Tag Archives: Inmarsat

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.

Maritime satellite gets with the programme

Maritime communications spent a long time being of little interest to most people. Beyond safety requirements, it took the dotcom boom to generate a significant uptick in activity, as software entrepreneurs discovered this ‘untapped’ market.

That ended with the dotcoms going belly up, but the Rubicon had been crossed. There was now a clear realisation that connectivity held the key to better productivity and perhaps even a more efficient supply chain.

Once again, the market was overtaken by events – namely the best earnings many had ever seen – and suddenly no-one cared about saving fuel or improving efficiency, because rates were through the roof.

Another crash followed and suddenly we are back to the future. This time, the recession looks longer, deeper and likely to claim more scalps. The answer? Better connectivity for increased efficiency and improved crew retention.

It’s a change that has not gone un-noticed by the analysts at NSR, whose Brad Grady hosted the big data panel session at the recent DigitalShip CIO Forum in Oslo.

“There is a definite increase in activity and the adoption criteria are expanding. Prices are cheaper, applications are becoming more sophisticated and the number of vessels as good candidates is increasing,” he says. With increased demolition of older ships the newer, better-wired ones are looking for efficiencies.

NSR updated its maritime sector report in May and he says the big change from last year to this is the uptick in merchant fleet activity in terms of new installs, retrofits and upgrades.

“There’s not necessarily an improvement in the economics [of shipping] but its finally coming to an understanding that this is the reality we are living in. Like all processes, it’s about putting something in place that will bear fruit,” he says.

On a longer time horizon he sees interest in the opportunities delivered by HTS and an expected increase in bandwidth uptake. Even with a cheaper fuel environment, owners are still feeling pressure to invest in optimisation and potential efficiencies.

In part the pressure is from the providers who have already delivered a huge amount of bandwidth to the cruise sector and are targeting maritime over offshore, which is also struggling to make money.

“We’re not expecting a tremendous amount of growth in the offshore sector over the next couple of years; growing demand there will be a challenge. Once oil stabilises we might see a return to resources with higher extraction costs and a similar investment in new technologies,” he suggests.

The emerging story in energy is non-geostationary HTS capacity; lower orbiting high capacity services which have much lower latency and therefore an opportunity to support emerging concepts like increased automation with reduced manning. Grady says these could support attempts by oil companies to reduce costs by cutting personnel in favour of high interval reporting.

“The question we don’t have an answer for yet is how many Non-GEO HTS megabits per second will you have to buy from these providers? If you can buy in nominal amounts at low prices then Non-GEO HTS Capacity could be a real game changer. It could have a tremendous impact on the way the market works.”

He thinks the alternative scenario for Non-GEO HTS capacity, which operators would probably prefer, whereby they sell dedicated beam capacity would “price Non GEO-HTS out of most markets, it won’t expand the addressable market size”.

For HTS capacity in geostationary orbit from the likes of Intelsat, SES, Inmarsat, and others, a similar story holds true, will end-users pay a little more and get a whole lot more Mbps, or can they pay less and get the same (or a few more) Mbps?

The bigger challenge is persuading shipowners that greater bandwidth, especially HTS capacity, is going to make enough difference to be worth the investment. Grady agrees this is perfect time for suppliers to get in front of owners but they will have to come with new and increasingly competitive pricing models.

Either way, he thinks HTS will be a higher end market play, but it doesn’t stop him being enthusiastic about its potential. “I don’t think there are technical barriers, it’s more about end-user education. Five years down road, when all the variables are known about HTS , it will be ‘why did we doubt how awesome it was going to be?’”

That doesn’t stop NSR seeing plenty of life in L-Band MSS though. He notes that if Iridium succeeds in getting IMO approval to provide GMDSS then together with its NEXT broadband platform, it will have a package that will be very commercially appealing. “MSS has been a doom and gloom story for a couple of years now, but there’s plenty of life left in it.”

Despite the industry being widely split on whether more consolidation is likely or even desirable in satellite, NSR sees the potential for this as well as greater price competition. Panasonic’s acquisition of ITC is a good example of the former, where a provider with growing aeronautical business who looked at maritime and saw an opportunity, he says.

As Intelsat, SES, KVH and others up their game, to some extent the pressure will be on Inmarsat as the maritime incumbent, to deliver its GX service with the same success it has sold L-Band services.

Part of that success will depend to what extent it opens up GX and allows SPs to act as Virtual Network Operators – enabling them to add their own applications and value and sell to whomever they like – and how much it tries to lock the service down.

“Inmarsat has always been simple from the SP standpoint and there’s a lot to be said for terminal ubiquity, with integrated L-Band for back-up. For some segments we’re pretty bullish on Ka-Band in merchant shipping.”

Inmarsat and KVH have been playing catch up with each other on adding value to their services, with entertainment and learning content available over both, in addition to more typical business applications. As if to underscore their symbiosis, the two announced a cross-selling deal instead of a rumoured merger.

Even though he sees greater levels of activity, Grady is less sure that the addressable market is changing as much and as fast as some claim. “How do you define the size and scale of that is really the question. For example, there are a lot of fishing vessels but their requirements are small narrowband solutions. Can you really convince these users to switch over to higher throughput?”

Operators are keen to talk up the potential, but Grady thinks for SPs it’s still a difficult conversation. Even industrial fishermen run a tight ship and don’t have much time to watch television. The evolution path is reminiscent of merchant maritime.

“The trick for SPs is finding right mix and that might not be streaming video. It could be more like upgrading equipment so they can do email and integrate personal devices. In Africa telecoms skipped wires and went straight to wireless. In fishing, you have to go right to value-add and work backwards from there.”

