A partnership of U.S. and European companies plans to provide high-definition television services for local markets on both sides of the Atlantic, in addition to providing consumers satellite-delivered broadband Internet service.

The deal involves, ViaSat and Space Systems/Loral of the United States, and Europe’s Eutelsat.

In separate interviews, the chief executives of ViaSat Inc. and Eutelsat stressed that

the success of their investments in two high-bandwidth Ka-band satellites, announced Jan. 7 and Jan. 8, does not rest solely on consumer broadband.

Berretta, chief executive of Paris-based satellite-fleet operator Eutelsat, said Eutelsat’s Ka-Sat spacecraft, to be built by Astrium Satellites and located at Eutelsat’s well-established 13 degrees east longitude slot for television distribution, will roll out what is known in the industry as local-to-local television service – satellite retransmission of local over-the-air channels – from the start.

In a Jan. 10 interview, Berretta said Eutelsat expects to generate 100 million euros ($147

million) in annual revenue

from Ka-Sat within two years of its entry into service. Eutelsat has estimated that it will spend 350 million euros on the program, a figure that Berretta said includes the costs of an elaborate ground network to prepare the satellite for provision of local television services in addition to the cost of building, launching and insuring the satellite.

Ka-Sat, to be launched in 2010, is expected to provide about 70 gigabits per second of throughput, which is the maximum bandwidth available to Eutelsat at the 13 degrees east position, Berretta said.

“When I speak of 100 million euros in average annual revenues, I am talking about new revenues, not revenues we would generate in any event from our Hot Bird satellites,” Berretta said. Eutelsat’s Hot Bird spacecraft at 13 degrees are the company’s chief revenue generators.

Eutelsat, which is the world’s third-largest satellite-fleet operator when measured by revenue

– $1 billion in 2006 – will have exclusive access in Europe to the next-generation SurfBeam ground terminal technology developed by ViaSat Inc. of Carlsbad, Calif., under an agreement between the two companies.

ViaSat Chief Executive Mark Dankberg said the decision to move into the business of owning and operating satellites was made only once it was clear that other companies were not meeting the demand for low-cost bandwidth – especially for consumer broadband services.

ViaSat has a contract with Space Systems/Loral of Palo Alto, Calif., to build the ViaSat-1 all-Ka-band satellite. Launch is scheduled for 2011. ViaSat-1 will provide slightly more than 100 gigabits per second of throughput from its orbital position at 115 degrees west longitude. Dankberg has said that neither of the two principal U.S. providers of consumer broadband – Hughes Network Systems of Germantown, Md., and WildBlue Communications of Denver – is moving fast enough to order new satellite capacity to meet surging consumer demand for broadband service.

terminals and other terrestrial gear provide satellite communications links. It has never built its own satellite, but it has long been involved with Ka-band services as the provider of the ground segment for WildBlue’s consumer-broadband service. With WildBlue hesitating to order a new satellite, ViaSat teamed with Loral to act independently. Dankberg said ViaSat expects ViaSat-1 to cost $365 million over four years, a figure that includes the ground segment and adapting the satellite for television broadcasts as needed.

Loral Space and Communications of New York, which owns Space Systems/Loral, agreed to purchase some 10 percent of ViaSat-1’s capacity for the life of the satellite. Loral said its purchase was made “in anticipation of Telesat Canada, which is 64 percent owned by Loral, utilizing the capacity for Canadian services.” The satellite’s orbital slot was provided by Telesat. Loral’s commitment to purchase ViaSat-1 capacity was key to the selection of Loral as the satellite builder. “The Canadian side of this is a big deal,” Dankberg said of the Loral commitment. “They [Loral] will be taking about 10 gigabits of capacity. When Loral added this offer, it switched the equation. It was a really big advantage for us and it became more of a package deal.”

and Berretta said the competition to build their Ka-band satellites included head-to-head battles of European and U.S. satellite manufacturers.

Berretta said Astrium offered the lowest-cost bid that met the company’s schedule requirements. Dankberg said a difficult choice was made simple once Loral threw in the

offer to purchase capacity.

Providing video services and mobile broadband in North America is included in the ViaSat-1 business plan. I

n addition, ViaSat will


lower-cost broadband access to consumers, Dankberg said.

ViaSat will be investing substantially in research and development in new satellite ground gear for both the U.S. and European systems, he


That investment will provide

what he called “a safety net” in the event

the consumer-broadband market in the United States does not materialize as expected.

Selling the satellite to a U.S. direct-broadcast television provider in the event of a collapse of the ViaSat-1 business model is also an option, Dankberg said, but he made clear that he does not view this as a likely scenario. ViaSat has both binding and nonbinding commitments totaling around $100 million for ViaSat-1, a figure that includes the Loral agreement to pay for 10 percent of the satellite’s capacity for its entire in-orbit service life.

ViaSat expects to create a subsidiary that will operate ViaSat-1. This yet-unnamed operating company will, Dankberg said, issue its own debt, which he estimated at between $75 million and $200 million. ViaSat’s partners in the venture ultimately will invest between $100 million and $200 million, leaving ViaSat to invest between $125 million and $200 million of its own into the project, according to Dankberg. The project in the United States will break even with just 300,000 ViaSat-1 customers, Dankberg said. The ViaSat-1 and Ka-Sat satellites together will be able to serve about 4 million customers.

Despite his attempts to portray the ViaSat-1 project as one with limited risk to ViaSat, especially given its European backing with Eutelsat, Wall Street reacted to the news by punishing ViaSat’s stock. It dropped 25 percent in the 48 hours following

the announcement.