EchoStar Reports Slowdown in Broadband Sign-ups

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PARIS — EchoStar Corp. on Feb. 20 said its Hughes consumer satellite broadband service provider reported a slowdown in net subscriber additions in the three months ending Dec. 31 as it reaches the saturation point on several of its satellite beams.

The company remains focused on coaxing growth from what it calls “the infield,” or those areas of the United States with relatively low broadband penetration, whose satellite beams have plenty of room to handle new subscribers.

Hughes said its North American consumer satellite broadband subscriber count was 977,000 as of Dec. 31, up 1.8 percent from Sept. 30 and an increase of 14 percent from a year ago.

Despite the slowing subscriber adds, Hughes said it increased the average monthly revenue per subscriber again, as it had throughout 2014.

Pradman P. Kaul, president of the Hughes division, said the rate of growth of subscribers in 2015 would again be constrained while the company waits for the Jupiter 2/EchoStar 19 satellite scheduled for launch in 2016 to provide more capacity in regions of highest demand.

Subscriber turnover, referred to as churn, in the three months ending Dec. 31 was about 2.7 percent per month.

But most of those leaving the service were legacy customers of Hughes’ slower-speed broadband service, often served by Ku-band capacity that Hughes leases from other satellite fleet operators. Hughes’ strategy has been to let these customers roll off the service and as they do, Hughes cancels its bandwidth-lease contracts with third-party fleet operators and loads new subscribers onto its own spacecraft.

Subscribers to Hughes’ HughesNet Gen4 high-speed service accounted for most of the new subscribers, whereas most of those leaving were those using the older, lower-performance service.

Jupiter 2/EchoStar 19 is, like its predecessor, a bent-pipe satellite whose beams are fixed, meaning satellite capacity cannot be moved around after launch to accommodate high-growth areas.

Kaul said that subscribers leaving Hughes were not moving to rival ViaSat Inc.’s Exede service. They are mostly those in neighborhoods where fiber or cable service has arrived.

Kaul said Hughes’ call center personnel have been trained to dissuade prospective customers from cable- or fiber-served homes from adopting the satellite service to avoid future disappointment with data volume caps.

Hughes has been attempting for several years to export its North American consumer broadband model. In 2014 it leased the entire Ka-band capacity on Paris-based Eutelsat’s 65 West A satellite, to be launched over Brazil in 2016, for 15 years.

The Ka-band capacity — 16 beams and 25 gigabits per second of total throughput — is enough to accommodate 300,000 Brazilian subscribers, Kaul said, a goal he said should be reached within two or three years of the service’s start. “Eutelsat 65 West will be our springboard into Brazil,” Kaul said.

Michael T. Dugan, chief executive of Englewood, Colorado-based EchoStar, said the company continues to have surprising difficulty in finding a partner to begin a satellite television service in Brazil but that the effort would continue.

EchoStar is moving into the European satellite services market with the launch, in early 2016, of the TerreStar-2/EchoStar 21 S-band satellite for satellite-terrestrial mobile communications.

In a Feb. 20 filing with the U.S. Securities and Exchange Commission, EchoStar said that in December it purchased, for $55 million in cash, the rights to TerreStar-2 held by EchoStar’s sister company, Dish Network.

EchoStar has not fully disclosed its business strategy for TerreStar-2, which will be operated by Solaris Mobile of Dublin, which has an existing satellite in orbit that has not generated much business.

EchoStar and Inmarsat of London will both deploy S-band satellites in 2016 under licenses issued by the European Commission. How much direct competition they will be for each other is not clear.

As did Inmarsat and Solaris Mobile before the EchoStar purchase, Dugan said EchoStar faces the “daunting task” of securing regulatory approval from every nation in Europe where it intends to operate — which means all 28 nations of the European Union. “We’re in the early stages of meeting with all the countries,” Dugan said.

The Solaris business model seeks to use the license for S-band satellite spectrum to deploy a complementary network of ground terminals to permit the mobile service to be usable even in areas beyond the satellite’s reach. How many ground terminals the EchoStar/Solaris service will need, and who will pay for them, has not been made clear.