Profile: SES Charts A Different Path With New Broadband Service

by












  Space News Business

Profile: SES Charts A Different Path With New Broadband Service

By PETER B. de SELDING
Space News Staff Writer
posted: 06 February 2008
04:43 pm ET















Alexander Oudendijk


Chief Operating Officer, SES Astra













T


he market acceptance of satellite broadband in North America and parts of East Asia has been one of the major commercial satellite telecommunications success stories of the past couple of years.



In North America, the major satellite broadband providers are either already providing capacity in the little-used Ka-band portion of the radio spectrum or are moving in that direction. In Europe, Eutelsat recently announced an all-Ka-band satellite for broadband and for television.



But Europe’s other big satellite-fleet operator, SES, has elected to go another route. After waiting for customer-terminal prices to drop, Luxembourg-based SES in mid-2007 launched its Astra2Connect consumer-broadband service using existing capacity on the company’s Ku-band satellites.

The response has been much more positive than SES expected, and the company now is evaluating whether to order its own Ka-band satellite, according to SES Astra Chief Operating Officer Alexander Oudendijk, who is overseeing Astra2Connect’s rollout. Oudendijk discussed the company’s plans with Space News staff writer Peter B. de Selding.




You have announced commitments for more than 200,000 Astra2Connect consumer terminals to be installed in the next three to five years. Is this ahead of expectations?





Yes, it has been a rather pleasant surprise. We had hoped for around 110,000-120,000 terminals to be contracted in the first year or two of service. We have been surprised that it has taken off so quickly.


You are using Ku-band capacity on your existing satellites for Astra2Connect. Your main European competitor, Eutelsat, is adopting Ka-band for its Tooway service and has just ordered an all-Ka-band satellite for the purpose. How do you account for the difference in strategy?






We have been perhaps a bit more cautious. We are not launching a satellite first and then determining whether there is a market. We started at the front end, to see whether it’s possible to have user equipment that costs less than 300 euros. Once we determined




this was the case, we started to roll out with existing Ku-band capacity. The next step is to transfer to a hybrid Ku-Ka-band service, also using existing capacity on our satellites. Depending on market uptake, we are considering an all-Ka-band spacecraft. Ka-band clearly has advantages from a capacity point of view. Nobody in the industry disputes that, and it also has value for local-to-local television.


When might we expect an order for an all-Ka-band satellite?





We are still investigating the market applications of such a satellite for broadband and for television. I would say the order could come, at the earliest, at the end of this year.


You say you have 165 million euros in Astra2Connect contract commitments. What does this refer to?





These are the total commitments over a three- four- or five-year period. Some Internet service providers (ISPs) may have the installations completed in three years, others a bit longer. Newtec is our terminal provider, and the orders for terminals are placed directly by the ISPs with Newtec. Our contract with the ISPs refers to a certain number of subscribers, a certain number of installations. What we commit to is satellite capacity for a certain amount of time and a certain throughput rate.



What are the kinds of subscriptions consumers can get?






There are generally three times: 256 kilobits per second (kbps) downlink and 64 kbps uplink




for around 19.90 euros ($29.23) per month; 512 kbps downlink and 96 kbps uplink for 29.90 euros per month; and 1,024 kbps downlink and 128 kbps uplink for 39.90 per month. These are estimated prices. It is up to each ISP to determine its own pricing level.





It’s early going, but have you noticed that one of the three subscriptions seems to






be more popular than the others?





The initial word we are getting from the ISPs is that their customers prefer the higher-end versions.





Is there a big variation in the end-user charges from nation to nation?





In principle it’s pretty much the same deal between the different coverage areas. The markets are transparent now. The ISPs do get volume discounts from Newtec for purchasing the equipment. But these boxes are priced to sell and not priced to include a lot of margin, so there shouldn’t be a huge difference in price from market to market.





Is there any exclusivity involved here either with Newtec or with the ISPs that are distributing Astra2Connect?





No, there are no exclusive arrangements. When we negotiate with an ISP, we first take a good look at the market in question, and we give them some recommendations in the market. But they make the commitment based on their own sense of what they can sell.





What kind of contract arrangement do you have with Newtec for the subscriber equipment?





Our agreements with Newtec are quite extensive, both in terms of consumer-premises equipment and the hub stations they are also providing to us. We have firm indications on where equipment pricing should be for the ISPs, with conditions that should see prices reduce if the order volume increases and we get to something approaching mass production. Certainly expect the price of the equipment to go down as sales go up.





In the United States and Europe, Hughes Network Systems, ViaSat, Gilat and others are well-established. How do you explain the choice of Newtec?





We looked at commercial VSAT providers with a view to having them redesign their VSAT product for our consumer audience. We had also been working previously with Newtec




on an interactive set-top box as part of a contract with the European Space Agency. It became clear to us that the better alternative was to redo this design to arrive at the subscriber hardware for Astra2Connect rather than to start with a VSAT design.



We gave all the manufacturers a set of specifications and Newtec was the lowest-cost option, and the product with the most stable performance. In fact, Newtec beat the competition on all counts.




Your choice was not dictated by the fact that Newtec is European?





No, we have no government subsidies and we ran a straightforward competition. Our expectation, and perhaps our fear, was that one of these other companies would offer a better option. But that has not materialized, interestingly enough. It might be because the Newtec competitors are basically hardware manufacturers that have more difficulty getting hardware costs down. Newtec is an engineering company.





Where is the hardware actually being built?





Another surprise there: in Belgium, at least for now. But they will have production operations in the Far East soon, as you would expect.




Installing a two-way broadband satellite dish is harder than installing a satellite-television system. Is installation a headache for your ISPs?





We have placed an enormous emphasis on making installation idiot-proof. One survey in Germany found that 60 percent of Astra2Connect users had installed the gear themselves. What we have in mind in the future is to provide a snap-on clip to the antenna so that you could get full satellite-television service along with your broadband.





Are the regulatory issues involved in rolling out a service, including dish antennas and set-top box specifications, a problem?




The regulatory environment has gotten much better for low-power two-way systems like Astra2Connect. We don’t need to register each terminal as it passes from one country to another. If we had had to deal with registration fees and difficulties with transport, that would have been a non-starter.