Tag Archives: MSS

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.”

Five things it would be good to hear at Satellite 2015

Young people tell me that the listicle is the way to go (flexible length, no need to build narrative flow) so here’s what I’m hoping for from Satellite 2015 next week.

From a maritime industry perspective, few of these things are likely: Satellite is peer-to-peer show more concerned with orbital insertion and the potential of nanosats than the niceties of maritime. That will get a lot more play the next week during CMA when the industry will talk about almost everything except communications.

  1. Less about HTS. The satellite industry is obsessed with HTS and its potential. And so they should be, since it brings potential communication speed out of the early 1990s dial-up era and into the early broadband era of the 2000s. In satellite that kind of improvement is worthy of this much fuss. Satellite is hard, expensive and tough to deliver to moving targets but the maritime industry for one is going to take some convincing that the next big thing is just that. It’s worth remembering the Stark Moore McMillan (as was) survey of a few years ago that found the majority of the maritime industry still working at 9.6kbps with thousands of seafarers still unconnected. HTS isn’t going to lift those people out of bandwidth poverty.
  1. More about end-users. If any of Satellite’s delegates have been paying attention, they will have noticed the Baltic Dry Index hitting its record low, all but a few containership operators bleeding red ink and global trade demand prospects so poor that even those who said this slump is not as bad as the 1980s are now keeping quiet. With the exception of tanker trades driven by low oil prices, the industry is in the toilet, so it’s not a great time to sell them new shiny things unless they are mandated by regulation. That doesn’t mean they won’t buy, just that satellite people have to listen first, sell second. The maritime satellite providers have talked a good game on the need for monitoring, telematics and chart updates but it would be good to see a little more evidence-based data of the need.
  1. Easier to buy VSAT. This is happening – KVH will say it has already happened – but if the industry is to take to VSAT in large numbers it needs to be a commodity sale just like L-Band has been. Owners are unsure about VSAT because they see a large per month expenditure, sometimes with expensive equipment on top and are unsure whether they can make it pay. Deciding whether or not they will monetise or incentivise their crew makes that clearer and I tend to think that crew would pay for a good service. The headlines tell us more and more owners are signing up for VSAT but they are still in the minority. No one issues a PR that says ‘Fleet77 unit still working, if pricey’.
  1. Making value added a reality. Shipping likes the idea of added value. Ship suppliers, classification societies, even satellite service providers use it to differentiate even though it means different things to them and their customers. Without it they are selling the same thing and price is the only thing that counts. But shipping is good at bolt-ons; telemedicine, e-learning, weather routeing and so on. When this stuff moves beyond the ‘bursty’ and into a continuous stream – then there is a supply-demand gap. Seafarers want it – and some companies too – but it is hard to get the bandwidth required to make it happen without confidence that your connection is robust enough to support it.
  2. Choice that is easier to choose. The maritime industry has seen satellite providers grow from IMO-mandated monopoly to duopoly then to a free market with a wealth of choice. But something has prevented them from seeing this as real choice.
    Perhaps it is a lack of inertia because ‘no-one-ever got fired for buying Inmarsat’, perhaps that the alternatives on offer really weren’t that much better. And where the incumbent used to respond to market changes slowly, it is now pushing them to stay in contention not just at sea but in the air and on land. Between the remaining L-band providers and the FSS VSAT companies who think there is a gold mine awaiting them in shipping, there is a lot of interest in carving out territory. But there is also an imbalance between the very large service/distribution partners, some of whom run satellites themselves and the traditional SPs whose value lies in experienced people who also have a handy way with a spanner. Ultimately this is an ‘out of town supermarket versus the high street’ scenario. One may have a preference, but from this side of the pond, it’s pretty easy to see how that one ended.

See you at the show and if you are free on Tuesday at 16:30 come along to the MSUA-12 maritime session. Full details:  www.satshow.com.

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…

Cold winds and tough times

Last week’s DigitalShip Hamburg conference was a living testament to the troubles that are threatening to wash away many shipping companies. Registration was strong but attendance was a little lower than previous years. Ask anyone about that and they would reply ‘these guys have other things to worry about’.

