Tag Archives: Ku-band

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.”

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.

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

‘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.”

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.

CrewComms_infographic

Crew retention is the tip of the digital iceberg

Almost 12 months ago an ambitious project began to take shape. Roger Adamson of Stark Moore Macmillan, Vizada (now Astrium Services) and two of the largest crewing agencies in the world, Philippine Transmarine Carriers and CF Sharp, joined forces to embark on the most comprehensive survey of crew and their attitudes towards and use of communications at sea ever undertaken.

The resulting report has generated considerable interest. But while Adamson says it is encouraging to see so many shipmanagers and operators recognising the operational benefits of improved communications from a crew retention perspective, in this guest blog, he lays out why he believes there is a wider opportunity which comparatively few in the industry are really grasping.

Considering the enduring importance of crew retention it may seem surprising that until last year no organisation had commissioned definitive independent research into the communications requirements and habits of seafarers.

However, when confronted with the logistics of reaching, collecting and analysing the written, paper responses of almost 1,000 officers and ratings, this lack of comprehensive research becomes rather more understandable.

Key to any research project is the quality of the data and the sample. Had we not been working with PTC and CF Sharp which between them send over 47,000 crew each year to over 1,000 vessels in the commercial cargo and passenger sectors, it is unlikely such a survey would have been possible.

It certainly wouldn’t have produced such high quality data and responses. With the total market for satellite based crew communications estimated at approximately 925,000 individuals, our sample represents in the region of 1% of the market – making the dataset both fascinating and statistically significant.

One of the headline results has been that 68% of seafarers now have access to communications whilst at sea either all or most of the time with only 2% reporting that they never have access to communications. However those headline figures mask a wide variance between different sectors. For instance the passengership sector, despite having the highest levels of communications equipment on board, provides the lowest levels of free crew communications of any sector.

In common with the passenger sector, offshore vessels have very high levels of equipment, but neither of these are principally driven by crew communications requirements. For the passenger sector, high-bandwidth communications systems are major revenue generators with the penetration of VSAT extremely high.

Similarly, the offshore sector is well penetrated with VSAT systems as charterer requirements dictate high-bandwidth be available, but in contrast to the passenger sector, offshore vessels offer far better access to free and paid-for communications, most likely a reflection of the scarcity of qualified offshore crew.

Across the sectors 46% of crew are not provided with any form of free communications at all. In the context of crew retention that figure should be raising eyebrows.

As a regular speaker at the Informa Manning & Training conference, where this year I’ve been asked to speak to delegates in Dubrovnik about crew communications, I consistently hear managers and operators wrestling with the issue of crew retention.

I’m repeatedly being told that the expense of training crew means that retaining them offers real dollar savings and competitive advantage. When one considers the noise VSAT has been making over the past several years it is curious that we are still in a situation where almost half of all seafarers have no access to free communications, when the ability to provide them with such would not only assist in their retention, but also offer broader opportunities to ship managers and operators.

I think this is where the real issues lie. Traditionally the expense of satellite communications together with the necessity for robust equipment and reliability in an environment where mission-critical literally equates to life and death, has always meant failure wasn’t an option and experimentation challenging.

As one of the most regulated industries in the world, shipping is about compliance and meeting minimum requirements. In many respects it is a unique industry, but it is not immune from the digital revolution which has swept up every other.

With the IMO advocating an over-arching e-navigation strategy combining ECDIS with new technologies converging across navigation, IT and communications, the landscape of maritime business is changing fast.

The opportunities for forward thinking ship managers and operators are highly significant, but unlocking maritime’s digital promise will require a major shift in thinking. IT, communications and digital technologies have the potential to drive cost savings, service improvements and the all-important crew retention.

In my experience shipmanagers and operators are hungry to understand how and where their businesses can implement and benefit from these changes, but as yet suppliers aren’t creating the cross-businesses value propositions to help them.

By commissioning the Crew Communications 2012 survey Astrium have signaled their intention to address this need. The wealth of information it has provided to shipmanagers and operators about the crew they depend upon is extremely valuable, but it’s only the beginning of what’s required.

Case studies have always been the primary tool in the maritime salesperson’s armoury, but what’s needed now are more independent, in-depth studies and analysis which can inform both suppliers, and ship managers and operators.

The advent of new High Throughput Satellite systems, from Intelsat EPIC to Inmarsat’s GlobalXpress, O3B to Iridium NEXT, means bandwidth and speeds will accelerate further. But without the context of operational implementation and potential cost efficiencies these systems are just adding a new level of complexity for ship managers and operators.

We are approaching an era of real technology convergence in maritime which has the potential to transform the industry for the better. Doing so will require technology suppliers to gain a far more holistic and in-depth understanding of the shipping business. And for ship managers and operators to help them.

A condensed version of the Stark Moore McMillan report, Crew Communications 2012 is available for download from here.

A year has gone by…

…since I started MaritimeInsight and March again finds me in Stamford once again, where the Connecticut Maritime Association moves and shakes for the next three days.

Over the last year I’ve tried to unpick the main issues impacting communications and technology. I probably haven’t always got it right but my guiding principle was to provide a forum for neutral debate on where the sector is going and how that fits with the wider industry.

That commitment remains because the 12 months have shown that left to the marketing men, there is as much spin and smoke around as there is clear guiding information. And because the next couple of years will likely define who survives and who falls by the wayside.

As I have noted it in recent posts, communications is a market in the midst of an upheaval and one for which the future will look somewhat like the past but there will be fundamental changes too. The next challenge is probably less about selecting systems and more about empowering and enabling crew to ensure that the users can extract real value from them.

One need only look at the latest DigitalShip to see that VSAT has gone from a nice to have to a must-have for owners of high quality tonnage. The emergence of the HTS era will see that trend strengthen but there are big questions to be asked and answered.

Will Inmarsat continue to gain enough traction on XpressLink to cement the take up of GlobalXpress? Will Intelsat get its IPO away and EPIC in service? and will Iridium NEXT get off the ground? Will Globalstar’s second-generation play come good? I recently authored an article for Via Satellite on the step change in satellite comms and I couldn’t get O3B to tell me anything so I guess they are busy.

How far will Ku-band VSAT be able to keep up the pressure on all these? And what happens to L-band spectrum as owners begin to move away from their comfort zone?

As Maersk Maritime Technology’s Bo Cerup Simonsen put it at last week’s GreenShip Technology conference, the biggest challenge is not technology, or financing or sustainability, it is ‘survivability’ and whether shipping companies and their suppliers have the financial stability to last the course.

Maersk of course is the industry’s bellwether, a company which defines engagement with the core shipping issues, principally the need to get a handle on big data and in the process improve operational efficiency.

The Maersk fleet of 870 large containerships ships is already reporting into a single database, with data flowing almost continuously on an automated basis, helping the company develop performance benchmarks on people and ships alike.

That means that big blue can sharpen its competitive edge, assessing the impact of fuel saving technologies and comparing vessel performance, dropping poorly performing chartered tonnage and bringing in younger ships as necessary. Crew are incentivised to improve performance within safe working limits.

“It’s a case of deciding if you are going to do the minimum or the best, to work beyond what is regulated and maintain your vision,” Simonsen said. “The key aspect for us is to make sure that the data and software burden are not placed on the crew. We monitor and measure then discuss with the crew what the implications are.”

Properly resourcing crew training was fundamental to this – there was no point in investing in technology without helping crew get the most out of it. So once again we are back to the humanware. Software, technology, systems, these are just means to an end. The real challenge is to educate and change mindsets.