB of duplex has 45MB going in each direction. But given the asymmetry, the 45MB pipe from the US is going to fill up a lot faster than the one flowing out [from Japan].

When one side fills up, the ISP has no choice but to buy more bandwidth so that the business can continue to grow. What we in the satellite world are saying is: Buy one way from us. All you would need then is a simplex circuit to the US, and you could very easily, and reliably, bring data into Japan over the satellite.

This seems like an attractive solution given the current bandwidth situation across the Pacific. Have you gotten any resistance to this solution from anybody in the telecommunications business?

Chesen: There is some resistance, of course. In many telecommunications companies, people are still thinking "fiber only." Getting them to think of satellite as a reliable and acceptable medium for Internet transmissions is a bit of a challenge. Once we do that, however, we find we get calls every month from customers asking us to double their capacity. The ramp-up in demand for capacity once someone becomes a customer and sees the Internet being delivered in this way is startling. We're growing existing customers at an extremely high rate. The tough part is convincing someone to do it for the first time.

What about speed?

Chesen: Up to 400KB per second - that's the speed data travels over the satellite. However, the Internet is a network of networks, and what happens on the Internet is largely out of anyone's control. So users will sometimes experience delays just like with fiber.

How much of PanAmSat's business is Internet-related?

Chesen: It is now probably approaching 10% of our total revenue - and that's just in the past year alone. From less than 1% to 10% in one year, for a company that does nearly a billion dollars in sales. This tells you the type of growth that we might be able to anticipate.

We expect whereas television is about 80% of our revenue now, that will probably drop to about 60%. You will see data, including the Internet, going to about 40%.

What about in Japan?

Chesen: I suspect that pattern will hold consistent in Japan as well.

John Chesen is based in PanAmSat's Tokyo office (phone 03-5521-1666, fax 03-5521-1665). He can be reached by e-mail at jchesen@panamsat.com

Thomas Caldwell is a freelance journalist based in Tokyo. He writes the monthly The Query Column for Computing Japan. You can contact him at caldwell@gol.com.

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