They are right. The insolvency of three single-ship KG companies associated with Hamburg’s Vega Reederei the same week underlined the fact that the German shipping market and the finance system that supports it are under serious threat.

The picture is the same globally, though owners have managed to defer the worst effects by burning through the cash piles amassed pre-2008 and because the banks (another group with rather bigger things on their mind) haven’t moved to repossess because interest rates have been so low.

That is changing and satellite communications may not escape unscathed as the market tightens. For a SOLAS universe of either 40,000 or perhaps closer to 70,000 merchant ships, there are at least three MSS airtime providers, dozens of DPs and SPs and rivals from FSS who moved into maritime a few years ago.

As Marlink’s Knut Natvig mentioned in his first-day introduction, the SP is the glue between the airtime provider and the customer – they have the crucial role of getting pricing right and adding value.

Now, the usual suspects will already be saying that Inmarsat is doing a pretty good job of putting smaller SPs out of business by raising PAYG prices, but looked at dispassionately, something will have to change.

Indeed, it has already changed. An SP of my acquaintance is fond of remarking that selling airtime may have been the past but certainly won’t be the future. When an OEM or a software vendor can also be an airtime provider, the fight gets too tough for many.

This will force the SPs to get better at what they already do – squeezing value out of L-Band even while they decide whether to take the bigger bet on Ku or Ka-band VSAT. And if rumours going around Hamburg that one big and well-known SP is indeed up for sale are correct, the evidence is that change is already observable.

And if the market pre-GX was tough, the market after could be tougher still. As DPs, SPs and OEMs sign up to the SEP and GX and accept everything that goes with that, the mid-size players, or simply those not fleet enough of foot, will be left to scrap it out even as the big boys pull further away.

For the Marlinks of this world, that may be less of a problem as they are hedged across all the products as are others, so customers can order a la carte or table d’hôte.

It was said once again in Hamburg that the IT department needs to get out from behind their desks and understand more clearly what is happening in chartering and operations.

As Pietro Amorusi of D’Amico noted, “Shipowners don’t want to take care of solutions, they want to forget about problems. When you go to buy a drill, what you really need is a hole – this should be the approach.”

And that goes the other way. DPs and SPs should be on their customers like glue, talking about the future, describing scenarios and laying out options.

They will still have a hard job. Inmarsat’s direct sales strategy is increasing pricing pressure but the other DPs and SPs are at it too. Inmarsat Maritime President Frank Coles told the audience he expected some kind of consolidation over the next couple of years and that he didn’t think there would be any ‘unlimited’ bandwidth packages on offer in maritime in future if demand continued to increase.

Zeev Steinluaf from Station711 said he could see the day when the majority of crew access was free at point of use, either subsidised by the owner, the DP/SP or supported by advertising.

So the trick of it, just as in the shipping piece itself, is relationships. What the L-Band DPs and SPs have that the VSAT vendors don’t by and large is the relationships – in some cases built up over years. The VSAT vendors can talk service speed and capacity, but you wonder sometimes if they are as close to the market as they claim.

Still, another DS done and we have reasonable clarity on what we might expect over the next year and into 2014 by which time we will have a first glimpse of what GX might be capable of. All shipowners and managers have to do know is call with great accuracy the timing and extent of the market’s recovery in their particular sector and we are home and dry…

Ku or Ka? Wide or Narrow? Clarity or… More on Intelsat’s maritime ambitions

In the second part of my interview with James Collett, Director Mobility Services at Intelsat, we talk more on coverage, capacity and confidence from the buyer’s and user’s viewpoints. There is also some de-mystification on the subject of Ku and Ka bands and even a view on why clarity matters more than mudslinging.

MI: Coming back to the user perspective, the traditional view runs along the lines of mariners like Inmarsat because it gives them a global coverage network. They can negotiate with the supplier on price and get it to a point where they are happy. But if I’m a spot trading shipowner can I use Epic and feel confident that I’m going to get the same global coverage?

