With satellite operators around the world looking to gain an edge in terms of offering new services, access to real estate is vital. However, with most of the so-called hot orbital slots taken, what opportunities remain for satellite operators to develop new positions or make better use of the existing slots?
As satellite operators seek to make the most of their orbital slots, developments in satellite technology and a more progressive approach by the International Telecommunications Union (ITU) offer the most promising methods to meet this goal. This is a multi-faceted debate with no easy answer as to what can be done to create additional room for more spacecraft. Most industry experts agree, however, that more can be done to free up slots and developing existing locations more effectively.
The question as to whether there are still hot slots out there is a hard one to define. Issues such as frequency bands and separation of satellites has to be taken into account. “The simple answer is that no, there are not any orbital slots currently unused or unspoken for (as in allocated to satellites already under construction and expected to launch in the near future) that provide access to what might be considered significant markets,” says Andrea Maleter, technical director at Futron Corp. Rachel Villain, director space and communications, Euroconsult, adds, “It depends on frequency bands. Spectrum is attached to frequency bands and to service type. Ku-band slot with 2-degree spacing and the right elevation is certainly the most difficult to find.”
However, others still see potential orbital real estate available. “There are certainly slots available,” says Max Engel, industry analyst at Frost & Sullivan. “There are, however, many fewer slots available for commercial firms to provide services to already established markets being licensed by the countries they are in. Saying how many slots is not like saying, ‘Is this a liter bottle of water?’, because with the licensing being done by national entities under the ITU, the slots available in the United States for instance, are not unlimited. But Mexico has empty slots. Satmex has slots where its satellites will soon die. In that direction, I was rather surprised Eutelsat turned down the opportunity to buy Satmex because it would have bought them North American slots. So slots are getting tighter but there are still ways to add locations.”
Patricia Cooper, president of the Satellite Industry Association (SIA) also sees opportunities for satellite players. “Naturally, some regions such as the North American and European arcs are more heavily utilized than others, particularly in the C- and Ku-band frequencies. Growth opportunities continue to exist in other regions such as Latin America, Africa and the Asia-Pacific. Satellite operators have been innovative in deploying higher-powered satellites with greater throughput and co-locating multiple spacecraft and using more advanced coding schemes to maximize the efficiency at each orbital slot. Other frequency bands, such as Ka-band, hold marked promise for continued growth.”
Another factor in this debate are the advances in satellite technology, which make it possible for satellites to be operated more closely together, says Maury Mechanick, Counsel in the Washington office of White & Case LLP. “When satellites were first launched in the 1960s and 70s, it was believed that satellites needed separation of a number of degrees in space to avoid interference problems,” he says. “Over time, the nominal standards for separation informally evolved first towards 3-degree separation and later and more formally — largely at the prodding of the U.S. FCC (Federal Communications Commission) — to 2-degree spacing. Whether satellite separations appreciably less than 2-degree spacing may be feasible in the future remains to be seen. But even the difference between 3-degree spacing (which in a geosynchronous plane would limit the possible number of satellites in a particular frequency band to 120 orbital slots) as contrasted with 2-degree orbital spacing (which would limit the possible number of satellites to 180) is considerable.”
Satellite spacing has become vital in gaining the most from assets in the sky. “The 2-degree spacing requirement pioneered by the FCC was a key example,” says Maleter. “The move to tweener satellites with 4.5-degree spacing for [direct-to-home spacecraft] in the United States is another. In addition, advances in ground station technology can help expand the utilization of spectrum to the same effect. So it is not just a matter of opening up new orbital slots but also how the satellite networks operate in the naturally limited number of slots available.”
There also are other factors on the technology side having an impact on the issue. “Use of hybrid satellites is another factor that may contribute to the relative inefficiency in use of orbital resources, since satellites with transponders operating in both frequency bands are less likely to employ maximum frequency reuse techniques in either band, although use of hybrid satellites may nonetheless offer certain countervailing flexibility advantages,” says Mechanick.
Engel also cites the importance of having larger satellites as a way to get around the fact that orbital slots are at a premium. “What is important is the amount of allocated spectrum because, as an example, Astra has five satellites in the 19.2 orbital position,” he says. “One of the things they are doing with their replacement strategy is replacing multiple satellites with single satellites. They are buying bigger more powerful satellites. They can have as many satellites in a slot as they have spectrum to use. So the real question when you talk about is not how much space there is, but how much spectrum. You can share a slot between satellites and even operators if you have spectrum. Depending on the nature of the spectrum, you can put more or less satellites in a given arc.”
ITU Steps Up Oversight
The filing mechanism for orbital slots also has come under the microscope in recent years, as some countries are pushing the ITU to crackdown on the use of so-called “paper satellites,” or spacecraft that most likely will not be manufactured or launched but instead are used to hold the slot for a given country. “The phenomenon of paper filings is a real, continuing problem, although the ITU has taken certain measures to try to discourage this,” says Mechanick. “One of the measures previously taken was to reduce the time period by which a satellite must be placed in orbit from nine to seven years. This, however, has not completely remedied the situation. Even so-called good citizens can be guilty of what in effect are paper filings, the clearest example being the United States at Ka-band, where the United States filed for a large number of orbital slots based on the filings of a number of U.S. companies, but where there would have been obvious bases for doubting that many of those systems would in fact actually be launched (and with actual experience having confirmed that this was the case).”
Villain believes regulations have tightened up in terms of the management of slots. “It is still the case (about orbital slots not being utilized) but much less than before as national regulatory agencies and the ITU have defined policy rules to prevent paper filings,” she says.
The ITU believes it has stronger measures in place to make sure slots are being filled within a more agreeable time frame. “Satellite overfiling behavior is on a much smaller scale now,” says Valery Timofeev, director of the ITU’s Radiocommunications Bureau. “The time scale in most cases now is seven years after you initiate the registration for the slots. If in those seven years, you are not informing the ITU of the implementation of the project, you will be requested to confirm the status of the project, and if there is no justification that the system is operational, it will be cancelled. We are doing this on a regular basis.”
Because of the demand to gain access to space, the role of the ITU is more important than ever, says Timofeev. “The role of ITU and the Radiocommunication Bureau in particular is even more important than before, because the situation is becoming more and more complex with the appearance of new services and new users and the more complicated sharing situation on the orbit. We are the only entity and global focal point that is capable of providing all countries with a spectrum-orbit
international management package which is efficiently co-ordinating their efforts and guaranteeing that their investments in space communications is wisely spent.”
