SES Americom got a shot in the arm recently with announcement of a deal with EchoStar Communications to provide satellite capacity to the U.S. direct broadcast satellite (DBS) operator on its AMC-15 satellite. This is seen as a first step in bringing a European wholesale model across to the United States. The operator is attempting to deploy a wholesale model similar to what SES Astra has deployed in Europe, with its ‘Americom2Home’ initiative. Also, with the U.S. satellite landscape changing because of News Corp’s effort to buy a controlling interest in Hughes Electronics and its DirecTV unit, it promises to be a challenging year for SES Americom. In an interview with Interspace Senior Editor Mark Holmes, SES Americom CEO Dean Olmstead talks about transplanting the European satellite television model to the United States and the changes that News Corp’s entrance into the U.S. market may bring about.

Interspace: When we spoke last year [Interspace issue 743], you had doubts about whether the satellite TV wholesale model in Europe would work in the U.S. A year down the line, are you more confident that this model will be a success in the U.S. market? Can you give us an update on how these plans are developing?

Olmstead: I didn’t really have doubts about the model. I think what I tried to convey was that I had no certainty that the model would work in the U.S., and we needed to go and test it in the U.S. market, and see whether it would take hold or not. I was optimistic. We have been putting a lot of energy behind those efforts in the last year, and I would say there are a lot of reasons for increased optimism. The model, which we call Americom2Home, while a little bit different, is not dramatically different than the very successful Astra business [in Europe]. If you think about it, Americom supported PrimeStar from its inception. That was the first satellite multichannel platform in the U.S. and it did achieve 2 million subscribers. It fell apart because of some ownership issues, otherwise it was a successful programme. What we have done in Europe as Astra, and the aspect that is a bit different from the existing DTH [direct-to-home] business in the U.S., is that the platform is more open. The platform is not vertically integrated, making it easier for content providers to control more of their own destiny, which we see as something that will be attractive to them. No doubt you have seen that the BBC has opted out of Sky’s DTH platform. That desire for independence is exactly the trend we see from customers here in the U.S. and reinforces our confidence in the opportunity for Americom2Home.

Interspace: You say there are reasons for increased optimism. What are these?

Olmstead: We see very clearly that both the incumbents and new entrants into the DTH market would require capacity, and could be potential customers. Our recently announced long-term agreement with EchoStar for the Ku-band and Ka-band payloads on the upcoming AMC-15 satellite indicates that our thinking was on the mark. At this time, we are in quite a number of discussions with people who are serious about leasing capacity from us to start new services at both 105 degrees and 85 degrees where we will have multiple DTH compatible satellites. We are not intending, with our Americom2Home to launch, a third DTH platform [in the U.S.]. It is not our primary thrust to develop a programming and/or retail service that competes directly with EchoStar or DirecTV. Nor is it our intention to own the subscribers. But, what we intend to do is put capacity into the market that can be utilised to offer new DTH services, in addition to what is offered today. The subscribers will be owned by their service providers and not by us.

Interspace: When do you hope to make announcements in terms of content partners for the Americom2Home platform? How difficult will it be to sign deals with content providers in order to get the programming you need to make this model work?

Olmstead: At the end of March we announced that EchoStar would begin to use the AMC-15 satellite when it becomes operational in the third quarter of next year. In addition to EchoStar’s interest, others have expressed a tremendous appetite for our DTH compatible bandwidth. Today, Americom has C-band deals with many of the pre-eminent content providers that distribute to cable headends. There are issues we have to satisfy with them regarding the technical platform for A2H, for example, what conditional access system would be available to them. We are working to get everyone somewhat aligned around that, clearly one of the challenges of not being vertically integrated. With a more open structure, we have to be careful and responsive in terms of our selection of the technical platform. That is part of what we are doing now, getting alignment behind a particular approach.

Interspace: How do you view News Corp efforts to enter the U.S. market?

Olmstead: It’s great for the market that News Corp seems to have made a successful offer for GM’s interest in Hughes Electronics and especially for DirecTV. News Corp’s acumen for the DTH business has been demonstrated in many regions. They have been very smart in terms of their interactive and programme-packaging strategies. They are trying things out, being very responsive and perhaps most importantly, they are making money. One of the reasons News Corp wants DirectTV is to make sure that Fox has adequate control over its distribution channels.

In terms of their interactive strategy – News Corp’s service in the UK is a tremendous example – they have successfully adapted the interactive service so that it can contribute significantly to revenues. I do believe there is plenty of room for that in the U.S. DirecTV and EchoStar have each kind of poked at it, but it hasn’t been a central focus yet. The time is just about right. As you know, SES is partnering with ESA [European Space Agency] to develop Satmode to provide a new technology for low-cost, low-rate return interactive services so that the end user will not be dependent on terrestrial systems. So, certainly News Corp may be the right player to bring a sophisticated interactive service into the market and get it right.

