ViaSat Enrolls 285K in Internet Satellite Service; CEO Talks Costs

3/19/13Follow @bvbigelow

As the “Satellite 2013” conference gets underway this week in Washington D.C., Carlsbad, CA-based ViaSat (NASDAQ: VSAT) says more than 285,000 subscribers have signed up for its satellite-based Internet service, which began just over a year ago.

In a statement yesterday, ViaSat chairman and CEO Mark Dankberg said, “Our results prove that driving down the cost of bandwidth can make satellite a better choice than slower terrestrial alternatives.”

ViaSat and its Colorado-based ViaSat Services group (previously known as WildBlue) say this month marks the first anniversary of the nationwide rollout of their Exede Internet service—which followed the successful launch of the ViaSat-1 satellite in October 2011. “The market success of ViaSat-1 strengthens our commitment to delivering a series of new satellites that push the boundaries of what’s possible in satellite broadband across a broad range of market opportunities,” Dankberg said.

ViaSat says Exede Internet subscribers receive download speeds of up to 12 megabits per second (Mbps). A report issued last month by the Federal Communications Commission found that ViaSat’s Internet service actually performed 140 percent better than 12 Mbps for 90 percent of the company’s subscribers during peak use periods.

Mark Dankberg

ViaSat claims that the quality of its Internet service has been so high that about 40 percent of Exede subscribers switched from slower DSL, cable, and wireless services. Dankberg touched on many of these points when he talked with me last year at ViaSat’s Carlsbad headquarters. What follows is an edited and condensed version of our conversation:

Xconomy: The last time we sat down like this, you gave me the analysis that went into the decision to launch the ViaSat-1 satellite. It had a lot to do with the tremendous growth of online video.

Mark Dankberg: Yeah, well, we’ve been doing data networking a long time. We knew back in 2000 that the key to high-performance satellite networking was in space. What was exciting about WildBlue at that time was that they came up with seven gigabits per second, which was a big step forward and it was at an affordable price. And we looked at that as… really the test case that was going to confirm this hypothesis, and it did.

What’s interesting is many other competitors just kind of went in other directions. They didn’t see the problem framed the way we did…

With Viasat-1 in the United States, we spend less than one thousand dollars per home to provide people with satellite broadband. To the extent that satellite is actually an acceptable, good solution for people, it’s enormously more cost-effective.

X: It sounds like what the telecom industry likes to call “a green field opportunity.”

MD: In Australia, they have similar worries there as the U.S. does, that we’re not in the top three in broadband speeds. In places like Korea, Taiwan, or Singapore, which are enormously dense, with very large numbers of people packed in small areas, they have a big advantage in the economics [of fiber broadband]. But if you look at lots of other market around the world, where people aren’t so densely packed, and where they do not have existing telecom infrastructure, cable TV infrastructure—that kind of environment goes really well with satellites.

X: So would you anticipate other opportunities for ViaSat in other countries, or are you thinking in some other dimension?

MD: It does indicate opportunities in other countries. And I think that those would come about in two ways. Number one, I think there will be other countries that will subsidize [satellite-based] programs. There are a number already that use satellites in a subsidized way. But they don’t pay much attention to how much bandwidth they’re getting. We are much more focused on delivering bandwidth. This is something that we’re really good at, and that’s an area [where] we can compete well. The other thing is, it’s going to improve the economy of scale, it’s going to help us push technology forward. In the long run, what I see is that you won’t need government subsidies to deliver broadband.

We still have issues in a lot of places where governments refuse to allow people to use satellite for Internet use. One example is in India. Another one would be China. These are big markets where satellites could really be effective to deliver the Internet. But right now, it’s just not legal.

X: What’s your view of how network infrastructure fits into economic development?

MD: One of the places is in emerging countries. You could look at things like agriculture, fishing, and the amount of crops that are lost due to spoilage, due to an inability to deliver products tomorrow, or the inability of the producers to capture the value [of fresh goods]. Without network infrastructure, they don’t know where their markets are, where to deliver them, and the buyers don’t know it’s available. One of the things that has had a big impact in places like India and Africa is just cell phone texting. It’s just extremely basic stuff. You can’t really communicate a lot of information. But having any information at all [can lead to] substantial economic progress.

