Huge changes in communications bandwidth coming - at bargain prices

Voice, data, video - all on demand

So much is happening offshore that you need a computer to keep pace - especially in the field of communications. If you operate offshore anywhere on this planet, you now have the following communications choices: microwave radio, cellular, satellite, or fiber optic. What you choose depends on what you want to do-and how much you're willing to pay. - Following close in the footsteps of seismic vessels, drilling units such as the deepwater unit above want more bandwidth to carry voice, data, and video on demand (Source: Noble Drilling and Alstom Drives & Controls).

Arriving on the market, at speeds so fast a consumer grows dizzy just comparing, are countless new services (instant Internet access, e-mail, high-speed data, lightweight handsets). Now comes the arrival of crystal-clear digital phones in compact, colorful packages. Complex new pricing packages, unheard of only months ago, are set to invade the marketplace. Even more choices are on the way.

How do you keep up? Most of all, how does an operator, service contractor, or oil-field supplier select a provider to fit individual needs and stay within budget? To accomplish all that, one computer won't do. You would need multiple machines and a staff of analysts.

The next best thing might be simple: pick a carrier you trust and shop around. More suggestions: take advantage of what's out there. Be prepared for changes to come. One thing for sure, communication costs appear on the way down. Don't count on that, though, for reasons to be explained later. But there's a lot to pick from in the way of services, equipment, and providers.

Basic uses

The Gulf of Mexico, perhaps due to longevity and a deepwater play, is considered the most active offshore region on the globe. In terms of dollars spent and minutes used, the Gulf of Mexico is a communications treasure house. This region accounts for half of oil and gas upstream communications traffic on the globe. Competition is stiff. The North Sea is second, while Brazil's Campos Basin is probably third. Campeche Bay in Mexico, Venezuela, West Africa, and the Middle East fall somewhere in next positions. All the rest of the world comes last.

As a measure of speed, home computers have modems rated at 28.8 kilobits per second (k) or more. High-speed modems are rated at 56k but rarely achieve that speed. That's for phone dialup connections. For the home, providers now offer ASDL, ISDN, or cable at faster speeds but that's not easily available offshore. Not yet anyway.

Bandwidth uses

Most platforms and mobile drilling rigs in the Gulf of Mexico have 64k on board. Only last year they pushed hard to achieve that goal. Many plan to upgrade to 128k or 256k. Even with that capacity or size, ordinary uses rarely get above 34k or 35k. One phone circuit requires 8k and a fax line about the same; that's when in use. If idle, bandwidth capacity can be shared. Only when moving video, especially two-way teleconferencing, or large blocks of data does an offshore site need much more. - One principle method of putting more bandwidth in the hands of offshore contractors and producers is to launch more low-earth satellites (Source: Globalstar).

One service provider has a deepwater drilling unit with 20 phone circuits, two-way video, and frequent rapid-fire bursts of high-speed data. That much activity calls for 384k or 512k. Many offshore units in the US Gulf ask for a dial tone in Houston or Lafayette, Louisiana, and they can have that. For a price. A few expect that ring in Oslo or London or Moscow.

Also, on a drillship or seismic vessel, the contractor charges a client to use that unit's communications system. Mud companies and loggers share the same network. At some installations, even caterers ask for a phone circuit. With demand to move data gushing, an offshore facility, whether fixed or mobile, falls constantly under pressure to install more communication muscle.

The trend now is toward more bandwidth. Everyone wants "broadband." Definitions of what that constitutes differ. The accepted limit is T-1 (1.54 megabits per second). Anything less is narrow-band service.

A few offshore facilities already have T-1 speeds, mostly from microwave. That service, from whatever source, costs $12,000 a month or much more, plus equipment. Installation may come to $100,000 or more. For 64k service and up, satellite communications run $3,000-$15,000 per unit if including stabilized antennas. Bandwidths under 64k cost $2,500 to $7,000. Depending on type of service, time charges can apply. Microwave usually adds $2,000-$3,500 a month to operating costs for each location. Microwave can provide service above 64k but reach is limited to line-of-sight. Cellular, covering most of the Gulf of Mexico but not all offshore sites, is charged by the minute.

Service providers

"We'd like to have broadband communications at sea," says William VerMilyea, Geoscientist and Communications Coordinator at Texaco's E&P Technology center in Houston. "Part of that is to access the Internet and send e-mails. To be really useful, we need a communication system that allows a rig or ship to be in Australia one month and off China the next. We also want to move big data files and large software programs back and forth. From ship to shore, or rig to rig. We need all that in a small package and as light a weight as possible - preferably in a package that can be hand carried. That's a lot to ask, I know. But that's what we want - and hope to get soon."

For now, a popular means of communicating at sea is satellite. Stabilized platforms for antennas allowed seismic vessels and floating vessels to capture and maintain signals while moving about. Satellite breaks down into Inmarsat and VSAT (for very small aperture terminals). Inmarsat was designed for ships at sea, at first for rescue and safety purposes. Inmarsat now provides up to 64k service but more power can be obtained. VSAT uses spot beam signals from regional satellites to cover a small area. Inmarsat covers the globe with four satellites. To get into VSAT, Inmarsat purchased a company called Invsat in London to provide that service in the North Sea and selected areas. Either service can be obtained from a long list of re-sellers.

