Tag Archives: Iridium

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.

‘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.”

Lights out for the territory

During last week’s Nor-Shipping when the talk was mostly of offshore support vessels and optimisation, a small but significant nugget slipped into the public domain. Amid all the kite-flying about Arctic shipping, sub-sea risk management and the Northern Sea Route, it emerged that this week’s Maritime Safety Committee at the IMO will include a submission by the United States on behalf of Iridium.

In the typically windy prose of the IMO, the submission notifies the committee that it intends to ask the newly-merged NCSR sub-committee (formerly NAV and COMSAR) to verify that the Iridium satellite constellation meets the criteria necessary to be used for the Global Distress and Safety System (GMDSS) and that the sub-committee recommends that the MSC recognises the system for such use.

What the committee makes of this remains to be seen. But presumably the distinguished delegates’ attention will first be drawn to the assertion that the Iridium constellation provides ‘at least 99% availability’.

Making this submission may require something of a procedural waiver since there is disagreement across the industry as to whether the Iridium network does indeed achieve this magic number.

This is not the first time that Iridium has tilted at the right to run GMDSS in addition to incumbent Inmarsat. When I shared the news with a maritime journalist at Nor-Shipping, their reaction was ‘oh no, not again’.

Why now appears to be the key question and the answer appears to be topical: concerns by the US Coast Guard that coverage of the polar regions is too patchy to give it the level of security it seeks as the ice retreats and the Northern Sea Route opens up to summer shipping.

Anyone attending the Nor-Shipping event in Oslo last week would identify with that, but it is important to remember that such conditions are not expected before 2050, depending on the rate of growth of CO2 emissions.

Last year there were less than 40 transits of the NSR – though that level has grown fast – and pundits who fancy themselves Arctic experts like to talk of days to be shaved off the Asia-Europe run by transiting the pole. Sober heads are less sure, pointing to the Russian attitudes to ‘cost recovery’ the lack of port infrastructure, pilotage, icebreaking tonnage and digital charts as potential icebergs.

Not to mention the fact that cutting service times for containerised cargoes would pretty much denude the existing supply chain and cause more stress to earnings. In wet and dry bulk it would rip up the tonne-mile rulebook too but that’s another story.

So the question again – why now? Perhaps the answer is more about building visibility and credibility in the next few years as Iridium seeks to raise the money needed to build and launch IridiumNext. And IridiumNext would probably be a stronger platform on which to build a GMDSS-capable network.

It’s no insult to call the current constellation the Ford F150 of maritime satellite – in fact it’s a compliment. It’s cheap, plentiful, easy to work with and users like it, though reliability is not all it should be by some accounts. Is that the criteria for a global maritime safety service? Practical concerns aired around the industry include whether the coverage is uniform enough to support GMDSS.

Sources at the MSC say that Inmarsat has wasted no time in writing to delegates welcoming competition (they would say that wouldn’t they) but pointing out that such competition will have to based on a level playing field.
Inmarsat spends an estimated $5m a year on network administration of GMDSS and has said it wants to continue investing to provide the service at a claimed 99.99%.

Its own figures show Iridium achieving no better than 96.2% in 2012 and presumably thinks that the criteria it must meet to operate GMDSS is being waived on Iridium’s behalf. It’s in the way of things that Iridium will doubtless contest those numbers and probably accuse Inmarsat of manipulating its own.

One way or the other, the committee must either be assured or change the starting criteria. Detail is what the Maritime Safety Committee is there for and there surely can be no surprise if it asks Iridium to either work on its performance or come back when Next is available.

What will be interesting to see is whether Inmarsat reacts accordingly and puts in place a plan for improved polar coverage in future. This last remaining gap is also being eyed by Telenor and KVH. The former has coverage planned in support of Norwegian offshore ambitions and the latter recently struck a deal with Iridium to use it as back up for ships sailing out of VSAT coverage, not for the first time either.

