U.K. Firm Building Satellite for Consumer Internet Services

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The British content-distribution company Avanti Screenmedia has secured public and private financing to order a Ka-band satellite to provide consumer and corporate broadband services in Europe.

Avanti signed a firm contract with Astrium Satellites for a small satellite using an Astrium telecommunications payload and a platform supplied by the Indian Space Research Organisation. Under the contract, which was expected to be announced in London May 15, Astrium will deliver the satellite in time for a launch in late 2008.

Astrium Satellites Chief Executive Antoine Bouvier confirmed in a May 11 interview that Astrium has been working on Avanti’s Hylas project since late 2005, and it has made enough progress on it to make a late-2008 launch feasible.

Astrium will use the Hylas satellite as an in-orbit validation of several technologies, mostly related to flexible, reconfigurable payloads, Bouvier said. Astrium Satellites has invested in basic research and development of technologies to be used on Hylas but is not investing in the Hylas project.

David Williams, chief executive of London-based Avanti Screenmedia Group, said Avanti expects its project to cost no more than 108 million euros ($137.5 million), including the construction, launch and insurance for the satellite.

Williams said in a May 12 interview that the company’s current business plan suggests that Hylas could generate 600 million euros in sales over 15 years.

Avanti, which has been traded since July 2004 on the London Stock Exchange’s Alternative Investment Market for high-growth companies, raised about 38 million euros for Hylas from its shareholders. The European Space Agency (ESA) provided another 34 million euros for Hylas from its Artes-3 telecommunications research program, which matches certain investments made by selected companies.

Williams said the remaining Hylas funds would be raised from debt.

The satellite, expected to weigh less than 3,000 kilograms at launch, will carry the equivalent of 24 54-megahertz Ka-band transponders for broadband transmissions, and four 54-megahertz Ku-band transponders for television transmissions.

Avanti in August 2005 received British regulatory approval to use the British-registered geostationary orbital slot at 33.5 degrees west longitude. Jose Maria Casas, division director for Artes-3 at ESA’s Estec technology center in Noordwijk, The Netherlands, said Avanti’s Hylas has become a credible consumer-broadband system.

“When Avanti first approached us, our reaction was: ‘Who are these guys?’ But we have had access to sufficient financial information to persuade us that this project is going forward,” Casas said in a May 11 interview. “What we are seeing here is the advantage of being a new player, with fresh thinking and a flexible management.”

Avanti reported sales of 8.44 million British pounds ($15.7 million) and an after-tax profit of 1.9 million pounds for the fiscal year ending June 30, 2005.

The company’s core business is providing broadcasts to screens installed in retail centers, bars and other areas where consumers gather in sufficient numbers to be valuable for advertisers to produce and distribute video programming. Williams said Avanti had video screens at 1,200 sites in Britain.

The Hylas project will be a new business area for the company and represents an attempt to do what Europe’s large, wealthy satellite-fleet operators — led by SES Global of Luxembourg and Eutelsat of Paris — have thus far declined to do: distribute high-speed Internet by satellite to areas in which cable and DSL links do not reach.

Eutelsat and SES Global officials have said repeatedly that two-way consumer broadband will be a difficult business proposition in Europe because of the multiple regulatory regimes that govern satellite access and consumer terminal equipment.

Williams dismissed this reasoning. “Companies like SES and Eutelsat are making too much money on video distribution to want to risk this,” Williams said. “Their shareholders look at them as almost like utilities. These companies cannot expect the broadband business to provide the huge margins they are used to on their video business.”

Casas said a special feature of the Avanti Hylas project is the fact that its payload is capable of reassigning capacity in orbit depending on where demand is greatest. The lack of such a capacity has been one drawback for the otherwise successful WildBlue Communications and Telesat Canada consumer-broadband services launched in the past year in the United States and Canada. WildBlue’s success in some regions of the United States has filled the Ka-band spot beams targeting those regions to capacity and has forced WildBlue to turn away new customers in those areas, at least temporarily.

Williams said Avanti expects the Hylas partners eventually will need to subsidize the cost of some of the consumer equipment, as much as WildBlue and Telesat have done, to bring prices down to a mass-market level.

Williams said the company has been using the European DVB-RCS technical transmission standard up to now, but that may change.

“We are not wedded to DVB-RCS,” Williams said. “It has certain advantages over the DOCSIS standard introduced by ViaSat in the United States, but it is costly. If we cannot get our CPE [consumer premises equipment] prices down to an acceptable level with DVB-RCS, we are prepared to move to DOCSIS.”

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