By Jonathan Amos
BBC News science reporter
A British satellite will launch in 2008 to help bridge Europe's digital divide.
Avanti's footprint will cover most of Europe
The Hylas spacecraft, owned by Avanti Screenmedia PLC, will deliver broadband internet services to rural Europe.
The £75m (110m euros) satellite, to be built by EADS-Astrium, will receive a third of its funding through the European Space Agency (Esa).
Private financing will pay for the rest of the project, which Avanti says will also be capable of delivering hundreds of high-definition TV channels.
"There is a major problem in the lack of supply of high-quality broadband services in many parts of Europe," said Avanti's chief executive, David Williams.
"I am delighted that a British initiative is the first large-scale project to address this requirement which the European Commission has estimated at 10 million customers."
Hylas, which should launch in the November of 2008, will take up an orbital position of 33.5 degrees West, giving it coverage of 22 countries in western and central Europe.
The 2,300kg platform will employ payload components developed under Esa's Artes programme (part financed by the UK government), which looks to push forward innovative telecoms technologies.
Avanti is probably best known for its advertising screen displays in supermarkets and other retail outlets, but it is also working on broadband packages for areas not served by terrestrial networks.
Its model is for internet services to be delivered to a central terminal in a village and then fed out to a cluster of users in a local area via a wi-fi network.
"We have a problem in Europe in that broadband is still not a universal service," said Giuseppe Viriglio, director of EU and Industry Programmes at Esa. "To do this we need to provide an infrastructure - even to the remotest areas - where fibres do not go; and satellite can do that. Satellite does not substitute ground infrastructure but it does have a role."
Avanti raised £25m on the stockmarket last year to support its ambitions and is currently financing the rest of the Hylas project with debt.
British Science and Innovation Minister Lord Sainsbury saluted the UK space sector for coming forward with a solution.
"Too many people think of space purely in terms of manned spaceflight and funding by government. I don't think people realise the extent to which space is mainly driven today by a fast-growing commercial sector. The UK is a world leader in this," he told a seminar on space finance where the Hylas announcement was made.
However, space analysts warned that Avanti would have to work hard to make its business model pay. Stephane Chenard, of Euroconsult, said previous experience had already shown how difficult it was to make money from satellite-delivered internet services.
"You need to aggregate enough customers," he said. "Everyone who has tried doing this quickly found that, first, the satellite is expensive to build and launch; and, second, you need to sell a lot of terminals to bring the costs down. Are there enough people in rural England and Europe to do that? I don't know."
But Avanti's David Williams countered by saying that the innovative technologies on Hylas would meet this challenge, helping to deliver an attractive bandwidth and price package.
"We've already fixed the issue of the customer premises equipment - the dish and modem. I can deliver service to a community of users, say in a small village, at an installation price of about £100-150. That's the sort of cost DSL companies face and they chose to subsidise it down and to recover it through subscriptions. This doesn't worry me."
Avanti says it is already in discussions with UK broadcasters, such as the BBC and ITV, to use Hylas to deliver HD-TV.
The new platform will be the first UK-owned and operated broadcast satellite for 15 years - the first since the Marcopolo satellites were put up by the now defunct British Satellite Broadcasting company (merged with Sky Television) in 1989 and 1990.