[Via Satellite 01-05-2016] ViaSat has long been one of the most exciting companies in the satellite sector. It builds some of the most powerful satellites out there, and has been at the cutting edge of technology for many years. In Mark Dankberg, the company has a previous Satellite Executive of the Year winner and one of the most respected visionaries in the industry. We talk to Dankberg about the 2015 highlights both for the company, as well as for the entire industry.
VIA SATELLITE: Not including your own company, what would say was the most interesting announcement you heard in 2015 regarding the satellite industry? Why have you chosen this?
Dankberg: Certainly AT&T’s acquisition of DirecTV was one of the most important and interesting events of 2015. In many ways DirecTV was performing at its absolute peak when it agreed to be acquired. Yet, management and shareholders determined that its long-term value as a pure stand-alone video provider was too uncertain for it to pass up the offer. That speaks volumes about the fundamental changes the broadcast-centric satellite industry is experiencing. It also addresses the increased need for more broadband options, where we could see a string of additional Merger and Acquisition (M&A) activity blurring the lines between traditional and non-traditional broadband service providers. The FCC’s list of conditions placed greater emphasis on making affordable, high-speed Internet universally accessible across the United States further touting consumer demand for more broadband is still on the rise.
VIA SATELLITE: This year was very much the year of “New Space” and Low Earth Orbit (LEO). Is history repeating itself or will these new constellations have a much greater impact than the ones we saw in the late 1990s? Are we seeing a “revolution” in our industry?
Dankberg: I don’t see it as a revolution so much as market segmentation. For Earth observation, a larger fleet of smaller spacecraft has a big advantage in terms of revisit rates compared to a smaller fleet of larger, higher performance spacecraft. The jury is still out on the relative demands in the market for that type of imagery, and the unit values associated with it.
For LEO communications constellations there are different market factors at work. As one of the very, very few non-sovereign new satellite operators in the world, we can attest to the stranglehold that the legacy operators have over GSO orbital slots. NGSO constellations, while technically and economically daunting, might seem attractive to new players compared to obtaining GSO global orbital rights. To us, LEO constellations look like a big bet that lower latency would have more appeal than much lower cost, much higher speed bandwidth from our ViaSat 2 and ViaSat 3 geosynchronous satellites. But, in the context of pretty much all other High Throughput Satellites (HTS) in the world, some of the LEO systems could offer both lower latency, and lower airtime costs. In some ways, that makes them a better bet than many other current investments in the satellite telecom industry. But, that’s more evolutionary than revolutionary.
VIA SATELLITE: If you could name one highlight for ViaSat in 2015, what would it be and why?
Dankberg: 2015 was a very good year for ViaSat and naming a single highlight is difficult. But, one of the most impactful events for us was introducing the ViaSat In-Flight Connectivity (IFC) system on Virgin America. That was a very important milestone for us in several ways:
- It established us as a prime contractor for both IFC and In-Flight Entertainment (IFE) services. In addition to providing Internet service, we deliver 18 channels of live DISH network television to Virgin America’s system;
- It showed how quickly we can respond — going from contract signing to first aircraft in service in about four months;
- It proved that the IFC market is not a land-grab where the first provider to capture an airline is entrenched indefinitely. On the contrary, it demonstrated that IFC is a rapidly evolving market, driven by passenger demand for fast reliable connections and with an expectation that when in-flight, they should be able to experience Internet speeds similar to what they have at home, with the freedom to watch, stream video and shop directly on any connected device. The presence of Netflix as a sponsor reinforced that delivering access to high-quality video streaming in-flight is here to stay, and has a very receptive, ready-made audience.
VIA SATELLITE: Do you believe the “traditional” FSS operators are under more pressure than ever before? What do you think they need to do to be successful in the future?
Dankberg: Yes — definitely. Broadcast TV is what makes the FSS industry work, and broadcast TV business models are being undermined by a number of big picture market forces including the ubiquity of mobile devices, the amount of content people are consuming on mobile devices compared to big screen TVs, the underlying shifts in business models in both advertising and bundled TV and broadband, and multiple other factors. At the same time, there is increasing pricing pressure on unicast satellite data services due to increasing terrestrial alternatives and the existence of very, very cost effective high capacity satellites such as ViaSat’s.
Ultimately, the FSS industry is going to have to let go of the business models that worked in the past (e.g. preserving the integrity of transponder pricing) and figure out how to compete in broader unicast data-centric markets.
VIA SATELLITE: Did you see any new trends emerge in the satellite sector in 2015? Are there any you would highlight?
Dankberg: Probably the most obvious trend is that virtually every significant satellite operator is incorporating HTS into their fleet. But, it also seems that those satellites — in the low to mid double digits in Gbps of bandwidth — mostly reflect a grudging acknowledgement that conventional satellite airtime is too expensive to compete in emerging broadband applications. None of the legacy operators seem to be embracing highest speed, highest volume, competitively priced bandwidth — in any place, in any vertical market — as the primary source of growth opportunities.
VIA SATELLITE: Michel de Rosen of Eutelsat said recently that the satellite industry is approaching a new era. Do you agree with this? Have the dynamics of the industry really changed over the last 12 months?
Dankberg: Of course there is a new era — and it’s already here, it’s no longer “approaching.” That era is going to be driven by broadband data connections — to individual homes, to Wi-Fi hot spots, businesses, mobile platforms and remote locations. We’ll know when the satellite industry has accepted that — when you stop hearing “People don’t need that much bandwidth.” A prime example is video streaming for in-flight Wi-Fi. Of course, people don’t need that, but they do want it and to the extent it affects passenger preference there is a big opportunity in meeting the demand rather than ignoring or belittling it.
What’s interesting is that we’re just at the beginning of this new era — where new applications will continue to be created, stirring the need for more simultaneous broadband connections and real-time access to streaming media services and content.
VIA SATELLITE: Finally, how do you see 2016 shaping up for the satellite sector? What trends do you see emerging in the satellite industry in 2016? What do you think we might be talking about at this stage next year?
Dankberg: 2016 will see a continuation — if not an acceleration — of the macro trend of increasing bandwidth demand at lower unit prices. The flip side of that is falling demand for high priced bandwidth. By the end of 2016 we will be talking about the first financial casualties of major satellite operators trying to protect the integrity of transponder pricing vs. investing in the most productive network infrastructure (in terms of bandwidth per unit capital cost).
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