Safety divided by competition won’t go

There have been some puzzling headlines in the past week or so following the decision by the International Maritime Organization (IMO) to give recognition to the bid by satellite services provider Iridium to run the Global Maritime Distress and Safety System.

The IMO sub-committee on Navigation, Communications, Search and Rescue (NSCR) gave the nod to Iridium’s pitch, which will be subject to approval by the Maritime Safety Committee, though probably not before 2016.

It’s true to say that the surprise has been pretty evenly-distributed around the industry. Certainly, there will have been something close to bewilderment at the headquarters of INMARSAT, which runs GMDSS under mandate from the IMO and which will have been lobbying hard to get the proposal squashed.

The surprise in communications circles is largely due to the apparent mis-match between the requirement the IMO places on INMARSAT for GMDSS uptime of 99.99% and the performance of the existing Iridium network.

Despite its somewhat chequered history: a big launch, a spell in Chapter 11, rescue by the US Department of Defence, and resurgence as the appetite for low cost communications broke over shipping – ship owners like Iridium. The products themselves are cheap and cheerful; Iridium was among the first to identify the potential for what was then called “commodity voice communications” – selling handsets and airtime that could keep seafarers in touch at very low per minute rates.

This was because Iridium needed something to do with its global network of Low Earth Orbit (LEO) satellites in addition to the capacity that the US military was using. In time, data products followed and the same principle applied – they were cheap, easy to use and easy to fix when broken.

This was good for owners who didn’t want to spend a lot on their communications but just needed something on board. The data transfer rates weren’t high either but the owners weren’t necessarily worried.

Slightly more problematic was that its network of LEO satellites – rather more complex than a handset – had an equally creaky reputation in practice. Iridium’s engineers have done admirable work prolonging the working life of its constellation but even with the use of spares, outages are a regular occurrence. Since 2001, iridium has lost 10 satellites from its 66 strong constellation, nine from technical failures, one a collision.

Its fiercest critics say that in areas of greatest ship congestion, heavy demand results in the network being unable to cope and like a weak Wi-Fi signal in a conference room, the contention is such that no-one gets any service.

This must be subject to some question, since Iridium services still sell well, but no hardware manufacturer or service provider is likely to admit that any delicate shipboard technology, whether comms or navigation, is subject to operational failure. You have to talk to seafarers to get to hear that and normally they make you buy them lots of beer first.

But it is important in the light of the sub-committee’s decision because GMDSS is not a commercial service but rather a safety one, mandated by the IMO and one that all SOLAS ships are required to fit and maintain. For that to happen, the IMO demands a level of uptime that the current Iridium constellation appears unable to achieve.

No doubt Iridium is able to produce statistics that confirm it hits 99.99% availability, just as its rivals can produce data saying the opposite, but it is the spread between what its commercial service can manage and the IMO-mandated requirement that raises eyebrows.

Incumbent GMDSS operator INMARSAT has been left spluttering by the decision, which it presumably believes rather undermines the goals it has been set in providing GMDSS since 1979. INMARSAT has also formally unveiled its own evolution of GMDSS, called the Maritime Data Safety Service (MSDS) which will “upgrade” the service onto more its modern I-4 satellites.

Iridium plans a similar development and wants to launch an entirely new network, NEXT comprising 72 satellites from 2015 onwards, with service availability from 2017 onwards. Its key differentiator here is the polar coverage its current and future networks can provide and Inmarsat’s cannot. Iridium will need to get capacity utilisation on this new network too – it plans aeronautical in addition to maritime and land services for NEXT and will need to keep pace with the next generation VSAT and HTS services that will be in place by then.

It appears that the potential for ship traffic in the Polar Regions was among the swaying evidence considered at the IMO. Whether or not the growth potential of the Northern Sea Route is really enough to convince the MSC that this makes enough of a difference is questionable enough in itself. A recent survey by consultants PWC of German ship owners found that 60% saw no fresh opportunities from the NSR’s opening up.

What is far more dangerous surely is for any would-be operator to view GMDSS as a prize, an opportunity that has for too long been under the control of one of its rivals. Some of the coverage of the IMO decision (to say nothing of the comments on social media sites that specialise in pushing commercial interests over public ones) suggest just that.

No-one can credibly assert that Inmarsat has “control” of a service that it was created to deliver under the mandate of the IMO. GMDSS has nothing to do with commercial maritime services like broadband, VSAT or HTS. It is a public service dedicated to the safety of the world’s 1.5m seafarers.

Should the provision of such a service be subject to competition and to the vagaries of national interests? Or should any future decision instead be based on the facts and made in the light of day. Assuming that the IMO has not changed its baseline of 99.99% network uptime, does the proposed service meet the requirement or not?

My editor at BIMCO kindly added the following clarification to the article as published on its website.

Editor’s Note: The NCSR Sub-Committee agreed to invite the MSC to consider and decide on which independent body should produce a technical and operational assessment of the information and provide a report to the sub-committee for evaluation. Following receipt and evaluation of the assessment, the sub-committee would then make a recommendation to the MSC as to the adoption of an MSC resolution recognising the new maritime mobile satellite services provider.

M2M and mad cows – through the mobility looking glass

Can satellite ever really go mainstream? It’s a nice idea, but one that has already claimed some scalps among those who have modelled the concept only to find the reality rather different. Two of those (fully resuscitated) examples were present on the MSS CEO panel at Satellite 2014 along with Inmarsat and Thuraya. Iridium and Globalstar are these days talking a strong book with launches tabled and new services in the pipeline.

Even if the low cost satphone in your pocket remains something of a chimera, the session provided a useful glimpse of what the roadmap looks like for the mobility majors.

