In late 2013 Media Networks Latin America, a division of Telefonica started commercializing Latin America´s first HTS offering via Ka-band spot-beam capacity on the Amazonas 3 satellite. This Q&A is to learn more about MNLA´s network and future outlook for Ka-band HTS in the region.
SP: For those not yet familiar with Media Network´s Ka band system, can you please give us a high level overview of the service offering and architecture: Aggregate capacity in Gbps, number and location of beams, gateways, etc.
Silva: Media Networks pioneers Ka-band satellite Internet in Latin America. Over the past few years, we designed and implemented a network of satellite services through the buildout and service startup of two Gateway stations (one in Laredo, TX U.S.A. and another one in Arica, Chile) and use of satellite capacity on Hispasat´s Amazonas 3 satellite. Through our commerecial partners, we can provide Internet service via 8 beams placed over the major economic spots in the region. Each of these beams have a nominal download capacity of 1 Gbps and beam width is approximately 250 Miles in diameter. These are placed in Brazil, Mexico, Chile, Colombia, Peru and Ecuador.
SP: We remember the resistance that Ku band initially faced when it was first introduced in this region, particularly here in Brazil, so now we wonder if something similar could happen to Ka band. What is the pulse of the market right now regarding use of Ka band? What feedback are you receiving from end users and partners?
Silva: Ka-band technology and high-throughput satellites (HTS) definitely reached the Latin American market with high expectations driven by the strong advantages that these technologies provide over previous ones; and also with a certain degree of uncertainty about some of the paradigms surrounding its functioning. After these months of service in the market, we can say that the results that our clients and ourselves have experienced positively exceed the expectations we had. The experienced high data rates, coverage extension as well as the stability and reliability in unfavorable weather conditions (thanks to the ground system technology installed) have meant that, in the countries where the service have been offered to the residential market, end users response has been very positive. The characteristics of Ka-band make this frequency band particularly successful in the residential market: The antenna size, data rates comparable with ADSL as well as competitive costs indicate that we will continue with this major deployment during 2014.
SP: In a previous interview about MNLA´s Ka band, we touched the topic of economies of scale. MNLA currently has 8 beams via a hosted payload arrangement on the Amazonas 3 satellite. When making these type of hosted-payload arrangements, how much do economies of scale influence on the actual cost per bit and fill ratios for the system to break even? Can small-scale HTS payloads achieve a cost-per-bit structure similar to large dedicated HTS satellites?
Silva: Economies of scale are always beneficial independently of the industry where t is applied and especially in the satellite industry, where large initial investments are needed for launching satellites, so large-scale commitments not only make the reduction of the cost per bit possible but also assure coverage in markets such as Latin America where, under different circumstances, would probably have had lower priority for the satellite developers.
Media Network´s participation and commitment made it possible for our region to have this access type available before 2015. Additionally, it is important to mention that the traditional business models being used in the satellite space will have a logical evolution considering successful experiences such as ours. We will have satellite manufacturers that will decide to take more risks in the distribution, venturing themselves even in service commercialization to end users, as well as traditional telecom operators that will desire to acquire satellite capacity to provide those services as a natural complement to other communication technologies. We will all watching how the industry evolves.
SP: For the Ka-band HTS offering, Media adopted a wholesale, white label distribution model similar to how Media has been commercializing DTH. Can you please tells us why MNLA decided to take this route and elaborate on the advantages of this commercialization model – What are the differences between the wholesale DTH and wholesale broadband markets as far as commercialization is concerned?
Silva: Media Networks has developed over the years an important experience in the white-label distribution of DTH services. This model has proved to be largely suecssful based on the economies of scale that can be achieved as well as the flexibility offered to each one of the contracting operator. These same advantages have been extrapolated to the satellite Internet service and are the meain reasons why Media Networks continued with the same business model for the proyect. However, there are some difefernces that have bene carefully studies and managed by Media Networks:
- Satellite Internet required larger commitments from the operators, so these had to clearly identify their target markets as well as the distribution channels to be sued for service commercialization.
- The installation process requires more precision than DTH installations, which prompted Media Networks to pay special attention on the training and certification of operators ‘installers.