Like others, Timofeev cites technology improvements that have changed the rules, even for an organization like the ITU. “Things are today very much different from 20 years ago when you were free to choose any orbital
positions without any practical coordination difficulties with the other users,” says Timofeev. “We had at that time the luxury of separation between neighboring satellites of 4 to 6 degrees. Now, if you check our current filing database in ITU, to have a neighboring satellite 6 degrees from yours is only a dream of the past. You will see some
satellites using the same spectrum, separated by 1 or 2 degrees. It means you are obliged to accept more constraints for your operations. There are more interference probabilities.
However, technology goes ahead, and what was not possible 20 years ago is now feasible.”
Challenge To The Satellite Community
Cooper, however, believes this issue will continue “to be a challenge to the satellite community. Unfortunately, the current process at the ITU still allows administrations to file for slots for spacecraft that will never be built,” she says. “The ITU planned bands are a good example of orbital slots that are set aside but are consistently under-utilized. This ultimately adds unnecessary costs and complications to new satellite development throughout the design and manufacturing stages. The ITU’s efforts to recover costs for satellite filings have had a positive downstream effect by reducing the time that paper filings in the non-planned bands sit in the queue,” she says.
“There has in the past been a significant issue with the filing of applications just to hoard slots, but the ITU has cracked down on this, implemented new procedures including changing the length of time a slot can be held, and this issue has been improved dramatically,” says Maleter. “The big problem is that there are only a limited numbers of orbital positions from which it is possible to cover key markets, and so even if you open up orbital positions around these locations, it is difficult for new operators to make as good a business case as those already operating. There is, nevertheless, some room for the ITU to more aggressively monitor and manage the coordination system that exists so that operators who do not achieve coordination of their satellites give way to those waiting in line behind them.”
Engel warns that an overzealous approach towards making slots active potentially could backfire, because new ideas can take a long time from concept to operational satellite. “WildBlue with Ka-band broadband is a very new application, and it took them something close to 10 years from the initial idea [to launching service],” he says. “They went bankrupt. They had issues. They had problems. They lost their second orbital slot. But they did eventually get a satellite up in the slot they retained, and it is doing great. It is a big commercial success. They are filling up their spot beams so much that they can’t add new people immediately. So if you had made a really hard effort to [free up an unused slot], we would not have WildBlue.”
However, the ITU can only do so much, and more needs to be done at the country administration level so that orbital slots are active, says Mechanick. “Because the ITU lacks real enforcement power — and there is considerable reluctance to grant it such power — it would need to be at the administration level,” he says. “Administrations can be more vigilant in how they license slots and also in the frequency with which they return slots to the ITU that will not be used. I would not rule out the possible positive influence of regional telecommunications organizations such as CITEL (the Inter-American Telecommunication Commission), PATU (the Pan-African Telecommunications Union) or others, which if nothing else, can help promote a best practices regime in terms of encouraging use of more efficient spectrum utilization techniques.”
The SIA has been active “in sensitizing governments to the commercial impact of their regulatory and spectrum management decisions,” says Cooper. “Satellite operators assume considerable risk when investing in new satellites, and they rely on regulatory certainty for market access, reasonable administrative fees and spectrum availability to allow them to build new satellites at new locations. With a healthy policy backdrop, the industry — from satellite operators, ground equipment manufacturers and customers — are fully committed to innovating and delivering quality communications services throughout the world.”
Despite the advances in technology and improvements in the administration of orbital slots, the playing field for orbital slots still remains crowded, and the best way to help create more space for new satellites likely is the development of other frequencies such as Ka-band, says Mechanick. “It is fair to say that orbital slots at C- and Ku-band are probably in relatively short supply, largely for historical reasons,” he says. “However, there are probably a large number of available orbital slots at Ka-band for a couple of reasons. Although there were a number of Ka-band filings in the late 1990s by various administrations, these filings were not likely to be quite as extensive as the collective filings to date for C- and Ku-band frequencies, which have a much longer track record. Moreover, many of the original Ka-band filings are now likely to be on the verge of expiring since so few Ka-band systems have to date actually been brought into service,” he says.
“It should be noted that just because a particular slot is fully utilized for Ku-band over the Northern Hemisphere, there is still potential for the same slot to be used for service at either Ku-band or other frequencies in the Southern Hemisphere,” says Maleter. “This is a matter of satellite design and is an area with great potential. Other technology enhancements can also be considered that might reduce the spacing required between satellites without causing interference,” she says.
Another move that may free up some slots is regional consolidation, says Engel. “Slots are not like parking places. There is not a steady turnover of people leaving with their satellites and driving home,” he says. “This is a very slow moving market and I would not at any time anticipate old satellite slots being vacated. You get access to slots far more frequently by buying the owner, which is what Intelsat did with PanAmSat and Loral’s North American assets. It was not just done to get slots but also to become players in the more lucrative video market, but it was the only way Intelsat could have gained so many slots. Alternatively, you can find an unused or underused location and make it valuable by providing compelling services that no one else is offering.”
Space has become congested. There is not an inexhaustible supply of attractive orbital slots for satellite operators, and as the economy becomes more global, access to this real estate becomes even more important. However, other frequency bands remain widely under-used, so plenty of opportunities exist for satellite operators to find ways to meet the needs of their customers. The challenge is to work within these new parameters.
Viasat’s curious antenna issues
Posted in Broadband, Financials, Operators, Services, ViaSat at 1:54 pm by timfarrar
Last fall, I found Harris’s announcement on its 2017Q3 results call that “we received our largest order for a single commercial satellite covering four reflectors, bringing total orders to eight over the past two years” to be particularly odd because the only commercial satellites on order with four unfurlable reflectors are ViaSat-3.
Viasat then effectively confirmed that they had made this order in their 10-Q, which showed that Viasat’s total satellite purchase commitments increased from $1037.5M to $1106.6M during the quarter and that the size of Viasat’s contract with Boeing had increased by $11.2M in the same quarter (presumably to cover integration of the Harris antennas).
Not only was Viasat’s order quite late in the game (some knowledgeable observers assumed that it would have been ordered back in 2016), but it is also just for one satellite, not for both of the ViaSat-3 satellites that are under contract with Boeing. Viasat may well have another purchase option (which it can exclude from its purchase commitments for the time being), but it is still surprising that it took so long to reach an agreement with Harris. And it may suggest that the construction schedule for Boeing’s second ViaSat-3 satellite will be longer than originally thought.
Another curious issue was Viasat’s decision to use a fake image of ViaSat-2, which Viasat’s President Richard Baldridge later admitted “in fact is not the actual ViaSat-2″ satellite, because “we obscured the sensitive parts”. It is hard to understand why Harris’s antennas are deemed so sensitive by Viasat when Harris themselves were happy to publish a mockup image back in 2016 (which has since been removed from their website) and the size of the antenna can easily be worked out from Viasat’s own FCC submissions.
