EchoStar Warns ViaSat-SSL Patent Dispute Could Impact Echostar 19

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PARIS — EchoStar Corp. on May 9 warned investors that the use of its EchoStar 19 Ka-band broadband satellite, now in development, may be affected by the patent litigation between EchoStar competitor ViaSat and EchoStar 19 builder Space Systems/Loral (SSL).

In a conference call with investors, EchoStar Chief Executive Michael T. Dugan said any possible effect on the satellite’s construction or use would need to await developments in the lawsuit between ViaSat and SSL.

A California District Court jury has awarded ViaSat a damages settlement, but ViaSat’s request for an injunction against SSL’s alleged ongoing violation of ViaSat patents will be subject to a separate court decision, which could come as soon as this summer.

EchoStar 19 is a high-throughput Ka-band satellite intended for EchoStar’s HughesNet consumer broadband business in North America. It is scheduled for launch in 2016.

The same issue may present itself with the Eutelsat 65 West A satellite, under construction by SSL. EchoStar has leased the full Ka-band capacity for this high-throughput satellite — 24 gigabits per second of Ka-band throughput — and plans to deploy a consumer broadband service in Brazil. Whether it employs any of the technologies patented by ViaSat is open to question.

EchoStar is financing development of the Ka-band payload on Eutelsat 65 West A through quarterly payments during the satellite’s construction, EchoStar said in a May 9 submission to the U.S. Securities and Exchange Commission.

Dugan said EchoStar continues to plan for a direct-to-home satellite service in Brazil, for which the company purchased rights to a Brazilian orbital slot, but that the search for a partner in the venture has not yet found anyone. He said EchoStar is nonetheless making the necessary preparations with ground installations in Brazil to be ready in the event a partner is found.

EchoStar recently ordered the EchoStar 23 satellite from SSL that will be adaptable to eight EchoStar satellite orbital slots, including one over Brazil. This Ku-band satellite will be using a satellite skeletal structure, or platform, that was originally built for an EchoStar S-band mobile communications venture in China.

The deal with the Chinese collapsed and the satellite, called CMBStar, has been in storage at SSL, virtually complete, for about six years. EchoStar 23 is scheduled for launch in 2016.

Another satellite that is virtually completed at SSL is TerreStar-2, an S-band mobile communications satellite originally intended for a now-bankrupt company. Dugan said Dish Network, EchoStar’s sister company, has ordered that the satellite be completed.

TerreStar-2 is scheduled for launch in 2016 for EchoStar’s Solaris Mobile operation in Europe. EchoStar purchased Solaris from European satellite operators SES of Luxembourg and Eutelsat of Paris, which abandoned their joint venture after encountering difficulties in finding partners to develop the ground infrastructure.

EchoStar’s Hughes division reported that its North American consumer satellite broadband business grew its subscriber base by 6.2 percent in the three months ending March 31, to 914,000.

It is this Hughes business that competes directly with ViaSat. Both companies are using nearly identical SSL-built satellites, which was the cause of the ViaSat lawsuit. EchoStar and Hughes are not parties to the ViaSat-SSL lawsuit.

EchoStar Chief Financial Officer David J. Rayner said the Hughes consumer broadband business reported increased profit margins as well as subscriber growth. The Hughes division reported revenue of $314.8 million for the three months ending March 31, up 8.8 percent from the same period a year ago.

Pradman P. Kaul, president of the Hughes division, said the consumer broadband business is growing at about the pace the company had forecast, but he cautioned that there are seasonal ups and downs. Historically the consumer broadband business grows fastest early in the calendar year and then dips in the spring before picking up again.