Northern Sky Research

O3b: A Work in Progress

Jul 11th, 2011

O3b signed a "multi-year, multi-million dollar reseller agreement" with Sky Fiber Corporation in June 2011 following on a similar announcement with Mavoni Technologies, South Africa in May 2011. Yet, beyond these two recent contracts and one additional framework agreement with Etisalat, O3b has been fairly quiet in terms of client deals since it completed its funding in November 2010. NSR’s take on this period of contracting calm is that O3b has largely depleted the early adopter market, and most of the rest of the industry is now waiting for O3b to make concrete progress in the construction and launch of its network as well as - and especially key in NSR’s view - provide detailed information on the cost and performance of its upcoming Tier 2 ground equipment.

The steady growth in fiber, notably in Africa, and the delay in getting its network in orbit since O3b was first publicly announced in September 2008 have led some in the industry to question if O3b might have missed its window of opportunity. NSR, which provided the industry’s first forecast of O3b demand take-up for trunking and backhaul services in its Broadband Satellite Markets 10th Edition study, believes that the window is still open.

For the trunking market, NSR expects O3b to be used primarily as a bridge between legacy trunking on FSS capacity and emerging fiber and microwave networks, thus enjoying a short- to medium-term window of opportunity. Use of Tier 1 equipment for large trunking links are currently assumed by NSR to be critical when the O3b network enters service in 2013 as the existing resellers seek to quickly fill up the capacity they have contracted for. Then, over time, the trunking market will shift to smaller trunks served by Tier 2 equipment that will fill in the gaps between fiber and reach areas unserved by terrestrial networks but where demand is measured in a few Mbps, not the tens to hundreds of Mbps that are best served by the Tier 1 equipment (but are most susceptible to eventual replacement by fiber or microwave).

For the backhaul segment, NSR sees this segment as a critical long-term market for O3b. This market will be best served by O3b’s Tier 2 equipment, and NSR expects a more gradual take-up of backhaul services as end user clients, notably cellular companies, wait to see real world proof of the cost and performance of O3b-provisioned services. Not forecast by NSR in its Broadband Satellite Markets 10th Edition study (yet of equal interest for O3b) are other market segments such as fiber backup, on-demand capacity for disaster response, and mobility applications. Once again, their success will largely depend on the specifics of the performance and cost of the end user equipment that is eventually developed for them.

Bottom Line
While some details on Tier 1 equipment do exist, there is a lack of real world numbers, mainly for equipment price and performance. It is NSR’s view that the specifics of the Tier 2 equipment (as well as other equipment classes) for different segments will be the ultimate determinant as to how successfully O3b will capitalize on its window of opportunity. It is also NSR’s view that this information will be critical in moving the “wait and see” part of O3b’s potential market from the sidelines to becoming real, and paying, clients as well as giving the early adopter resellers the ammunition they need to develop their businesses.

Information for this article was extracted from NSR's report Broadband Satellite Markets, 10th Edition