PARIS –
ViaSat Inc. believes that in addition to winning new satellite broadband customers, the large all-Ka-band satellite it is building
also will take more conventional telecommunications business away from the existing satellite-fleet operators in North America,
the company’s chief executive said May 28.

 

In an address to an investor conference organized by Cowen & Co., Viasat Chief Executive Mark Dankberg said the ViaSat-1 satellite, to be launched in 2001, will be able to offer low-cost satellite bandwidth for private business networks, mobile broadband users, cellular backhaul services, certain Department of Defense applications and also applications for the U.S. Department of Homeland Security.

 

“It’s not just direct-to-home broadband,” Dankberg said of ViaSat-1, which is expected to have about 100 gigabits of throughput capacity. “Broadband is the most obvious use, with clear and mature distribution mechanisms. But anything that is bandwidth intensive by satellite is an excellent candidate.”

 

Carlsbad, Calif.-based ViaSat decided to expand beyond its core business of providing commercial and military satellite transmission ground gear in January with the award of a contract to Space Systems/Loral to build ViaSat-1. ViaSat estimates the satellite and related investments, including launch, will cost about $350 million.

 

The decision to own its own satellite came after a key ViaSat customer, WildBlue Communications Inc. of Denver, failed to order a new Ka-band satellite even though WildBlue’s existing satellite capacity was filled nearly to capacity in some areas.

 

But in addition to consumer broadband users, ViaSat is looking further afield and targeting some the classic telecommunications markets now served in the United States by Intelsat of Washington and Bermuda, the SES Americom subsidiary of SES of Luxembourg, and Telesat Canada.

 

“There are 25 to
30 FSS [fixed satellite services] satellites over the United States now,” Dankberg said. “Between a quarter and a third of this capacity services these types of [high-bandwidth] applications, so we see a lot of opportunity to migrate existing FSS customers onto this new satellite.”

 

Dankberg said ViaSat-1 will be able to provide 1 gigabit per second of bandwidth for about $3.5 million in capital costs. He said the WildBlue Ka-band satellite and the larger Spaceway 3 Ka-band satellite operated by Hughes Communications of Germantown, Md., have required $40 million in capital costs to provide the same gigabit-per-second capacity.

 

“There aren’t very many times in this world when you get a factor of 10 improvement relative to the existing competition in your cost basis in a dimension that seems to be the most valuable to customers,” Dankberg said.

 

The conventional Ku- and C-band satellites providing general telecommunications over the United States have required $225 million in capital expense to provide the same throughput, according to ViaSat estimates.

 

Eutelsat of Paris, which is building its own all-Ka-band satellite for its core European market, has said the spacecraft, called Ka-Sat, will be used both for two-way broadband services to consumers and for direct-to-home television.

Internet market analysts differ in their assessment of whether satellite broadband can long compete against terrestrial alternatives that are spreading well beyond their initial urban markets.

The core of ViaSat’s argument is that the way people are using the Internet is changing. Using data compiled by Internet networking gear provider Cisco Systems, Dankberg said that in 2005, nearly half of all Internet use was for surfing
Web pages, exchanging e-mail and transferring files. For these uses, satellite transmission has a disadvantage because of the delays inherent in sending signals to and from a spacecraft 36,000 kilometers in altitude.

 

But these conventional uses of the Internet now take a backseat to video applications, which satellites can provide as well as terrestrial links – assuming the bandwidth is available.

 

“The most striking thing, if you look at what’s gone on in the satellite Internet space, is that the amount of bandwidth offered by [Hughes] and WildBlue hasn’t changed since 2005. It is limited by the satellite capacity they have, which is already being constrained.”

 

Wall Street has reacted cautiously to ViaSat’s new investment, and Dankberg conceded that he needs to find further investors beyond the initial 15 percent stake purchased by Loral. He said ViaSat continues to court strategic investors and financial partners for ViaSat-1 and likely will have announcements of partners “this year or shortly thereafter. We know people are looking at this and saying: ‘Who are the other people who believe the same things you do?’”

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