PARIS — Satellite broadband equipment and services provider ViaSat said it is continuing to lose subscribers to its WildBlue commercial satellite broadband service because of delays in the launch of its ViaSat-1 satellite. The company is also incurring ground-segment costs for ViaSat-1 even though the satellite will not be in operation until December.
Carlsbad, Calif.-based ViaSat said its business with the U.S. Defense Department, focused as it is on high-priority areas like facilitating broadband access, appears protected from spending cuts, especially since a large portion of the work is already under firm contract.
In an Aug. 5 conference call with investors, ViaSat said that while its commercial broadband business has taken several blows related to the delays in the launch of ViaSat-1, results of testing on ViaSat’s new consumer broadband terminal, SurfBeam 2, show it can deliver even higher throughput than forecast.
ViaSat Chief Executive Mark Dankberg said ViaSat this fall will begin deploying SurfBeam 2 terminals in the western United States in a kind of broad-scale test drive to see just how much throughput it can offer WildBlue subscribers for no increase in monthly fee.
Dankberg said early indications are the terminals will be able to more than triple or quadruple the throughput of the first-generation WildBlue terminals. The SurfBeam 2 gear will operate with WildBlue’s two existing satellites, the ViaSat-owned WildBlue-1 and the U.S. Ka-band beams aboard Canada-based Telesat’s Anik F2 satellite.
In the conference call, Dankberg said deploying SurfBeam 2 this fall “will be a junior version” of what the company will provide when its ViaSat-1 satellite is in operation. ViaSat’s SurfBeam 2 terminals are also being used for Paris-based Eutelsat’s Tooway consumer broadband service, which is expected to take off in the coming months with the new Ka-Sat satellite declared operational starting in June.
Dankberg said Tooway subscriber additions appear to be meeting expectations so far but that mass deliveries of terminals have not yet started, creating an inventory backlog at ViaSat that he said should soon be turned into revenue.
The $400 million ViaSat-1 program was supposed to start commercial operations this summer, a date that was pushed to September and then to December. ViaSat has begun incurring charges related to ViaSat-1 including a terrestrial fiber-backhaul network, gateway Earth stations and a data center, all of which are operational even if ViaSat-1 is not.
ViaSat Chief Financial Officer Ronald G. Wangerin said during the call that the company spent $15 million over the past six months on expenses that had been committed before ViaSat-1’s problems were known.
The latest delay was due to an alert by satellite builder Space Systems/Loral of Palo Alto, Calif., following a failed solar-array deployment on a Loral-built satellite launched in late May. It was not until mid-July that Loral and ViaSat, along with the ViaSat-1 insurance underwriters, concluded that the defect was a one-off issue on a single satellite and would not affect ViaSat-1.
ViaSat-1 is now scheduled for launch Sept. 30 aboard an International Launch Services Proton vehicle from Russia’s Baikonur Cosmodrome in Kazakhstan.
Because the current WildBlue service has no available capacity on beams where demand is highest, ViaSat and WildBlue have had to cap their subscriber count, sacrificing new customers. The company — ViaSat acquired WildBlue in 2009 — did not provide detailed figures for WildBlue during the conference call on ViaSat’s financial results for the three months ending July 1.
But in the 12-month period ending in April, WildBlue’s subscriber count dropped by 3.5 percent, to 409,000. ViaSat said it has dropped further recently. “We have begun seeing some of the effects of the satellite delay on our subscriber numbers,” Dankberg said. “We’re seeing some falloff in wholesale gross adds, and some upticks in churn.”
ViaSat’s defense business appears to be bucking the trend among suppliers suffering from planned U.S. defense budget cuts. Two main programs already under contract are the Multifunction Information Distribution System Joint Tactical Radio System for defense aircraft, and the second-generation Blue Force Tracking (BFT-2) program to permit troops to distinguish friend from foe.
Defense programs are a hefty part of ViaSat’s large backlog, which at July 1 totaled $568.2 million, up 16 percent from where it stood a year ago. New contract awards in the three months ending July 1 totaled nearly $254 million, including a $40 million contract from Thales Alenia Space of France and Italy to provide Ka-band feeder links for the second-generation Iridium Next mobile satellite constellation, and a total of $39 million in orders from Boeing as part of the Boeing-led Mexsat satellite system for the government of Mexico.
ViaSat said its aeronautical broadband business, which began as a mainly commercial market endeavor, is now seeing more installations aboard government aircraft — manned and unmanned — than on commercial aircraft.
Ground-based government users will not be far behind, Dankberg said. The company has tested a portable broadband terminal with U.S. special forces using Eutelsat’s Ka-Sat, and “it got really, really good results,” he said.