Personal computers and local area networks are on the road to becoming basic display and input/output devices and services, with principal data storage and computer processing power housed in a remote location. Apple Computer’s June announcement that it is fully embracing cloud computing is the latest development in the paradigm shift to Web-based computing, which is hosted, operated and maintained by third party data centers that have server farms, technical support and monitoring, but do not have their clients’ industry expertise, regulatory knowledge or non-computer technical knowledge.

The shift to remotely-hosted data centers, with all the implications for security, back-up, storage and transmission of proprietary data, has major implications for enterprise generally and especially for regulated industries that require enterprise to establish and maintain privacy, security, anti-corruption and other controls over their and their customers’ data.

Cloud computing’s promise is the effective outsourcing of hosting and maintaining software applications, data and even operating systems, while harnessing the power of greater computing power than a given enterprise would be justified in maintaining itself. The downside is separation of enterprises and their data, with risks, known and unknown, in how that data is maintained and made available. The challenges involve ensuring rapid access to remotely stored data, assuring its security and allocating risks, rights and obligations among the enterprise, the data center operator and third-parties that deal with the enterprises.

The paradigm shift also has serious implications for the satellite sector on both the customer and procurement sides at every point at which satellite service interfaces with terrestrial networks. The advent of cloud computing also has competitive implications for satellite operators. Also, satellite operators can and should benefit from cloud computing architecture in their own operations.

In commercial terms, reception of satellite-uplinked data and transmission of satellite-downlinked data to remote hosts other than the customer demands allocation of risk of loss and transfer of title as between operator and customer. Responsibility for security and encryption of transmissions must also be determined. If the customer is in the primary relationship with the remote host, those risks are most naturally borne by customer, but not inevitably so. It is even possible to imagine data centers becoming primary satellite operators’ customers, if the model evolves to one in which data centers become, for example, video archives that perform storage, indexing and archiving services for multiple media customers.

Consumer privacy and other data protection rules have traditionally been the province of terrestrial customers in regulated industries like telecommunications and healthcare. If a satellite operator is in direct contact with a remote data center providing cloud services to the customer that may be no more expert than the satellite operator in the regulatory scheme in question, however, allocation of responsibility for regulatory compliance between operator, customer and data center operator is critical. Those responsibilities may be contractually allocated, but in some regulatory schemes, primary responsibility for the regulated industry enterprise may be impossible to avoid.

The advent of high-capacity storage remotely hosted data centers with high bandwidth pipes for uplinking and downlinking poses a competitive challenge to satellite providers. To a customer, interfacing with the cloud may seem remarkably like interfacing with a satellite network, but satellite operators will be faced with a development that makes terrestrial networks generally faster and more powerful. Less developed regions, with little or no terrestrial wireline broadband infrastructure, also are obvious beneficiaries of cloud computing. Satellite-based cloud services also are a clear fit where even wireless terrestrial broadband infrastructure is lacking.

Satellite operators can benefit from using cloud-based services themselves as an improved focus on their core expertise. The bent-pipe architecture of most fixed satellite service satellites places a premium on high processing power in the ground segment, and cloud computing is all about a more powerful ground segment. Effective use of cloud-based ground segments — as oxymoronic as that sounds — will allow operators to more real time and archived data from terrestrial head-end or gateway to customer more quickly and transparently, minimizing the effects of latency through better caching and faster throughputs.

Owen D. Kurtin is a practicing attorney in New York City and a founder and principal of private investment firm The Vinland Group LLC. He may be reached at [email protected].