SES supports News Corp’s distribution in both Europe and Asia, and Americom hopes to find ways to assist News Corp as they work to realize the full potential of their U.S. DTH service ambitions.

Interspace: Are you facing any interference issues with the satellite planned for the 105.5 degrees W position? How have your discussions gone with DirecTV in terms of resolving these technical issues?

Olmstead: Americom2Home should not be confused with the 105.5 degrees West satellite. That is a BBS [broadcast satellite service] slot, a particularly frequency we are trying to add to the mix, but it is only one of several potential satellites. The first satellite is AMC-15 planned to operate right next store at 105. We want to build on the 1058 West neighbourhood and replicate to some extent our 19.2 or 28.2 degrees slots in Europe where we have multiple satellites operating in multiple frequency bands at the same orbit slots. So, the 105.5 degrees is an extension – we have an RFP out on the street now for a satellite called AMC-14 for that slot. We already have the licence from the UK to use the BSS slot, but we need the landing rights in the U.S. In any case, Americom2Home will proceed and AMC-14 will augment the capacity and enable continued growth. DirecTV has been trying to block our BSS development by using a lot of procedural activities. From a technical perspective, the data supports co-existence with 4.5 degrees spacing; we operate at 4.5 degrees in other parts of the world. The fact the U.S. is still at 9 degrees spacing has more to do with a variety of historical factors, than it does with current technical reality. We are sure that the two [DirecTV and Americom] can co-exist. But, DirecTV does not want the competition. So, they continue to try to block us with procedures. In March, we had a meeting in Bermuda with the FCC [Federal Communications Commission] and the UK RA [Radiocommunications Agency] and the operators. We feel as though we made some headway, and hopefully by the next meeting in May, we will be able to get down to some more concrete substance.

Interspace: Could you explain SES Americom’s Ka-band strategy? Do you believe Ka-band is making a comeback?

Olmstead: SES was one of the first operators to offer commercial Ka-band services on our Astra 1H satellite in Europe. We would have had an extension of that on Astra 1K if that had been a successful launch. The AMC-15 satellite that Americom will put into 1058 W has a Ka-band payload on it. We are taking somewhat the same approach that we have taken in Europe, and that is, it is an incremental investment in Ka-band. Technically, the AMC-15 Ka-band payload is a bit larger and more flexible in its usage than the one in Europe, but the business concept is the same. It can support upwards of half a million residential broadband subscribers, so it is pretty significant even though it is an incremental payload. We think it is the right mix of being aggressive, in the sense of approaching the market place and making an opportunity available, but also being prudent and not over- committing.

Interspace: What do you make of alternative systems such as WildBlue, which is backed by an impressive set of investors?

Olmstead: We think we have a couple of advantages over WildBlue. Firstly, we have all the other spectrum available at 105 degrees W to offer video services so there will be an attractive video and broadband offering into a single antenna feed. WildBlue plans to operate from two different slots, with the potential Loral satellite and the Anik F2 [Telesat] spacecraft, so they require multiple antenna feeds. WildBlue doesn’t have any clear video bundle arrangement yet. We don’t see how standalone broadband can be as successful as one, which is bundled, or is a hybrid between broadband and video. Having broadband and video at the same orbital location is a key aspect for us. The other problem WildBlue faces is that they will have a lot of dedicated assets. If they launch this Loral satellite, they have to make it work. For us, I don’t want to say it is irrelevant, however if AMC-15 Ka-band isn’t successful, it would be incidental. It is more than an experiment, but it is not the lifeblood of the company. In WildBlue’s case, it is.

Interspace: What is your view of Hughes Network Systems’ SpaceWay broadband project?

Olmstead: It is an awesome satellite [system] – what a killer. The question is do you really need to spend $1.8 billion to build a satellite [system], and what is the value- added proposition that you get for that investment? Much like being able to build and complete the WildBlue satellite, building satellites is just a small part of the problem. The big part of the problem is having a compelling value proposition and driving it in to the market place and being able to handle the distribution. In SpaceWay’s case, the CPE [customer premise equipment] is enormously complicated and expensive. This is why AOL gave up on it. It is a tremendous machine, but is it what the market place is demanding? Does it give enough value that people are going to be willing to pay the prices necessary to support it without some kind of financial restructuring? We wish them every success. We believe that if SpaceWay survives, it will be in a different market segment than ours and WildBlue. The AMC-15 and WildBlue satellites are technically bent pipe satellites. What that means is that they are optimised for network access, that is the residences require simple broadband connections back into the network. What SpaceWay is optimised for is point-to-point between remote locations. So, it is really optimally configured for big corporate networks that can’t get fiber. That is not the market we operate in. We don’t see it as terribly compelling, but that is where they have to be successful if SpaceWay is gong to make it. It is not a residential play.