03.24.26
Posted in Amazon, AST SpaceMobile, D2D, Globalstar, Lynk, Operators, Services, SpaceX, Spectrum, ViaSat at 5:43 pm by timfarrar
After more than 20 years, it looks like Jay Monroe has finally achieved his goal of selling Globalstar at a profit. In the coming days, I understand that the sale process initiated back in October will reach its conclusion, and Globalstar will be sold at something close to Jay’s asking price of $10B. And as I promised Jay in Paris last September, I’ll owe him an apology for ever doubting that he would be able to make money on his Globalstar investment.
Rumors have been swirling all week here at the satellite conference in Washington DC and many people have guessed that the winning bidder would be Amazon. That seemed to be the most likely outcome back in January. However, I think that Jay took Amazon’s offer to SpaceX and they probably decided to beat it, in order to further cement Starlink’s dominance of the satellite industry. Amazon already faces severe competitive pressure from Starlink in the broadband market, and a Starlink purchase of Globalstar would block another opportunity for Amazon to broaden its appeal and match Starlink’s D2D offer.
Buying yet more spectrum might not be seen as the wisest course of action for SpaceX, if some international regulators decide that because Starlink controls Globalstar’s MSS spectrum there is no need to grant Starlink additional rights in the 2GHz MSS spectrum acquired from EchoStar. But Brendan Carr’s threats that he will block European satellite operators from the US market if the EU withdraws Starlink’s spectrum rights should carry the day in the near term.
In particular, a two year extension is likely to be granted for the current EU 2GHz spectrum licenses (which is conveniently beyond the November 2028 presidential election). And 2029 is a long way away, given the number of balls Elon Musk has to juggle in the next few years to get Starship flying, meet NASA’s moon ambitions and sort out the challenges at xAI and Tesla.
What is much less clear, is what will happen to Globalstar’s C-3 constellation and the relationship with Apple after a sale. Would Apple continue to pay Starlink hundreds of millions of dollars per year to support connectivity on existing iPhones? Would the C-3 constellation still be completed, especially if it takes MDA another two years or more, by which time Starlink might have its own next generation Starlink Mobile constellation on orbit? That decision could go either way, depending on how confident SpaceX is that Starship will be ready to launch the next gen constellation on time.
Meanwhile, in other news, it seems that Viasat has concluded that it will have to put some of its own money on the line to get started with the 2800 satellite Equatys constellation, with RocketLab likely to be chosen as the satellite bus contractor. Plausibly, RocketLab’s recent $1B fundraising could be used to provide an equity injection into the Equatys joint venture.
And AST is telling people that it will now rely on New Glenn for 9 of its first 12 launches, implicitly confirming the rumors that the company can’t figure out how to stack satellites within the much smaller Falcon 9 fairing. Of course, there’s no way that New Glenn will provide AST with anything like 9 launches this year, so AST’s deployment plans will be pushed out even further.
The level of skepticism about AST at the conference is quite remarkable, but despite Starlink’s dominance, there’s little reason for mobile operators to withdraw their support in the immediate future. Instead, with Starlink’s next generation Starlink Mobile constellation at least two years away and alternatives including AST, Equatys and Lynk all on a similar timetable, MNOs can wait and see, and perhaps pray, that one or more alternatives to Starlink ultimately emerges, and that, in the meantime, more clarity emerges about whether their customers actually care about D2D at all.
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09.08.25
Posted in AST SpaceMobile, Echostar, Globalstar, LightSquared, Operators, Regulatory, SpaceX, Spectrum, T-Mobile, Thuraya, Verizon, ViaSat at 5:47 am by timfarrar
My post last week on the potential scenarios for EchoStar assumed that the buyer of EchoStar’s spectrum would be a terrestrial player, because only using the spectrum terrestrially could produce a return that justified paying Charlie Ergen’s asking price. 12 months ago that was true when the rumors were that SpaceX was only willing to pay a few billion dollars for access to EchoStar’s AWS-4 spectrum.
With Deutsche Telekom apparently getting cold feet about buying spectrum for D2D, and Verizon not yet at the table, that meant the most likely scenario was for EchoStar to continue moving forward with its own constellation, in order to keep control of the whole AWS-4 block and significantly constrain Starlink’s D2D capacity in the US (while having the opportunity to monetize the spectrum in urban areas through leases to a wireless operator like Verizon).
But ROI has never been the primary determinant of SpaceX’s decisions, when the opportunity presents itself to dominate an industry and force competitors out. That’s why we are seeing aggressive actions from Starlink in the satellite broadband market, lowering prices for hardware and service in both the consumer and professional markets to make Amazon Kuiper’s entry harder (including a new unlimited maritime plan for merchant vessels at only $2500 per month, which will also undermine Viasat’s NexusWave).
And in this case, by spending $17B, SpaceX has not only persuaded EchoStar to give up its D2D plans but has now made it much harder for any competitor to move forward when they can’t possibly compete with SpaceX’s speed in bringing new satellites to market. That was evident in the article published by The Information in May, where Apple staff working on the D2D project with Globalstar expressed concerns that their bosses would cancel the effort and decide to partner with SpaceX instead. And we’ve seen more on that front in recent months, as Globalstar’s new satellites have been delayed, and Apple was apparently forced to support Starlink on the iPhone 13 in order to secure a new launch slot.