Although I have no evidence to suggest this is actually the case, one possible reason for these two apparent coincidences would be if Viasat had sought to patent some features relating to deployment of the Harris antenna on ViaSat-2 in order to try and prevent rivals from making use of Harris’s unfurlable Ka-band antennas (in particular Hughes and SS/L will likely use them for Jupiter-3). That would certainly explain Harris’s decision to highlight during the Q3 results call that the commercial reflector business is “a commercial model driven business where we invest our own R&D to develop that offering. We sell it into the marketplace.”
Now we have Viasat revealing today that Boeing “has identified an in-orbit antenna issue, which has caused some spot beams to perform differently than they did during ground testing.” It seems very likely that the issue is related to the unfurlable 5m Harris antennas, since “Viasat believes the issue will not affect the coverage area of the satellite” and the smaller solid antennas will provide most of the geographic coverage, while the larger unfurlable antennas will provide the high capacity coverage within the continental US.
It also seems somewhat more likely that this is a deployment problem (i.e. an issue primarily for Boeing/Viasat) rather a problem with the antenna itself (i.e. an issue primarily for Harris), since the antenna performed “differently” (and presumably correctly) during ground testing. If this problem relates to a new feature that Viasat or Boeing introduced, then that would clearly be particularly contentious, especially if it was related to any patent issues that might have been in play previously. So now we need to wait and see how the blame game develops and what this means for the future relationship between Harris and Viasat.
Eye of the hurricane…
Posted in Aeronautical, Broadband, Eutelsat, Inmarsat, Operators, Services, SES, Spectrum, ViaSat at 12:54 am by timfarrar
This week in Paris all seemed calm, after the turbulence of the last few years, with the only major announcement coming from SES with its new O3b mPower MEO constellation. But under the surface a lot is happening, and (perhaps appropriately) I think we are now just in the eye of the hurricane, and the storm will shortly ramp up once again, before we find out who and what will be left standing in a couple of years time.
SES’s announcement came several months after it selected Boeing to build the O3b NEXT constellation (the “development agreement” was announced in July as part of SES’s half year results) and the delay until now appears to have been due to SES waiting for an anchor tenant that never materialized. In fact I believe SES originally expected to announce the contract in May, as was hinted at when SES’s CEO said he was “too busy” to go to Satellite 2017). However, SES is clearly not willing to see OneWeb, ViaSat and Inmarsat take the lead in new data-oriented satellite systems, whether or not it secures a major anchor tenant for this system.
Another subject of much debate is what Panasonic will decide to do now its original plan to invest in dedicated XTS satellites appears to be dead. Panasonic wants to lay off much more of the risk on a satellite operator, rather than underwriting the satellite costs in full, as Thales did with SES-17. Will an FSS operator be prepared to take this risk, bearing in mind that Intelsat is short of money, SES is now building O3b NEXT (which won’t be well suited for high latitude aero operations) and Eutelsat is intending to partner with ViaSat? Or would Panasonic do something more radical and let a rival like Inmarsat take over provision of connectivity services?
Finally, Inmarsat seems to be under a lot of pressure after a 15% decline in its share price in the last two weeks, and some were speculating that recent personnel changes were connected to this uncertain outlook. Profitability of aero contracts (notably that with Lufthansa) remains a major concern, and issues remain to be resolved for the EAN air-to-ground network, especially if Inmarsat is forced to provide a more robust satellite link in the wake of ViaSat’s legal challenge.
All of these issues provide much food for thought, and could lead to significant realignments in the industry over the next year. Decisions affecting the inflight connectivity market are almost certain to occur, because Panasonic can’t wait too long to provide clarity on its future positioning, and so we had better batten down the hatches for the coming winds of change.
Me first, no me…
Posted in Broadband, Regulatory, Spectrum at 9:42 am by timfarrar
Yesterday the FCC released the proposed text of its Report and Order on “Updating Rules for Non-Geostationary-Satellite Orbit Fixed-Satellite Service Constellations” which will be voted on at the Open Meeting on September 26. There are some minor wins for SpaceX and other systems that aren’t as advanced as OneWeb, notably in the relaxation of the 6 year construction deadline so that only 50% of the constellation needs to be completed by that date.
However, the key text on the geographic scope of the FCC’s in-line interference avoidance rule (that requires the spectrum to be shared equally between NGSO systems when their satellites are aligned with one another) marks a major defeat for SpaceX, because the FCC will allow the ITU’s “first-come, first-served” coordination procedures to take precedence for non-US systems operating outside the US.
53. Geographic Area. SpaceX and SES/O3b ask that we clarify the geographic scope of our NGSO FSS sharing method as it relates to non-U.S.-licensed satellite systems granted U.S. market access. While SpaceX argues that it should govern such operations worldwide, a grant of market access typically considers radiofrequency operations only within the United States. Sharing between systems of different administrations internationally is subject to coordination under Article 9 of the ITU Radio Regulations. We believe this international regime is the appropriate forum to consider NGSO FSS radiofrequency operations that fall outside the scope of a grant of U.S. market access. Because ITU coordination procedures do not apply between two U.S. systems, our coordination trigger of ΔT/T of 6 percent will govern such operations both within and outside the United States.
OneWeb is licensed by the UK and Telesat by Canada, and these systems have ITU priority in the Ku and Ka-band NGSO spectrum respectively. Thus SpaceX will have to operate on a non-interference basis with respect to these systems in either band outside the US. This (proposed) ruling represents a big problem for SpaceX, which needs to find another line of business outside of launch to justify its latest $21B valuation.
SpaceX is already building two experimental 400kg Ku-band satellites, apparently pictured above, which are scheduled for launch at the end of 2017, as co-passengers with the Hisdesat PAZ SAR imaging satellite (note that the orbital injection parameters of PAZ and SpaceX are identical: a sun-synchronous orbit at 514 km altitude with an inclination of 97.44 degrees). A license from the FCC, both for these test satellites, and likely for the entire constellation as well, is expected very shortly.
The key purpose of SpaceX’s accelerated launch schedule is to beat OneWeb (which plans to launch its 10 test satellites in early 2018) to orbit, as under the FCC’s regulations, the first system to launch gets to choose its “home” spectrum during an inline event. Presumably on the assumption that possession is nine-tenths of the law, SpaceX also recently extended the planned lifetime of these two satellites from 6 months to at least 20 months, stating that “if this lifetime is exceeded, SpaceX plans to continue operation until such time as the primary mission goals can no longer be met.”
However, now the FCC’s proposed order appears to have derailed its strategy, SpaceX will need to find a way to gain ITU priority, if it is to build and operate a global constellation. From this point of view, Telesat, which has been adamantly defending its ITU priority, appears to be sitting pretty. Indeed we are told that after its planned test satellite launch later this year, Telesat will wait until next summer before deciding how to move forward, presumably expecting to have a wide variety of suitors once its ITU priority status is recognized.