So, one idea is whether we can augment that [texting] with basic Internet. One of the reasons texting is so popular is because you can communicate effectively with very, very few bits. What the Internet really does, broadband does, is that it drives down the cost for bits. So with the same amount of money, think about pennies on each of the transactions that users are sending, a few characters of text, you can send pictures or images, or you can actually have a phone call or a face-to-face conversation for pennies.

ViaSat-1 launch

What has made it possible is really cheap telephone handsets, with very low-cost monthly bills, mostly prepaid. So you can imagine that with low-cost Android-based phones or other types of low-cost smartphones with very low-cost WiFi access, or that use satellites, you could get the same effect. Just give people more bandwidth and I think that would be very impactful in a lot of places.

X: How do you measure the cost of satellite-based Internet service?

MD: For subscription-based telecom services, there are two measures. One is cost per home passed. If I build out any type of network infrastructure, what does it cost me to be able to knock on your door and say, “You could buy service if you want to”?

The other key metric is the cost per home actually served. If you look at those numbers for traditional telecom, they are in the thousands of dollars per home for broadband, high-speed Internet.

With satellites, the cost per home passed is in the single digit dollars per home, and the cost per home served is in the hundreds of dollars per home. So that’s what the benefit is. The same thing is true of satellite TV. What makes satellite TV successful are those exact metrics.

X: How has the deployment of Exede Internet service been going?

MD: Our serving data says something like 40 percent of the new subscribers switched to satellite from some form of terrestrial broadband. Generally it was wireless 3G, 4G or DSL. So one of the points that we’re trying to establish is that people don’t really care what the technology is, they care about what the service quality is. And just as we said, speed is really an important ingredient in service quality.

X: I have received a couple of e-mail complaints from subscribers who have had problems getting satellite Internet service. Are these isolated complaints, or are you seeing significant issues in rolling out the WildBlue service?

MD: We’ve been pretty upfront that the demand for service exceeded our install capacity in a number of places, and we use third-party installers. For two or three years, the WildBlue install rate was fairly flat. They would do four or five thousand installs a month nationally. Well, we went from that to having four or five times that… There were just not enough installers to meet the demand. We ran up a pretty big backlog pretty fast.

That’s going to settle out. It’s improved a lot. The other factor is just the quality of the installs. I think that the installation has a very big impact on people’s perception of the service, and that’s true whether it’s from a cable company, telephone company, or satellite company. It’s one of the reasons that a lot of the cable companies have such poor service reputation. So what we believe is that, statistically, it’s relatively small numbers, but we’re also going to try to figure out who are the good installers. The first issue is can we meet the demand, and second issue is how well are we meeting the demand. Both of those things are things we’re working on.

X: Is there anything that I haven’t asked that is on your mind?

MD: The things I think are the most important are really the market-based things, about what people want in broadband and our ability to deliver those, and the changes in perceptions in the way that people rank this new satellite broadband services compared to other choices.

We’re also doing remote advanced news gathering, and that’s already got a really good initial response. With the Colorado wildfires, for instance, a number of networks were using Viasat-1 to do their live reporting, because they could get really high-speed, high-definition video from very remote places very conveniently.

People also are using Viasat-1 to broadcast music concerts, and other events live, remotely. So I think all those things are going to have a good impact.

I think all these things are going to help people rethink the role of satellite and broadband and communications, so I think it’s good.

 

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

By posting a comment, you agree to our terms and conditions.

  • Sevokevo

    I kind of wish that they will be able to raise the Data Threshold soon because only getting a max of $25 GB a month is really low compared to Normal Internet companies that have Data Limits of 250GB a month… And then if you want more Data you have to pay $10 extra a GB that only last till the end of the billing period.

  • Jonathan Henschel

    I am an Exede customer, and thankfully I am one of the users that tends to get better speeds than advertised. However, I am experiencing a continual problem, and one look at their Facebook page or message boards confirms I am not alone.

    My problem: The data caps. Now, I understand they are necessary to a point. But, the Exede usage meters simply do not work properly. If I pay for 10 gigs of bandwidth a month, and I supplement it by using their “Late Night Free Zone” when bandwidth is free and not counted towards my 10 gigs, then I should actually get 10 gigs of bandwidth.