It shouldn’t be ignored that just like in fall 2022, the SpaceX announcement comes right before Apple’s own event tomorrow to announce its new iPhone. So while this might not be on the agenda tomorrow, decisions about the future of the Apple-Globalstar partnership and the new C-3 constellation will be on everyone’s minds. The cancellation of the EchoStar D2D constellation was already a major blow for MDA, but any decision by Apple to pull back from the C-3 constellation would be even more devastating.
SpaceX especially wants Apple to cooperate instead of pursuing the C-3 constellation because the H-block and AWS-4 spectrum, that SpaceX is now acquiring from EchoStar, is not supported by any current phones (EchoStar’s Band 66 and Band 70 used different frequency pairings). Thus support from device manufacturers will be needed to get the new capabilities enabled by this spectrum into consumers’ hands in the near term. Of course if Apple doesn’t come around, then there’s always the possibility that SpaceX will announce a “Starlink phone” as Apple executives worried about in the May article.
In recent years, Musk has also plotted the ultimate challenge to Apple, said a person with direct knowledge of his thinking: building his own phone to get around Apple’s gatekeeper position in the market. Musk has discussed Tesla building the phone and providing satellite connectivity through Starlink, the person said.
Musk hasn’t kept his openness to making a smartphone secret. He has publicly toyed with the idea on social media at times, but he has also made it clear he doesn’t want to deal with the headaches of such a monumental effort.
“The idea of making a phone makes me want to die,” Musk said at a Trump rally in Philadelphia last October. “If we have to make a phone, we will. But we will aspire not to make a phone.”
And as far as other competitors go, AST is already struggling with enormous delays, which are now even worse than the company indicated in mid August, after the FM1 satellite wasn’t ready to ship at the end of August as promised during AST’s Q2 results. And AST needs to raise over $400M in the next few weeks to make the $420M payment due to Viasat at the end of October. The one good piece of news for AST from this deal is that it very likely means EchoStar won’t retain its EU 2GHz license (though there will undoubtedly be litigation if it is cancelled), leaving AST/Vodafone in competition with SES/Lynk for what will presumably by a paired 10MHz license (assuming Viasat retains its own paired 15MHz license).
It’s also unclear what Viasat will do next, as the company hoped to secure financial backing from UAE-based Space42 to build its own LEO L-band network. While I don’t think a formal deal was likely to be announced next week in Paris, this announcement probably gives Space42 further pause about whether it makes sense to challenge Starlink in the D2D market, especially as the expectation was for Space42 and the UAE government to put up most of the funding.
Finally, I think we can now look to EchoStar to gradually wind down the rest of its operations and sell off its remaining spectrum. The remaining major block is AWS-3, which Verizon might pick up in the next few months, potentially at a discount to the $10B EchoStar paid, especially if Verizon takes on the AWS-3 reauction obligations. And then it would be reasonable to assume that DISH DBS would merge with DirecTV and Hughes could eventually be sold (perhaps to a private equity buyer?).
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08.14.25
Posted in AST SpaceMobile, Financials, Inmarsat, Operators, Regulatory, Spectrum, ViaSat at 9:02 pm by timfarrar
The famous saying from George Santayana is one that often comes to mind in the MSS industry, where companies repeatedly make the same mistakes as their predecessors a decade or two ago. And this blog has plenty of posts from 2009-14 about the mistakes made by MSV/LightSquared and Phil Falcone (who incidentally was so irritated by my posts that he was moved to comment on one of them from his Harbinger Capital computer – which is why my X/Twitter bio says that “I enjoy annoying billionaires”).
So it’s now particularly ironic to see that ancient history once again take center stage in the industry as the dispute between Viasat and Ligado/AST heats up. While Phil Falcone has other things on his mind nowadays, some of us remember those days only too well, including Jennifer Manner, who worked at MSV/SkyTerra from 2005-2009. Back then, Inmarsat and MSV signed a 100 year long Cooperation Agreement which was hugely advantageous to Inmarsat and has been a millstone around Ligado’s neck ever since. It has also been the source of endless disputes over the years as Ligado ran short of money, and Inmarsat tried to make sure it collected as much as possible.
The agreement was great for Inmarsat (which received ~$1.7B in spectrum lease payments, while its new owner, Viasat, stands to receive billions more between now and 2107) and Rupert Pearce, then General Counsel of Inmarsat, who negotiated the agreement and subsequently moved on to become CEO of Inmarsat. MSV’s then CEO Alex Good signed the agreement because Falcone had told him that an agreement was needed before Harbinger would provide a sorely needed $500M cash infusion (and Falcone had no understanding of what it actually said). Of course Falcone had many regrets later on, when LightSquared was forced into bankruptcy by GPS interference concerns, and once it became clear that Ligado was not going to deliver a windfall from its spectrum holdings, he unsuccessfully sued MSV’s executives and owners.