Gulf of Mexico markets

Actually, microwave still dominates the Gulf of Mexico, holding 80-90% of that market. The largest provider is now Stratos Global, a Canadian company with a strong presence off Newfoundland. The company entered the US market by acquiring IDB Global in 1997. Stratos later obtained Canada's Teleglobe satellite business. Last December, Stratos purchased Shell Offshore Services Company's microwave facilities. Then in March, Stratos bought DataComm, of New Orleans, for $65 million. With these purchases, Stratos grew to "gorilla" size. The company also retails a variety of services for mobile and fixed sites.

Stratos's market strategy is to offer "solutions" and operates a model platform at Hibernia off Canada's east coat. From that 512k station, Stratos provides shared services, connects the offshore platform to phones in St. John's, and monitors a fleet of boats and helicopters supplying the platform.

For satellite, the Gulf's largest providers are CapRock Communications, of Houston, and PetroCom, of New Orleans. They alternate, sometimes week to week, in number one position, each holding a market share of 30% with the rest split among smaller providers. Both offer VSAT up to 512k (and bigger for the right fees). PetroCom also dominates cellular in the Gulf. Coastel, of Lafayette, shares the cellular market.

Satellite has advantages and some disadvantages. With VSAT, a client has 24-hour use of all circuits. On Inmarsat, customers pay for what they use. The usual charge is on a per-minute basis, which varies from $3 to $5. Signals must go up to a satellite (bird) circling 22,000 miles in space. There's a microsecond delay up and down. Further, on KU-band service, there's sometimes an atmospheric or "rain" effect, causing poor transmission, which can be offset by antenna sizing.

To overcome this delay, new satellite providers rushed into to market. They are called LEOs (for low-earth orbits) and MEOs (for medium-earth orbits). They occupy a belt 800-1,000 miles out. Unfortunately, to achieve that range, they must launch more birds - and that costs a great deal of money.

Both Iridium and ICO Global sank under the capital load and declared bankruptcy. They now show signs of coming out with fresh cash infusions. Only American Mobile Satellite Co. and GlobalStar, a consortium headed by Loral Space and Communications, survive today. AMSC covers the Gulf of Mexico, the lower 48 states, and into South America. GlobalStar broadcasts a distinctive signal. Performing like "bent-pipes," or mirrors in the sky, CDMA (code division multiple access) signals enter "gateways" on earth. Company satellites are placed in eight orbital planes, in a tiled pattern, of six satellites.

GlobalStar, expected to be another gorilla in the field of mobile communications, provides service to 38 countries and opened services for China in April. The company plans to serve 60 countries by July. Numerous companies operate in the former Soviet Union, including CapRock which can provide a dialtone in Moscow from almost any rig as easily as from a phone in Houston's Galleria office district. Whoever gets a foothold in those nations first will certainly benefit.

Future growth

"Fiber optic has an almost unlimited capacity for bandwidth," says John Payne, PetroCom President. Last year, PetroCom connected seven platforms in the Gulf of Mexico with fiber carrying 2.5 gigabytes of communications power. Cable was laid but not covered properly.

Payne expects to have the network commissioned soon. When fully commercial, operators will contact platform hubs by cellular. Fiber cable inside abandoned pipelines or seabed ditches carry the signals to New Orleans. From there, they enter public switched networks or connect directly to a company network.

"We plan fiber spurs to reach some of the deepwater locations by next season," says PetroCom's Payne. "Most new deepwater platforms built for the Gulf of Mexico have fiber circuits designed into hull risers. They want broadband-T-1 service or better out in deepwater. That's a big potential market for communication services."

More choices are on the horizon, says Texaco's VerMilyea. "The big guys - AT&T, Southwestern Bell, and Sprint - now offer reliable broadband services at certain locations. This new ASDL system has potential. What we'd like to see is that service extended to production platforms and mobile drilling units."

Meanwhile, pricing evolves. Onshore, AT&T offers local and long distance at bargain rates for a monthly fee. To compete, distributors provide wireless customers with access and packages of minutes for a set rate. Before long, these ideas will stretch offshore. Access to service, guaranteed bandwidths, bundled minutes, charges by fractions of a minute: all these could show up on company invoices before long.

Bandwidth on demand

"More trends are coming," says Kel Brown, an Australian living in Houston and now at work for AOS Inc., a firm better known for encryption codes and security measures. New to the satellite side of the communications business, AOS offers bandwidth on demand. The company guarantees 64k service and access to 384 for a subscription fee of $3,500 a month and $85 an hour for the higher bandwidth. So far, that's only for platforms in the Gulf of Mexico, the Lower 48, or fixed sites in and off South America. AOS doesn't offer a stabilized platform, but plans to do so.

"All this came up in the past five months," Brown says. "That's pretty cheap when you think about the alternatives out there now." Others agree. British Telecom offered to provide last year guaranteed service up to 512k, but hasn't promoted that lately.