So much so in fact that Iridium CEO Matt Desch offered to double his bet with Globalstar’s Jay Monroe that his new network would be up and running before Globalstar’s – a wager he offered to settle in Iridium stock. He subsequently agreed that the NEXT schedule had slipped somewhat but insisted he was not in hurry, despite wanting to bring new services on. Such is the mirror world of mobility satellite.

Though rumours persist that Globalstar is waiting to be acquired by an internet company keen to use its spectrum rights for the delivery of more day to day goods and services, Monroe insisted that the potential to address a market unserved by cellular with a $100 product was still realistic.

Desch and Samer Halawi disagreed – the former probably through bitter experience – the latter because Thuraya’s BYOD play the SatSleeve has attracted so much attention by extending two already successful brands.

Halawi thought that lack of standardisation made it hard to achieve a consumer market opportunity Monroe thought was ‘worth millions’, though he again asserted that SatSleeve’s mission was to liven up a “somewhat dull MSS market”.

Desch agreed that low initial costs would always tend to rise and “making a commodity product that Best Buy would want to list for $30 would be hard to make a success for partners and channels too”.

Inmarsat’s Rupert Pearce has the new iSat 2 handheld in the game but said their model was enterprise users with heavier usage and better average revenue per user. “We are business to business and business to government. Consumer is a bridge too far.”

Away from the user the threat to all their businesses is the apparent desire of mobile phone operators to grab back spectrum it thinks mobile satellite is not using to its fullest extent, including the L-Band the industry ‘doesn’t need’ as it moves increasingly to Ku and Ka.

GVF has already done a lot of work on the political lobbying and Pearce was unequivocal. This was a bubble that needed to be burst “it will be hyper-politicised [at the ITU’s World Radio Council 15 meeting] and we need a coalition of the willing to lobby on the need for critical satellite services”. He didn’t add ‘rather than more leisure users’ but one sensed that’s what he meant.

Moderator Tim Farrar pondered by how much GX was delayed or on track – rather a moot point for maritime users – but important for the company’s reporting and financials. Despite suggestions of delays to the iDirect hub component, Pearce said the core equipment and satellites were aligned and said that “more than 30% of GX revenues were already committed, including the 1,000 XpressLink installs which are ready to move to GX”.

The surprise purchase of Globe Wireless is among a series of ‘quick buys’ Inmarsat has made to help its channel cover Ku to Ka conversions over first 18-24 months. He mentioned the Globe iFusion box as being a component of the value that Globe brings to Inmarsat, though  how that dovetails with the CISCO Router that lies at the heart of GX connectivity was not made clear.

For Desch, Iridium’s strategy remains little changed – evolutionary compatible products in which broadband remains an upside to the ‘low-end’ segment it serves, one he feels can grow further. Iridium he said would be providing new capability before its NEXT network is finished and speeds would increase too but “it’s not worth chasing commodity broadband because that market is going to look different in three to five years from how it looks now – we are going to take a bigger chunk of what we do with more capability”.

For Halawi, the future means considerations on how to design and build next generation satellites, though the Thuraya CEO insisted time was on his side. Thuraya has said for some time that its next generation concept is under development but it won’t be a ‘me-too’ system. “We are looking at future applications, how people will use technology 10 or 15 years from now and how technology can support that. There will be more clarity by next year but it won’t be a system similar to the ones being planned for today,” he said.

Pearce has new launches in mind too, but in this case he meant the Inmarsat I-6, the next generation of L-Band satellites to complement the GX service. He said its potential users understood that a dollar spent on better communications could deliver $10 into the enterprise and he also pointed out that most of Inmarsat customers won’t be moving to GX and will need to be supported by the i6 constellation.

Pearce was lightly pressed on Inmarsat’s E&E and FBB price rises over the past two years but insisted that prices had fallen by more than they had risen when compared to the newer FBB bundles. Calling the price rises ‘a win-win’ and a ‘virtuous cycle’ was probably pushing it for users and SPs who had been squeezed as a result, but the continued evidence of users ‘marching up the packages as they understand the value’ was as close as we would get to an explanation.

He must have known the channel question would be next and he suggested that indirect sales remained the priority, with direct sales reduced by 2% per over five years and a stronger focus on controlling where the company goes direct, primarily maritime GX where the learning curve is steep.  “We are trying to work out where network ends where channel adds value,” he said.

Desch countered that price rises had enabled Iridium to work with SPs and their end-users frustrated by lack of price control. Iridium has no desire to go direct he said, but the potential lack of trust in Inmarsat created a continuing opportunity.

Where the satellite industry certainly sees value is the M2M market, with acquisition and expansion on the slate for the MSS operators. Monroe memorably described this as ‘data heroin’ – with tracking as a gateway drug that led on to heavier and heavier usage.

Desch agreed on the growth potential but said ARPU was ‘more interesting than it is attractive’ and no-one would be making millions from M2M anytime soon. “We have natural advantages and we will see it grow but we need our standards to be compatible with what is being written in the terrestrial world.

Farrar quipped about projections for huge growth, everything from cargo monitoring to tracking cows in Brazil or sheep in Scandinavia. Monroe replied that this was far from a pipe dream.

“The projections are for tens of millions of units but there is a real example. Brazil spends millions every year trying to combat mad cow disease. Now, could you track the herds, segregate the infected stock and treat them? They are looking at it seriously.”

The internet of animals – it might have smelled like bullshit, but it was a suitably enigmatic note on which to ponder what the future would really look like for mobility and whether it would really that dull after all.

