David Williams, Avanti CEO

Avanti Communications Group, the U.K.-based fixed satellite services operator, is preparing for the launch of its HylasOne satellite, which is designed to serve the satellite broadband markets of Europe.
    “The satellite procurement is going reasonably well,” said David Williams, CEO of Avanti. “It is a very complicated satellite. I am very glad that we have passed the critical design review and the technology risks of the program have been retired. So we are now into the last leg, which is a comparatively straight forward process of assembly and test.”
    Williams discussed the operator’s plans for its first satellite and what impact he hopes the operator will have in markets throughout Europe.

Williams: The technology and the markets it was serving before were not ready. I first started looking at this when I was a banker trying to finance early generation projects in the late 1990s. The market was not ready. The demand for broadband is now overwhelming. The penetration rates in the developed economies are now incredibly high. Broadband has almost become utility like in the shape of its demand. People regard it as fundamental. That is a very big evolution in the telecoms market.

Williams: The technology before the arrival of Ka-band services was frankly poor — slow speeds, high-costs and hardware and software that suffered from a lack of standardization. Vendors were unable to make the investments needed to make to affordable, reliable customer premise equipment. Now, those investments have been made, and we are buying modems that are as reliable as cable and ADSL modems. They are being made in the volumes that make it viable for the vendors to invest in them. Ka-band satellites mean you can now sell services to customers at the same price of ADSL or cable, and can provide fundamentally the same service levels.

Williams: We always assumed competition would arrive. I think the satellite business is traditionally not full of commercial innovation. I think the U.S. market has more commercial innovation than others, but the satellite market has not had a lot of commercial innovation for quite some time. That is probably because it has taken on the look and feel of a utility with very attractive high margin and stable cashflows. If you are in a fortunate position to have a business like that, then the incentive to innovate is quite low, so we always felt that once Avanti had proved the business model and technology, that others would follow. We are comfortable with competition here.

Williams: In the United States, there are four Ka-band competitors, three of which have satellites already. They all seem to agree that the market in the United States. is around 13 million customers. We think the market in Europe is 24 million customers, and that is just retail broadband. That does not include for institutional and corporate data, and these are also big markets. So just based on purely rural broadband alone, the market is big enough for 15 to 20 large Ka-band satellites. We were delighted when Eutelsat announced their Ka-band satellite. Eutelsat is very well regarded company in our industry, and the fact they decided to buy a Ka-band satellite somewhat validated some of the assumptions we have been talking about for a while. We believe there is room for everyone. It has worked in America, and they all seem to be happy and everyone is building a business. There are big markets in Europe. I think the demand for satellite Ka-band services will get bigger.

Williams: We have firmed up a new opportunity which is about providing mobile base stations for cellular backhaul. This is a relatively mature market in Africa where satellite has been used for a long time, but that has been driven by the non-availability of any kind of terrestrial backhaul. What we have discovered in Europe is that mobile phone companies have really, within the last year, experienced a dramatic surge in the peak data requirements placed on mobile phone base stations as a result of the uptake of devices such as the new Blackberries and Apple Iphones. Mobile phone base stations that were originally scaled to cope with voice and so provisioned with 2 megabits per second of backhaul now experience peak data demand of 40 megabits per second. Upgrading cable is not economically viable. In many countries, microwave is expensive and there are many licensing issues, so the mobile phone industry seems to have flipped completely from the point we were at a couple of years ago where they were saying, “We don’t like satellite, and there are latency issues for us to the point.” to where they are saying, “We need satellite, and for data transactions latency does not matter.” I believe the advantages Ka-band has will enable us to take a big chunk of this market.