The initial success of consumer satellite broadband services in the United States and Canada has not persuaded EchoStar that the business is financially viable in the long term, EchoStar Chairman Charlie Ergen said.
Littleton, Colo.-based EchoStar Communications Corp. invested in consumer broadband in the late 1990s and subsequently wrote off the expense when these efforts ran into financial trouble.
But since then, the direct-broadcast satellite television provider has purchased Ku- and Ka-band satellite capacity from SES Global of Luxembourg, saying that part of this capacity could be used to add broadband to EchoStar’s core television-delivery service.
In addition, EchoStar has signed contracts with Lockheed Martin Corp. for two Ka-band satellites, although whether those satellites will actually be built is unclear.
These spacecraft could be used for high-definition television broadcasting as well as for a broadband service. EchoStar competitor DirecTV Group of El Segundo, Calif., has demonstrated that Ka-band satellites designed for broadband services can be converted to television.
In an Aug. 9 conference call with financial analysts, Ergen said EchoStar remains undecided about broadband despite early indications that a service operated by WildBlue Communications of Denver, which debuted commercial operations in June, is off to a fast start. A similar service operated by Telesat Canada is reporting high demand in Canada as well.
“Their system is technically very sound from what we’ve seen,” Ergen said of the WildBlue and Telesat broadband ventures, both of which currently use Ka-band capacity on a Telesat satellite to provide two-way high-speed Internet links to homes and businesses equipped with SurfBeam terminals provided by ViaSat Corp. of Carlsbad, Calif.
“The economics remain a concern, in terms of the cost of the equipment and the amount of income you can get out of the customer,” Ergen said. “It’s certainly a good technology and a good [technical] standard. There is another standard, a more worldwide standard, that we’re looking at as well.”
Ergen was apparently referring to the DVB-RCS technical standard, which is competing with ViaSat’s DOCSIS-based system for dominance in the nascent satellite broadband industry.
The decision by WildBlue and Telesat to use ViaSat’s DOCSIS standard has permitted the production of enough Ka-band satellite terminals to drive unit costs down to a level at which any competing technology would have difficulty entering the market.
But Ergen’s remarks suggest that EchoStar thinks the market has not yet decided the issue.
SES Global Chairman Romain Bausch said EchoStar and SES Global “are getting closer” to a decision on broadband rollout in the United States, where EchoStar’s 11.5 million satellite-television subscribers could offer a ready-made broadband market.
“We strongly believe in roll-out for broadband in the U.S. market, where EchoStar has leased Ku- and Ka-band capacity on our satellites,” Bausch said during an Aug. 8 conference call. “We are less optimistic about Europe. It’s a different regulatory environment, and DSL has been aggressively rolled out.”
Ergen said EchoStar’s past failed investment in satellite broadband will make the company move cautiously. “We’re really looking to make sure we are on the right standard, with economics that can make some sense,” Ergen said. “If we don’t get to [that] point, then we’re not going to pour more money into it. If we get to a set of economics that makes sense — and again, we believe that’s possible — then we’ll have future things to say. But today, we’re happy to see WildBlue treading new ground.”