When shipping and satellites collide

It’s a strange experience to be at a trade show and know perhaps 2% of the people rather than 60-70% but that is the experience at Satellite 2014, where the communications industry is continuing to mount a charm offensive on their maritime counterparts.

The first day of the show yesterday saw the Global VSAT Forum host a day of sessions including maritime-focussed panels looking at the maritime opportunity.

All the big beasts were in attendance and if the audience was sometimes rather less enthused than one might have expected the range was broad, from future regulation and safety services to the ‘super-segments’ of cruise and energy, through regional VSAT services and even a little shout for good old L-Band.

One thing is certain though, all the operators and their service partners see maritime as an untapped market that is ripe for more coverage and connectivity. This in itself is not news, but when Cobham’s Jens Ewerling said they were building 25,000sq m of manufacturing capacity for maritime terminals and antennas you get a sense of the complementary moves being made that will balance the investments in GX, EPIC-NG, Thor-7 et al.

Given that competition is so strong and that the land grab for customers and real estate is really only just getting going, there was polite deference to Inmarsat and the potential of GX to follow on from FleetBroadband for users that want to upgrade to VSAT over the next few years.

Telenor’s Lars Janols stressed that Thor-7 was not designed to compete with GX and that the ability to roam Ka-Ka and across bands is a long term wish, though not one he expects to see soon. Later same day, Intelsat’s James Collet pushed the line that EPIC would provide the fast focussed throughput in regions where it was needed, in addition to more measured global coverage.

Asked how much interoperability he thought was enough, iDirect’s Eric Watko came out in favour of platforms that enabled roaming rather than the ‘closed architecture’ of the GX Service Enablement Platform, but he said his company still wanted to work with Inmarsat if possible.

Whether this would also result in an ‘all-band’ antenna is less certain. Ewerling suggested that though possible, the real question was whether users would be prepared to pay three times what they are paying now for single-band units.

This outbreak of peace doesn’t mean there aren’t problems elsewhere COMSYS’ Simon Bull rounded on Iridium (confusingly on a VSAT panel despite being an L-Band operator) for its high latency despite being a LEO operator. Iridium’s Brian Pemberton said the company had installed additional gateways in Norway and Alaska to improve the service.

Pemberton had a surprising card to play though. Iridium NEXT, its planned next generation L-Band system is designed to host Ka antennas that the company could lease to another operator that wished to run a global Ka-band network. And so another plank in the Ka v Ku band argument gets knock away. Pemberton said Iridium’s links to VSAT providers for which his system is used as a backup might provide fruitful opportunities for collaboration.

O3B’s Ashok Rao got an even rougher ride, but he insisted that an eight month delay to service start was not a big deal and that banner cruise customer RCCL would be delighted with the service when it got up and running. He also said the operator would look for energy business and would be ready to launch its next satellites by June.

O3B might be the current whipping boy for the risks attached to innovative services, but Bull wondered if the real problem might not be that maritime satellite was suffering from a lack of innovation. Where were the innovative services, the Teledesics, [and ICOs and Connexion by Boeing] that promised so much.

Well, for the most part, we know the answer to that one, but the real question is where the industry might be in 20-30 years’ time – by which he meant satellite not shipping.

You would assume more speed but really the answer was more about flexibility, efficient use of spectrum, optimised signals and better managed connectivity, to get more from what can be delivered rather than simply promising more and more.

That might mean a different kind of upgrade – from infrastructure that was designed to support a PTT or LESO model and away fro processes to manage capacity that are somewhat behind where the industry is going in terms of quality and reliability of the signal.

But wouldn’t that mean a change in the risk profile of the industry asked Bull? Yes, nodded the satellite men, without obliging any further information for what that might mean for them or, indeed the user.

The VSAT challenge – be more like Inmarsat?

It’s DigitalShip Athens this week and a welcome chance to take the temperature of the comms market over two days of speeches, debate and I suspect, just a little alcohol. Looking at the programme, one might expect a little unfriendly rivalry between the L-band and VSAT fraternities. Except that for the most part, the latter are not there this year.

True, we can expect some disruptive talk from the first few speakers – Inmarsat’s Frank Coles, Globecomm’s Gregor Ross and Thuraya’s Geoff Davidson in particular – but for the most part the VSAT crowd will be in the audience or in the exhibition.

There at least they will be joined by owners who are presumably getting ready to sling more Greek fire on Inmarsat for promising not to raise prices on FleetBroadband but then raising them pretty much everywhere else.

But the fact that Inmarsat will likely dominate proceedings is not just down to history or sponsorship dollars in my view. Recent conversations about the nature of the maritime market and the satellite supply chain suggest to me that biggest problem VSAT has in more deeply penetrating the maritime market is as much about brand and marketing as it is about service delivery.

Put bluntly, there are too many VSAT re-sellers chasing maritime dollars – by some estimates perhaps as many as 90 of them – but since there are not that many satellites in the sky, the majority of these vendors are really consolidators, re-selling bandwidth from the other satellite operators.

The big names in the FSS market, including Intelsat, SES Astra and Eutelsat provide the capacity and like Inmarsat et al, use distributors to sell to maritime and other mobility users. But not all of these have a solid appreciation of the market or much of an idea about how to address it.

Even so, they are targeting mobility users – in part because they have read about the growth potential in maritime and figured that it is better to get on the boat, wherever its destination.

But more problematic for buyers and airtime providers alike is that these vendors lack the unified approach that Inmarsat – and Iridium and Thuraya for that matter – can offer the market.

This leads to a somewhat exasperating situation whereby a shipowner may have on his desk three proposals for FleetBroadband which will all be more or less the same, give or take a few cents here and some megabytes there. In another pile will be the VSAT proposals; all different, possibly contradictory and probably more complex.