    But, when using the Late Night Free Zone counts towards my monthly allotment of 10 gigs, when it is advertised that it will not and cannot count against it, this is bad business. When I see this same issue with many other users, I suspect the problem is even bigger since many people just think that they are the problem, especially when the customer service department tells them that yes, they are the problem and that their service is working perfectly fine.

    Last month, I checked my usage meter, and soon after I had an internet outage, and when my internet came back online an hour or two later, 9 of my 10 gigs were mysteriously missing. Obviously if i am offline for 2 hours, I cannot be using 9 gigs of bandwidth, when in the previous week I had only used 0.6 gigs.

    For Exede to grow, they need to get new customers, but they also need to retain the customers they already have. They either need to get rid of the bandwidth caps since they have no way to properly track usage and find other ways to sell their product, or they need to actually give the customer what they are paying for.

    And, they need to have a proper customer service department. If I call Exede to order service, I get to a live person instantly. If I call customer service, the typical wait to speak to a representative is well over an hour, which is unacceptable.

    If they get these problems sorted out, they will have my business for years to come. If they do not, why would I want to do business with a company that cannot give me what I am paying for on a consistent basis?

    • Exede Nick

      Jonathan, I would be happy to investigate this concern for you. Can you please send me an email at exedelistens@viasat.com so I can correct this for you. Please be sure to include the name and phone number that are on your account in your email so we can get this resolved for you as soon as possible. Thank you!

  • Rick Fraser

    Be sure to read your terms and conditions. I came from a bad WildBlue experience nine/ten years ago. Then had a similar experience with HughesNet soon after. Been with AT&T managed T1 since, they are expensive but consistent.

    As of April 2013 we are now a week into this satellite company service. I find myself with super low, inconsistent bandwidth speeds and now talking with the exede customer support team. I am afraid they sing the same song as their predecessors- “read your terms and condition.”

    Last test 6.82Mbp/s down 265Kbp/s up~ although it jumps all over the place. I have scheduled a second appointment to fix but I fear this satellite company has the same flavor as the others.

  • http://www.facebook.com/craig.lynd.5 Craig Lynd

    Well he tells a good story but with the data caps, the idea of streaming movies and such doesn’t fly. Even with the top plan of 25G a month a movie a week will quickly eat that up along with the other surfing one does. As far as being cheaper it’s not cheaper per GB to the user,it actually went up. I was paying $79 a month for 22GB with Wildblue (17 down/5 up) now I pay $139 a month including a $10 modem fee for 25GB an extra $60 for 3 more GB. Yes there is the late night free zone, which works OK if you want to get up between 12 and 5 in the morning to download a movie, but for the average day worker its like getting all the water you want at the ocean, sounds good but in reality you can’t drink it. When they promoted the new satellites prior to announcing the price plans they claimed we would get more for less and that the one new satellite had more capacity than all the others combined and that was before Hughes put up a similar satellite. I’m assuming that the statement was true but they must be limiting the consumer side and selling most of the capacity to the government and/or business. In fact it only took Dishnetwork who uses Exede about 6 months to reduce the 25GB plan to 15GB and they don’t allow the free night zone that you get when you subscribe direct through Exede. I would also suggest that the majority of the backlog wasn’t from new users clamoring to get satellite internet, it was from existing users clamoring for the faster speed and converting from Wildblue or Hughes. The only new users of any consequence may be from those who were relying on cell coverage which is the only internet service that is more expensive per GB than satellite, the others may be from DSL users on the fringe who get slow speeds. I can’t imagine any cable user who gets high speed internet service with high caps or no caps at all for a lower price switching to satellite. The last thing is the usage meter they provide is useless and inconsistent, apparently there are not state regulations covering the accuracy of their meters like you have at a gas pump. If they’re going to limit the amount I can use then they should have to have the software accredited and validated by the a States Weight and Measures division. I will say that the speed is a vast improvement over the prior offerings but the low data caps and high pricing makes it impractical for all except those of us who are stuck without a practical alternative, I’m sure if you took a poll of satellite users most of them feel taken advantage of. The Hughes commercials where everyone in the family is a happily using the internet and streaming away is a joke, in real life that doesn’t happen with satellite instead you watch that usage meter closely and limit any streaming to the absolute minimum.