That brings us to today, when the dispute flared up once again, and both Viasat and Ligado filed competing motions with the bankruptcy court, detailing a dispute over the agreement to assume the Cooperation Agreement and sublease the spectrum to AST. There was a contentious mediation which had appeared to be settled back in June.
Now Ligado alleges that the Cooperation Agreement does not prohibit either Ligado or AST from seeking access to more L-band spectrum outside the US in the future, while Viasat alleges that the Cooperation Agreement has always prevented Ligado from operating outside the US, and AST should also be bound by these terms.
Ligado cites the drafting of the Mediation Agreement to support its argument that the only limitation is on AST’s initial application for its LEO constellation and nothing stops it from making modification requests in the future. It also includes a curious declaration from CEO Doug Smith, which sets out Ligado’s attempts to do a satellite lease deal with Avanti in 2016, at a time when there was lots of intrigue around Avanti’s future.
On the other hand Viasat argues that the Cooperation Agreement contains multiple references to Inmarsat’s exclusivity outside the US, and that the company would never have agreed to a deal that left Ligado or AST with the potential to interfere with its operations elsewhere in the world. Of course, Viasat has its own ambitions to build a LEO D2D constellation in partnership with Space42, operating in the L-band around the world, plus the 2GHz MSS band in Europe.
It remains unclear what the outcome of this dispute will be, especially as US bankruptcy courts often tend to favor the debtor in disagreements with creditors, but this could hold up the proceedings for quite a while. That may be one of Viasat’s objectives, as it looks towards an EU decision on 2GHz by the end of the year, and tries to cement its own LEO funding plans. Ligado’s submission even states explicitly that “Inmarsat’s position poses an existential threat both to the viability of the AST Transaction and the feasibility of the [Bankruptcy Reorganization] Plan”.
It is also intriguing why AST is so keen to pursue L-band rights outside the US, especially as these will undoubtedly be very difficult to secure, given the longstanding presence of both Viasat/Inmarsat and Space42/Thuraya. However, an application by Viasat to shift spectrum from GEO to LEO could provide an opening and AST would certainly prefer it if Viasat didn’t build another competing LEO NTN/D2D constellation.
But I also suspect that AST realizes the weakness of its claim to 2GHz (where the company claimed to have “priority rights” from last week’s deal with Sky and Space Global, omitting to mention that these are low priority) and the not insignificant probability that it will lose the EU 2GHz competition to either SES/Lynk or EchoStar (most observers think Viasat is fairly certain to retain its rights and there is only expected to be one other wideband license up for grabs). This would mean AST has little option other than to pursue L-band rights on a global basis if it wants to build a new constellation operating in “midband” spectrum in a few years time.
Now we wait to see how this develops. But for the time being AST may no longer be able to claim a clear path to developing what it asserts will be “broadband” D2D through use of MSS spectrum. So while this dispute continues, the company will have to focus on its very limited terrestrial spectrum leases with AT&T and Verizon, which will at best be sufficient to offer a narrowband service that is similar to Starlink (and will need the FCC to approve AST’s non-compliant SCS application, which is not at all certain).
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08.02.25
Posted in AST SpaceMobile, Echostar, Handheld, Lynk, Operators, Regulatory, Services, SES, SpaceX, Spectrum, ViaSat at 9:36 am by timfarrar
Yesterday EchoStar chose to announce its plans for a new $5B D2D constellation of 200 satellites, including an initial US$1.3B contract with MDA to build the first 100 satellites. Though the MDA contract was in line with my prediction back in March, EchoStar’s heavy emphasis on prospective wholesale partnerships with mobile operators during the results call suggests that Apple has declined to provide financial backing for the system. That’s perhaps unsurprising after the press revelations in May describing a lack of consensus within Apple about whether to continue investing in D2D.
As EchoStar CEO Akhavan noted in the results call, EchoStar had to make a decision now, because the EU is in the process of deciding what to do about the current European 2GHz licenses held by EchoStar and Viasat when they expire in spring 2027. Indeed I understand that EchoStar assured the EU of its plans to build this system in its confidential response to the EU’s consultation back on June 30. Now we face an all-out battle between at least four players (Viasat, EchoStar, AST/Vodafone and SES/Lynk) for only two licenses when they are awarded at the end of this year.
However, EchoStar’s announcement also came as an unwelcome surprise to many investors, who were hoping that reports earlier in the week of FCC Chairman Carr’s “Best and Final Offer” to sell AWS-4 spectrum signaled that EchoStar would scale back its ambitions and strike a deal to sell or lease this spectrum. Contrary to some analyst perceptions, the biggest threat from the FCC has always been a potential rulemaking on the 2GHz MSS band that would open it up to additional sharing by Starlink. However, it was also very unlikely that Elon Musk and Charlie Ergen would have a meeting of minds on the value of this spectrum in any commercial deal for Starlink to access the band.