Technology and Commercial Partners
SP: Media selected Hughes for its HTS system and a selected set of partners for its sales pipeline in various countries. Can you please tell us at a high level what criteria Media used for such selection?
Silva: The selection of Hughes for our baseband technology was the result of a thorough selection process carried out together by the procurement areas of Media Networks and Telefonica. We received very interesting proposals from various technology vendors with proven experience in HTS or satellite technology but the main non-economic criteria used to select Hughes were the spectral efficiency (Bits/Hertz) achieved during the trials as well as the technology implemented to reduce the impact of unfavorable climate conditions on the Ka band.
SP: The industry is debating the pros and cons of the so-called “open” and “closed” architectures. Although these terms are arguably oversimplifications of all possible ways to provision HTS, it does seem that MNLA would rather fall in the “closed” category given that the service offering vertically integrates capacity and service provisioning. What are your views on this matter and how do you envision HTS systems in this region will tend to evolve? Is this application-dependent?
Silva: As we mentioned before, the satellite market and its business models will change over time. We believe that at this point in the lifecycle of the product, the so-called “closed” models offer more advantages over the “open” models that are coming to the market. However, just like we have seen in other sectors of the telecom industry, we expect to see that open solutions will develop at a faster pace. We hope that technology vendors will be able to provide competitive solutions over the next years and we will surely be the first to analyze these with the goal of providing our clients and their end users with better alternatives.
SP: MNLA´s ka-band offering primarily targets the residential market in the selected covered spots. Can you please share information about the number of residential users that currently use the system and projections over the next five years? Which of the covered countries are poised to exhibit good growth? Is residential satellite broadband viable without government subsidies?
Silva: At this moment, after a few months of operation in the region, we have over 2,000 end users enjoying satellite Internet at home. We have had positive growth in Brazil, Colombia and Chile and we hope we will soon also see this in Perú, Ecuador and México after the massive commercial launches we have programmed for the next months. The total capacity of the 8 available beams of the AMZ3 allow us to serve over 250K users, which we expect to reach over the next 36 months. These type of services are viable without government subsidies since they depend on the end users: There is a quite substantial end user market with disposable income to acquire these services but we have seen that our services could also be used by government entities to take connectivity to locations that were not able to connect any other way.
SP: For years we have heard about triple play and the efficiencies derived from service bundling. Do you foresee opportunities for satellites in the region to bundle DTH and HTS residential broadband?
Silva: Service bundling as well as cross-selling are absolutely important opportunities for the development of these type of services. Users of both services (DTH and Internet) are the same and if we had a viable, competitively-priced option to provide both services via the same antenna, this would surely have an important market in the region.
Markets and Applications
SP: What other markets and applications do you envision that the network could be used for? Do you envision the system could be potentially used for enterprise-class services and B2B offerings as well?
Silva: Current Ka-band Internet, because of its limited coverage, continues being a complement to Ku-band offerings. There are some enterprise applications (such as M2M as an example) that could be served through Ka band but we believe that the core links of enterprise networks will continue being serviced via Ku band in the near future.
SP: Are there plans to acquire additional HTS capacity? Can you please share specifics: satellite/s, number of beams, new GWs, throughput, etc?
Silva: Yes, we have strategic alliances planned to continue expanding our HTS coverage in 2015 but, at this time, we cannot provide more details until the alliances have completely materilzed.
SP: Media is first in Latin America to deploy and commercialize HTS capacity but we know that large satellite players like Hughes, ViaSat, Intelsat, O3B, Inmarsat and others have committed to deploy capacity in Latin America, some of these as early as in 2015. Is there a first mover advantage in HTS in terms of the opportunity to shape how this business is structured in the region? Do you anticipate that sometime down the road, there could be market disruptors such as the possibility of ViaSat or Hughes deploying large capacity?
Silva: Absolutely, being region´s first with this service type and having had a demonstrated success opens the possibility for other players interested in this market. For us, the acquired experience will surely give us a differential advantage that will take time for the next players to replicate. And we will sure see great growth of satellite supply over the next years for Latin America but we believe there will still be a market for all of us.
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