It’s hardly surprising that for shipowners of a certain kind, the commodity market approach of the L-band airtime vendors has made it very easy for service partners to sell their products when compared to what appears a more complex and initially more expensive alternative.

There are only a few VSAT distributors – Astrium is one and KVH another – that appear to understand the need to sell solutions, not equipment and airtime and that they need to do it under a single unified brand that their customers understand. The traditional maritime solution has been ‘take this pain away from me’ but nowadays it’s more likely to be ‘I need something or crew calling: tell me why I need VSAT and what is this HTS thing is all about’.

I still think that while IT managers and perhaps other senior staff want or need to know what they are using and where, the average seafarer genuinely cares little. It’s a little like turning on the tap – as long as you get clean water at the right pressure, then all is well.

It’s for that reason too that the more maritime-focussed VSAT re-sellers have been buying extended coverage in busy ocean regions. They understand that one of the reasons why users buy Inmarsat is because people look and the coverage map and conclude they would be stupid to buy a version that looks as if Dr Frankenstein has stitched it together (and is still working on patching the holes).

However successful, Inmarsat’s direct sales efforts have been, that advantage applies to XpressLink because even though what sits behind it is the same as the other VSAT vendors, the brand has immediate recognition and implied value. It transfers to Inmarsat GX too, although, just like FleetBroadband, the deployment of coverage will take time to be fully in place and even once it is, the data rates are not going to be anything like the sticker speed for most people.

Shipping, despite what its detractors say, is a commodity business and as anyone who has tried to sell a shipowner anything will tell you, pricing reflects that. It may be possible as Frank Coles believes, to get owners to spend more money on their communications. To some extent the success of VSAT in penetrating the market for high end owners has proven that.

How ironic then if those VSAT vendors, having first disrupted the market are unable to capitalise on the upswing in demand for higher bandwidth services for want of the scale they need to do so. Especially since they kicked open the door in the first place.

A carrot-shaped stick

Last week’s publication by investment bank Morgan Stanley of a report which polled three industry professionals on their views on FSS market prospects has caused a flutter or two, given its conclusion that the sector has entered a ‘no-growth’ cycle, with returns likely to decline over the next few years.

Fortunately at least for Inmarsat, Intelsat, O3B et al, Morgan’s fairly damning conclusions don’t seem to extend to the MSS sector nor to maritime, which together with aero and oil & gas is singled out as the source of strong growth in coming years.

The three FSS experts polled by the bank are bullish on Latin America and ‘large parts’ of Asia, but less promisingly think that High Throughput Satellites (HTS) will “struggle to open up new markets,” leading to an overall negative outlook, their creators having failed to book enough backlog pre-launch.

Handy then that shipping is a source of untrammelled revenue growth (insert smiley here). Across the MSS sector, this year has been something of a stinker and the latest developments hardly seem to encourage a significant change.

The war being fought over maritime HTS territory has moved from a land grab towards a series of skirmishes in which competitors compete to estimate how delayed the other’s service will be.

It’s ‘situation normal’ over at City Road too, where no sooner had Inmarsat announced that there would be no price rises on FleetBroadband for 2014, it announced a soaking of E&E customers for the revenue shortfall.

Inmarsat Maritime president Frank Coles told Digital Ship Singapore that there would be ‘categorically’ no changes in FleetBroadband pricing for 2014. This looked like good news – the increases in FB pay as you go pricing in 2012 and 2013 were a source of easy ammunition for Inmarsat’s many L-band and Ku-band competitors – despite making bulk plans cheaper.

As a result, maritime revenues have seen consistent growth, suggesting that either users love FB so much that they are prepared to swallow hard and pay or, more likely that the 38,000 active terminals represent a point of no return for users.

The point of no return is being experienced for users of Inmarsat’s existing and evolved (E&E) services – mostly Inmarsat Fleet and some Inmarsat-B – who will see prices increase by almost half in the new year.

DigitalShip reported that E&E services would increase by 48 per cent on services for 2.4 kbps fax and data; 9.6 kbps fax and data; ISDN/HSD (64 kbps); MPDS; and F77 128 kbps ISDN.

The really puzzling thing here is that given that there are 60,000 E&E terminals in service, Inmarsat blamed the change in pricing on ‘a result of a reducing number of users on its older satellite networks’. For sure the costs of maintaining those services are increasing but since 60,000 is a figure somewhat greater than 38,000, that claim doesn’t really stack up, does it?

Inmarsat told DigitalShip it had “advised partners that, owing to the rate of customer migration from legacy E&E services to FleetBroadband and XpressLink [Inmarsat] had carefully considered the financial impact of maintaining legacy E&E services for a declining customer base. As a result, it was planning “to align the value of the data services on its Fleet77 services with that of the increasingly popular FleetBroadband and XpressLink”.

In other words, the need to book revenue growth meant the increase had to come from somewhere. And that means laggard owners who have not yet seen the light will now pay even more for the privilege of using a legacy service.

Researching an article on maritime satcoms earlier this year it became apparent just how much owners resented the increases on pay as you go FB and on E&E services. While the trend seemed to be towards changing out Fleet77 there was a double-bind; pay an increasing amount for E&E or upgrade to a service that might be faster and cheaper initially, but tht comes with no guarantee of a price cap.

Owners have that certainty for a year at least, but previously contented E&E users might think very hard before they opt for FB over the proliferating Ku-band competition – after all, they will be locking in one way or the other.

