Eutelsat, ViaSat Expand Broadband Plans

[Satellite News 1-15-07] Eutelsat’s satellite broadband plans have gained momentum last week, as the company announced plans to procure a dedicated Ka-band satellite in conjunction with ViaSat Inc., which is also ordering a Ka-band spacecraft.
    EADS Astrium will manufacture Ka-Sat, the first all-Ka-band satellite for Eutelsat, the satellite operator announced Jan. 8. The spacecraft is scheduled to be placed into orbit in the 2010 third quarter to provide consumer broadband services across Europe and the Mediterranean basin. The procurement of the satellite and associated ground system is part of the investment objective Eutelsat laid out in October. Space Systems/Loral (SS/L) will build ViaSat-1 for ViaSat. The spacecraft, intended to serve the North American market, is planned for launch in 2011.
      “We are crossing a new frontier to a specifically designed infrastructure for interactive consumer services,” Giuliano Berretta, chairman and CEO of Eutelsat, said in a statement. “… Through the satellite infrastructure programs announced today by Eutelsat and ViaSat and the collaboration between our two companies, consumer satellite broadband is making exciting progress in terms of efficiency and competitiveness and can have a substantial impact in resolving the digital divide. More than 15 million homes in Europe and as many in North America will still be beyond range of terrestrial broadband networks in 2010.”
    Eulelsat also unveiled a contract Jan. 15 with Swisscom to expand Eutelsat’s Tooway satellite broadband service throughout Switzerland. Tooway provides consumer broadband satellite service, via Ka-band capacity on Eutelsat’s Hot Bird 6 satellite as well as Ku-band capacity on the Eurobird 3 satellite and will be deployed by Ka-Sat once the spacecraft is in orbit. The service, which debuted in Germany is based on ViaSat’s SurfBeam Docsis two-way broadband satellite system and already has been expanded into France, Spain and Bulgaria using in-country partners.
    Ka-Sat will be the first all Ka-band European satellite, and will help Eutelsat reduce costs as well as allow the satellite operator to cater for demand where it is strongest, Jean-François Charrier, vice president of marketing and institutional relations, telecommunication satellites at Astrium. “The 80-plus narrow spot beams provide very high signal performance, increasing the efficiency in each cell for the communication,” Charrier said. “They can operate with cheaper and simpler terminals, reducing costs per bits transmitted. We offer a flexible assignment of power to each beam to adjust to market demand, so the operator can adapt the spacecraft to where the market will materialize.”
    Charrier hinted that technology progress means the cost of building such satellites is dropping. “This deal is definitely a breakthrough for us compared to everything that has been procured in Europe,” he said. “Compared to other Ka-band multibeam satellites ordered so far, we are using a payload architecture and technology which makes things cheaper for operators. We have been able to provide Eutelsat with a satellite able to operate more than 80 spot beams, with a flexible payload, enabling a low cost of capacity in orbit, compatible to a successful business plan for them.”
    Eric Beaudet, a satellite equity analyst at Natixis Securities believes Eutelsat is making a smart move by investing in a dedicated Ka-band satellite, although he believes it will take time for Eutelsat to grow the market. “If broadband does not pick up that fast, they will be able to broadcast TV from the satellite, so they have a back-up plan,” he said. “And if their broadband does really pick-up, it is a satellite that will be able to generate a lot of revenues. I think that satellite broadband will pick-up well, but I think ultimately it will take some time. I really don’t think it is going to pick-up fast in the first two-to-three years. You need to educate the customer. You need to gain a critical mass. It is going to take some time.”
    Sarah Simon, a satellite equity analyst at Morgan Stanley believes the move is indication that Eutelsat is being more aggressive in the satellite space than rival SES Global. “While there have been previous abortive attempts to commercialize broadband via satellite in the consumer market, the difference now is that CPE costs are far lower and service prices comparable to alternative broadband offers,” she said in a Jan. 14 research note. “Eutelsat’s commitment to a dedicated Ka-band satellite (rather than a Ku/Ka hybrid) marks the company out as the more aggressive player in this space, we think.”
    Simon believes SES may be taking a more cautious approach because the operator has been aggressive in the past with broadband offerings and failed. “We believe this was primarily because the market was not yet sufficiently developed and the cost of in-home hardware punitive. This may have meant that SES is slightly more reticent to commit to an all Ka-band satellite until the demand for broadband via satellite in Europe is proven,” she said.
    While Simon believes the Ka-band investment could position Eutelsat strongly if there is an increase in demand for satellite broadband, there is a risk involved. “If demand for broadband via satellite in Europe is strong, Eutelsat is probably better positioned, as it has now begun the process of securing additional capacity that would be required in such an event and the type of capacity that potentially has more attractive economics,” she said. “If, on the other hand, satellite via broadband is not as large a market as anticipated, the investment in Ka-Sat, which we estimate at 265 million euros ($393.5 million), may end up making a very low return as the alternative uses for this satellite are likely to be more limited.”