Telesat Canada Customer Invests in Hughes Satellite

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A key consumer-broadband customer of Telesat Canada has agreed to make a major investment in a Ka-band broadband satellite planned by Hughes Network Systems, complicating the efforts of Telesat majority owner Loral to sell capacity on a competing satellite in which it has an ownership stake, according to the companies involved and industry officials.

Under an agreement announced Oct. 29, Barrett Xplore of Canada has agreed to purchase more than 10 gigabits per second of capacity on Hughes’ Jupiter all-Ka-band satellite for a price of more than $100 million. Jupiter, under construction at Space Systems/Loral in Palo Alto, Calif., and scheduled for launch in 2012, will have more than 100 gigabits per second of throughput capacity.

The satellite manufacturer’s parent company, Loral Space and Communications of New York, in early 2008 purchased 15 percent of the capacity on ViaSat Inc.’s ViaSat-1 all-Ka-band satellite, which is also under construction at Loral and scheduled for launch a year before the Jupiter spacecraft.

Loral had agreed to spend about $60 million for its share of ViaSat-1, an investment the company thought it had to make in order to secure the ViaSat-1 construction contract. Loral said at the time that it would sell its ViaSat-1 stake to Telesat, which already sells Ka-band capacity aboard its Anik F2 satellite for consumer broadband in Canada.

Loral said it assumed Telesat would agree to the purchase. To encourage the Canadian satellite fleet operator to act quickly, Loral tacked on a premium that Telesat would have to pay for biding its time. The premium started at $6 million and gradually rose to $13 million depending on when Telesat confirmed its purchase.

But Telesat never entered into the agreement, which expired Oct. 31 — just two days after the Barrett-Hughes announcement.

Asked in mid-September to explain his company’s position, Telesat Chief Executive Daniel S. Goldberg said Telesat remains a believer in satellite consumer broadband based on its experience with Anik F2, but wanted further clarifications about the Canadian government’s broadband-stimulus financial package before accepting the deal from Loral.

Telesat spokeswoman Vanessa Brule said the company would have no comment on the Barrett-Hughes announcement.

Loral spokeswoman Wendy Lewis also declined comment beyond saying Loral’s belief in the value of its ViaSat-1 stake has not lessened in the nearly two years since it entered into the contract with Carlsbad, Calif.-based ViaSat.

In a statement issued with the announcement, Barrett Chief Executive John Maduri said: “This considerable investment in satellite capacity demonstrates Barrett’s ongoing commitment to rural broadband and strengthens our ability to reach all rural Canadian households with cost-effective, high-speed Internet.”

One industry official said that, depending on how the Canadian market develops, Barrett and other satellite-broadband service providers may need more capacity than what Barrett has agreed to purchase from Hughes. This official also noted that ViaSat-1 is likely to be operational at least a year before Hughes’ Jupiter.

Woodstock, New Brunswick-based Barrett Xplore Inc. operates Xplornet Internet Services throughout Canada and was an early partner with Telesat in introducing satellite broadband.