The ADEC Digital Satellite Network: A Proposal
Revised: October 06, 1998
This purchase is essential to realizing the ADEC vision and program goals, including the capacity to provide high quality and economical distance education programs and services via the latest and most appropriate technologies. The ADEC Board has declared this as a major ramp-up of the organization. ADEC is rapidly becoming an international distance education organization and its core mission programs are required in rural and remote areas, as well as urban and suburban learning centers. Core mission programs include, but are not limited to:
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A recent model published by the Harvard Business School titled "Winners and Losers: Industry Structure In the Converging World of Telecommunications" strongly suggests that the keys to success in the new 21st century telecommunications environment will be:
In addition, ADEC must control its transmission costs and reach into parts of rural America that will never be economically reached by phone lines, cable TV or methods other than wireless. Just as MTV is more valuable than any individual program provider to MTV - the sum of the ADEC parts/aggregated content is far more valuable than fragmented individual member offerings.
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Why does ADEC need its own transponder? So it can:
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Additional rationale for an ADEC-owned transponder comes from the need to be in a better position to use leverage and bargaining power in pursuit of consortium wide interoperability. Currently vendors use a divide and conquer strategy, selling multiple formats and standards to public institutions, none of which are compatible with each other. The current situation is one of state designed and owned fiber, microwave and other telecommunications systems, unable to communicate from state to state, resulting in reduced program delivery to customers and a tremendous waste of resources. Consortia members are unable to easily exchange content/programs and they have no bargaining power in the marketplace. If wasted transmission expenditures can be reduced, dollars can be shifted to support needed additional program production.
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The Harvard model also strongly endorses the proposition that the "first movers" are going to win audience and position in the emerging digital environment. ADEC has the opportunity to be a major "first mover" on the digital satellite scene with a full range of program and services from public higher education. On the financial side, pricing is currently attractive for the purchase of an entire transponder. However, the window of opportunity is only expected to stay open for another 8 to 12 months (Mitch Robinson, Intelligent Devices Incorporated).
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If ADEC waits...and doesn't make a decision now...we’ve really made a decision...albeit a wrong one!
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Considerable marketing hype, smoke and mirrors surround distance education and learning via technology. The U.S. public now erroneously believes that a college degree is 3 to 4 times more expensive than it really is. Public higher education has taken a beating in the last two years. It’s time for the ADEC institutions to take a leadership position by working "together" through the consortium. This action will demonstrate that the 21st Century Land Grant institutions are just as ready to take the university to the people using new technology as were our 19th century counterparts using face-to-face methods. But the Land Grant institutions will not be able to lead without an adequate telecommunications infrastructure, control of our own content-packaged, marketed and delivered at a cost we control.
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This diagram is a simple representation of the elements of the proposed ADEC Network. A more detailed diagram & technical explanation is attached. Very simply, we’re proposing to deliver both video and data to the campus, to Learning Centers, to the workplace and to the home.
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So how will the ADEC transponder be used?
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Reduced cost for satellite time: Current digital time on spot market costs $200-$400; Current analog time is $600-800. We expect to offer pricing BELOW $135/hr. for members. - One satellite for all of the programming offered by the consortium...eliminating the need of your remote sites to be constantly retuning their receive dishes. - One channel providing programming directly into homes via a connection with a commercial DBS provider, such as Echostar, Primestar, etc. - Wireless Internet access at speeds ranging from 110 - 250 Kps
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This is a low end example, assuming that a site has no equipment now. It also assumes that the satellite receive dish remains pointed at the ADEC transponder (so it’s not a steerable dish) and that you’d be using a telephone or other terrestrial return method.
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If you have an existing analog satellite receive set-up, upgrading that site to add digital capability is less expensive than our first case. You won’t need Items 1 and 5...so you’ll still have the cost of Items 2 & 3 and a reduced cost for the items in #4. This configuration allows the reception of both analog and digital satellite signals other than just the ADEC digital transponder. However, when the steerable dish is pointed to an analog location or a digital transponder other than the ADEC satellite, the simultaneous Internet from satellite is lost. But you’d still have your low speed Internet connection from your local Internet Service Provider.
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If you want to add a satellite Internet return capability, from your site BACK TO the Internet, an option can be added using a technology called VSAT or Very Small Aperture Terminal. We hope to negotiate for a volume buy of this equipment, which should drive the price toward the $1,000 per site cost. This option may be very desirable where land line charges are expensive. This means you would not need an Internet Service Provider.
