Consumers in Canada and the United States now have access to broadband satellite communications at sponsor-subsidized prices of about $480 for the two-way satellite terminal, including professional installation of the rooftop antenna and connecting cables.
The service, which is being offered in Canada by Barrett Xplore Inc. of Woodstock, New Brunswick, uses the long-awaited Ka-band section of the radio spectrum via Telesat Canada’s Anik F2 satellite. Subscription charges for downlink speeds of 512 kilobits per second, and uplink speeds of about 128 kilobits per second, will be around $50 per month, with higher rates for customers needing more bandwidth.
Other prospective entrants into the satellite broadband market, including Hughes Network Systems of Germantown, Md.; EchoStar Communications Corp. of Englewood, Colo.; Luxembourg-based SES Global and others now on the sidelines, will be watching closely to see if this business model can mimic the success of satellite television with a similar level of consumer acceptance.
Early questions that need to be answered center on whether the consumer terminals will be supplied fast enough by builder ViaSat Corp. and its distributors, and whether the initial prices can come down far and fast enough to find a mass market.
“We’re getting out of the gate quickly and are in the middle of a national dealer tour to educate our dealer networks about the service,” said Bruce Barr, president of Barrett Xplore, which is distributing Telesat Canada’s Ka-band service throughout Canada under the brand name Xplornet.
“We have two concerns,” Barr said in an interview. “First is equipment availability. Equipment is trickling in now, and we want to see that trickle turn into a flood. The second issue is prices. The current subscriber prices are much too high, and subsidies are too high. They need to come down.”
Telesat Canada of Ottawa began loading commercial customers onto its system May 25, using Ka-band capacity from Anik F2 and expects its distributors to be installing hardware at rates of 1,000-to-2,000 per month, according to Dave Lahey, Telesat vice president of business development.
By the end of 2005, Telesat expects to have around 15,000 subscribers in Canada. Within three years, it forecasts that its initial order of 40,000 SurfBeam Ka-band consumer broadband terminals ordered from ViaSat Corp. of Carlsbad, Calif., will be sold.
The company has secured distribution agreements with several subsidiaries of BCE Inc. of Canada, which owns Telesat, for distribution in specific geographic areas in Canada, as well as with Barrett Xplore for nationwide distribution.
Telesat has firm commitments from its distributors for orders that will book more than half the commercial Ka-band capacity available to Telesat on Anik F2, Lahey said in an interview.
Anik F2 has 45 Ka-band spot beams, 15 of which are reserved for Telesat’s broadband service. After removing what is reserved for the Canadian government, Telesat’s commercial Ka-band capacity on Anik F2 will allow 150,000 subscribers to hook up to the satellite. That figure will drop to around 115,000 depending on the number of high-end users signing on for higher-bandwidth service.
Barr said Barrett Xplore has made reservations for half the Canadian commercial capacity.
Telesat remains confident enough that the Anik F2 capacity will be sold out that it is preparing to request bids from satellite manufacturers for an all-Ka-band satellite, called Anik G1, which it expects to order by the end of this year.
Lahey said the initial glitches in ViaSat-provided SurfBeam ground infrastructure have been overcome and that there are no technical glitches in view that would slow rollout. Telesat has been testing some 600 SurfBeam terminals over the course of the past year in preparation for the introduction of commercial service.
Just behind Telesat is WildBlue Communications Inc. of Denver, which has leased the remaining 30 Anik F2 Ka-band spot beams and is debuting a U.S. service similar to Telesat’s starting in June.
The National Rural Telecommunications Cooperative (NRTC), a WildBlue investor, is placing its affiliates at the service of WildBlue for distribution and also is offering free installation — normally $180 — for early subscribers. Free installation would reduce the one-time charge for the hardware to $299 .
For Telesat, WildBlue and their partners, commercial success will come only if demand is sufficient to enable them to make a second bulk terminal order with ViaSat that is large enough to bring unit costs down to consumer-acceptable levels. Lahey said the current prices for terminals “are heavily subsidized” by program sponsors hoping to jump-start early demand.
While he declined to provide specific figures, Lahey said Telesat’s next bloc-buy purchase of ViaSat terminals, coupled with WildBlue’s expected demand, should be large enough to eliminate the sponsor subsidy at today’s retail prices.