A joint venture with SpaceX (to which Telesat contributes its licenses and SpaceX brings the money) is certainly a plausible option, though it would require SpaceX to shift its plans to Ka-band. However, if this became a real possibility, it wouldn’t be surprising for SoftBank to try and head off SpaceX by investing in Telesat, or perhaps even buying Loral Space and Communications.
The ramifications of such a move on SoftBank’s part would be even more significant, given that Intelsat’s investors apparently expect SoftBank to return to the negotiating table next year, after they rejected SoftBank’s previous offer in May, and a switch to Telesat would put them in a tricky position.
So now we have to wait and see how SpaceX responds to this setback. Will SpaceX still move forward aggressively into the satellite business or will some of the executives who have in the past counselled caution gain the upper hand? Will the experimental launch proceed on plan (I assume so)? And most importantly, which partners will emerge for Telesat’s proposed LEO system?
Posted in Broadband, Financials, Intelsat, Iridium, Operators, Regulatory, Services, SES, Spectrum at 3:40 pm by timfarrar
I’m unashamedly stealing the title of the book which chronicles the Iridium bankruptcy, because not only did John Bloom give a talk at this week’s Satellite 2017 conference, but discussion of new LEO satellite systems dominated the conference itself. The proposed merger of OneWeb and Intelsat is only the most visible sign of this return to the 1990s, when Iridium and Globalstar’s satellite phones and Teledesic’s proposed broadband system fascinated both the satellite industry and the wider investing community.
But below the surface there is an even more radical shift going on, as most leading operators are cutting back on their investments in high throughput GEO satellites for data services, and many of them are focused instead on the potential of LEO and MEO systems. Intelsat has already indicated that it is cutting GEO capex, and the merger with OneWeb will mean most of its future capex will be devoted to LEO, in line with Masa Son’s vision of a huge new opportunity for LEO satellites.
However, SES, whose CEO stayed away from the conference, is also hinting at a reallocation of its priorities towards O3b’s MEO system, probably accompanied by a sizeable reduction in overall capex. Telesat is also focused on developing its Ka-band LEO constellation for next generation data services, leaving only Eutelsat (which has already announced that it will cut capex substantially) amongst the Big 4 focusing solely on GEO.
This is deeply worrying for satellite manufacturers, and even the indication by Boeing that GEO demand will “remain soft” at “between 13 and 17 satellites in 2017″ may prove to be overly optimistic. All satellite manufacturers now need to play in the LEO/MEO world, with Thales constructing O3b and Iridium, and Airbus taking the lead role on OneWeb, with SS/L as a major subcontractor.
That leaves Boeing, which is not part of any announced LEO satellite contract, but has its own proposal for a V-band LEO system, which is under consideration at the FCC, along with several rival filings. While Boeing has suggested in the past that it was open to partnerships to develop this concept, most people in the industry are convinced that it already has funding from a potential customer, given the amount of effort that Boeing is putting into developing V-band service rules at the ITU and FCC. Boeing has also indicated to these people that it does not need export credit funding for the project, which supports the idea that this project is backed by a deep pocketed US entity.
There aren’t many possibilities for such a backer, and of the four large technology companies Boeing mentioned two years ago, Google and Facebook have apparently lost interest in satellites (although Google did invest $900M in SpaceX and Facebook tried with Amos-6), and Amazon is pursuing its own efforts in the launch market through Blue Origin. That only leaves Apple as never having discussed publicly its potential interest in space.
This aligns with the chatter I heard from a number of sources at Satellite 2017 that Boeing’s V-band development work is being funded by Apple, which is clearly trying to find the next big thing and has been exploring cars, TVs and other large market opportunities. Its not hard to discern why Apple might want to consider a satellite constellation, when SpaceX came out with a business plan last year that suggested SpaceX alone could generate $30B in revenue from satellite internet by 2025.
Just as in the car market there’s no guarantee that Apple would take this project forward to full deployment, but with SpaceX, SoftBank and now apparently Apple becoming enthusiastic about non-geostationary satellite systems, in addition to most of the main satellite operators, it seems that a dramatic reshaping of industry priorities is underway.
It remains to be seen whether this enthusiasm will last, or whether, like at the end of the 1990s, the pendulum will eventually swing back towards geostationary orbit. However, over the next few years, until we find out whether the ambitions of these visionaries can be realized, non-GEO satellite systems are likely to be the most important contributor to driving satellite communications technology forward.
Posted in Aeronautical, Broadband, Echostar, Eutelsat, Operators, Services, SES, ViaSat at 10:47 am by timfarrar
As we get closer to Satellite 2017, where major new deals and partnerships are often announced, it looks like a number of players may be getting cold feet about their future satellite plans. This may be partly attributable to fears that OneWeb will contribute to a eventual glut of capacity, now it has secured SoftBank as a lead investor and raised another $1.2B. Even though capacity pricing may have stabilized somewhat for now, its certainly the case that a satellite ordered now is likely to enter the market at a point when pricing is set to decline much further.
We’ve already seen a delay in Panasonic’s XTS satellite order, which was supposed to happen before the end of 2016. Ironically enough, Leo Mondale of Inmarsat said at the Capital Markets Day last October that he believed “Panasonic in Yokohama are a little wary of getting into the satellite business” and in the wake of the recent FCPA probe, Panasonic Avionics now has a new Japanese CEO.
Moreover, one way of viewing the recent announcement that Eutelsat will take its ViaSat JV forward (and include aero mobility, which was not part of the original agreement) is that Eutelsat no longer believes it will strike a deal to operate Panasonic’s XTS satellites. That’s a much better explanation than bizarre speculation that ViaSat is going to buy Eutelsat, especially when ViaSat is still struggling to fund its third satellite for Asia and is openly hinting that it will need US government contracts to close the business case. Eutelsat also seems to be cutting back elsewhere, with some speculation that the Ka-band broadband satellite previously ordered for Africa may now be repurposed for other (non-broadband) applications.
But the biggest news appears to be a pull back on SES’s part from the long rumored global Ka-band GEO system that I noted last summer. SES announced only a single satellite (SES-17) for the Americas in partnership with Thales last September, but had plans for two additional satellites, and it seemed increasingly likely that a partnership with EchoStar would be announced soon to fund this development. Now it seems that effort is on hold, leaving EchoStar without an obvious way forward to achieving global coverage (as it seems EchoStar considered but rejected the idea of buying Inmarsat last fall).
