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ViaSat Boosts R&D to Build ViaSat 3 Payloads in-House

By | May 25, 2016
      ViaSat Headquarters

      ViaSat corporate headquarters in Carlsbad, Calif. Photo: ViaSat

      [Via Satellite 05-25-2016] ViaSat expects to spend close to $100 million on Research and Development (R&D) throughout its fiscal year 2017 dedicated to developing the high capacity ViaSat 3 satellite system. The Ka-band satellite system, first announced in December last year, consists of three terabit-level spacecraft, with the first covering the Americas and the second covering Europe, the Middle East and Africa.

      While Boeing is the manufacturer for the first two ViaSat 3 satellites, ViaSat is taking on much of the work itself. The company is pursuing an unconventional approach to satellite procurement, opting to build the payloads for ViaSat 3 in-house in its own facilities. This is driving R&D expenses up by approximately 50 percent, with aeronautical being the other main area of increased R&D investment.

      “We believe it’s extremely difficult to [obtain] the kind of technology needed to reach this kind of productivity without the level of vertical integration we have achieved,” Mark Dankberg, chairman and CEO of ViaSat, said May 24 during a conference call accompanying the company’s 2016 fourth quarter and year end financial results. “It requires close coupling of multiple technology and business domains in ways that are not practiced by incumbent satellite operators, satellite manufacturers or other members of the existing business ecosystems. We started this journey years ago, and we’ve got a systematic approach to burning out technical and systems risks.”

      Boeing is providing the payload framework for ViaSat to build the payloads into. Dankberg has previously mentioned ViaSat’s work building payloads with Thales Alenia Space for Iridium Next as providing valuable experience. In a previous interview with Via Satellite, he described mass-producing the payloads as akin to achieving the economies of scale pursued by Low Earth Orbit (LEO) systems, but without the need for production of other technologies such as propulsion or solar arrays.

      “We just recently opened our new Arizona facility that includes a clean room high bay for assembling two concurrent ViaSat 3 payloads. Initial market reactions to the ViaSat 3 constellation have been very encouraging. We continue to make progress with multiple potential partners as well as users for the system,” he said.

      Dankberg said payload flight hardware builds will be capitalized investments, while pre-flight hardware builds and tests will be expensed. He said that because pre-flight hardware expenses are “front loaded” in the overall ViaSat 3 program, the company will be incurring a large portion of these costs in fiscal year 2017. ViaSat is bearing more of the R&D costs associated with new satellites than a typical company because of its much more involved approach. Dankberg stressed that this more invested strategy is critical to bringing improved bandwidth and coverage at an accelerated rate.

      “We believe there is a Moore’s Law type learning curve effect we can leverage to gain even more separation from other satellite systems and operators, and with the launch of ViaSat 2 now approaching, we are seeing a smooth segue from optimizing the applications of ViaSat bandwidth, to a rapid growth driven by leveraging our superior bandwidth economics across a footprint that will triple in total bandwidth inventory, and with substantially greater geographic coverage,” he explained.

      ViaSat 2, the company’s soonest to launch spacecraft, is now within seven months of its Ariane 5 mission. The next generation High Throughput Satellite (HTS) has roughly twice the capacity and seven times the coverage of its predecessor, ViaSat 1, deepening the company’s presence in North America and expanding to include parts of Latin America down to Colombia and Venezuela, along with transatlantic coverage to Europe.

      Dankberg said the construction of ViaSat 2, which Boeing is also building, is progressing steadily. The satellite is almost fully integrated, and will soon undergo thermal and vibrational testing in preparation for launch. ViaSat is also close to completing insurance at what Dankberg described as “favorable rates.” Having switched from launching on the yet-to-fly SpaceX Falcon Heavy, Dankberg previously mentioned launching with Ariane 5 as improving insurance costs. The satellite is expected to create lots of new business opportunity by providing growth capacity.

      “We think the skills we’ve been refining on ViaSat 1 will serve us very well with the bandwidth abundance on ViaSat 2. We expect to be able to grow our addressable consumer markets by offering plans with even higher speeds and virtually unlimited bandwidth without hard usage caps. We are also aiming for more growth in In-Flight Connectivity (IFC), enterprise services, government, and to begin to grow in new markets including Wi-Fi, maritime, oil and gas, and Ka-band general aviation,” said Dankberg.

      During fiscal year 2016, ViaSat reported record revenue of $1.4 billion, along with record awards of $1.5 billion. Two of the company’s divisions, satellite services and government systems, saw record quarterly highs of $145 million and $164 million respectively. Commercial networks declined 26 percent for the quarter year over year, which ViaSat attributed to the winding down of work with Australia’s NBN Co. ViaSat’s consumer subscriber count grew 2 percent year over year to 697,000, and the company’s total number of connected commercial aircraft reached 476. Total revenues for the quarter were $372 million.

      Dankberg said ViaSat intends to offer plans and services to subscribers with ViaSat 2 that allocate more bandwidth per subscriber than provided today. Though subscribers shifting from ViaSat 1 to ViaSat 2 may cause the former satellite’s fill rate to decline, he said the combined number of subscribers is expected to grow meaningfully. Dankberg dismissed concerns that weakness seen in the revenues of other Fixed Satellite Services (FSS) operators might translate to ViaSat as well. Instead he pointed to massive jumps in capacity matched with concomitant drops in pricing as creating a much larger addressable market, thus justifying future investments.

      “People in the industry sort of looked at ViaSat 1 as an outlier … ViaSat 2 expands that coverage, but with ViaSat 3, we should be everywhere. We are seeing a lot of interest for bandwidth priced at the types of levels that we can with those satellites. So this notion that there is no elasticity of demand or not much, I think it’s really just a question of how sensitive people are to price,” he said.