So its now clear that Ergen has decided to defy Carr’s mandate and move forward on his own, without providing any evidence that a major new partner for the system has been secured. Hopefully clarity on financing and partnerships will be provided in September when EchoStar has promised to give more details of its plans. But in the meantime, Carr must decide whether to launch a 2GHz rulemaking or leave Starlink out in the cold without access to MSS spectrum that will soon be sorely needed to increase the capacity of its D2D system. Carr’s decision may well turn on whether Ergen has secured President Trump’s backing, after his recent falling out with Elon Musk, and that would certainly help to explain why EchoStar is highlighting a large headline investment of $5B in the planned D2D system.
Fortuitously for those who are trying to make sense of these developments, yesterday evening I also released my new 100+ page deep dive report on D2D, telling you everything you need to know about D2D technology, regulation and the progress of all the different satellite operators involved in this market, updated with the latest information on EchoStar, AST, Starlink, Apple/Globalstar and other planned systems. We’ve seen lots of ludicrous forecasts about the size of this market, which simply fail to understand the technological constraints on these services in terms of capacity, data rates and costs. Unlike these other forecasts, my analysis looks at realistic capacity, usage and pricing models to assess how many customers Starlink and AST’s systems can serve and what they will need to charge per Gbyte of capacity. That’s a familiar topic to who followed my blog posts on LightSquared back in 2011-12 when it became clear that there was no there there…
I also analyze regulatory constraints, feasible deployment schedules (especially in light of continuing delays for AST which make the company’s claimed launch plans totally implausible) and how much spectrum will be needed for these systems to operate. As I discussed in another report back in January, MSS spectrum (and the 2GHz band in particular) is likely to be critical to providing adequate capacity for D2D constellations. Starlink only has a paired 5MHz block of spectrum in the US, but has already decided that it needed to upgrade to a paired 15MHz block in New Zealand after only 6 months of operations. So EchoStar’s announcement, and how the FCC now decides to respond, will be critical in determining the future direction of this market.
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12.12.19
Posted in Broadband, Echostar, SpaceX, Spectrum, ViaSat, VSAT at 4:47 pm by timfarrar
I was surprised to see last month that generally well informed observers like Om Malik were taking seriously (and even describing as “astute”) a blog post by Casey Handmer that suggests Starlink is a “very big deal” that will “catalyze enormous positive change, bringing, for the first time, billions of humans into our future global cybernetic collective.”
In order to justify that level of hype, Handmer claims that each satellite will cost $100K (which could “fall to $20k by the thousandth unit off the line”) and generate $30M in revenue during its five year lifetime, delivering “the ocean of gold needed to philanthropically build a self-sustaining city on Mars”. The first half of this claim is excessively optimistic unless the capabilities of the satellite are dramatically scaled down, which is already known to be the case.
For example, Starlink has abandoned crosslinks, at least for now, and would require a fundamental change in design and deployment in order to accommodate them: placing fragile movable RF antennas (let alone laser payloads which was the original plan) on the corners of the satellites would mean changing the current stacking and non-propulsive deployment mechanism and potentially implicate other characteristics like the stabilization of the satellite bus, due to the need for extreme pointing accuracy (especially for laser crosslinks). And the cost of a single phased array antenna on the ground can exceed Handmer’s supposed $100K cost for the entire satellite, which may be another explanation for why the current satellites are apparently operating in a fixed beam configuration.
But my primary focus is on the second half of the claim with regard to revenue, which is far easier to validate against terrestrial broadband benchmarks. In order to get to his $30M per satellite figure, Handmer assumes that a satellite will generate 100 beams capable of supporting 100Mbytes per second (800Mbps), i.e. a peak capacity of 80Gbps per second, with a loading factor of 100 seconds per 90 minute orbit (i.e. 1.85%) in order to carry 1000 GBytes of data per orbit. This peak capacity is significantly in excess of the figures in SpaceX’s own November 2016 FCC filing (which states an average aggregate downlink capacity of 20Gbps), and that filing doesn’t account for any reduction in capacity resulting from SpaceX being required to share spectrum with other satellite systems such as OneWeb.
However, Handmer’s assumed loading factor could be slightly on the low side (thought certainly not “ludicrously low” as he alleges), if Starlink was able to provide services all around the world. For example, Iridium’s (never filled) capacity for its first generation of satellites was just under 4% of the nominal peak capacity per satellite (1100 calls per satellite x 66 satellites = 38.2 billion minutes, but the system only had 1.5 billion minutes of saleable capacity per year).
On the other hand, SpaceX is planning to ignore the ITU spectrum priority rules (claiming merely that Starlink needs to initiate rather than complete coordination with other systens), which give OneWeb priority access to the NGSO spectrum and may block Starlink from gaining market access in many countries. And the low altitude of Starlink’s satellites, combined with the lack of crosslinks, means that providing services to ships and planes crossing the oceans and poles is not a feasible objective in the foreseeable future.
Combining these two factors, it appears that Handmer’s 1000Gbytes of saleable capacity per orbit will in reality be more like 250-500Gbytes per orbit (i.e. 2-4 times less), based on a peak capacity of up to 20Gbps (downlink plus uplink) and a loading factor per orbit of 2%-4%.
