Alcatel’s Broadband Future
The broadband joint venture between SES Global, Alcatel Space and Gilat Satellite Networks is expected to take the European broadband market by storm. After all, the world’s biggest satellite operator is linking up with a global leader in broadband products and services and a top VSAT provider. In theory, it seems like the perfect way to exploit the undeniable broadband opportunities.
Despite lofty goals, the partners are keeping their feet on the ground. They are initially hoping to gain a 5 percent to 10 percent share of Europe’s enterprise and residential broadband markets that won’t be served by terrestrial-based technologies in the coming years.
In an exclusive interview with Interspace, Alcatel Space CEO Pascale Sourisse says that the venture’s business plan “is certainly conservative.” She adds, “This doesn’t mean that this is the overall objective of the company. What it does mean is that even with very reasonable assumptions, we can reach breakeven in a satisfactory manner.”
Based on these figures, the company expects to hit its breakeven point in 2004 with a quarter million customers. If the demand is there and competition is slow to respond, the venture could be profitable a lot earlier.
In fact, a healthy dose of conservatism forms the backdrop for the joint venture. By setting up a joint venture structure, the companies are spreading their risk. But Sourisse does not agree that this was the primary motivation. “It is not a question of necessarily spreading the financial risk. We saw that it really made sense to address this broadband market to join forces among people who have a strong expertise in services, operations and systems in telecoms and satellite.”
The announcement has been a shot in the arm for SES Global. This venture has given much-needed clarification to its broadband strategy. SES has said it expects to generate 25 percent to 33 percent of its total revenues in 2005 from broadband services. But, have other European satellite players been slow to target this market? Sourisse comments, “I think European players have really prepared their strategy. We needed to reach a point when we had sufficiently low prices, in particular for terminals. We think that the situation is sufficiently mature now to launch those services. I think Europe is taking quite an aggressive position in this market. I expect that this should have an influence on broadband markets in all regions of the world.”
The 200 million euro ($178 million) venture could also mark the beginning of new era of satellite broadband, particularly in Europe. It remains to be seen what impact the venture would have on other satellite operators who want a slice of the broadband pie. “We certainly expect that other initiatives based on similar ideas will be deployed in Europe,” Sourisse says, adding, “We certainly expect to have some competition there. This initiative is the first of a very substantial scale that has been announced in Europe.”
Sourisse says the venture could be a “catalyst for other initiatives as at least this will demonstrate that a few big players believe in this market as we have invested in it. So, I see this as having an acceleration effect on the market. A solution like this is needed to serve the demand, which is already very substantial and cannot be served by terrestrial technologies.”
Alcatel Space will have a 20 percent stake in the venture, making it the minority player. It will, however, still have a critical role. “Alcatel’s key role in this is that of a supplier of solutions,” Sourisse says. “We have put in place those two additional agreements to provide broadband solutions to both the residential market and enterprises. We don’t intend to be the key player in the service part. In the service part, what we intend to do is really to make available our expertise in broadband networks to help this company.”
One of the other key areas for the venture is the partners’ commitment to open standards. Alcatel has inked an agreement with Gilat concerning the development of marketing and sales of a residential broadband product. Alcatel has also announced an agreement with SES Global, focusing on an enterprise solution based on DVB-RCS, the standard used in the provision of two-way interactive broadband services.