There are also other more speculative projects that need to show some progress to remain credible. When it was disclosed by the WSJ last month, SpaceX’s business plan for its satellite internet service was widely dismissed as laughably unrealistic. However, I believe that in fact this is not the business plan that corresponds to the current system design, and instead SpaceX will be seeking a large amount of US government money to fund its constellation. Compared to SpaceX and OneWeb, Telesat’s constellation ambitions have largely been ignored by commentators, despite Telesat’s priority claim to the Ka-band NGSO spectrum band. So Telesat therefore also faces pressure to secure external investors in the near term so that it can keep pace with OneWeb.
Now the question is whether caution amongst major existing players will make it harder for new entrants to move forward. Will it signal to investors that they should be cautious about investing in any satellite businesses? Or will it be perceived that new opportunities will face less competition from existing operators? The NewSpace community certainly seems to still be living in a bubble, despite the deeply negative implications of Google’s decision to abandon its efforts in satellite and hand over Terra Bella to Planet (not least because a sale to Google or other internet companies was seen as the most plausible exit for VC investors). So I look forward to seeing how much reality intrudes on the discussions at Satellite 2017.
Posted in Broadband, Regulatory, Spectrum at 10:46 am by timfarrar
Probably the most surprising thing about today’s announcement that Softbank is investing $1B in OneWeb as part of a $1.2B funding round, is the lack of a spoiler announcement from SpaceX. That’s happened in the past on both of the two occasions when OneWeb made a major announcement, in January 2015 (when OneWeb announced its initial agreements with Qualcomm and Virgin) and in June 2015 (when OneWeb announced its initial $500M equity round).
In fact one of the more important fights that is going on behind the scenes is related to regulatory priority in terms of ITU filings, where SpaceX is some way behind. OneWeb is acknowledged to be have the first filing for an NGSO Ku-band system, but also needs access to the Ka-band for its gateway links. That led Telesat to request that the FCC deny OneWeb’s petition for a US licenses, based on “Canadian ITU filings associated with Telesat’s Ka-band NGSO system [that] date back to 2012 and January 6, 2015″ whereas “the earliest ITU filing date priority for OneWeb is January 18, 2015.” LeoSat also claimed that it had priority over OneWeb in November 2016, based on “French ITU filings for LeoSat’s Ka-band MCSAT-2 LEO-2 network [that] date back to November 25, 2014.”
However, OneWeb now appears to have attempted something of an end run around these objections, acquiring rights to the French MCSAT LEO with an ITU advance publication date of April 2, 2013 network from Thales Alenia Space. That’s particularly odd because LeoSat, which states specifically in its FCC application that it “will deploy the LeoSat System in conjunction with Thales Alenia Space,” might now find TAS’s own filings being used against it.
UPDATE (12/20): I’m told that the relevant ITU coordination dates for the different Ka-band NGSO proposals are as follows:
Telesat (Comstellation): December 20, 2012
LeoSat (MCSAT2 LEO2): November 25, 2014
OneWeb’s newly acquired MCSAT LEO filing: December 3, 2014
SpaceX: December 27, 2014
OneWeb’s original Ka-band filing: January 18, 2015.
That would imply that OneWeb has now jumped ahead of SpaceX at the ITU, but remains behind Telesat and LeoSat, although I’m sure there will be many arguments to come.
All this fighting to be first in line at the ITU will also have to take into account the FCC’s attempt to clarify the rules for new NGSO systems in an NPRM released on Thursday, December 15. The FCC’s rules state that NGSO systems should share spectrum through the “avoidance of in-line interference events” and the NPRM proposed new language in an attempt to make this more explicit. However, this language is far from clear about whether the sharing of spectrum is required on a global basis or just in the US, specifically the key paragraph in the newly proposed §25.261 states:
(a) Scope. This section applies to NGSO FSS satellite systems that communicate with earth stations with directional antennas and that operate under a Commission license or grant of U.S. market access under this part in the 10.7-12.7 GHz (space-to-Earth), 12.75-13.25 GHz (Earth-to-space), 13.75-14.5 GHz (Earth-to-space), 17.8-18.6 GHz (space-to-Earth), 18.8-19.4 GHz (space-to-Earth), 19.6-20.2 GHz (space-to-Earth), 27.5-29.1 GHz (Earth-to-space), or 29.3-30 GHz (Earth-to-space) bands.
whereas the existing language states:
(a) Applicable NGSO FSS Bands. The coordination procedures in this section apply to non-Federal-Government NGSO FSS
satellite networks operating in the following assigned frequency bands: The 28.6-29.1 GHz or 18.8-19.3 GHz frequency bands.
The pertinent question here, which is left unresolved by the proposed changes shown in the italicized text above, are whether a “satellite network” consists of both an FCC-licensed satellite system and the earth station it is communicating with, and if so whether both of these or just the satellite system itself must “operate under a Commission license or grant of U.S. market access” according the new text. If it is the former, then the new rules will clearly apply only in the US (where the earth station is licensed by the FCC), whereas if it is the latter, then the rules could be taken to imply that any recipient of a satellite system license from the FCC in the current processing round may have to agree to comply with these sharing rules on a global basis.
It therefore seems that regulatory lawyers will have plenty of work for the next year arguing on behalf of their clients. However, OneWeb will have the money to move forward quickly and extend its lead over other NGSO systems, apart from O3b, which is currently building its next batch of 8 satellites. It remains to be seen if other systems will catch-up, but Telesat (which has already ordered two test satellites) is potentially best positioned to be a third player, especially if it can secure Canadian government backing for universal service in the Arctic region.
Then we need to see how the market evolves. Greg Wyler highlighted his ambitions for OneWeb to serve 100M people by 2025 and after the alliance with Softbank, this will most likely be in the form of cellular backhaul from tens or hundreds of thousands of small cells in remote areas, just as Softbank already does at over 6000 cell sites in Japan using IPStar capacity. In contrast, O3b should continue its plans to serve highly concentrated demand hotspots, like remote islands needing connectivity to the outside world and large cruise ships.
Most of the other NGSO proposals, including Telesat and SpaceX, appear to have a fairly similar plan to O3b, with small beams used to serve a select number of demand hotspots. So the question then becomes, how much concentrated demand exists for satellite connectivity? O3b will generate roughly $100M of revenues in 2016 and has a clear path to growth into the $200M-$300M range. But is it a multi-billion dollar opportunity and is there room for one or more additional systems in this niche? And can new systems overtake O3b, given its multi-year lead in this market? Only time will tell, but if OneWeb can maintain its focus on low cost cellular backhaul and gain anchor tenant commitments from Softbank, Bharti Airtel and perhaps others, these competitive dynamics are going to be much more of an issue for O3b.
