Installation Bottlenecks Slow Start of New ViaSat Service

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PARIS — Satellite broadband hardware and services provider ViaSat Inc. on May 17 said it signed 49,000 subscribers to its new high-speed consumer broadband service in the three months ending March 30, and predicted the take-up rate would climb to more than 30,000 per month by the end of the year.

The new service, called Exede, offers download speeds of up to 12 megabits per second and will test ViaSat’s long-held belief that satellites can compete with DSL and other terrestrial-broadband technologies in many areas of the United States. Exede is enabled by the ViaSat 1 Ka-band satellite, which entered service in January but was not fully available in its entire U.S. coverage area until late February.

In a conference call with investors on the company’s financial results for the fiscal year ending March 30, ViaSat officials said the early results from ViaSat-1 would have been better were it not for bottlenecks in subscriber equipment installation.

“We couldn’t keep up” with the demand, ViaSat Chief Executive Mark D. Dankberg said during the call. He said the company has reworked the way it pays installers to provide them with greater incentives to serve customers more quickly.

For most customers, connecting to Exede requires a rooftop satellite dish and the cabling to the set-top box linked to the users’ home computers.

Carlsbad, Calif.-based ViaSat’s early Exede results are muddied by the company’s transition from its older, slower WildBlue consumer satellite broadband service.

Dankberg has acknowledged that WildBlue tried to load too many customers on the two satellites it uses, resulting in often-mediocre service quality.

ViaSat is rebranding WildBlue as Exede. The WildBlue satellites, WildBlue-1 and part of the Ka-band payload on the Anik F2 satellite operated by Telesat of Canada, will provide the Exede 5 service at 5 megabits per second.

As ViaSat-1 takes on more customers, space will be freed on the two older satellites, providing better service, company officials say.

It will take several months for ViaSat to work through the transition, Dankberg said.

The results for the three months ending March 30 show the transition issues. Of the 49,000 new customers to Exede, 7,100 were former WildBlue customers seeking the higher-speed service. Another 33,900 WildBlue customers ended their subscriptions during the three-month period, meaning that ViaSat’s total consumer broadband subscription base grew by just 8,000, to 385,000, as of March 30.

Dankberg said early indications are that Exede will have far fewer customer defections — “churn,” in industry jargon — than the 3 percent per month that left WildBlue on average.

In addition to sticking with the service, Exede customers are paying higher monthly fees than WildBlue customers. The subscribers added since Exede was operational pay on average $48 per month. WildBlue subscribers added in the three months ending Dec. 31, 2011, paid $42 per month on average, according to ViaSat figures.

Three-quarters of the 49,000 customers that began service in the first three months of 2012 signed up for the Exede 12 12-megabits-per-second service.

For Exede to deliver on its promise — ViaSat spent about $400 million on ViaSat-1, including the satellite’s launch and insurance — it needs to expand satellite broadband’s reach beyond those regions without a terrestrial alternative.

Going head-to-head with DSL and cable in some areas will require the satellite service to provide the same customer-satisfaction levels as the terrestrial alternatives. Early subscriber surveys suggest this is the case, according to ViaSat.

Dankberg said one-third of the new Exede subscribers are from areas where terrestrial broadband is available, which is more than what ViaSat had forecasted so soon after service introduction.

ViaSat estimates that it can load at least 1 million subscribers onto ViaSat-1 without sacrificing service quality. ViaSat-1 is the second of a new generation of high-throughput satellites to enter service after the Ka-Sat satellite owned by Eutelsat of Paris, which began service in Europe in mid-2011.

Close on the heels of ViaSat-1 is the EchoStar 17 satellite, formerly called Jupiter, owned by ViaSat competitor Hughes Network Systems, now a division of EchoStar Corp. of Englewood, Colo.

EchoStar 17 is scheduled for launch in late June. Thus far it has faced none of the manufacturing and launcher-related delays that cost ViaSat-1 and Exede at least six months of first-to-market advantage in addition to the cash that ViaSat spent on ViaSat-1-related fixed costs on ground gateways, fiber backhaul service and a ViaSat-1 data center.

Dankberg said ViaSat-2 is likely to be ordered this summer. Space Systems/Loral of Palo Alto, Calif., which built ViaSat-1 and EchoStar 17, is not considered a likely contractor given the breach-of-contract and patent-infringement lawsuit ViaSat filed against Space Systems/Loral, which has since countersued ViaSat.

ViaSat said it spent $1.1 million in legal fees related to the Space Systems/Loral lawsuit in the three months ending March 30.