Unexpected Demand Takes WildBlue, Telesat by Surprise

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  Space News Business

Unexpected Demand Takes WildBlue, Telesat by Surprise

By PETER B. de SELDING
Space News Staff Writer
posted: 13 February 2006
12:05 pm ET


An unexpected demand surge in some parts of the United States has forced satellite-broadband provider WildBlue Communications to close two of its satellite beams to new subscribers as it designs a software upload to accommodate the new capacity, WildBlue and industry officials said.

“We’ve been shocked at the level of demand in a region including parts of Ohio, Pennsylvania, Illinois and New York,” said Erwin C. Hudson, WildBlue’s chief technology officer. “To preserve the quality of the service for our existing customers, we are no longer accepting new subscribers on these two beams. We are uploading the software modifications to permit increased capacity and expect to open those beams up again to new customers this spring.”

Denver-based WildBlue, which started service from Telesat Canada’s Anik F2 satellite in June, is rolling out a nationwide Ka-band consumer broadband service using 30 spot beams covering almost every region of the continental United States. Telesat is operating a similar Canadian service on the remaining 15 spot beams.

Unlike the Hughes Network Systems Spaceway 3 satellite set for launch in 2007, the Anik F2 spacecraft cannot be reconfigured easily to reassign on board capacity to match peaks and valleys in customer demand.

As of Dec. 31, WildBlue had 25,000 subscribers for its high-speed Internet access service, a figure that company officials said is better than expected. But the demand has not been distributed evenly.

WildBlue plans to launch its own, dedicated Ka-band broadband satellite late this year aboard a European Ariane 5 rocket. In an interview here Feb. 9 at the Satellite 2006 conference organized by Access Intelligence, Hudson said the new satellite will be brought into service within three months of the launch.

Telesat Canada Chief Executive Larry J. Boisvert said around 30,000 two-way Ka-band satellite terminals have been sold in Canada. By the end of 2006, he said, subscribers in Canada and the United States combined is expected to reach 200,000.

Boisvert said Telesat has been surprised not only by the quick uptake in demand — especially since the service was slowed this summer by equipment-supply hiccups — but also by the type of service that customers want.

WildBlue and Telesat offer several classes of service, with prices corresponding to throughput. Boisvert said Telesat had expected that only 10 percent of customers would opt for the higher-priced, high-speed option. Instead, about one-third of them do.

Also like WildBlue, Telesat is planning its own dedicated Ka-band satellite, called Anik G1, to be able to accommodate new customers and to provide an in-orbit backup to the Anik F2 satellite. Telesat also has ordered eight Ka-band spot beams to be included on its just-ordered Nimiq4 direct-broadcast television satellite. The Ka-band payload will target those areas of Canada — mainly southern Ontario and southern Quebec — in which broadband demand has been strongest, Telesat Canada Chief Financial Officer Teg Ignacy said.

Mark Dankberg, chief executive of broadband satellite user-terminal manufacturer ViaSat Corp. of Carlsbad, Calif., said the company has ramped up its production of WildBlue and Telesat consumer equipment and foresees no further shortages of the sort that occurred during last summer’s startup.

“We have had the normal ramp-up problems, nothing more,” Dankberg said in an interview here. “We have gone from producing around 3,000 to 5,000 [terminals] per month to a point where, next month, we will be producing 15,000 terminals.”

ViaSat reported that in the last three months of 2005, it built 44,000 consumer broadband terminals. Dankberg said more than two-thirds of these were for WildBlue.

Dankberg said he was pleased to hear that WildBlue had decided to close subscriptions in high-demand regions while capacity is adjusted rather than let service quality suffer.

“They have made the difficult decision to preserve the integrity of the service,” Dankberg said. “What we need to do now is generate enough volume to bring terminal costs down close to what people pay for satellite TV. Telesat’s Anik G1 satellite could get us near that point.”

David Lahey, vice president for business development at Telesat, said the Anik G1, likely to be ordered this year, will have 30-40 times the capacity of Anik F2. It also will be less expensive to build than Anik F2, he said.

Telesat Canada’s owner, BCE Inc. of Montreal, has announced plans to recapitalize Telesat, adding to the company’s debt before selling up to 49 percent of it in an initial public stock offering (IPO) scheduled for the second half of this year.

Ignacy said the added debt and preparations for an IPO will complicate Telesat’s expansion plans but that the company still expects to order the Ka-band satellite.

“We’ll obviously have to work through these issues, but the fact is that our current owners will be retaining a majority stake in the company,” Ignacy said in an interview. “They have an ongoing interest in seeing us continue to grow, and our current capital expenditure plans are what will drive our growth.”

Ignacy said Telesat Canada would need between 125,000 and 150,000 subscribers to its current satellite-broadband service to “make all our financial margins. Because of the equipment-delay issues early on, we are about six months behind in our schedule. But we like the direction this is taking and we think we will reach our goal in a couple of years.”

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