Early Satellite Broadband Demand Exceeds Expectations

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  Space News Business

Early Satellite Broadband Demand Exceeds Expectations

By PETER B. de SELDING
Space News Staff Writer
posted: 08 August 2005
11:39 am ET


Early demand for satellite consumer broadband in North America is proving greater than anticipated, but hardware-delivery delays remain a concern, according to industry officials.

With Telesat Canada’s Anik F2 satellite’s Ka-band service operational and the testing of a ViaSat Inc.-based consumer broadband terminal completed, the front line in the battle to make satellite broadband a viable presence in North America now moves to the distribution points, where a two-month delay in product delivery — especially in northern latitudes — can threaten a business plan.

U.S. and Canadian distributors would prefer to deliver and install consumer equipment — a rooftop antenna linked to a modem attached to a computer — before winter closes in.

In the case of Barrett Xplore Inc. of Woodstock, one of Ottawa-based Telesat’s biggest consumer-broadband distributors across Canada, a scheduled July 1 commercial launch date was scrapped because insufficient numbers of terminals were available.

The company continues to take orders for the product, sold under the brand name Xplornet, and had more than 1,000 customers committed to take delivery on July 1.

“We are now into August and we still have not officially launched,” Barrett Xplore said in a statement issued to Space News Aug. 3. “We have between 50 and 100 units, but problems with the manufacturers continue, so we are still in our pre-signing phase. We are taking orders to get an idea of where to distribute once the product arrives. A couple of thousand units delivered now might be enough to permit us to start commercial deliveries. But the orders we have had from our dealers were in the tens of thousands.”

Telesat Canada and WildBlue Communications Inc. of Denver are both using Telesat’s Anik F2

satellite. Both have signed bulk orders for terminals from hardware manufacturers.

Ted Ignacy, chief financial officer of Telesat, said Aug. 3 that demand for the broadband service is just as strong as the company had hoped. But he also said that the consumer-hardware manufacturers have had trouble ramping up their production fast enough to meet demand.

“Right now demand is outstripping supply,” Ignacy said. Telesat already has seen the first benefits of consumer broadband demand from its sales of Anik F2 satellite capacity to WildBlue and to the Canadian government. This capacity was pre-sold before Anik F2 was launched in July 2004 but was not booked as revenue until this year.

The early success of Anik F2 partly explains Telesat’s record revenues and earnings for the three months ending June 30. As reported Aug. 3, Telesat posted net earnings of $26.3 million, up 35 percent from a year earlier. Revenues, at $137.3 million, were up 62 percent.

Ignacy said between 30 and 40 percent of the increase could be attributed to one-time events including Telesat’s purchase of Spaceconnection, a satellite-services company that Telesat purchased in January.

Telesat and WildBlue both ordered satellite modems and transceivers from ViaSat Inc. of Carlsbad, Calif. The modems are attached to users’ computers, and the transceivers are part of the outdoor unit that features a two-way Ka-band antenna built by Raven Antenna Systems of Accrington, England.

Raven manufactures most of its antenna components and purchases some from China. The equipment is then sent to Raven’s Bavavia, Ill., assembly plant, which was inaugurated in January.

Marc H. Agnew, ViaSat vice president for broadband systems, said ViaSat had trouble with its modem in the spring, and more recently slowed deliveries because of underperformance of its transceiver in extremely cold conditions.

“We are going from a couple of hundred units per month to 10,000 or more per month, and it is not unusual to face ramp-up issues,” Agnew said Aug. 4. “Also, you have the fact that both WildBlue and Telesat are ordering the same product from us, and they are competing to get delivery.”

Agnew said the issues related to the modem were resolved in May, and the transceiver-performance problem was resolved in June. There are no more issues that need to be resolved, other than those inevitably associated with manufacturing and shipping a new product.

ViaSat Chairman Mark H. Dankberg said in an Aug. 4 conference call with financial analysts that ViaSat profit on the WildBlue and Telesat programs will be longer in coming than forecast, in part because of the continued research and development expense ViaSat is incurring to ensure that the product meets customer requirements.

“Overall, my impression is that it’s gone pretty well,” Dankberg said. ViaSat shipped 12,000 units in the three months ending June 30, with almost all of them occurring in June.

Raven Managing Director Richard Davies agreed with ViaSat’s Agnew that part of the delivery bottleneck is due to the simultaneous demand for a new product from Telesat and WildBlue.

Davies said Aug. 5 that Raven had agreed with WildBlue and Telesat to deliver 100,000 antennas over two years. Since the commercial introduction of the systems in the United States and Canada in June, those forecasts have been revised upward.

“We now think that the 100,000-antenna mark will be passed after 12 months, not 24 months,” Davies said. “The product has been more popular than anyone expected. It’s great news, but it does take time to increase production in China and in Britain, and then to ship to the United States for assembly and delivery.”

Davies said Raven shipped 2,000 antennas in June, 7,000 in July and plans to deliver about 10,000 in August. By January, he said, deliveries should be between 10,000 and 15,000 per month.