Inmarsat says prices for in-flight connectivity have not dropped in deals it has signed. Credit: Honeywell

PONTE VEDRA, Florida — Mobile satellite services provider Inmarsat on Aug. 3 said its recently ordered fifth Global Xpress Ka-band satellite offers the bandwidth economics of ViaSat Inc.’s terabit-per-second ViaSat-3 for a total cost of $200 million including launch.

Under construction by Thales Alenia Space of France and Italy and scheduled for launch in late 2019, GX-5 will be stationed over Europe and the Middle East to bolster Inmarsat’s existing four-satellite fleet of GX satellites.

Once in service, the GX-4 satellite being stationed over Europe and the Middle East likely will move eastward as London-based Inmarsat tries to capture the huge demand for in-flight connectivity (IFC) emerging in China.

“China is building 10 new airports a year,” Inmarsat Chief Executive Rupert Pearce said in a conference call with investors. “China is ripe for an enormous growth in IFC. But there are regulatory impediments.”

GX-5, $200 million w/ launch, one-half cost of Boeing GX satellites

Inmarsat in June announced that its contract with Thales Alenia Space, for $130 million, would provide new capacity for the dense European and Middle Eastern commercial air corridors. Inmarsat assumes a $70 million launch.

In the conference call, Pearce said GX 5, whose precise technical characteristics he declined to disclose, would cost “around $200 million, fully launched,” making it remarkably inexpensive for a satellite Pearce agreed is a very-high-throughput model.

That is one-half the per-satellite cost of the four Inmarsat-5 satellites built by Boeing, all now in orbit and offering global coverage outside the polar regions. GX-5 will be located over Europe and likely will replace the GX-4 satellite, which then will move over Asia, Pearce said.

GX-5 “is incredibly cheap and offers a huge advantage on cost per bit. It’s our first foray into very high or ultra-high-throughput satellites and goes way beyond ViaSat-3 economics. It’s the latest thing you can get your hands on.

“And the good thing is you can drop it into GX to boost capability in a given region. It has a limited geography but offers [in its geography] a 36x increase in power and capacity compared to Inmarsat 5.”

Inmarsat to ViaSat: Bring on ViaSat-3! We’ll compete head to head

ViaSat has partnered with Paris-based Eutelsat to develop a consumer satellite broadband business in Europe, including an IFC business. The two companies have initiated legal action in Europe to stop or delay Inmarsat’s air-to-ground component to its S-band satellite-based European Aviation Network (EAN) service.

ViaSat and Eutelsat argue that using the S-band license won by Inmarsat to deploy a mainly terrestrial-based IFC business runs counter to the original terms of the license, which was designed to reduce the digital divide in Europe.

“We believe that we have a very strong case, which we have brought to the General Court Of Justice, to claim that use of the license to serve ATG in the 2-gigahertz license was a distortion of usage,” Eutelsat Chief Executive Rodolphe Belmer said in a July 28 conference call with investors.

“The license was attributed back in 2008 with certain conditions, which are not respected at all by the ATG. And that’s why we joined ViaSat’s litigation. We will most probably engage in litigation at the local level if needed,” Belmer said.

ViaSat and Eutelsat are still negotiating the terms of an agreement in which they would share the cost of a ViaSat-3, terabit-per-second satellite over Europe.

There are political and industrial interests in Europe, including Thales Alenia Space and Airbus Defence and Space, that are trying to stop the agreement in favor of Eutelsat’s deployment of a made-in-Europe consumer broadband offer.

But Belmer suggested that while negotiations with ViaSat were not easy, “our intention is to bring together the ViaSat-3 for Europe.”

Pearce said Inmarsat has seen no signs from its prospective IFC customers that the Eutelsat/ViaSat lawsuit is causing the market to hesitate before signing on with EAN.

Inmarsat has more than 1,200 aircraft signed up for GX and awaiting installation. Pearce said 70% of the order book is for aircraft contracted by Inmarsat’s own sales force and not third-party service providers, “fully validating the internal opex investment we have made” in going directly to end customers.

Of the few governments that have yet to approve the ground antennas, all are nearing the end of their approval process  — Pearce mentioned France and Germany as among these — and likely to signal final authorization in time for EAN to enter service late this year.

Inmarsat CEO: ViaSat/Eutelsat ‘may not get to litigate’ vs EU Commission

“The whole thing is about publicity,” Pearce said of the ViaSat/Eutelsat legal action. “It’s about delaying us and about trying to intimidate national regulators into not giving us these licenses. All these issues were discussed a decade ago.”

Pearce said the two competitors “may not actually get to litigate” their case against the European Commission given the nature of the lawsuit.

Inmarsat has revised its coverage strategy and will now operate the fourth GX satellite over Europe and the Middle East. In late 2019, when the fifth satellite arrives, it will be over Europe and GX-4 likely will move over Asia. Credit: Inmarsat

On the commercial front, Pearce said Inmarsat would welcome competing with a European ViaSat-3 satellite, “once [ViaSat-3] is funded, launched and deployed.”

“ViaSat has been very vociferous that ViaSat 3 will outcompete the EAN. So: Bring it on, ViaSat! Bring on ViaSat-3 and let’s offer European air travelers a choice. Let’s compete head to head.

“I am told I was supposed to do that math because I only have 30 MHz of S-band and they have 500 GHz to come — once funded, once launched and once deployed. Apparently, if I do the math I am destroyed. Well, Verizon must be quaking in their boots. They only have 70 MHz in North America.”

Export potential for European Aviation Network

In a nod to the European regulators that may be hesitating, Pearce said the European Aviation Network has good export potential to expand beyond the 31 nations where Deutsche Telekom is now installing ground hardware.

Other members of the alliance include Airbus, Thales, Thales Avionics and Nokia. “You’ve got a European alliance with a very cool piece of technology that we can start exporting beyond the edges of the European Union,” Pearce said.

Inmarsat Chief Financial Officer Tony Bates said during the investor call that the company still plans to invest around $70 million in 2017 in what Inmarsat calls “industrial costs” associated with IFC installations on customer aircraft.

Pearce said the global IFC market was in a “global-capture period” during which spending like this is needed to secure market share. “We believe [it] will be of short duration,” he said.

But while the competition among Inmarsat, ViaSat/Eutelsat, Gogo, Global Eagle Entertainment, Panasonic Avionics and Thales InFlyt remains intense, Pearce said he had seen no severe pressure on IFC prices.

“I am not seeing massive issues on price competition in IFC… perhaps because we’re focused on airlines for which GX is a differentiator. If anything, I’ve seen a bit of hardening in the economics there for us.”

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Peter B. de Selding
Peter B. de Selding
Peter de Selding is a Co-Founder and editor for SpaceIntelReport.com. He started SpaceIntelReport in 2017 after 26 years as the Paris Bureau Chief for SpaceNews where he covered the commercial satellite, launch and the international space businesses. He is widely considered the preeminent reporter in the space industry and is a must read for space executives. Follow Peter @pbdes