Chinese checkers, Indonesian intrigue…
Posted in Broadband, Financials, Handheld, Inmarsat, Operators, Regulatory, Services, Spectrum at 9:18 am by timfarrar
UPDATED Feb 5, 2017
There’s been a lot of recent news about Chinese investments in satellite companies, including the planned takeover of Spacecom, which is now being renegotiated (and probably abandoned) after the loss of Amos-6 in September’s Falcon 9 failure, and the Global Eagle joint venture for inflight connectivity.
There were also rumors that Avanti could be sold to a Chinese group, which again came to nothing, with Avanti’s existing bondholders ending up having to fund the company instead in December 2016. The latest of these vanishing offers was a purported $200M bid from a Chinese company, China Trends, for Thuraya in mid-January 2017, which Thuraya promptly dismissed, saying it had never had discussions of any kind with China Trends.
Back in July Inmarsat was also reported to have approached Avanti, but then Inmarsat declared it had “no intention to make an offer for Avanti.” I had guessed that Inmarsat appeared to have done some sort of deal with Avanti, when the Artemis L/S/Ka-band satellite was relocated to 123E, into a slot previously used by Inmarsat for the ACeS Garuda-1 L-band satellite (as Avanti’s presentation at an event in October 2016 confirmed).
However, I’m now told that the Indonesian government reclaimed the rights to this slot after Garuda-1 was de-orbited, and is attempting to use the Artemis satellite to improve its own claim to this vacant slot before these rights expire. I also understand that with Artemis almost out of fuel, various parties were very concerned that the relocation would not even work and the Artemis satellite could have been left to drift along the geostationary arc, an outcome which thankfully has been avoided.
The action by the Indonesian government seems to hint at a continued desire to control its own MSS satellite, which could come in the shape of the long rumored purchase of SkyTerra-2 L-band satellite for Indonesian government use, similar to the MEXSAT program in Mexico. If that is the case, then presumably the Indonesians would also need to procure a ground segment, similar to the recent $69M contract secured by EchoStar in Asia (although that deal is for S-band not L-band).
Meanwhile Inmarsat still appears to be hoping to secure a deal to lease the entire payload of the 4th GX satellite to the Chinese government, which was originally expected back in October 2015, when the Chinese president visited Inmarsat’s offices. That contract has still not been signed, apparently because the Chinese side tried to negotiate Inmarsat’s price down after the visit. Although Inmarsat now seems to be hinting to investors that the I5F4 satellite will be launched into the Atlantic Ocean Region for incremental aeronautical capacity, last fall Inmarsat was apparently still very confident that a deal could be completed in the first half of 2017 once the I5F4 satellite was launched.
So it remains to be seen whether Inmarsat will be any more successful than other satellite operators in securing a large deal with China or whether, just like many others, Inmarsat’s deal will vanish into thin air. China has already launched its own Tiantong-1 S-band satellite in August 2016, as part of the same One Belt One Road effort that Inmarsat was hoping to participate in with its GX satellite, and Tiantong-1 has a smartphone which “will retail from around 10,000 yuan ($1,480), with communication fees starting from around 1 yuan a minute — a tenth of the price charged by Inmarsat.” Thus Inmarsat potentially faces growing pressure on its L-band revenues in China, and must hope that it can secure some offsetting growth in Ka-band.
What about the dish?
Posted in Broadband, Regulatory, Services, Spectrum at 4:42 pm by timfarrar
Although there have been plenty of news articles describing the proposed 4000 satellite constellation that SpaceX filed with the FCC last week, to date there has been no analysis of how technically plausible this proposal actually is. That is perhaps unsurprising because the Technical and Legal Narratives included with the submission omit or obscure many of the most salient points needed to analyze the system and determine how realistic the claims made in SpaceX’s Legal Narrative actually are.
In particular, SpaceX claims that it has “designed its system to achieve the following objectives”:
High capacity: Each satellite in the SpaceX System provides aggregate downlink capacity to users ranging from 17 to 23 Gbps, depending on the gain of the user terminal involved. Assuming an average of 20 Gbps, the 1600 satellites in the Initial Deployment would have a total aggregate capacity of 32 Tbps. SpaceX will periodically improve the satellites over the course of the multi-year deployment of the system, which may further increase capacity.
High adaptability: The system leverages phased array technology to dynamically steer a large pool of beams to focus capacity where it is needed. Optical inter-satellite links permit flexible routing of traffic on-orbit. Further, the constellation ensures that frequencies can be reused effectively across different satellites to enhance the flexibility and capacity and robustness of the overall system.
Broadband services: The system will be able to provide broadband service at speeds of up to 1 Gbps per end user. The system’s use of low-Earth orbits will allow it to target latencies of approximately 25-35 ms.
Worldwide coverage: With deployment of the first 800 satellites, the system will be able to provide U.S. and international broadband connectivity; when fully deployed, the system will add capacity and availability at the equator and poles for truly global coverage.
Low cost: SpaceX is designing the overall system from the ground up with cost effectiveness and reliability in mind, from the design and manufacturing of the space and ground-based elements, to the launch and deployment of the system using SpaceX launch services, development of the user terminals, and end-user subscription rates.
Ease of use: SpaceX’s phased-array user antenna design will allow for a low-profile user terminal that is easy to mount and operate on walls or roofs.
What is particularly interesting is that the application says nothing whatsoever about the size of the user terminal that will be needed for the system. One hint that the user terminals are likely to be large and expensive is that SpaceX assures the FCC that “[t]he earth stations used to communicate with the SpaceX System will operate with aperture sizes that enable narrow, highly-directional beams with strong sidelobe suppression”. More importantly, by analyzing the information on the satellite beams given at the end of the Schedule S, it is clear that the supposed user downlink capacity of 17-23Gbps per satellite assumes a very large user terminal antenna diameter, because there are only 8 Ku-band user downlink beams of 250MHz each per satellite, and thus a total of only 2GHz of user downlink spectrum per satellite.
In other words this calculation implies a link efficiency of somewhere between 8.5 and 11.5bps/Hz. For comparison, OneWeb has 4GHz of user downlink spectrum per satellite, and is estimated to achieve a forward link efficiency of 0.55bps/Hz with a 30cm antenna and up to 2.73bps/Hz with a 70cm antenna. Put another way, OneWeb is intending to operate with twice as much forward bandwidth as SpaceX but with only half as much forward capacity per satellite.
That’s because OneWeb is intending to serve small, low cost (and therefore less efficient) terminals suitable for cellular backhaul in developing countries, or for internet access from homes and small businesses in rural areas. In contrast SpaceX’s system appears much more focused on large expensive terminals, similar to those used by O3b, which can cost $100K or more, and are used to connect large cruise ships or even an entire Pacific Island to the internet with hundreds of Mbps of capacity. While this has proved to be a good market for O3b, it is far from clear that this market could generate enough revenue to pay for a $10B SpaceX system. Even then, an assumption that SpaceX could achieve an average downlink efficiency of 10bps/Hz seems rather unrealistic.
