ViaSat urges commercial airlines to do the math on satellite connectivity

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PARIS – Satellite broadband services and hardware provider ViaSat Inc. on Aug. 9 sought to deliver a decisive blow to airline-connectivity competitors including Inmarsat, Gogo, Global Eagle Entertainment and Panasonic Avionics.

Sensing that the coming months could be crucial in the competition to sign up airline in-flight-connectivity customers, especially in North America, ViaSat Chief Executive Mark D. Dankberg asked airlines to perform a simple calculation:

Determine how much bandwidth per beam is available for each of the competing services, and multiply that by the number of beams the service plans to devote to its airline customers in a given market.

The resulting “total illuminated gigahertz,” Dankerg said, will be divided among the hundreds of planes likely to be in the air over a given populated airspace such as the East Coast of the United States. Regardless of how good the modem or how big the antenna on the aircraft is, bottlenecks will develop because of the raw amount of bandwidth is available on the satellites whose capacity has been leased by the airlines’ service providers.

Performance in congested areas is key performance metric

“You’re seeing people point out one airplane or two airplanes and say, ‘Look, we can stream Netflix,’ or ‘We can get 100 megabits per second,’” Dankberg said in a conference call with investors, an obvious reference to Chicago-based Gogo Inc. “The real issue is: What happens when you have hundreds or thousands of airplanes in a small number of beams? People are still a little bit confused and so that’s our current campaign.”

Carlsbad, California-based ViaSat as of June 30 had 509 commercial jets fitted with its Exede airline connectivity service using the ViaSat-1 Ka-band satellite. ViaSat-2, with double ViaSat-1’s total bandwidth, is scheduled for launch in early 2017.

Both satellites focus on the Americas and surrounding air and sea lanes. But Dankberg said ViaSat will be able to focus all of ViaSat-2’s bandwidth over the United States if market demand justifies it, enabling the company to offer more than 100 Mbps per plane even when hundreds of ViaSat customer aircraft are flying in the same region.

“Each of the other systems has only about five or six beams in total available to serve the entire U.S. market, and each of these five or six beams has a total throughput of between 50 and a few hundred megabits per second when delivered to an aeronautical mobile terminal,” Dankberg said.

ViaSat-1, he said, currently is capable of delivering 100 Mbps per plane even in high-demand regions and “at each point in their flight,” meaning those high-aircraft-density areas around airports.

With ViaSat-2, he said, this same level of per-plane bandwidth will be assure even if 2,000 or more aircraft are demanding bandwidth simultaneously.

Even if a competing technology is able to deliver 100 megabits per plane, its maximum per-aircraft delivery will be divided by the number of planes passing through the satellite’s beams, resulting in much lower satellite bandwidth available to a given aircraft.

Ku-band high-throughput satellites won’t solve the problem because of the limited bandwidth available on the satellites being used, he said:

“The failure mode here is not that the bandwidth is so expensive, it’s that there’s just not enough of it, resulting in congestion, slow service, limited number of passengers per plane and limited online activities.”

Firm contract with Boeing for two ViaSat-3 platforms

ViaSat is designing a next-generation system, ViaSat-3, aiming at throughput of 1 Terabit per second of total throughput.

In an Aug. 9 filing with the U.S. Securities and Exchange Commission (SEC), ViaSat said that in July it converted a preliminary ViaSat-3 order with Boeing into a firm contract.

Under the contract, valued at $368.3 million, Boeing will build two ViaSat-3 skeletal structures and then integrate onto them the ViaSat-built electronics payloads. The contract includes options for ViaSat to purchase up to two additional ViaSat-3 platforms from Boeing. ViaSat plans to launch the first ViaSat-3 in calendar-year 2019, with the second planned for 2020.

The contract gives an indication of the value of payloads. In May 2013, ViaSat contracted for Boeing to build the ViaSat-2 platform and payload for $358 million.

Zero subscriber growth, but higher per-subscriber revenue

ViaSat’s consumer broadband service in the United States, using the same ViaSat-1 satellite plus the aging WildBlue-1, reported 696,000 subscribers as of June 30 – flat from March 31. ViaSat consumer service growth continues to be stunted by the fact that many ViaSat-1 beams in high-demand regions are full.

But while the subscriber numbers are flat, ViaSat has been able to extract more revenue from each subscriber in addition to increasing the number of planes using the service. Consumer revenue for the three months ending June 30 averaged $60 per month, up 2.5 percent from March 31.

Adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, for the satellite services division was $72 million for the three months ending June 30, up 30 percent from the same period a year ago.