Suing Space Systems/Loral Costing ViaSat $1 Million per Quarter

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PARIS — Satellite broadband product and service provider ViaSat Inc. said Feb. 6 it is spending around $1 million per quarter on its patent infringement and breach-of-contract lawsuit with satellite builder Space Systems/Loral (SS/L) and that the cash outlay for legal fees could go higher.

In a conference call with investors, ViaSat officials said they are ready to settle with SS/L if possible but that they are also prepared for a long court case if necessary.

In what may be a related development, ViaSat Chief Executive Mark D. Dankberg said the company expects to order a ViaSat-2 broadband satellite by June. Until the ViaSat lawsuit, filed Feb. 1 in the U.S. District Court for the Southern District of California, SS/L would have been considered the favorite for the contract, to be valued at around $200 million.

One Loral competitor speculated that a possible settlement could come in the form of a large discount for ViaSat on a ViaSat-2 built by SS/L.

SS/L built the ViaSat-1 satellite, which was launched in October and began offering service to ViaSat’s U.S. customers in January. The satellite’s 140 gigabits per second of throughput dwarfs the capacity of other spacecraft and is being positioned as a viable competitor to DSL and other terrestrial broadband technologies in certain geographic areas.

Carlsbad, Calif.-based ViaSat alleges that SS/L used ViaSat-owned intellectual property developed for ViaSat-1 for other SS/L satellites, including the Jupiter satellite being built for ViaSat’s principal U.S. satellite-broadband competitor, Hughes of Germantown, Md.

ViaSat-1 is intended to put ViaSat and its newly rebranded Exede consumer broadband service back into the business of growing its subscriber base. The company’s WildBlue consumer service, which uses the lower-capacity WildBlue-1 and Anik F2 satellites, currently has about 385,000 subscribers. That figure has not changed in recent months, in part because these two satellites have run out of space on the beams focused on the high-demand areas of the United States, and in part because prospective customers were waiting for ViaSat-1 to enter service.

ViaSat-1’s launch and entry into service occurred about six months later than ViaSat had planned following a series of delays in the satellite’s manufacture and launch. In addition to depriving ViaSat of the new revenue source, the delays forced the company to incur some $23 million in costs associated with leasing fiber-backhaul capacity, beginning operations at data centers and gateway-related charges.

Despite being able to offer much faster broadband speeds to consumers, ViaSat-1 is able to support at least 1 million subscribers, according to ViaSat.

To accompany the gradual introduction of ViaSat-1 — about 75 percent of its 20 ground gateways have been activated, with the rest to come on line by the end of February — ViaSat is scrapping the WildBlue service name to focus on the new Exede brand. Exede12, its fastest service, will be for customers in the eastern half of the United States, where ViaSat-1’s beams are focused.

Exede12 offers 12 megabits per second of download to customers. Upload speeds are limited to 3 megabits per second.

Data plans allowing 7.5, 15 and 25 gigabytes of monthly usage are offered for subscriptions of $49.99, $79.99 and $129.99 per month, respectively.

Customers on the WildBlue-1 and Anik F2 satellites outside the ViaSat-1 coverage area will be offered up to 5 megabits per second of download.

Dankberg declined to provide a forecast for subscriber growth, saying the service is too new to provide reliable projections, especially given the fact that it has not yet been activated in its entire coverage area.

Hughes’ Jupiter satellite — the ViaSat-1 twin that ViaSat suspects is designed using stolen ViaSat technology — is scheduled for launch this summer, with an entry into service planned by the fall.

That gives ViaSat no more than six to eight months to establish ViaSat-1 in the market and cement relations with wholesale and retail customers. The company has signed wholesale distribution agreements with satellite television provider Dish Network, and with the National Rural Telecommunications Cooperative. ViaSat is looking to sign on satellite television provider DirecTV as an Exede distribution partner as well. DirecTV, and especially Dish, have made clear their wish to bundle broadband into their television offer.

Dankberg said he expected Dish ultimately would favor Hughes, which is owned by Dish sister company, EchoStar, in its distribution scheme. But he said ViaSat intends to use the next six months to establish a distribution channel with EchoStar nonetheless.