Tag Archives: Harris Caprock

Yes we can! (maybe)

And he doesn’t have any HTS capacity coming onstream. Nati Harnik/AP

With the political fervour in the US growing daily stronger it seemed appropriate that the 2016 Satellite show followed hard on the heels of the Conservative Political Action Conference at National Harbor on the outskirts of Washington DC.  But even once the politicos had departed, the prevailing mood echoed the incumbent president’s best-known slogan.

There is a pretty simple reason for this. The huge amounts of new capacity coming onstream over coming months and years contrasts starkly with the depressed end user market. Where FSS/mobility providers are eyeing expansion into terrestrial markets and talking up compatibility to the next generation of cellular services, there is no escaping the gap between ambition and reality in the maritime market.

This means the providers have to believe in something that at first look seems highly questionable. As more capacity and greater competition acts to lower prices, shipowners can be persuaded to pay to use more data, the pie will grow and the supply side will prosper.

These same providers must be able to differentiate on more than just cost and in doing so must still make money. This is happening at a time when the trend in VSAT is towards lower margin, more commoditised services, similar to current L-Band offerings.

The maritime panel at Satellite 2016 featured three network operators, all of whom are bringing new capacity to market, either High Throughput or enhanced L-Band and service providers that enable the ground segment and whose role is to distribute services to end users.

Billions of dollars are being spent on campaigns to convince owners and managers not only that they need more bandwidth, but also that they should choose a particular product even if it is more expensive than what they are using now.

This makes it more like an election campaign than the participants on the maritime panel would probably admit, but if this is a battle, what wins?

To Matt Broida of HarrisCaprock, the formula “is 60% cost, 30% business model and 10% technology” and he sees significant growth potential from the latent demand in a number of deepwater segments.

But that cost element shouldn’t be all about price. Broida pointed out that Exxon has cut staff by 20% in 20 years but produced 25% more oil in the same period. “That’s the model we have to go to. Bandwidth and hardware prices are going to come down but keeping that value for yourself is the business model. Staying competitive means you don’t want to give that all away to customers.”

His view is that it is the value chain that is disruptive “and if your strategy is to keep doing what you’re doing but better, you’re waiting to go out of business”. Service providers have to figure out who to partner with. “If you choose the right partners you can come out of disruption on the right side of it. It forces you to place some big bets but it enables you to place more bets than you could make on your own.”

For Inmarsat’s Drew Brandy the move from the company’s legacy L-band services to VSAT is an inflection point with a similar metaphor. “Like us many others are gambling on increased demand driven by new applications and that we can evolve to provide new differentiated solutions,” he said.

The Inmarsat FX VSAT model is designed to mirror its L-band offerings, built for simplicity and pre-assembly so moving away from bespoke nature of VSAT. “It strips some of the cost out of the solution because you’re not doing bespoke customised installations every time.”

Perhaps driven by the need to prepare previous damage to its partner relationships caused by waves of price rises, Inmarsat is focussed on adding value for its distribution channel to provide sufficient margin support and Brandy thinks there could be more for SPs than in current L band deals.

Inmarsat was one of the innovators in crew calling but less than 30% of crew are still properly served. Crews consistently put comms access near the top of their wish list but the lack of delivery is not going to change until vessel operators accept it as a differentiator. “As costs start to fall over the next few years, the internet will become for accessible and available and owners will start to make that change provided strict access policies are in place” he suggested.

The price elephant is still in the room. Intelsat’s Chris Insall bemoaned shipowners’ decades-long focus on price above all other things. “It’s just been part of the process but the focus we see is increasingly on operational efficiency. We’re entering a phase where there is a realisation that sub-500kb [ie L-Band] systems are unable to match the requirement of crew and operational demands. I hope we have moved beyond area of focus on cost.”

As a result he took issue with the assertion that maritime bandwidth is in oversupply for either crew or operational demand. “The majority of users say they want more bandwidth than is currently available, there is a need for genuine broadband services.”

To Comtech EF Data’s Louis Dubin the proliferation of HTS products and solutions is still creating confusion and he stressed a need for innovation to be baked-in. “If price is your only differentiator, we’re all going down quick.”

The risk for owners he said is that they cannot capture the benefits of HTS because they are relying on a previous generation of infrastructure. You might buy multi-megabit but end up getting kilobits. In the space segment very little changed for decades but with so much happening so fast, owners are increasingly looking for a consultative approach to their investments. “It’s not their core competence. They need you to prove it for them.”

So this need not be a zero sum game – even if the session title was Battle on the High Seas. What the supply side must do is find ways to help users make money, not just with cheaper communications but with applications that allow them to realise efficiencies, according to Iridium’s Brian Pemberton.

“Some customers are very content with the basic operations they are running but others are interested in what might be possible with 10x or 20x connectivity without having to increase their spend 20 or 30 times.”

Iridium to a great extent made its reputation in crew calling, providing commodity voice services at competitive prices. Nonetheless this is a segment that remains underserved and Pemberton doesn’t expect that to change. Much of this comes back to the ability to monetise the service.

“Understanding crew behaviour and cultural expectations is very tricky. We see a lot of opportunity going forward, but the willingness to pay and ability to pay are definitely challenges,” he said.

There are still too many operators who analyse the opportunity and conclude crew communications is a pot of gold. “In fact it’s about taking mean margins from a lot of people and aggregating those into something. There are a lot of broken business cases out there,” he added.

