Market for Space-Based Internet Service Heats Up for ViaSat
It appears that the competition to provide satellite-based Internet service is heating up for ViaSat, the Carlsbad, CA-based defense contractor, at least judging from an account today by Susanna Kim in the New York Times.
As I reported earlier this year, ViaSat has placed a billion-dollar bet on creating space-based Internet service as a new commercial business. In 2008, the company announced it had decided to order its own $450 million communications satellite, ViaSat-1, from Palo Alto, CA-based Space Systems/Loral. ViaSat put the other piece together last October, with the $568-million acquisition of WildBlue, the Denver, CO-based Internet service provider.
The scale of the gamble is substantial. Before commissioning ViaSat-1, the Carlsbad company was generating almost $500 million in annual revenue, and specialized in satellite-based communications equipment used primarily by military customers. Its product line includes data modems that fit in the noses of jet fighters and mobile ground stations used by military ground forces to communicate.
In our interview, ViaSat CEO Mark Dankberg told me he felt the company had a comfortable lead when they made the decision in 2007 to order a satellite optimized for Internet service with an extremely high data rate of more than 100 gigabits per second. ViaSat (NASDAQ: VSAT) plans to launch ViaSat-1 next year. But ViaSat now faces a challenge from Germantown, MD-based Hughes Network Systems, although the Times is non-specific about ViaSat’s lead, saying both companies plan to launch broadband satellites “in the next couple of years.” (Hughes also chose to order its satellite from Space System/Loral, a subsidiary of Loral Space & Communications, which must have been somewhat of a surprise at ViaSat.)
As the Times notes, other Internet service providers also are moving to accelerate development of high-speed broadband services they offer through cable and telecommunications networks.
So how does ViaSat view the intensifying competition?
In an e-mail sent to the company first thing this morning, I observed that ViaSat undoubtedly expected some competition eventually. But is all this happening sooner than expected, I wondered? And how does ViaSat keep the high ground, so to speak?
Citing information that ViaSat has previously provided to the investment and technical communities, CEO Dankberg writes in response:
” Obviously we’ve been aware of the Hughes satellite since it was announced. We believe it is about 1½-years behind ours, and that’s within the window that we anticipated.
“We believe that there is a significant competitive advantage to having the most cost-effective broadband capability at each point in time, and that a 1½-year advantage is important.
“We also expect that it will be an ongoing competition, and that longer term, the ability to sustain a broadband economic advantage will be very important. We are comfortable competing in that environment. That would imply the ability to make meaningful improvements to ViaSat-1 type satellites for the foreseeable future.”
ViaSat spokesman Bruce Rowe adds: “Before we announced our satellite, no one was talking about 100-gigabit-per-second satellites. We put a lot of effort into the design of our satellite—far more than most satellite customers do prior to contracting with a manufacturer. Many elements of the design have been submitted for patent protection…ViaSat-1 also is just the first step, and we believe we can continue to design even higher capacity satellites, to build on our first-to-market advantage.”
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