But the more important assumption is that this capacity will be sold at “a subscriber cost of $1/GB”. That figure is ludicrously overstated compared to the cost of broadband today. For example the average usage of Altice customers was 220Gbytes per month back in Q2 2018, while Charter’s median broadband usage in Q1 2019 was 200Gbytes with cord cutters averaging 400Gbytes per month. If we take a typical retail ARPU of around $60 then the retail price is $0.15-$0.30 per Gbyte and with consumer Internet data usage projected to increase by 160% between 2018 and 2022 (according to Cisco) the retail price of data on existing fixed broadband connections will soon be below $0.10 per Gbyte. So Handmer has overestimated the retail revenue potential per satellite for Starlink by at least 20-40 times.
Another, even more critical consideration is that the underlying cost of data delivery over fixed networks is much, much lower than the retail price. Back in 2016, Dave Burstein noted that it cost ISPs less than 1 cent per Gbyte to deliver internet traffic, and that figure is undoubtedly lower today. That’s the more appropriate basis for comparison with the cost of delivery for Starlink (unlike Handmer’s ridiculous comparison with an obselete 14 year old submarine cable, when most domestic internet traffic doesn’t even need to go outside the US), which (using our 250-500Gbytes per orbit figure above) would have a satellite capex cost alone of 0.7-1.3 cents per Gbyte over 5 years.
Then you need to add the cost of the ground segment and backhaul (certainly at least as high as the satellite capex), and most importantly, the cost of the user equipment, which will be much higher than the (less than $100) cost of a terrestrial cable modem and will far outweigh the cost of the satellites themselves. As CNN notes, “ground equipment may pose one of the biggest obstacles to success” and was probably the main reason why previous efforts like Teledesic folded.
Viasat spends $700 to acquire each satellite broadband customer of which roughly $300 is the end user equipment and installation adds another $150. But those are fixed dishes which do not need to track the satellites as they move across the sky. A Starlink terminal could easily cost $1000 or more, even with various compromises to reduce cost (such as narrowing the scan angle, though that will require a very large number of satellites, potentially several thousand, to be in orbit), before adding the cost of rooftop installation, let alone customer acquisition. And if each customer consumes say 500 Gbytes per month, then that will mean 250-500 terminals will need to be deployed to consume each satellite’s saleable capacity, implying incremental terminal costs of at least $250K-$500K per satellite (at $1000 per terminal).
To sum up, Handmer’s assessment that the satellites will generate revenue equal to 300 times their costs is fatally flawed. Even looking purely at retail revenues, then the revenues will be 20-40 times lower than he estimates, while the total system capex costs will be 4.5 to 7 times higher than he estimates (including ground segment costs of $100K per satellite and terminal costs of $250K-$500K per satellite). In the best case (and with unlimited demand!) that means retail revenues will be just over 3 times the capital costs, while in the worst case the retail revenues will only just cover the capital costs, ignoring ongoing operations, service and support.
When looking at the underlying costs of data delivery, it is also clear that Starlink’s costs will be meaningfully higher than the cost of terrestrial data delivery in areas with access to broadband, giving terrestrial rivals plenty of room to compete to retain their existing customer base (and ensuring that additional cost sensitive markets like cellular backhaul will remain out of reach).
So my conclusion is that while Starlink may be a “big deal” for the satellite industry (and for astronomers), it certainly isn’t a big deal for the terrestrial broadband market. In essence, under any plausible set of cost assumptions, Starlink’s bandwidth will cost more than current terrestrial broadband connections, and Starlink’s ability to disrupt a retail market where existing providers have existing infrastructure with enormous gross margins will be very limited. That’s nothing like Handmer’s nonsensical claims that “further launches will be funded entirely by providing better service to high density cities”.
Starlink may provide service for customers with no access to terrestrial broadband alternatives, but the satellite broadband market has fewer than 2M subscribers in North America and 1M users in the rest of the world combined, which Viasat, Echostar and others have spent the last decade trying to serve (and at least in North America have essentially saturated the market). So it seems unlikely that Starlink will do much better.
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01.09.18
Posted in Broadband, Financials, Operators, Services, ViaSat at 1:54 pm by timfarrar
Last fall, I found Harris’s announcement on its 2017Q3 results call that “we received our largest order for a single commercial satellite covering four reflectors, bringing total orders to eight over the past two years” to be particularly odd because the only commercial satellites on order with four unfurlable reflectors are ViaSat-3.
Viasat then effectively confirmed that they had made this order in their 10-Q, which showed that Viasat’s total satellite purchase commitments increased from $1037.5M to $1106.6M during the quarter and that the size of Viasat’s contract with Boeing had increased by $11.2M in the same quarter (presumably to cover integration of the Harris antennas).
Not only was Viasat’s order quite late in the game (some knowledgeable observers assumed that it would have been ordered back in 2016), but it is also just for one satellite, not for both of the ViaSat-3 satellites that are under contract with Boeing. Viasat may well have another purchase option (which it can exclude from its purchase commitments for the time being), but it is still surprising that it took so long to reach an agreement with Harris. And it may suggest that the construction schedule for Boeing’s second ViaSat-3 satellite will be longer than originally thought.
