Eutelsat expands ViaSat JV, shrugs off Sky going dishless

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WASHINGTON — Satellite fleet operator Eutelsat says it sees “absolutely no impact” from British broadcaster Sky’s new satellite-free U.K. television product, and that it is GEO, not LEO, that will prove to be the most effective means of connecting underserved populations today.

Rodolphe Belmer, chief executive of Paris-based Eutelsat, also told investors Feb. 9 that the company’s joint venture with ViaSat, first announced exactly a year ago with the expectation of closing in the following quarter, is days away from completion — with a much larger scope than originally planned.

Belmer said Eutelsat is slowly adding new business to its Hot Bird broadcast neighborhood, and is poised for greater growth in residential and mobile connectivity while demand for fixed data services continues to contract due to pricing pressure.

Addressing the elephant in the room

Belmer said Sky’s decision to launch a dishless television service in the U.K. is only evidence of the continued growth of Over-the-Top, or OTT, broadcast services and not a signal of satellite’s fading importance. Major OTT product launches in Italy, France, Poland and Greece happened without leaching significant numbers of customers away from satellite, he said. Eutelsat doesn’t expect the case to be any different in the U.K.

“As announced very well by Sky, the objective of those new set top boxes is to reach the very dense urban areas where satellite dishes have not been able to penetrate in the past because it is very difficult to install the dishes in very big buildings, meaning that it doesn’t target the satellite market, but rather the high density population areas which are typically covered by cable and fiber,” Belmer said.

Eutelsat’s broadcast business, which accounts for 64 percent of the operator’s total revenue, decreased by 2 percent for the six months ended Dec. 31, a decline Eutelsat said “was fully attributable to lower revenues in Professional Video” services as stadiums opted for fiber over satellite. The operator counted 6,339 channels broadcasting on Eutelsat satellites, of which Belmer said 1,055 are part of the operator’s Hot Bird satellite neighborhood over Europe, the Middle East and Africa (EMEA).

Belmer said satellite broadcasting continues to grow everywhere in the world despite the fast-paced uptake of OTT globally. Satellite’s market penetration continues to grow in these regions too, he said. The reason, according to Belmer, is that to reach large audiences, satellite’s point to multipoint architecture still reigns as the most efficient means of sharing content.

“Through OTT, distribution of content is a variable cost; through satellite it’s a fixed cost,” he explained. “It would be very detrimental for pay-TV operators like Sky to switch from [Direct-to-Home] DTH to OTT because their cost of transition would be multiplied by a significant factor, and that’s why we are pretty confident that the bulk of the distribution of content by pay-TV operators will remain through satellite.”

ViaSat joint venture includes splitting ViaSat-3 EMEA satellite cost

Belmer said Eutelsat will be paying for 51 percent of the cost of ViaSat-3 EMEA, the second of three large Ka-band satellites ViaSat is designing to have 1 Terabit per second of throughput each. Eutelsat will pay $331.5 million of the $650 million cost of the second ViaSat-3 satellite, an expense Belmer said the company will meet without raising its 420 million euro ($447.5 million) capex guidance. He said the 132.5 million euros ViaSat agreed to pay for 49 percent of Eutelsat’s KA-SAT is earmarked to go toward Eutelsat’s investment in ViaSat-3.

“We will close the planned joint venture with ViaSat in the coming days with a wider scope, now covering both broadband and mobility in Europe, and we are expecting to add [the] ViaSat-3 HTS satellite to accelerate growth in the connectivity vertical in the EMEA region from the early 2020s,” Belmer said.

Belmer said the joint venture will now include aeronautical connectivity and other mobility services, along with residential connectivity. He said Eutelsat completed an initial technical assessment of what he referred to as ViaSat-3’s VHTS, or Very High-Throughput Satellite technology, that convinced the company to expand the partnership to a larger geography.

Taking on the LEOs

Thanks to capacity secured on Yahsat’s Yahsat 1B and future Al Yah 3 satellite, Belmer said Eutelsat is creating its Konnect Africa satellite broadband program on almost the same schedule as before with Spacecom’s Amos-6. Borrowing language similar to O3b Networks, Belmer emphasized the need for satellite to achieve fiber-like levels of cost and speed. However, Belmer disagreed with the notion that non-geosynchronous, particularly low-Earth orbit systems are the obvious ways to reach unconnected populations.

“What they want is high speed internet, [and] high bandwidth, and only geostationary satellites, which are big factories to produce the megabits, are capable to do that at a cost which is affordable by consumers, and with VHTS satellites we will be able to deliver what we call a fiber-like benefit at a fiber-like price,” Belmer said. “This is very new, and this is what is going to unlock the mass market.”

Belmer said VHTS will enable throughputs exceeding 30 Mbps, possibly climbing to 100 Mbps. Eutelsat remains steadfast in its conviction that geostationary is the place to be while many of its competitors pursue other orbits in tandem. Intelsat partnered with OneWeb in January 2015 to provide LEO services combined with GEO once OneWeb’s 648-satellite constellation is operational; SES purchased O3b Networks in May 2016 to provide Medium Earth Orbit (MEO) and GEO services; and Telesat is building its own network of 117 small satellites. ViaSat as well has filed with the U.S. Federal Communications Commission to operate Ka-band satellites in MEO.