SpaceX is able to gain some increased efficiency compared to OneWeb by using tightly focused steered gateway and user beams, which the Technical Narrative indicates will provide service in “a hexagonal cell with a diameter of 45 km” (Technical Annex 1-13). But there are only 8 user downlink beams per satellite, and so the total coverage area for each satellite is extremely limited. A 45km diameter hexagon has an area of 1315 sq km (or 1590 sq km for a 45km circle). Taking the more generous measure of 1590 sq km, over 5000 cells would be needed to cover the 8 million sq km area of the continental US. And SpaceX states (Technical Annex 2-7) that even in a fully deployed constellation, 340 satellites would be visible at an elevation angle of at least 40 degrees. So this implies that even when the constellation is fully deployed, only about half the land area of CONUS will be able to be served simultaneously. And in the initial deployment of 1600 satellites, potentially only about 30% of CONUS will have simultaneous service.
SpaceX could use beamhopping technology, similar to that planned by ViaSat for ViaSat-2 and ViaSat-3, to move the beams from one cell to another within a fraction of a second, but this is not mentioned anywhere in the application, and would be made even more challenging, especially within the constraints of a relatively small satellite, by the need for avoidance of interference events with both GEO and other LEO constellations.
In summary, returning to the objectives outlined above, the claim of “high capacity” per satellite seems excessive in the absence of large, expensive terminals, while the “worldwide coverage” objective is subject to some question. Most importantly, it will likely be particularly challenging to realize the “low cost” and “ease of use” objectives for the user terminals, if the phased array antennas are very large. And the system itself won’t be particularly low cost, given that each satellite is expected to have a mass of 386kg: taking the Falcon Heavy launch capacity of 54,400kg to LEO and cost of $90M, it would take at least 32 Falcon Heavy launches (and perhaps far more given the challenge of fitting 140 satellites on each rocket), costing $2.8B or more, just to launch the 4425 satellites.
Instead one of the key objectives of the narrow, steerable beams in the SpaceX design appears to be to support an argument that the FCC should continue with its avoidance of in-line interference events policy, with the spectrum shared “using whatever means can be coordinated between the operators to avoid in-line interference events, or by resorting to band segmentation in the absence of any such coordination agreement.”
This continues SpaceX’s prior efforts to cause problems for OneWeb, because OneWeb provides continuous wide area coverage, rather than highly directional service to specified locations, and therefore (at least in the US, since it is unclear that the FCC’s rules could be enforced elsewhere) OneWeb may be forced to discontinue using part of the spectrum band (and thereby lose half of its capacity) during in-line events.
OneWeb is reported to be continuing to make progress in securing investors for its system, and it would be unsurprising if Elon Musk continues to bear a grudge against a space industry rival. But given the design issues outlined above, and the many other more pressing problems that SpaceX faces in catching up with its current backlog of satellite launches, it is rather more doubtful whether SpaceX really has a system design and business plan that would support a multi-billion dollar investment in a new satellite constellation.
Still up in the air?
Posted in Aeronautical, Broadband, Globalstar, Operators, Services, VSAT at 10:09 am by timfarrar
Yesterday was an eventful day, not only for the US as a whole, but also for the inflight connectivity sector when both ViaSat and GEE announced their quarterly results at the same time. We’ve all been waiting for Southwest Airlines to make a decision about their future connectivity choices, so when ViaSat announced that “Subsequent to the end of the second quarter of fiscal year 2017 (i.e. since September 30), ViaSat was selected by a North American airline to retrofit more than 500 aircraft from its existing, mainline domestic fleet with ViaSat’s highly advanced in-flight internet system” it was natural to assume that this was Southwest.
Coming after Inmarsat and Rockwell Collins’ recent win of Norwegian Airlines for GX, which is GEE’s second biggest connectivity customer, this would also have helped to explain GEE’s announcement of a Chinese investment and joint venture which will serve over 320 planes in China.
However, GEE has now denied that the ViaSat’s new customer is Southwest and when asked about the progress of the Southwest RFP on their results call, GEE stated that investors should “stay tuned” for an announcement but that GEE “expect[s] to continue to enhance the product and services that we provide at Southwest. And our expectation that we will remain a major customer of our connectivity business well beyond the current commitments.”
What this doesn’t say is that GEE is likely to retain anything like its current business with Southwest, indeed this statement is eerily reminiscent of Gogo’s assertion in February that it hoped to “retain a strong and lasting relationship” with American, when American ultimately split its orders between Gogo and ViaSat. And a conclusion to the Southwest competition appears imminent, with either Panasonic or ViaSat expected to capture a major share of Southwest’s fleet. Panasonic certainly think they are still in the game, but others (not just ViaSat itself) appear to believe ViaSat is now in the lead on the back of aggressive terminal pricing.
So what did ViaSat actually announce? Most have assumed that if it wasn’t Southwest, it must be the outstanding mainline aircraft at American Airlines, which American has the option to move away from Gogo’s ATG service. But those orders were expected to be decided in two separate batches and not necessarily in the immediate future, since American has still not even received the first installations for either of the existing contracts with Gogo 2Ku and ViaSat.
UPDATE: So its a big surprise that American has now confirmed that it will be moving essentially all of its mainline fleet to ViaSat (other than the pending 2Ku installations). I had wondered if the order might instead be for upgrades at United (where ViaSat already serves 360 planes) combined with United’s rumored pending order for 100-120 new planes. And that might very well still be another win for ViaSat in the next month or two.
FURTHER UPDATE: Back in late May, Gogo signed a term sheet with American Airlines which specified that its “terms will form the basis for transition to a new unified agreement to be negotiated in an effort to sign no later than October 1st, 2016.” Curiously, Gogo’s Q3 10-Q filed on November 3, makes no mention of a new agreement being signed with American Airlines either before or after the end of the quarter, which raises the question of exactly what is the status of this relationship right now, and whether the companies were unable to finalize the agreement because American decided to move the remaining mainline aircraft off Gogo’s ATG network without making any further commitment to 2Ku. However, we may not get much clarity on this issue for some time, perhaps not until Gogo’s Q4 report at the end of February.
Sorry I jumped the gun on Southwest, but things still look bad for GEE, and may in fact be even better for ViaSat than I expected if they win both American and much of Southwest’s fleet, not to mention another possible win for 100+ new planes and 360 upgrades at United.