It’s another big bet by Inmarsat that customers will favour a global service over regional VSAT services with back-up that puts them back in the discomfort zone and presumably the work to communicate the news to the channel partners is being done with the customary tact and diplomacy. Even so, it’s one hell of a carrot-shaped stick.

Maritime HTS: revolution or business as usual?

To mark the publication of its most recent maritime analysis, Maritime Satellite Markets on Cusp of Bandwidth Revolution, I asked Senior NSR Analyst Brad Grady to give MaritimeInsight readers an introduction to the report. With the level of background noise down a little this year – how should owners prepare for the introduction of High Throughput Satellite services?

Recent news reports – since vehemently denied by Inmarsat – suggesting the start of its Global Xpress service has been delayed, do not change the fact that the maritime markets are poised for a bandwidth revolution.

Nearly all segments of the maritime market feel the need for greater throughput to enable critical business and crew communications, despite – or perhaps because of – facing continuing pressures to cut costs and increase productivity.

With the on-coming wave of new High Throughput Satellites (HTS) entering the market, what changes should end-users expect?  Is this new capacity business as usual, or should maritime customers really expect a revolution?

As the NSR report makes clear, between now and 2022, narrowband MSS will account for a majority of maritime satellite terminals, enabling everything from engine monitoring, to safety and distress. However, broadband continues to be a major driver of revenues and in-service units across all maritime market sectors. FSS C-band continues to grow but is vastly outpaced by FSS Ku-band and HTS solutions. Between 2012 and 2022, GEO HTS will add almost as many in-service units as FSS Ku-band.

HTS, a term coined by NSR, is any satellite or satellite payload that has at least twice the throughput of a traditional FSS satellite for the same amount of allocated frequency on orbit, can use any frequency and almost exclusively makes use of frequency reuse and multiple spot beams to increase throughput and reduce the price per bit delivered.

Upcoming satellite services such as Intelsat’s EpicNG, Telenor’s Thor-7, Inmarsat’s Global Xpress, and O3b’s constellation (amongst others) fall into this group.  Combined, they will have capacity available to maritime customers across C/Ku/Ka-bands, and will have a significant impact on maritime customers over the next 10 years.

Globally, HTS will supply upwards of 2.3 terrabits per second (tbps) by 2022; a significant increase over current satellite throughput.  For the maritime market that means greater access to applications such as video conferencing from remote vessels to shore-based centers, faster database replication between the onboard server and onshore datacenter and more bandwidth for social media to communicate with family onshore.

While all of these applications can be found now in the maritime market, HTS launches aim to enable these bandwidth-hungry services more cost-effectively than current [mostly L-band] satellite services.

But what should end-users look out for when considering these HTS-enabled services?

‘More bits for the same bucks’ is – the in simplest terms – the key take-away from industry-laden conversations typical of any reference to HTS.  While the satellite industry continues to discuss Ka-band versus Ku-band, wide versus small spot-beams and open architecture versus closed platforms, end-users are left wondering – how much of this revolution should I worry about, and should I join this HTS revolution?

Scientific evidence supports the argument that Ka-band suffers from ‘rain-fade’ more than other frequencies, but new modulation techniques and hybrid network designs help mitigate those impacts.  Spot-beam size and overall network throughputs are debates best left in the hands of service providers and satellite operators. End-users instead should focus on Service Level Agreements and Quality of Service requirements.  Perhaps the biggest issue end-users should focus on, is that of open versus closed architecture networks.

Open architecture networks, such as Intelsat’s EpicNG, allow greater compatibility with existing remote terminals and equipment.  Closed architecture networks, such as Inmarsat’s Global Xpress have a narrower set of terminal compatibility – usually requiring an upgrade at the vessel to enable the HTS service.

While one might equate the term open with better, in fact, the conversation is much more nuanced.

More so than traditional FSS networks, deployments of HTS-enabled services need to take a holistic approach – from vessel movements, and application criticality, to deck space, current VSAT equipment, and overall bandwidth needs.

Globally-trading vessels will likely favor an Inmarsat-based HTS solution whose coverage mirrors the existing Inmarsat L-band network.  Vessel owners with significant investment into current equipment might lean towards an Intelsat-based solution due to the open-network design of EpicNG. Those with extremely high bandwidth or low latency needs such as cruise ships, offshore or government vessels might further lean towards an O3b-based solution.

In short, the conversation starts with the vessel’s current or prospective maritime service provider.

The bottom line is this. HTS promises a revolution both in throughput and total cost of ownership.  Paired with a strong SLA and a close relationship with the service provider, end-users should have no trouble adopting HTS-based solutions.

However, end-users and service providers alike need to continue to match the best service for the given application – this might sometimes be HTS, sometimes FSS, sometimes MSS – and sometimes it might be all of the above.

Brad Grady is a Senior Analyst at Northern Sky Research, a leading international market research and consulting firm with a core focus on the satellite sector and related industries.  He is the author of NSR’s latest report – Maritime Markets via Satellite, 1st Edition. Further information about NSR and Maritime Markets via Satellite can be found at www.nsr.com

Kicking and screaming – and that’s just the shipowners

With apologies for the hiatus, I had to spend some time attending to client work, hence the radio silence from www.maritimeinsight.com. The summer seemed to give me a certain amount of cover but given that it’s September and London International Shipping Week it seemed high time to get back into the fray.

And as this blog began with Inmarsat – and in the process gave its competitors something to complain about – it seems reasonable to pick up where I left off before getting back into the wider issues around communications and technology.

You have to hand it to Frank Coles, Inmarsat Maritime CEO: he doesn’t give the impression of caring much what people what think of him as long as he gets the message across.