The irony of this situation is not that Inmarsat is concerned by a competitor muscling in on its (IMO-mandated) territory. It is that the same competitors who accuse Inmarsat of sharp practice, clearly sense an opportunity to get one over on the old lady by resorting to a little ‘diplomacy’ of their own.

Not the end of history: some ruminations on maritime communications

Tim Farrar is an analyst and blogger who has been covering the satellite industry since the mid-1990s. We had crossed paths before, notably discussing his End of History blog and when he posted again about Inmarsat‘s moves in maritime, the time seemed right to have a proper chat with the man for his views on the evolving maritime satcomms space and how the main players were shaping up.

Some time passed (my fault) but what follows is our conversation around those topics and Tim’s views on the major contenders’ plans in maritime. Not a shipping person himself, he is still objective on the offers, how they are priced and how they differentiate in a market that is lining up on different sides of the beam for a struggle for market share and territory in L, Ku and Ka-bands.

MI: I was interested to read one of your recent blog posts which seemed to be coming back to a familiar theme over the last couple of years of castigating Inmarsat somewhat for throwing its weight around. I was writing about LESO-hopping and the lack of transparency and price sensitivity maybe 10 years ago. How’s the current situation different and why is it more important now?

TF: “Well I wasn’t necessarily being critical, I was just noting a shift from what I perceive to be Inmarsat’s reluctance in the past to be as aggressive. Obviously when Inmarsat was not in the retail business it left all of that fighting to the LESOs. And Inmarsat didn’t need to dirty its hands with that competitive stuff.

“So really I think the issue in my mind is not that this should be a surprise, it’s just that it is a difference, Inmarsat is being more aggressive itself. And it has been somewhat reluctant to do that in the past because of it being such a big player. It was all very well for Iridium or other smaller players to come along and offer prices 20% lower than Inmarsat’s and take some of the business.

“Inmarsat is fighting back and saying, ‘I’m going to go very directly after other people’s pricing and offer big incentives’.That’s the difference and when you’re by far the biggest player in the market you wonder whether that will come back to bite them later if for example Inmarsat wants to acquire anyone in this business.

“Let’s think about what happens with LightSquared over the next year. If they want to get out of the business, Inmarsat wants to buy their assets, you could see that aggressive competitive behaviour could be something that would be cited to raise concerns about that.”

As you said they’re not the only people doing it but they are doing it to a greater degree than previously. So does it suggest that this is more of a game for keeps with HTS coming?

“I think you’ve remarked on it in some of your blog posts about how Inmarsat is being more active in that regard from a competitive standpoint. Taking a step back from MSS specifically but just generally, a small player can be aggressive from a competitive situation, and that may not be terribly disruptive to the market.

“If the big player ends up being very aggressive from a competitive front, that’s more likely to end up in a price war type situation. We just we don’t know whether that will happen.

“Clearly Inmarsat have got the resources to outlast some of their competitors if we do get in to a price war. Other people obviously have more financial challenges. If they drive a competitor out of business, that might help Inmarsat in the short term. But as I say it may end up raising issues downstream, especially if Inmarsat ends up picking up the pieces.”

If I can ask you to speculate for a minute do you feel it’s likely that Inmarsat will try to drive some more consolidation in the airtime segment?

“Well I think being over in this part of the world [the US] you naturally have to ask what happens with LightSquared downstream? If it ends up in the hands of its debt holders, they’re hedge funds and they don’t want to be running a satellite business.

“Further downstream you could say maybe Thuraya has to make decisions about what they do with future systems, again they are L-Band and potentially compatible with Inmarsat. It might be quite hard to strike a deal because Thuraya probably want to stay in the satellite business. But there’s possibilities there.

“We can probably rule out Inmarsat and Iridium but on the L-Band front it’s just a situation where many other players are having a relatively tough time and if they ultimately do exit, then is Inmarsat going to want to pick up the pieces?

And do you think it is all about price or is there a degree to which the users signing these contracts are also going with Inmarsat on a bit of a comfort factor – because of who it is, because of its heritage potentially rather than they’ve maybe read about existing reliability and throughput of VSAT?