Another curious issue was Viasat’s decision to use a fake image of ViaSat-2, which Viasat’s President Richard Baldridge later admitted “in fact is not the actual ViaSat-2″ satellite, because “we obscured the sensitive parts”. It is hard to understand why Harris’s antennas are deemed so sensitive by Viasat when Harris themselves were happy to publish a mockup image back in 2016 (which has since been removed from their website) and the size of the antenna can easily be worked out from Viasat’s own FCC submissions.
Although I have no evidence to suggest this is actually the case, one possible reason for these two apparent coincidences would be if Viasat had sought to patent some features relating to deployment of the Harris antenna on ViaSat-2 in order to try and prevent rivals from making use of Harris’s unfurlable Ka-band antennas (in particular Hughes and SS/L will likely use them for Jupiter-3). That would certainly explain Harris’s decision to highlight during the Q3 results call that the commercial reflector business is “a commercial model driven business where we invest our own R&D to develop that offering. We sell it into the marketplace.”
Now we have Viasat revealing today that Boeing “has identified an in-orbit antenna issue, which has caused some spot beams to perform differently than they did during ground testing.” It seems very likely that the issue is related to the unfurlable 5m Harris antennas, since “Viasat believes the issue will not affect the coverage area of the satellite” and the smaller solid antennas will provide most of the geographic coverage, while the larger unfurlable antennas will provide the high capacity coverage within the continental US.
It also seems somewhat more likely that this is a deployment problem (i.e. an issue primarily for Boeing/Viasat) rather a problem with the antenna itself (i.e. an issue primarily for Harris), since the antenna performed “differently” (and presumably correctly) during ground testing. If this problem relates to a new feature that Viasat or Boeing introduced, then that would clearly be particularly contentious, especially if it was related to any patent issues that might have been in play previously. So now we need to wait and see how the blame game develops and what this means for the future relationship between Harris and Viasat.
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09.15.17
Posted in Aeronautical, Broadband, Eutelsat, Inmarsat, Operators, Services, SES, Spectrum, ViaSat at 12:54 am by timfarrar
This week in Paris all seemed calm, after the turbulence of the last few years, with the only major announcement coming from SES with its new O3b mPower MEO constellation. But under the surface a lot is happening, and (perhaps appropriately) I think we are now just in the eye of the hurricane, and the storm will shortly ramp up once again, before we find out who and what will be left standing in a couple of years time.
SES’s announcement came several months after it selected Boeing to build the O3b NEXT constellation (the “development agreement” was announced in July as part of SES’s half year results) and the delay until now appears to have been due to SES waiting for an anchor tenant that never materialized. In fact I believe SES originally expected to announce the contract in May, as was hinted at when SES’s CEO said he was “too busy” to go to Satellite 2017). However, SES is clearly not willing to see OneWeb, ViaSat and Inmarsat take the lead in new data-oriented satellite systems, whether or not it secures a major anchor tenant for this system.
Another subject of much debate is what Panasonic will decide to do now its original plan to invest in dedicated XTS satellites appears to be dead. Panasonic wants to lay off much more of the risk on a satellite operator, rather than underwriting the satellite costs in full, as Thales did with SES-17. Will an FSS operator be prepared to take this risk, bearing in mind that Intelsat is short of money, SES is now building O3b NEXT (which won’t be well suited for high latitude aero operations) and Eutelsat is intending to partner with ViaSat? Or would Panasonic do something more radical and let a rival like Inmarsat take over provision of connectivity services?
Finally, Inmarsat seems to be under a lot of pressure after a 15% decline in its share price in the last two weeks, and some were speculating that recent personnel changes were connected to this uncertain outlook. Profitability of aero contracts (notably that with Lufthansa) remains a major concern, and issues remain to be resolved for the EAN air-to-ground network, especially if Inmarsat is forced to provide a more robust satellite link in the wake of ViaSat’s legal challenge.
All of these issues provide much food for thought, and could lead to significant realignments in the industry over the next year. Decisions affecting the inflight connectivity market are almost certain to occur, because Panasonic can’t wait too long to provide clarity on its future positioning, and so we had better batten down the hatches for the coming winds of change.
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05.14.17
Posted in Aeronautical, Inmarsat, Operators, Services, ViaSat, VSAT at 12:51 pm by timfarrar
Back in June 2016 there was considerably excitement around ViaSat’s sole source $73M contract to provide connectivity for Air Force One and other senior leadership aircraft. The plan was to replace Boeing’s Ku-band BBSN (which has continued to operate ever since the commercial Connnexion-by-Boeing project was cancelled in 2006) with a dual Ka/Ku-band solution which could utilize the ViaSat Ka-band satellites within their coverage footprint and then switch back to Ku-band in other parts of the world.