As lead sponsor of the Fathom Ship Efficiency conference this week, Coles might have been expected to make a few genial observations about the roadmap for maritime communications and retire. After all, the company was due to host its own seminar the following day.

What we got instead was Classic Coles – combative and uncompromising, challenging the industry and his previous speakers from AP Moller-Maersk and Wartsila that if shipping wants to achieve the energy efficiency measures that are required for economic and regulatory reasons, it has to make better communications part of the mix.

“If shipping had changed as fast as information technology we would be moving cargo on 50 knot unmanned LNG-powered catamarans. Instead, shipowners are still being dragged kicking and screaming towards an era of better connectivity,” he said.

Coles has clearly taken a dose of futurology as he suggested that tomorrow’s ship’s master might be kitted out with Google Glass and driving the ship on an iPad “that way he can be on his email and looking out of the window at the same time,” he quipped. “We have already had our first internet-based collisions and it will continue to be a problem.”

That communications is ‘100,000 times cheaper and 50-100 times faster’ gives the shipping industry the tool it needs to run vessels more efficiently but has not been used, he said.

And the perpetrators of this situation? Shipowners of course. Owners he suggested, spend money for two reasons, “because they are made to or because they think they can save money”. Coles suggested that comms was the key enabler of the monitoring of onboard systems for energy management and compliance but that few owners were taking advantage of a real-time data stream off the ship.

“It seems incredible to me that while everyone will give their kids a cellphone so they can try and find out where they are, $100m worth of ship and cargo aren’t worth a similar type of investment,” he said.

The refrain that purchasing managers are herded by management consultants to drive costs lower and lower is not new, but referring to his customers as “crocodiles; large animals with small ears, small eyes and small brains who only say price, price, price” created plenty of amusement.

His point – that comms represents perhaps 0.3 of daily running costs and that the average ship according to Inmarsat, spends just $25 a day on staying in touch – is far more serious, particularly with bunkers at $6-700 per tonne.

“And yet we are still told communications is too expensive. Something is wrong in the mindset,” he continued. “A company will spend $100,000 taking off the bulbous bow but they don’t get the big picture. Ships need to be in touch.”

Well he would say that wouldn’t he? But Inmarsat estimates that an owner can save double that, or potentially 10% of running costs, not bad for an annual investment of $36,000.

“The industry has to change. We’ll be driven there of course but it would be nice if we didn’t have regulators drive us there one more time,” he concluded.

Given that his predecessor on the panel, AP Moller-Maersk’s Niels-Bjorn Mortensen was among those giving their ships nose jobs, it seemed logical to ask if the company was leveraging this kind of communications intelligence. He seemed unconvinced.

But it was a theme that cropped up more than once during the day, in the process adding weight to Coles’ argument. Monitoring not just of ship, engine, route, hull performance and cargo, as well as reporting of carbon and black carbon emissions too are either on the menu or coming, depending on whom you believe. The green NGOs pretty much rubbed their hands with glee, which I guess was not his original intention either.

The information management system vendors brought the argument full circle by the end of the day. Jon Agust Thorsteinsson, co-founder and CEO of Marorka told delegates that the real challenge for shipping was how to manage the stream of data coming off the ship, turning it first into information and then into knowledge.

Mr Mortensen’s reluctance to give a firm endorsement could be taken either as evidence that Maersk Maritime Technology is already working on something similar (it has the habit of innovation so it’s quite possible) or that owners see bigger problems.

Gather a big bunch of data from the fleet and you need brains and bodies to interpret it and turn it into actionable information. With many superintendents already running more ships with the same or fewer resources they are unlikely to want more work to do.

That suggests to me at least, that this task will be subbed out to the same management consultants whose job is to drive down costs even further, to the presumed chagrin of more than just Frank Coles.

‘Following a ship around with a satellite beam is not a business’

In part two of my conversation with consultant, analyst and blogger Tim Farrar, we dive a little deeper into the undergrowth: what the HTS upgrade path looks like and how to tell perception from reality, how the recent competition stacks up to the incumbent and what new opportunities may be out there for those prepared to seek new markets.

MI: I’ve had conversations recently with end users who have said, ‘I’m really interested in HTS but I sure as hell don’t want to be first through the gate, I want to see it up and running, I want other people to be signed up and using it before I consider moving. Again I’m speculating but I’m assuming that Inmarsat will make it attractive financially for users to upgrade to GX but are there other drivers too?

TF: “For new customers, every VSAT terminal they install from now is upgradeable, straightforwardly. When you go back to the investor day last October they said, ‘We’ve got 20% of our business plan committed and they included all 1100 ShipEquip VSAT terminals in that. Despite the fact that only 300 of those have actually gone to XpressLink.

“Probably only 100-200 of them actually have a compatible terminal, maybe even less than that last October because the compatible terminals have only been available for a short period of time. So quite how you square that circle and you say to those people, they [Inmarsat] will turn off Ku-Band by whatever date is an interesting question.

“But certainly, from a financial point of view, Inmarsat’s sending the message to its investors that it intends to cut back its Ku-Band leases as rapidly as possible so it can shift people over to its own system and obviously have a dramatically higher gross margin.”

Do you find it as hard as I do to make like for like comparisons? Inmarsat talks about 32,000 active FB terminals, KVH talks about terminals shipped. So it’s actually quite difficult to really get hard usage analysis of who’s really using what beyond what the airtime vendors are telling us or am I being too naïve about that?

“The VSAT industry has always been one where people tend to exaggerate a little bit and they like to tell you shipped or committed or whatever rather than actively revenue-generating terminals.

“People have their own definitions and it’s one of those things that’s self-reinforcing. If you think you’ve got a bigger market share than your competitor and your competitor is saying a number that is stretching it slightly then you’re going to have to stretch your number a little bit too.