"Pay on demand would be ideal for oil and gas," says Texaco's VerMilyea. "For example, we don't need 512k all the time. We might need that bandwidth only for short bursts of activity. But to have that available has become a goal for everyone."

Another trend is packaging or system integration. "Companies want performance and solutions," says Wayne Rentfro, Comsat's energy- market representative. "They aren't concerned about the technical aspects of the communications network. They want a service that meets their needs in an efficient, cost-effective, and reliable way. The energy market calls for unique solutions to integrate local services with global

systems like Inmarsat. What works in West Africa may not perform elsewhere. Individual systems need to be designed. Not just for a company, but an area - even a particular situation. Providers need to be creative and agile."

Meanwhile, the "big guys" threaten. They are AT&T, Southwestern Bell, and Sprint on the US of the Atlantic, and British Telecommunications and Telenor on the European side. AT&T already offers bandwidth services up to 512s to residences and offices. Moreover, these can be purchased on a one-price plan, currently $25 a month and up. In the UK - though not yet available offshore in the North Sea - BT does the same. BT's rate is $65 a month for residential use and $150 for businesses. Opening service is 512k, 24 hours a day, starting this summer and goes up to 1-2 megabits per second in September. While neither AT&T nor BT aim directly at the offshore market, it's only a matter of time.

Unlimited potentials

Errol Olivier, Vice President of CapRock, sees a crushing demand ahead. "Capabilities of telemedicine are overwhelming," he says. "We set up a link at the University of Texas Medical Branch in Galveston connecting the emergency room to drilling units. With a lab technician on a mobile rig, we can do live video. We have the technology to listen to heartbeats, peer down throats, or look inside an ear."

Much of that can be done at 128k, he says. With 512k or more, the possibilities are unlimited. Right now, problems loom because of shortages in satellite space segments. Demand for wireless Internet and broadcast video soaks up new bandwidth. Meanwhile, software applications grow bigger. That eats up bandwidth. Clients ask for more power. "Some applications of Windows or NT won't perform better by just increasing bandwidth," says Olivier. "More bandwidth doesn't always mean faster access. We can help design systems to improve capacity."

With customers urging service providers to upgrade systems, he predicts demand will go to 768k within two years. Sizing the radio and antenna helps. Most demand comes from deepwater drilling units. The amount of demand has to do with rig size, number of people, and types of service contractors on board. Seismic ships now process data on board, allowing home offices to ask for another run across a section when engineers see a promising target. Taken together, these additional demands mean industry may one day have to share circuits.

"Offshore, operators want voice and data and video available upon demand," explains Olivier. "Using frame-relay technology, we can multiplex voice circuits with 128 or 383 or 512k wide area networks."

That leads to talks about DAMA. Olivier defines that as demand assignment multiple access (DAMA) or shared networks. Some providers already utilize the practice. Olivier says CapRock still provides dedicated single channel per carrier service.

But if demand continues skyward, he predicts industry will change to share.

Market direction

Where will this market go? Predictions vary but recent studies show demand exploding. Teledesic, a new provider calling itself "Internet-in-the-sky," estimates global telecommunications in 1998 was worth $730 billion. The company forecasts that will grow to $2 trillion by 2010. A significant part will come from data services for multinational businesses, broadband Internet uses, and expansion of basic voice and data to rural and undeveloped areas. For satellite alone, broadband use should be worth $20-30 billion by 2005, reports Pioneer Consulting (1999) and Booz-Allen & Hamilton (1998).

Teledesic, of Bellevue, Washington, expects to participate starting in 2004. The network will provide up to 64k on the downlink and 2,000k on the uplink. At least 288 LEO satellites will be launched, and their reach will cover 92% of the globe. Investors include Craig McCaw, Bill Gates, Motorola, Saudi Prince Alwaleed Bin Talal, Abu Dhabi Investment Co., and Boeing.

Down the road, more competition is ramping up. Astrolink, run by Lockheed, TRW and Telecom Italia, expects to launch in 2002 and provide worldwide service for broadband data in 2003. Spaceway, calling for an investment of $1.4 billion, is in development by Hughes Electronics, PanAmSat Corp., and DirecTV. CyberStar, organized by Loral Space & Communications Ltd. with France's Alcatel, already delivers broadband service to providers in 120 countries. During a Miami show in April, CyberStar set up a live-broadcast steaming video test at close to T-1 speed.

And don't overlook Comsat, active in this field since the start of Inmarsat. That company's Linkway 2000 project was selected last fall to implement a broadband network in Russia for Rosneft, a Soviet oil and gas giant. Rosneft intends to connect 10 companies from Moscow to Sakhalin Island by satellite. That calls for using the latest methods, asynchronous transfer mode (ATM), frame relay, and integrated services digital network (ISDN). When up and running, further commercial uses may come out.

Besides those, there's a new method coming up. A number of European and American companies conduct tests to transmit data including Internet traffic and voice over electric power lines. Driving force behind this is demand for bandwidth. Competing systems may emerge. Nortel and United Utilities in Europe joined to develop DPLS (digital power line system). When available, this may provide speeds approaching T-1, 10 times faster than ISDN.

While power lines don't extend offshore, they could easily do so. In this field of communications, anything can happen.

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