I’m told that one reason this upgrade happened was that President Obama’s daughters complained that the connectivity on Air Force One compared unfavorably to the speeds available on other ViaSat-equipped aircraft they had flown on, and ViaSat ultimately received a sole source contract, with the US government purchasing a couple of dozen of ViaSat’s dual Ku/Ka antennas in addition to the airtime contract.
But I’ve heard rumors that the RF performance of this Ku/Ka antenna failed the WGS compatibility tests required by the Air Force, and so to date the US government has not installed these new terminals, and Air Force One is apparently still operating with the old Boeing system. Its unclear what the end result will be, or if this is an easily solvable problem, but ViaSat’s competitors (especially Inmarsat, which has successfully leased GX capacity to the DoD for manned surveillance missions in the Middle East) are now rubbing their hands with glee.
[UPDATE 5/15] A spokesperson for ViaSat states that this rumor “is inaccurate. ViaSat is on target with our testing and deliverables, per our DISA contract.”
The broader prospects for ViaSat’s Ku/Ka antenna also appear uncertain, with the only commercial customer to date being Virgin America, which is using a handful of terminals on its Hawaii routes. Virgin America’s new owner, Alaska Airlines, has announced its intention to replace its existing Gogo ATG solution with a high speed satellite solution, but some now think that Gogo’s recent lease of the AMC-4 satellite for Pacific coverage means it will win this business with 2Ku.
Its interesting to note that Gilat has also developed a Ku/Ka antenna, which Hughes will offer for roaming outside its own Ka-band coverage footprint. Will this antenna be better than ViaSat’s solution, and more broadly will a combined Ku and Ka antenna (which inevitably has a smaller aperture and more beam skew problems) be a realistic alternative to high performance flat panels like Gogo’s 2Ku? The answer to that question will dictate whether ViaSat and Hughes can provide competition in the long haul passenger aircraft market over the next few years, or whether Panasonic, Gogo and Inmarsat will continue to dominate that segment until all three ViaSat-3 satellites are launched in the early 2020s, by which time most airlines will already have made their choice of provider.
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02.17.17
Posted in Aeronautical, Broadband, Echostar, Eutelsat, Operators, Services, SES, ViaSat at 10:47 am by timfarrar
As we get closer to Satellite 2017, where major new deals and partnerships are often announced, it looks like a number of players may be getting cold feet about their future satellite plans. This may be partly attributable to fears that OneWeb will contribute to a eventual glut of capacity, now it has secured SoftBank as a lead investor and raised another $1.2B. Even though capacity pricing may have stabilized somewhat for now, its certainly the case that a satellite ordered now is likely to enter the market at a point when pricing is set to decline much further.
We’ve already seen a delay in Panasonic’s XTS satellite order, which was supposed to happen before the end of 2016. Ironically enough, Leo Mondale of Inmarsat said at the Capital Markets Day last October that he believed “Panasonic in Yokohama are a little wary of getting into the satellite business” and in the wake of the recent FCPA probe, Panasonic Avionics now has a new Japanese CEO.
Moreover, one way of viewing the recent announcement that Eutelsat will take its ViaSat JV forward (and include aero mobility, which was not part of the original agreement) is that Eutelsat no longer believes it will strike a deal to operate Panasonic’s XTS satellites. That’s a much better explanation than bizarre speculation that ViaSat is going to buy Eutelsat, especially when ViaSat is still struggling to fund its third satellite for Asia and is openly hinting that it will need US government contracts to close the business case. Eutelsat also seems to be cutting back elsewhere, with some speculation that the Ka-band broadband satellite previously ordered for Africa may now be repurposed for other (non-broadband) applications.
But the biggest news appears to be a pull back on SES’s part from the long rumored global Ka-band GEO system that I noted last summer. SES announced only a single satellite (SES-17) for the Americas in partnership with Thales last September, but had plans for two additional satellites, and it seemed increasingly likely that a partnership with EchoStar would be announced soon to fund this development. Now it seems that effort is on hold, leaving EchoStar without an obvious way forward to achieving global coverage (as it seems EchoStar considered but rejected the idea of buying Inmarsat last fall).
There are also other more speculative projects that need to show some progress to remain credible. When it was disclosed by the WSJ last month, SpaceX’s business plan for its satellite internet service was widely dismissed as laughably unrealistic. However, I believe that in fact this is not the business plan that corresponds to the current system design, and instead SpaceX will be seeking a large amount of US government money to fund its constellation. Compared to SpaceX and OneWeb, Telesat’s constellation ambitions have largely been ignored by commentators, despite Telesat’s priority claim to the Ka-band NGSO spectrum band. So Telesat therefore also faces pressure to secure external investors in the near term so that it can keep pace with OneWeb.
Now the question is whether caution amongst major existing players will make it harder for new entrants to move forward. Will it signal to investors that they should be cautious about investing in any satellite businesses? Or will it be perceived that new opportunities will face less competition from existing operators? The NewSpace community certainly seems to still be living in a bubble, despite the deeply negative implications of Google’s decision to abandon its efforts in satellite and hand over Terra Bella to Planet (not least because a sale to Google or other internet companies was seen as the most plausible exit for VC investors). So I look forward to seeing how much reality intrudes on the discussions at Satellite 2017.