“On the VSAT side I think there is clearly a pricing issue and there’s a terms issue as well. Inmarsat started off with XpressLink saying it was five year contracts and you’re committing to upgrade to GlobalXpress. It’s far from clear that all of those conditions are being held to, so price is one part of it, flexibility’s another. And yes, adding an L-Band back-up is another differentiator.

“It’s a mixture of all of those, and I think if Inmarsat is stuck with trying to get people to agree to sign up for five years and commit to moving to GlobalXpress whenever they [Inmarsat] want so they can turn off their Ku-Band leases, then those sorts of things, regardless of the price, may have made it a lot more difficult to get people to commit.”

I may have this wrong but I had understood until last year that signing up for XpressLink didn’t just mean a complimentary upgrade to GX, it was a mandatory upgrade. I understand that from a marketing point of view but as you say, it gives little room for manoeuvre.

“And it’s not clear that that happened because the way at least the press releases read, it said Inmarsat would offer you double bandwidth when you moved to Global Xpress so it’s not like saying you’re moving regardless. It’s saying, you will have a better service if you upgrade. It’s not clear if they’re going to go back to clients who already have non-GX compatible terminals and proactively replace those so that they’re ready to turn on to GX or whether they wait for a decision point downstream.

“Obviously they’ve been somewhat constrained in terms of installers, and they’re hiring more and they’ll have more ability to do stuff there, but it’s a question of whether it is worth it to proactively change those old terminals now as opposed to waiting until later.”

Part two follows – on HTS, comparing Inmarsat and VSAT and how to sell either or both…

Owners speak – and you might not like everything they have to say

I was commissioned out of the blue earlier this year to write an article for Via Satellite magazine. I was flattered to be asked frankly – time for writing is a rare luxury these days – hence the lack of updates here recently.

The one thing the editor was clear on was that I couldn’t speak to any airtime providers – or at least couldn’t include any of their comments in the article. The piece had to be purely on the developments in the market and how owners and managers were responding.

What I found was largely what I expected – a movement towards Ku-band VSAT among the higher end owners and a period of adjustment elsewhere as buyers transition off older and increasingly expensive L-band systems and onto lower per MB packages as a positional move ahead of HTS systems becoming available within the next few years.

There is some mixing and matching of systems going on, based on areas of operation and there is the usual trade-off between the coverage and higher bandwidth models. The more specialist the operator of course, the more focussed the usage, with ferry operator Stena Rederi using hybrid services to cover crew, passenger and business use. It also has a service agreement that effectively transfers a lot of the performance risk onto its provider, but Stena says the relationship has prospered as a result.

For the tanker owners such as Laurin Maritime, crew usage is unsurprisingly cited as the primary driver for VSAT contracts and business use remains a secondary consideration for the most part.

What they mostly think is that satcoms are still too expensive – or at least that they expect the landside model to prevail – guaranteed performance up to a point, faster services and lower prices resulting from stronger competition.

In the process of upgrading its fleet, Intership Navigation of Cyprus also sought even more flexibility, the ability to conclude short term rental agreements rather than make purchases or conclude long term leases.

That seems surprising when airtime suppliers are pricing so aggressively to win business from each other, but it might make sense if suppliers could provide a service that gives the owner a completely new level of flexibility.

There is also a sense that buyers are risk averse, sensing that the shift from L-Band to VSAT and on to HTS carries the risk of the unknown that in the current climate could be a risk too far. This might be conservatism and it might be experience.

One owner reminded me of the Connexion by Boeing debacle, when the mainstream satellite market once again eyed maritime as some kind of untapped opportunity. Its complete failure made for great copy at the time but a salutory warning.

Shipowners have long memories as well as big problems and shallow pockets. Selling to this market will take a golden touch. The idea of being first to market is less appealing than in the heady days pre-2008. Expensive mistakes are not an option.

Oh and by the way in case you are wondering, I didnt choose the headline – my suggestion was a lot more sanguine – but I hope you enjoy the article.