And neither does he see the operational segment as a cash machine as owners bank on increased data for competitive advantage. “They want to enable that connectivity but what they may find is that they already knew 99% of what the data is telling them. What I think we could see is that processing taking place on the vessel with just the exceptions sent back.”

But he added that customers shouldn’t expect the same from Iridium’s new services as they have in the past. Iridium he said planned to be “quite disruptive to the market in migrating our customer [and] putting tools into hands of distribution partners which they can use to differentiate and earn better margins.”

At the time of writing, there are 228 days to the US election. But for the mobile satellite providers and their partners the battle for hearts, minds and wallets is only just beginning.

Epic stuff – James Collett on Intelsat, Inmarsat and what really matters in maritime

To leafy Chiswick in West London and the offices of Intelsat for a wide-ranging conversation with James Collett, late of Inmarsat and now Director of Mobility Services at Intelsat, charged with building its rival’s maritime business on promising foundations.

In a quiet period ahead of its planned IPO, we were obliged to steer clear of forward looking statements and much as in conversations with Inmarsat, there was no firm detail on costs of the system and its throughput. But that didn’t prevent us from discussing the merits of Global Xpress as well as EPICNG, Intelsat’s HTS programme that offers GX its most concerted competition.

It became clear as we talk that Intelsat’s ambitions are to move beyond the high end segments and attack the mainstream maritime market too. Also that Intelsat sees its DP and ISP relationships as key to success in the maritime market. Also clear was that Collett personally has little time for the back and forth that seems to obsess some satcom commentators.

Indeed, his understanding of Inmarsat’s business as well his plans for Intelsat speaks volumes for what will be an interesting couple of years for satellite operators with a strong, scalable offer and a firm grasp on the realities of the market.

Maritime Insight: Let’s talk about Intelsat and I guess Intelsat EpicNG is the thing that is of interest as an HTS solution. Do you see it as a competitor to Global Xpress?

James Collett “I think it’s fair to say that our customers will build solutions that are competitive to Global Xpress by leveraging Epic. However it’s not in itself a competitive response to Global Xpress – it’s an evolution of our technology, the embracing of High Throughput Satellite by Intelsat, and is really a route for us to grow with our customers in the regions we serve today. We worked closely with our customers to develop this platform.

“There are obviously a lot of similarities because we are in the same sectors as Inmarsat. We see the same drivers, we see the same opportunities, we have access to the same space technology as they do, and we are also continually in an investment phase in terms of replenishing our fleet.”

You are certainly both on the same trend in terms of putting up High Throughput Satellite (HTS) services?

“Yes, HTS is what everyone is talking about but we’ve come at it in very different ways. In L-band, and typically for Inmarsat, it’s been about looking into the future, and creating an offering that you think is going to have wide appeal. The FSS operator’s approach is more around what demand do I see from my customers today, where are my customers heading, and how can I continue to grow with them?

“The deals that we’ve announced on EPIC – MTN for cruise and Harris CapRock for oil and gas – are both based on meeting the customer’s growing future requirements with the Epic network. Outside of maritime and offshore, we have announced Panasonic Avionics as a leading aviation service provider for whom Epic technology will allow them to reach the next level with their customers.

“Having those customers leading from the front really solidified our case for going ahead with this technology.  Subsequently it’s become a question of how do we make the capability enabled by Epic more accessible in the marketplace, and how do we drive that capability to the maritime users who we think will benefit most from those new services.”

So you’re in a similar position to the old Inmarsat model if I can call it that, in that your partners act as DPs or ISPs, adding value to your signal?

“We feel we have always benefited from the richness and the diversity that the distributors of the Intelsat service provide to maritime users. Intelsat has traditionally been seen as a fixed satellite services operator where the value-add has been around teleports and our IntelsatOne terrestrial network and the value-added services that those distributors offer. Our model for Epic allows those integrators and distributors to carry on in that mode of working.

“We feel that it’s not our skill and our competence to define the specific services that a maritime end user should be buying. Similarly we won’t define the price points at which they should be sold. We’ve clearly got distributors that are far more expert in that, whether it’s Astrium Services, MTN, Harris CapRock, Globe Wireless or KVH, who are all experts in that domain, and whose business is absolutely built on differentiation.

“That’s the interesting bit for me and where the Inmarsat and the Intelsat paths are very divergent. There have been observations that with Global Xpress, the latitude and opportunity for a distributor is being squeezed since you’ve got retail prices being set by the wholesaler. You’ve also got a flattening of the distribution channel in that players who previously were second tier are now effectively direct to Inmarsat.

“On top of all that you’ve now got value-added solutions being provided by the satellite operator, so I think some people in the value chain will be asking ‘what’s left for me?’ If a distributor has a choice between selling one service which makes them a fixed margin, with another that gives them more flexibility over the contribution it makes, then there’s no surprise which one they will push.”

Intelsat has agreements in the very high end segments where there is big demand from energy and offshore cruiseships – but can you scale it down in effect, for mainstream merchant shipping?

“Those are customers and segments that we are very strong in today, and ones in which we see further growth. At the same time we’re not ignoring the market opportunity that exists in commercial shipping, because that is largely a new market for Ku-band VSAT. There’s obviously been some well publicised incursions into that, such as the Maersk, Ericsson/Globecomm deal.

“We do see more opportunity coming in that area. So I don’t think there is this natural segmentation in the market which will keep us apart, I think just as Inmarsat is keen to make it clear that they’re coming after the VSAT market, then Ku-band VSAT has been after the Inmarsat market for a long time.”