Brazilian President Michel Temer on March 12 announces a Rs 2 billion ($600 million) broadband subsidy program for the country’s municipalities to get connected. The question: What is the line between the public and private sectors’ roles in the program? Credit: Brazilian president’s office

WASHINGTON — As many as four separate satellite fleet operators already active in Brazil plan to protest the award of a broadband partnership contract to ViaSat Inc. by Brazil’s state-owned Telebras telecommunications company, industry officials said.

For now, the companies — including Hispasat, Telesat Canada, Yahsat, Star One and Hughes Network Systems — appear to be in information-gathering mode as they try to understand what happened.

Acting on behalf of Brazil’s Sindisat — the National Union of Telecommunications Companies — these operators wrote Telebras on March 12 demanding disclosure of the terms of the ViaSat contract.

A Telebras official said the company would be responding with some, but not all, of the information demanded. The official said the ViaSat award respected Brazilian regulatory rules. Viasat, the official said, was selected because it alone had certain technologies, including a rural WiFi hotspot product, that confirmed with Telebras’s needs.

How successful the eventual protest will be is open to question. Brazil’s Anatel telecommunications regulator is known as one of the world’s most open and transparent regulators.

In addition to Telebras, the Brazilian government telecommunications ministry blessed the Telebras-ViaSat agreement as fully in line with Brazil’s National Broadband Program, PNBL, which the Brazilian government has restated is a high priority. For the protesters, the ministry’s blessing was done as a last-minute election prelude to be able to show progress on Brazil’s national satellite broadband program, which has been much delayed.

The core of the issue is this: In recent years, many satellite fleet operators, taking advantage of Brazil’s Open Skies policy, have purchased rights to operate Brazil-licensed orbital slots to deliver telecommunications services in Brazil.

Several of them — including Hughes, Telesat, Hispasat and Yahsat — have made substantial investment in Brazil for broadband deployment.

Now comes Telebras, which has been given access to the Ka-band aboard the Brazilian government’s civil/military SGDC satellite, with a contract giving ViaSat the right to develop multiple broadband services so long as it fulfills its broadband-deployment commitments in regions of Brazil that might not otherwise attract private investment.

Brazil’s minister of science, technology, innovation and communications, Gilberto Kassab, said this about the Telebras-ViaSat agreement when it was announced on Feb. 26:

“As a government, we are excited and confident with the SGDC project. With this partnership, companies will be able to conduct this great work and bring a new reality of connectivity to Brazil. It… promises fast and secure connections among Brazilians. It is a period of economic and social progress that will reach the entire Brazilian territory. [W]e are sure that this model will serve as an example and will be a landmark for the nation.”

Telebras said that the ViaSat agreement is “structured on a revenue-sharing model, in which Telebras expects to generate more than R $ 3.3 billion ($1.01 billion) in revenues for the company in the coming years.”

Hughes Network Systems, a division of EchoStar Corp., is building a satellite-broadband business in Brazil, using as a model its business in the United States. At a briefing here at the Satellite  2018 conference March 13, Hughes said its Brazilian business, only 18 months old, has already secured 58,000 subscribers.

Vinod Shukla, Hughes senior vice president for international subsidiaries, said Hughes was blindsided by the Telebras-ViaSat agreement:

“We were quite surprised by the award. We were in discussions with Telebras on potential solutions and we had the understanding that there would be an RFP process, so we were quite surprised to see an announcement being made about a ViaSat selection. We don’t have a lot of details yet on what that means. I think the industry is looking at the alternatives they have and trying to understand why and how this happened, they were quite surprised.”

Built by Thales Alenia Space as part of a broad technology-offset program, Brazil’s SGDC satellite has an X-band payload for the military, and a Ka-band payload for Brazil’s National Broadband Program, PNBL. Credit: Thales Alenia Space

Shukla said there is a formal procedure in Brazil for contract-award protests and he suggested, while not saying outright, that Hughes would be filing a protest.

Marzio Laurenti, chief executive of Telespazio Brazil, a satellite services provider, said here March 14 that he is confident that Brazilian authorities will explain the award to the satisfaction of the other bidders.

Marzio Laurenti, chief executive, Telespazio Brasil. Credit: Alitalia

“The space sector in Brazil is reacting to the news of this partnership contract between Telebras and ViaSat in a very negative way,” Laurenti said. “Anatel has always been very transparent and this has allowed the satellite sector in Brazil to progress rapidly. Now something unusual has happened. There is not sufficient legal ground for this contract.

“There may be some sort of legal action” to protest the contract, Laurenti said. “But it is important to say that, at the end of the day, Brazilian authorities will resolve this in a fair way.”

Telesat Canada Chief Executive Daniel S. Goldberg said the ViaSat-Telebras deal raises questions about the proper positioning of the government vis a vis the private sector.

“This announcement that ViaSat made with Telebras is something we all need to look at very, very carefully,” Goldberg said here March 13, noting that Telecast has invested heavily in Brazil, including winning auctions for orbital slots.

“Whenever you have the government getting involved and perhaps displacing some of the commercial players and muddying the waters in terms of the commercial dynamics, that’s something that needs to get looked at very closely, and if that does happen it needs to be a very transparent process.

One official said Telebras held an auction for the contract and no one showed up because the terms of the contract — dictated by Brazilian law — meant the winner would need to return the satellite access rights to Telebras after only five years.

If these and other constraints are part of the Viasat contract, then the protests may lose their reason for being. But the protesting companies have concluded that the contract’s terms were impossible for any satellite services provider, and so ViaSat must have been granted waivers that were not offered to the others.

Viasat Chief Executive Mark D. Dankberg, in a March 13 interview, said Telebras and ViaSat had both been scrupulous in moving forward on the contract to assure its conformance with Brazilian law.

“Telebras is very aware of what the situation is,” Dankberg said. “They feel that what they did is absolutely in Brazil’s best interests. They were extremely conscientious about striking a contract that they felt was legal. That will be tested.

“They did [run an RFP procedure]. There was an auction, and there were no responses. So that was their RFP. They put a lot of effort into that. There was a process, they had a plan for it, and in the end it didn’t work. There were no takers. They believe that once they got to a certain point in the process, they had more discretion.”

Under the contract, ViaSat is scheduled to begin delivering equipment immediately. Dankberg said the company will be working on applications including defense, mobility, residential and rural broadband.