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

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

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