New Phase for Satellite Broadband in United States

By | October 1, 2012 | Telecom

Bloomberg has reported that Dish Network will be offering satellite broadband to its customers sometime this fall. This offering will use EchoStar 17 (previously known as Hughes Network Systems’ Jupiter) to provide broadband service to up to two million Dish Network subscribers. As this was not an official Dish Network announcement much remains unclear. For instance, what does this mean for Hughes? Will they be edged out of the North American satellite broadband business? If Dish is potentially planning to use the entire capacity of EchoStar 17, what will Hughes do to compete with ViaSat? Or is Hughes, like WildBlue before it, to be fully subsumed into the corporate monolith that purchased it? These questions will be answered in time. Even if Dish were talking, these issues would only truly be answered by experience, not by words. The real answer will be if there is a competitive HughesNet offering in a few years.

It is too early to talk about the fate of Hughes or the potential need for further high throughput satellites to reach more of EchoStar’s subscribers (EchoStar has 17 million subscribers, far more than the two million potentially covered by EchoStar 17). The Bloomberg article discusses the possibility of bundled offerings, video and broadband. I believe, however, that this is thinking too small. I think that what we are seeing here is the long delayed response by a satellite video provider to the mammoth changes in the video delivery market we have experienced in recent years. Beyond that we are finally seeing satellite broadband technology live up its initial, late 1990’s hype.

The latest generation of high throughput satellites has enabled satellite broadband companies to compete with terrestrial alternatives for the first time. Although not as good as a truly fast terrestrial connection, satellite broadband can now compete with a good portion of DSL service plans. In order to do so, satellite broadband costs had to come down to the level where they were comparable to the costs of providing the DSL offerings that they compete with. In one way, this means that satellite providers can pick off individual DSL subscribers. Reversing the telescope, however, this means that a satellite-based network is now theoretically competitive with terrestrial alternatives. Consumers do not necessarily opt for the fastest possible broadband; there is a complex interplay between the perceived need for speed, cost, convenience (bundling) and the effort to change providers. It appears that Dish believes that this equation now favors them enough to create this offering.

It is a mistake to see this as a simple expansion of Dish’s business from video-to-video and broadband. The true value of this offering is in the way it positions Dish to compete in a non-broadcast video world. There was a time when people talked about video-on-demand (VOD), now the talk is about over-the-top (OTT) video. In either case the most important feature is that consumers are able to leave the walled garden of broadcast video, in which choices are severely limited (when compared to the total amount of video that has been produced) and explore a much larger video world. No one knows where this evolution will end but in order to play at all, a video provider must have an interactive connection to the viewer. In my opinion, this has always been satellite video’s greatest weakness.

Satellites are a very efficient way to deliver broadcast video to large audiences over large regions, but they completely lack interactivity. With the possibility of large scale, satellite-based broadband networks the same advantages that make satellite broadcast video so powerful now apply to the interactivity that will propel them into the new video age (whatever it may be). Instead of cobbling together a virtual “network” out of various terrestrial Internet connections a satellite-based network will enable satellite video providers to tightly integrate different types of video offerings in whatever package (or packages) proves to be the future of video access.

Video access, not video delivery, is the future for video providers and until now satellite providers were at a disadvantage in this race to the future. If Dish is able to create its own broadband network it will have ensured that it will remain a viable player for the foreseeable future and will have blazed a trail for other satellite video providers worldwide.

Max Engel is an experienced satellite industry and telecom industry analyst and founder of The North Star Consultancy.
He can be reached at maxnorthstar@gmail.com.

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