In the meantime, we face more intrigue with respect to SmartSky and Gogo’s unlicensed ATG plans, with Microsoft filing with the FCC for tests to “develop channel models for air-to-ground operations in the 2.4 GHz ISM band” and to “examine various techniques that might minimize the potential for the air-to-ground link to disrupt Wi-Fi communications on the ground in the area surrounding the ground station.”
After Microsoft tested Globalstar’s proposed TLPS solution (which incidentally may have been administered the coup de grace by Trump’s win last night) and claimed a “profound negative impact,” it would not be in the least surprising if they now propose that the FCC should commence a rulemaking on where these ATG ground stations should be located (presumably not in the vicinity of Xboxes!), similar to the work on LTE-U (which also complies with existing FCC rules for unlicensed spectrum).
While those rules would not necessarily prevent deployment (ATG ground stations would simply be located in rural areas away from other buildings), any rulemaking could result in delays of 1-2 years before the network can be deployed. The consequence of that would potentially be to accelerate the migration of mainline commercial aircraft away from ATG and towards satellite solutions, in order to free up more capacity on Gogo’s network for smaller aircraft and business jets.
Overall, my concerns about continued ruinous competition in the inflight connectivity market have now been amplified further. Inmarsat has achieved key wins with Norwegian and IAG, which have put it firmly back in the game. ViaSat continues to grow its market share and now GEE’s refocusing on China and new investment from ShareCo could allow it to continue to compete in some international markets as well. Thales may be able to take JetBlue away from ViaSat (as Inmarsat suggested at its Capital Markets Day last month) and move these aircraft onto AMC-15/16 and ultimately SES-17. And Gogo and Panasonic still have a massive backlog of orders to work through. So despite all the talk of potential consolidation, it looks like airlines (and hopefully passengers) will continue to benefit from terminal subsidies, lower wholesale session costs and increasing bandwidth for some time to come.
Posted in Broadband, Echostar, Financials, Inmarsat, Operators, Services, ViaSat at 10:50 am by timfarrar
In late July, EchoStar raised $1.5B in debt, to add to its existing $1.5B in cash and marketable securities. Echostar’s lack of obvious need for these additional funds has led to considerable speculation about what the company’s intentions are, including the possibility of an Avanti acquisition.
As an aside, Avanti is clearly in serious trouble, having leaked the possibility of an Inmarsat acquisition on Friday, in order to try and drum up more interest in its sale process, only to be rebuffed by Inmarsat today, with Inmarsat stating that “it has withdrawn from Avanti’s announced process and it is not considering an offer for the shares of Avanti.”
It seems very likely that there is no potential buyer for the company (otherwise the leak would not have been needed) and therefore Avanti will be forced to file for bankruptcy on or around October 1 when its next bond interest payment is due. Inmarsat would clearly be interested in certain Avanti assets, including Ka-band orbital slots for its I6 and I7 satellites and possibly the Hylas-1 satellite for additional European capacity, but these can be picked up in bankruptcy, likely for no more than $100M. And it is hard to imagine other mooted potential buyers, such as Eutelsat and EchoStar being more generous: Eutelsat has made it clear it does not intend to invest more in Ka-band satellites until they reach terabit-class economics, while Charlie Ergen’s past adversarial relationship with Solus and Mast (in DBSD, TerreStar and LightSquared) makes him very unlikely to bail out Avanti’s investors. At this point, it is therefore probable that there will be no buyer for Hylas-4, forcing Avanti’s bondholders to continue to fund its construction, if they want to avoid a NewSat-like situation, where the nearly completed satellite is simply abandoned and handed over to its manufacturer.
Returning to the question of what EchoStar intends to do with its $3B of cash, it seems that a response to ViaSat’s global ViaSat-3 ambitions is likely to emerge in the very near future. After all, Hughes announced Jupiter-1 in 2008 in response to ViaSat-1, and then pre-empted ViaSat-2 with its own Jupiter-2 announcement in 2013. EchoStar could do this in one of three ways:
1) EchoStar could build its own global satellite system. This seems like the least plausible option, because there will already be at least three global Ka-band systems (from ViaSat, Inmarsat and SES). However, if EchoStar decides it does not believe the fully global opportunity is large enough, it could decide to just build a North America focused Jupiter-3 satellite (which would likely have a capacity of at least 500Gbps, and would have competitive economics to ViaSat-3).
2) EchoStar could partner with another operator. This is very plausible, especially as SES seems poised to announce its own GEO system soon, and would be keen to offload risk to an anchor tenant. Its even possible that EchoStar could build Jupiter-3 for North America, and partner in a separate global coverage effort with somewhat lower capacity.
3) EchoStar could buy another operator. This would be the most radical option, with Inmarsat the obvious candidate. There are many challenges here, not least that EchoStar might not be able to afford to buy Inmarsat, but the fit would be perfect, enabling EchoStar to leapfrog ViaSat to fully global coverage today, while being able to backfill Inmarsat’s limited GX capacity with its own HTS satellites. Moreover, Ergen would clearly attach significant value to Inmarsat’s L-band spectrum assets, not least in the leverage he could obtain over Ligado’s efforts to become a competing source of terrestrial spectrum to DISH in the US.
There remain other possibilities, but these seem less likely to emerge in the near future. EchoStar could build out a terrestrial network to meet the buildout deadline for DISH’s AWS spectrum holdings, and lease it to DISH, but it would be odd to announce that before the incentive auction has finished. EchoStar also changed the disclosure about new business opportunities in its SEC filings earlier this year, noting that:
Our industry is evolving with the increase in worldwide demand for broadband internet access for information, entertainment and commerce. In addition to fiber and wireless systems, other technologies such as geostationary high throughput satellites, low-earth orbit networks, balloons, and High Altitude Platform Systems (“HAPS”) will likely play significant roles in enabling global broadband access, networks and services…We may allocate significant resources for long-term initiatives that may not have a short or medium term or any positive impact on our revenue, results of operations, or cash flow.
However, this new language appears to have related to Ergen’s discussions about a partnership with Google, which I noted previously, and Google appears to have opted for an alternative path for its wireless broadband buildout, with its recent acquisition of Webpass.
As a result, I think EchoStar is likely to push forward with its satellite broadband efforts in the next month or two, presenting a serious challenge for ViaSat. That means its certainly not the case, as Jefferies wrote in its coverage initiation on ViaSat today, that “ViaSat-2/3 will give [ViaSat] the best bandwidth economics in the world (for now) and a de facto monopoly in residential broadband”. Indeed, I’d predict that although ViaSat will undoubtedly grow its satellite broadband business in North America very substantially (by as much as a factor of two) over the next 5 years, its extremely unlikely to pass EchoStar in the total number of subscribers, especially given the lead to market that Jupiter-2 will have over ViaSat-2 during 2017.
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