Hughes Expands Partnership with British Startup Avanti in Europe

by

PARIS — Satellite broadband service provider Hughes Communications, expanding its relationship with startup broadband provider Avanti of Britain and positioning itself to better compete with ViaSat Inc. of the United States, will provide 48 gateway Earth stations for Avanti’s Hylas 2 satellite, scheduled for launch in 2012, Hughes announced April 27.

The contract, valued at $18 million, follows a similar contract signed last October under which Germantown, Md.-based Hughes is providing eight gateway stations and 50,000 customer terminals for Avanti’s Hylas 1 satellite, scheduled for launch late this year. That contract was valued at $24 million.

In addition to providing hardware, Hughes is purchasing an undisclosed amount of capacity on London-based Avanti’s Hylas satellites, which will use Ka-band broadcast frequencies to provide broadband access to consumers and businesses. Hylas 1 is designed to serve Europe, with Hylas 2 expanding the Avanti service to Africa and the Middle East.

Hughes’ current European business is providing terminals and satellite links to enterprise customers such as lottery systems and energy suppliers. In a March presentation to investors, Hughes said it had shipped 135,000 terminals to customers in Europe, its second-biggest market after North America. Most Hughes customers in Europe use Hughes-built VSATs, or very small aperture terminals, to link with conventional Ku-band satellites whose capacity Hughes leases from satellite fleet operators.

In an April 27 statement, Hughes Chief Executive Pradman P. Kaul said the Avanti relationship “positions us to rapidly expand Ka-band services across Europe and the Middle East — especially for consumers and small businesses, building on the momentum of our record-breaking success delivering HughesNet satellite Internet service in North America, now with over 500,000 consumer subscribers.”

The expanding Hughes-Avanti relationship means Europe’s satellite consumer broadband market is shaping up as another arena of competition between Hughes and ViaSat of Carlsbad, Calif.

ViaSat, which in 2009 purchased consumer broadband service provider WildBlue Communications, builds satellite broadband ground hardware. ViaSat has an established relationship with satellite fleet operator Eutelsat of Paris, whose Ka-Sat Ka-band satellite is scheduled for launch, like Avanti’s Hylas 1, late this year.

Unlike Hughes, ViaSat does not have a European service business and its relationship with Eutelsat appears to be limited to providing gateway Earth stations and consumer terminals for Eutelsat’s Tooway consumer broadband service.

It remains unclear whether Hughes will compete against other Hylas satellite broadband distributors for individual consumers and small businesses in Europe. Hughes is gradually shedding its leases of Ku-band capacity in the United States — which costs an average $1.5 million per 36-megahertz transponder per year — and moving its customers to Hughes’ own Spaceway 3 Ka-band satellite.

That same transition would appear even more necessary in Europe, where Ku-band capacity is in general more expensive than in North America, accenting the per-megabit cost advantage of Ka-band capacity.

Simon Bull, a senior consultant with Comsys Ltd. of Britain, a consultancy specializing in satellite data networks, said many of Hughes’ 135,000 terminals in Europe are for lotteries that use little satellite bandwidth. Hughes is under no cost pressure to switch these customers to Ka-band, Bull said in an April 28 interview. But to start a consumer broadband business in Europe, “sooner or later Hughes would need a Ka-band play, and Avanti’s Hylas appears to be it.”

ViaSat is also the ground-hardware supplier for Yahsat of the United Arab Emirates, whose YahClick broadband service will be inaugurated by the company’s Yahsat 1B Ka-band satellite scheduled for launch in 2011.

ViaSat and Hughes both have ordered 100-gigabit-per-second capacity satellites from Space Systems/Loral of Palo Alto, Calif. ViaSat-1 is scheduled for launch in 2011, with Hughes’ Jupiter to be launched in 2012.

The two companies’ partnerships in Europe mean both will be able to offer Ka-band broadband hardware for use by consumer, corporate and government customers in a coverage area stretching from the West Coast of the United States through Europe, the Middle East, Africa and into Central Asia.

In a separate announcement April 27, Avanti said it had signed a contract with an unnamed government customer who has agreed to purchase a specific amount of Hylas 2 capacity for up to 113.4 million British pounds ($174 million) over three years. Avanti will receive an option fee of 280,000 pounds as part of the contract, for which the capacity-purchase option expires in three years, the company said.

Hylas 1 is under construction by a joint venture between Astrium Satellites of Europe and the Antrix commercial arm of the Indian Space Research Organisation. It is scheduled for launch late this year aboard the inaugural flight of the European version of Russia’s Soyuz rocket. Financing for Hylas 1 development was provided in part by the 18-nation European Space Agency as part of the agency’s research into new satellite-payload designs.

Hylas 2, being financed with loans and guarantees from the U.S. and French export-credit agencies, is under construction by Orbital Sciences Corp. of Dulles, Va. Europe’s Arianespace consortium will provide launch services.

Avanti has said Hylas 2 will provide 8.28 gigahertz of capacity to up to 1 million subscribers, while Hylas 1, with a capacity of 3 gigahertz, can serve up to 350,000 subscribers.