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Now let’s look at the proposed business plan for making this all happen... Starting with a definition of the various categories of investors in the network... Then moving to an analysis of the costs, revenues and a comparison of the two...
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We’re proposing that an "owner/member" would be an institution (or some combination of institutions) that would invest $50,000/yr. for the 5-yr. life of this contract. Our analysis of the consortium membership leads us to believe that 30 is a reasonable number of owner/members for us to expect to buy in at this level.
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440 hours of digital satellite time at no extra cost 166 individual connection locations for high-speed, wireless Internet at no extra charge Ability to buy extra time at "favored" rate Ability to buy extra 7 x 24 channels at $250,000/channel(at cost) Owner rights detailed in letter of commitment subject to approval by Executive Committee of the Board.
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Based on our research, we are using a conservative estimate that we will see 25 institutions in this category within five years.
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Digital satellite time at preferred rate Access to all ADEC information and Intranet Access to ADEC Grants Representation within ADEC governance structure
Opportunity to become owner at later date ... subject to availability and Board approval
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The total projected costs are 2.9 million dollars. This breaks down into three major components:
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As I mentioned earlier, we’re proposing to buy one entire 36 megahertz digital transponder, using the Ku-band. We are negotiating for a five year contract, at a per year cost of 2 million dollars.
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All ADEC programming would be sent via satellite or videotape to the proposed teleport at Boulder. There, the ADEC consortia member & customer programming would be aggregated and segmented, according to ADEC instructions. Then the teleport would uplink the various channels of programming and data to the ADEC owned transponder. The costs attached to establishing and maintaining this capability at CSU are as follows:
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The operational costs for the Teleport at Colorado State University are as follows:
Personnel = $259,500/yr. Total expenses = $299,500/yr (a more detailed breakdown of the costs is included in the appendix) *by policy, ADEC currently pays only direct costs
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Costs for physical construction of securing dish, associated wiring and connectivity to control equipment are a one time expenditure that would cost approximately $81,500. We will pay for this by a combination of CSU, ADEC, federal grant and foundation monies.
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With the new transponder will also come some additional costs to the consortium for a person to deal with the acquisition, organization and scheduling of programming for the ADEC combined channel and the one providing programming to the DBS provider...as well as someone to sell the additional transponder time and channels and manage the allocation of this capacity.
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Current operations costs are for the ADEC President, office staff, supplies, operations, program grants and infrastructure development. These total approximately $375,000.
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Our best estimate for costs are as follows:
Digital transponder = $2 million Total costs = $2,924,500
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30 owner/members@50,000 = $1.5 mil. Total revenue = $2.956 million
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Sale of 200 hrs. of occasional use satellite time at $135hr. = $270,000 Sale of 300 hrs. of occasional use satellite time to non-members @ $200/hr.= $600,000 Sale of 600 Internet connections at $200/yr to non-owners = $120,000 Total = $990,000
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A comparison of our yearly costs and revenues shows us at a "break even" scenario with the figures we’ve used...but this is assuming a less than full use of our transponder space. There are other potential revenue sources that need to be considered...but we must do this in the context of some criteria for appropriate operation of our transponder in light of our status as a non-profit organization.
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We have talked with the Army Reserve on several occasions...and they are interested in making use of our transponder on the weekends for training via satellite. This fits in well with our member needs, since most of that need occurs Monday through Friday. The Army Reserve is VERY serious about partnering with us...and may even come to the table as an "owner," with a $50,000 "deposit" for us to hold a slot for them for future weekend use. In addition, foundations such as Kellogg and Rockefeller have indicated an interest in partnering with us in some fashion to make use of our transponder, teleport and nationwide network of downlinks for distribution of some of their programming.
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Our overall guideline is that ADEC member needs come first Once these are met, additional transponder or teleport capacity will be brokered to organizations that provide a good operational fit or affinity with the ADEC core mission Uncommitted revenues will be used for program development and production grants and other expenses as approved by the Board
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And what happens if we don’t make a decision...well, I referred to this a bit earlier, in that by not making a decision, we’ve really made one. And we would limit our ability to take part in the allocation of parts of the digital spectrum for educational use; the potential allocation of 4 to 7 percent of the DBS spectrum for education; a possible public interest/education/commercial broadcast digital partnership; Internet 2 initiatives; we’d lose perhaps the only real method to meet the connectivity needs of rural America, and we’d put a serious roadblock in front of our plans for increased distribution of ADEC programming.
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