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08.01.16
Posted in Broadband, Echostar, Financials, Inmarsat, Operators, Services, ViaSat at 10:50 am by timfarrar
In late July, EchoStar raised $1.5B in debt, to add to its existing $1.5B in cash and marketable securities. Echostar’s lack of obvious need for these additional funds has led to considerable speculation about what the company’s intentions are, including the possibility of an Avanti acquisition.
As an aside, Avanti is clearly in serious trouble, having leaked the possibility of an Inmarsat acquisition on Friday, in order to try and drum up more interest in its sale process, only to be rebuffed by Inmarsat today, with Inmarsat stating that “it has withdrawn from Avanti’s announced process and it is not considering an offer for the shares of Avanti.”
It seems very likely that there is no potential buyer for the company (otherwise the leak would not have been needed) and therefore Avanti will be forced to file for bankruptcy on or around October 1 when its next bond interest payment is due. Inmarsat would clearly be interested in certain Avanti assets, including Ka-band orbital slots for its I6 and I7 satellites and possibly the Hylas-1 satellite for additional European capacity, but these can be picked up in bankruptcy, likely for no more than $100M. And it is hard to imagine other mooted potential buyers, such as Eutelsat and EchoStar being more generous: Eutelsat has made it clear it does not intend to invest more in Ka-band satellites until they reach terabit-class economics, while Charlie Ergen’s past adversarial relationship with Solus and Mast (in DBSD, TerreStar and LightSquared) makes him very unlikely to bail out Avanti’s investors. At this point, it is therefore probable that there will be no buyer for Hylas-4, forcing Avanti’s bondholders to continue to fund its construction, if they want to avoid a NewSat-like situation, where the nearly completed satellite is simply abandoned and handed over to its manufacturer.
Returning to the question of what EchoStar intends to do with its $3B of cash, it seems that a response to ViaSat’s global ViaSat-3 ambitions is likely to emerge in the very near future. After all, Hughes announced Jupiter-1 in 2008 in response to ViaSat-1, and then pre-empted ViaSat-2 with its own Jupiter-2 announcement in 2013. EchoStar could do this in one of three ways:
1) EchoStar could build its own global satellite system. This seems like the least plausible option, because there will already be at least three global Ka-band systems (from ViaSat, Inmarsat and SES). However, if EchoStar decides it does not believe the fully global opportunity is large enough, it could decide to just build a North America focused Jupiter-3 satellite (which would likely have a capacity of at least 500Gbps, and would have competitive economics to ViaSat-3).
2) EchoStar could partner with another operator. This is very plausible, especially as SES seems poised to announce its own GEO system soon, and would be keen to offload risk to an anchor tenant. Its even possible that EchoStar could build Jupiter-3 for North America, and partner in a separate global coverage effort with somewhat lower capacity.
3) EchoStar could buy another operator. This would be the most radical option, with Inmarsat the obvious candidate. There are many challenges here, not least that EchoStar might not be able to afford to buy Inmarsat, but the fit would be perfect, enabling EchoStar to leapfrog ViaSat to fully global coverage today, while being able to backfill Inmarsat’s limited GX capacity with its own HTS satellites. Moreover, Ergen would clearly attach significant value to Inmarsat’s L-band spectrum assets, not least in the leverage he could obtain over Ligado’s efforts to become a competing source of terrestrial spectrum to DISH in the US.
There remain other possibilities, but these seem less likely to emerge in the near future. EchoStar could build out a terrestrial network to meet the buildout deadline for DISH’s AWS spectrum holdings, and lease it to DISH, but it would be odd to announce that before the incentive auction has finished. EchoStar also changed the disclosure about new business opportunities in its SEC filings earlier this year, noting that:
Our industry is evolving with the increase in worldwide demand for broadband internet access for information, entertainment and commerce. In addition to fiber and wireless systems, other technologies such as geostationary high throughput satellites, low-earth orbit networks, balloons, and High Altitude Platform Systems (“HAPS”) will likely play significant roles in enabling global broadband access, networks and services…We may allocate significant resources for long-term initiatives that may not have a short or medium term or any positive impact on our revenue, results of operations, or cash flow.
However, this new language appears to have related to Ergen’s discussions about a partnership with Google, which I noted previously, and Google appears to have opted for an alternative path for its wireless broadband buildout, with its recent acquisition of Webpass.
As a result, I think EchoStar is likely to push forward with its satellite broadband efforts in the next month or two, presenting a serious challenge for ViaSat. That means its certainly not the case, as Jefferies wrote in its coverage initiation on ViaSat today, that “ViaSat-2/3 will give [ViaSat] the best bandwidth economics in the world (for now) and a de facto monopoly in residential broadband”. Indeed, I’d predict that although ViaSat will undoubtedly grow its satellite broadband business in North America very substantially (by as much as a factor of two) over the next 5 years, its extremely unlikely to pass EchoStar in the total number of subscribers, especially given the lead to market that Jupiter-2 will have over ViaSat-2 during 2017.
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