James Collett: “I think the important question for shipowners is, can they can use Intelsat’s network and be safe that they have got coverage in the right places? Today we have a very extensive global Ku-band footprint based on wide beam technology. We’ve got our launch of Intelsat 27 early next year which will complete what we call our global Ku-band mobility platform.

“Let me put it in context of a major maritime VSAT operator with a mature customer base of offshore, commercial and fisheries customers and who would say that 3% of their requirements are not covered by their Ku-band footprint. The coverage improvement on Ku-band has been dramatic. Intelsat has particularly been focused on the mobility segment, and decided that we would incrementally improve our global Ku coverage. So I think we’re starting from a good place where we could put global Ku band in front of the typical shipowner, and it would cover 97% of their traffic requirements.

“Another prevalent sales objection for Ku-band VSAT is ’I need a path into next generation Ka-band’.  That’s where Epic comes in, because we’re not saying to the customer, you’ve just got to stick with today’s wide Ku-beams. We are delivering an overlay network which will allow them to derive a service which is a blend across two Intelsat networks. We’re already providing very fast services in our wide Ku-band beams, so you will either be able to go faster or you will have a more cost effective service when you have the benefit of Epic coverage.

“Our distributors and integrators will create packages that bring the benefits of Epic to the regions where they have most vessels, thereby delivering a cost per bit improvement in the right places. Our aim is to put the capacity where people most need it.

“So from a maritime user’s perspective his Intelsat service will look exactly the same whether the vessel’s in a wide beam or in an Epic narrow spot beam. More importantly though in the parts of the world where shipping densities are highest that Intelsat Epic NG spot beam could support much higher levels of aggregate traffic.”

But doesn’t that work only as long as all ships and all aircraft look at your coverage maps before they set out and go well we’ve got to go this way to stay in the footprint?

“With the Intelsat network, ships will sit in the wide beams ordinarily, and because they’ll be more dispersed in those beams, we can give them plenty of capacity. But where they’re all concentrated in the same area, we’ll have additional capacity in the shape of the Epic narrow beams. The two Intelsat Epic NG satellites we have announced are not the start and finish of the EPIC network – it’s a capability which we can bring to any new satellite.”

So would it be fair to speculate that the customer would be getting better throughput for about the same price as they might be paying for Global Xpress?

“The true metric is the cost of moving a bit from shore to ship or ship to shore. The design of Epic will have 8-10 times the throughput of a standard satellites, allowing for cost efficient high throughput transmission Customers will see higher performance through lower cost per bit.”

From what you’re saying, I wonder if the Ka vs Ku debate is getting to be a slightly pointless level of comparison?

“I think that’s a fair observation, and I don’t think Intelsat has never said that Ka-band isn’t a good solution. In fact, we fly some Ka capability today. By the same token the Epic platform will incorporate C-band, Ku-band and Ka-band payloads, and I think there’s enough evidence today that high throughput is not about the band but it’s about the way you deploy the network.”

The recent Panasonic white paper seemed to say the answer is it depends on what you’re using it for, how you’re using it, what you’re trying to do.

“What I took from that paper is that it’s not Ku versus Ka, its narrow spot beams versus wide spot beams. And once you put K-anything into narrow spot beams you get a huge throughput advantage.”

What I also can’t help but feel is that the whole Alan Gottleib vs Inmarsat debate is a diversion too. It doesn’t actually help the mariner or the satcoms buyer, the shipmanager, or the superintendent. I find most of what is being said redundant and pretty unhelpful.

“I completely agree. In my mind I bring it back to a couple of key things that will determine success in this area. Firstly, enabling more cost effective solutions for the shipowner and the shipmanager, where ultimately we as an industry are able to drive an increased spend on communication by really delivering value at the ship level.”

“And secondly I think the other big industry debate and what will govern success or failure, is engaging and enrolling distributors to be able to profitably market the creative solutions that are going to drive that utilisation. Ultimately if you can deliver value to the end user through a motivated and creative distribution channel, then I think you can be successful.”