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Intelsat Strikes Key U.K. Broadband Deal

By | June 7, 2004

      Intelsat reached a key agreement to let it tap the potentially lucrative U.K. broadband market. The company’s deal calls for it to forge a partnership with BT Broadcast Services (BTBS), which will be launching a new satellite broadband service in the United Kingdom.

      John Stanton, president of Intelsat’s data carrier and Internet business unit, told Satellite News in an exclusive interview that the deal was significant because it showed there were still broadband opportunities in the U.S. and in other highly developed markets.

      “The deal with BT is a timely reminder that even in countries like the U.K., which many people considered to be fully wired up, there are significant parts of the population that don’t have access to broadband terrestrially and probably won’t have in the foreseeable future,” Stanton said. “After all, if the U.K. needs satellite-based broadband, show me a country that doesn’t.”

      The deal, signed June 2, will see BT launch a two-way, high-speed service to users throughout the U.K. Intelsat will manage the turnkey network, which includes capacity on Intelsat’s satellites and use of its teleport in Germany.

      Jonathan Wing, head of satellite broadband at BTBS, said, “We chose Intelsat because of its extensive satellite experience, commitment to service quality, and willingness to work with us to customize this offering to our specific needs.”

      BTBS will provide a fully managed service to ISPs and Other Licensed Operators (Oleos) on behalf of their customers, including installation and ongoing support via a dedicated customer support network. The service uses a managed satellite network provided by Intelsat as well as a focused Ku-band spot beam. The first ISP to offer the service will be BT’s Retail division. Two packages will be offered on a wholesale basis: Satellite Broadband 500 Late at $86.50 a month per user and Satellite Broadband 500 Plus, which starts at $158.30 a month per user. Equipment prices start at $1,288, with standard installation costing $460.

      BTBS could extend the service into Western Europe if the U.K. operation proves to be a success.

      Grab Attention

      Stanton believes the deal could give the company a boost in the satellite broadband space, adding, “It is certainly a significant deal for us. BT is a large and experienced player in telecom, and it has specific expertise in satellite communications. The fact we were able to present a solution and go into this new aspect of our commercial relationship with BT is important. It is a deal that will grab some attention and assist the efforts that we are making globally to rollout satellite based broadband services. This deal is part of the overall traction that we are starting to develop in broadband services.”

      Other than the United States, additional geographic regions exist where Intelsat could provide broadband services.

      “We do have commercial broadband networks running in Africa and in Latin America, and we are starting up in Saudi Arabia with another major player,” Stanton said. “This is certainly part of the beginnings of the growth we are seeing more generally for this service. In terms of satellite broadband, we see opportunities elsewhere in Asia, and also in Eastern and Western Europe. The Middle East is another area where there is potential for satellite-delivered broadband services to take root.”

      Despite its undoubted potential, satellite broadband has proved a difficult market to crack. Stanton admitted, “If broadband via satellite was a slam dunk, we would be in a different situation. You would have seen more rapid rollout.”

      Stanton had hinted about the BTBS deal during the recent Media cast show in London, where he spoke about the growth opportunities for Intelsat in the data and Internet arenas. Satellite broadband remains a key growth barometer for the company. In terms of how it’s broadband business is developing, Stanton said, “To date, our activities in broadband have been focused on Small Medium Enterprises (Sees), and small office and home office (SOHO) types of clients. That continues to be the primary focus, although we are also addressing corporate customers to a lesser degree. There are a lot of Sees and Shoos in those markets, including the major European markets, and a sizeable portion that do not have access to terrestrial broadband. So, we still believe that segment is well and truly worth addressing.”

      New Trends Emerging

      However, trends are emerging which offer the company new opportunities. Stanton added, “One of the other trends we are seeing is an emphasis on secure communications, be it for government agencies, police and so forth. We are seeing these type of opportunities emerge in Europe and elsewhere.” Satellite-based networking inherently is secure and, increasingly, agencies place great stock in being able to manage their network and ensure their security.

      “There is also a push in many countries around education and the ability to ensure that all students, irrespective of where they live, have access to the types of advantages that flow in an educational sense from having broadband access,” Stanton said. “I think that will continue to be a strong push.”

      The company’s business model in this area has evolved significantly in the last few years. The direction is now toward managed solutions. During the last few years, Intelsat’s customer base significantly increased in the data and Internet space.

      “We have had to develop new applications and solutions and, to a degree, a new customer base,” Stanton said. “We have something like 600 customers today, which is approximately double what it was five to six years ago. We have seen a lot of new carrier players and cellular players come on to the system, but also a global base of ISPs that we weren’t servicing directly five years ago. Our GlobalConnex service has more than 120 operating wholesale customers around the world. It has started to become a more significant part of our overall story.”

      Cellular Opportunities

      But, while satellite broadband could be a strong growth opportunity for the company, Stanton also believes other areas, like cellular backhaul, could be revenue drivers. Intelsat has been working with new players in underdeveloped but liberalizing markets. The company aims to provide a solution to solve even the most complex of mobile infrastructure issues.

      “There is a forecast that there will be one billion new cellphone users coming onto networks in the next five years, and they predominantly will be in developing markets rather than in the fairly saturated, major western cellphone markets of today,” Stanton explained. “There is a very good opportunity for us to continue to use satellites for traffic backhaul and extension of cellular networks in developing countries.”

      Cellular Solutions

      Extending these cellular backhaul solutions could lead to significant growth in this area. “The degree of new growth and success will depend in part on the ability to develop solutions for less densely populated areas,” Stanton said. “At the moment, the focus has been on the extension of networks to regional cities and we are working with vendors on ways to package a solution that will be economically viable into smaller and less dense population centers. If we get that right, it expands enormously the addressable market.”

      The deal with BT and others in the pipeline is leading to cautious optimism on the part of Intelsat officials about an overall recovery in the satellite space. On this issue, Stanton explained that more than 2,500 customers from throughout the world attended his company’s recent Global Telecoms meeting in Washington, D.C. The general mood of those in attendance was “palpably different” than what it had been during the past two years, he added.

      “It is clear there were more signs of activity, planning and investment generally than we had seen in recent years,” Stanton said. “That is encouraging.”

      –Mark Holmes

      (Susan Gordon, Intelsat, 202/944-6890)

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