“So people will quote numbers that are what they hope for when they’ve got through their backlog rather than what they actually have that are revenue generating right now.”

Certainly the view from Inmarsat seems to be that they are keeping their heads down and to some extent downplaying the penetration of XpressLink and the impact they expect Global Xpress to have.

“That’s because the 40-50% [market share] figure can’t be reconciled with reality (laughs). I don’t know how they came out with that. [At last year’s investor day, Inmarsat claimed to have won 50% of all high-end VSAT contracts] it’s a number that appears to relate to a selected period of time excluding KVH and a bunch of other things.

“I think they tried to downplay that number just because it’s hard to reconcile with reality over a more extended period of time. And is excluding KVH from your numbers the right way to go? Especially given the issue of where GX is going to be pitched in terms of the low end versus the high end and all those sort of things.”

“There hasn’t been necessarily huge amounts of growth in the VSAT business, it’s been a little bit slow. It’s not easy at that high end of the business either, at least in merchant shipping due to the economic climate.”

And as people like Roger Adamson have said recently there’s either two ways, either to fulfill crew calling demand or get in at the boardroom level and sell to a much higher level.

“Yes that’s right and at the board level, it’s a very difficult. They have many, many preoccupations right now other than just details of how you implement your communications.”

You touched previously on Inmarsat’s other competitors, Iridium and Thuraya. I don’t hear so much from Iridium these days but from what I do hear is that people like using Iridium OpenPort because it’s cheap and simple and the crew can install it but reliability is an issue. For Thuraya, they have a strong play albeit regionally, so I guess my question is, how far from death is the legacy L-Band market. In fact does it actually get a bit of a new lease of life if the others can carve themselves out a nice niche there?

“Well the question is how far down the spend level is VSAT going to go? I guess you could say, a KVH solution at $600 has some place in the mix. But the reality is I think that I see sub-thousand dollar a month customers being dominated by L-Band for the foreseeable future.

“But yes, OpenPort is a good cheap and cheerful solution, it has had some challenges, Thuraya has tried to become more of a FleetBroadband competitor. It has tried before and it didn’t quite work out but I’m sure that they’ll try again with another maritime broadband-type product on a regional basis.

“And obviously IridiumNext could give Iridium something more directly comparable to FleetBroadband so I think there’s potential for competition to FBB in future. Inmarsat is sort of opening itself up to that by leaving a gap between the pay as you go and the entry level type bundle.

“The people who only want to spend three, four, five hundred dollars a month, they don’t have the greatest set of options for the data at this point in time. Because how much can 10 or 20MB a month really give you? I’ve heard people say, should I bother upgrading my old Mini-M terminals, do we really want to upgrade them to FB150, because I’m not really sure what we do with 10 or 20MB a month – would that get us any further forward?

“I think Inmarsat’s pricing bracket strategy is good because it gives them lots of differentiation and once people are in those buckets you can push the bucket a little bit in terms of pricing and you won’t have people jump out of it.”

“One of their key issues is going to be now they’ve got a 2GB package how do they shift those people up from spending $1,600 to $2,000 so that they’re going to then feel that they don’t have to spend any more for VSAT. It does leave them open to a bit more competition once better alternatives are in the market.”

“You put all that together and it seems obvious there will be more competition at that lower end of the market from other L-Band solutions in the future.”

I’m interested in the comparison between Intelsat Epic and GX – what’s your take on whether you feel EPIC is going to get much traction beyond the energy, offshore and cruise markets.

“I think it definitely is directed at that higher end of the market. The challenge for GX is just the limits on what you can do in any one beam. If you have 50Mbps, you could put two carriers in one beam and get 100Mbps when it’s not raining.

“But it’s pretty much constrained to that and you think about it from the point of view of a cruiseship, you can’t really dedicate 20Mbps because if you do that to more than a couple of users and all those cruise ships end up in the same part of the Caribbean, then you run out of capacity. And when do cruise passengers want to use the internet? Normally when it starts raining outside and they can’t sit out in the sun so that’s not helping you a whole lot.

“So there’s obviously a desire to stick with Ku-Band to work around rain fade. It’s one of the limitations of GX that it’s designed for coverage, it’s not designed for lots of capacity in a given area.

“So what Intelsat is doing with Ku-band, as I understand it is working the flexibility to add capacity in particular spots, and it’s really designing it around these big pre-committed buyers [MTN and Harris CapRock] who have come along said they want X amount of capacity in the Caribbean. Or Panasonic would say they want X amount across the North Atlantic and that’s what they can put there.

“So it’s been very closely designed in conjunction with those really big players. Whether it will exactly match what a mid-tier maritime player wants, hard to know. For Inmarsat the limitation is how much capacity it can provide in any one area. It also has to manage the capacity itself to some degree. It doesn’t want to be dedicating capacity to a service provider, unless it’s for the government and you want your dedicated beam.”

In terms of other newcomers, O3B is a bit of a mystery to me.

“Yes there must be business there but I’m not sure how it will work out for them. If your market is cruiseships with more than six thousand passengers then there’s a dozen of them then it’s just bizarre. Following cruiseships around with a single beam is not a business. I don’t know how much the cruise ships are actually paying but if you track back to O3B’s numbers their original business plan said they were trying to get something like $4M per beam in revenue and I’m sure that a single cruise ship’s not paying four million dollars per year for capacity.

“I suspect that if they’re paying $1m per year that would be the high end of what I would expect. So you look at it like that it’s not exactly a wonderful business, it’s come back a long way from what they’d hoped.”