EchoStar to Buy Hughes

Oh Lord, bless this thy hand grenade, that with it thou mayest blow thine enemies to tiny bits, in thy mercy. Search for the Holy Grail

EchoStar this week said it plans to purchase Hughes Communications in a deal valued at about $2 billion. EchoStar, the parent of satellite television company Dish Networks, promises to add internet access to their DISH Network satellite tv bundle.

Dish provides satellite TV service to more than 14 million subscribers throughout the U.S. It competes with DirecTV, which provides satellite TV to 18 million subscribers. Neither have two-way internet capability.

DISH Network could begin offering HughesNet satellite broadband after the deal closes later this year. DISH currently lacks broadband services. They typically partner with existing DSL services or use WildBlue, which charges $79.95 for a 1.5-Mbit/s downstream and 256 Kbit/s upstream connection, with a 17 gigabyte monthly download cap.

WildBlue, which was recently acquired by Viasat, is a 2-way satellite internet competitor to Hughes. By contrast, HughesNet currently charges $89.99 per month for a 2-Mbit connection, with a 400 Mbyte-per-24-hours download cap for consumer access.

DirecTV’s 2-way satellite internet business (and Spaceway 3) was spun off from Murdock’s DirecTV to Hughes Network Systems.

With 10 Gigabits per second of gross capacity, Hughes says SPACEWAY 3 is the highest traffic-carrying satellite to be brought into service in North America.

The Hughes Ka-band SPACEWAY 3 is different from it’s main Ka data competitor WildBlue. SPACEWAY 3 uses on-board traffic switching that enables direct small-dish-to- small-dish connectivity, while WildBlue links use traditional “bent pipe” architecture and must be switched terrestrially. Advanced antenna technologies with Ka-band spot beams provide 2-way broadband services.

Both WildBlue (ViaSat) and HughesNet have earlier 14 Ghz Ku satellite broadband, but most subs now use their first generation Ka-band internet services. Ku-band internet access was never cost effective. Without spot beams, a million dollar a year transponder lease could be saturated by a few thousand users. The Ku band is now being repositioned as a premium internet service for trains and planes.

Both Hughes and Viasat plan to upgrade with more advanced Ka-band satellites and faster terminals, providing up to 10 Mbps down and 2 Mbps up. WildBlue is expected to launch ViaSat-1 in a few months and Hughes will launch Jupiter-1 sometime later. Both satellites have hundreds of spotbeams with 10 times the capacity of current (fixed) internet satellites.

The chart (above) shows the capacity of ViaSat-1. The similar (but different) Hughes Jupiter was also designed by SS Loral. ViaSat-1 is expected to have 12 to 14 times the throughput of the current WildBlue-1 satellite with similar per-bit cost delivered to customers. The Hughes Jupiter-1 is expected to have similar specs.

Hughes Communications said a little over a year ago that the company had 500,000 internet subscribers, a 19 percent increase over the previous year. Meanwhile, WildBlue said at the time their internet subscriber base grew by about 15 percent, to 425,000.

“We are very pleased to announce this transaction as it brings together the two premier providers of satellite communications services and delivers substantial value to our shareholders,” said Pradman Kaul, president and chief executive officer of Hughes (pdf). “By combining Hughes’ operational strength and proven record of customer satisfaction with EchoStar’s expertise in cutting edge satellite video technology, customers will benefit significantly from our shared institutional excellence.”

The monster Hughes Jupiter-1, due to launch in a year or so, is designed to deliver over 100 Gbps thoughput.

Neither of these satellites provide mobile satellite phone service. A much lower frequency in the Mobile Satellite Service (MSS) is used for that. Geosynchronous satellite phones use the 1.6 GHz band (Lightsquared) and 2 GHz band (ICO/TerreStar).

Ergen has a plan for that, too.

Dish Network, the second- largest U.S. satellite-TV provider, agreed to buy bankrupt 2-way satellite provider ICO, now reorganized as DBSD North America, for about $1 billion, reports Bloomberg. The $1 billion includes interest accruing on DBSD’s debt. The transaction is still subject to approval by the FCC and the courts.

Through his companies, Charlie Ergen has built up significant positions in both DBSD and TerreStar Networks, by buying up debt that potentially converts into equity, explains the NY Times. Ergen has been a shrewd investor, acquiring shares of both Terrestar and ICO (DBSD) at a fraction of their value.

According to satellite consultant Tim Farrar, “This creates the opportunity for potential partners to consider using a rival 40MHz block of 2GHz MSS spectrum instead of investing in LightSquared or Clearwire. Now in addition to the Clearwire spectrum, apparently valued at “up to $2B” for 40MHz of spectrum, we may also have an even more direct comparison of 40MHz of MSS-ATC spectrum also valued at around $2B.”

LightSquared’s updated ATC plans were approved by the FCC (pdf). Dish, on the 2 GHz S-band, may now be able to create a new nation-wide, terrestrial LTE network that could compete with Philip Falcone’s LightSquared, on the 1.6 GHz L-band.

DBSD and TerreStar (using 2 GHz) and Lightsquared and Inmarsat (using 1.6 GHz) are valuable not just because of their huge operational $250 million satellites, but because their spectrum can now be used terrestrially, via the Ancillary Terrestrial Component (ATC) rules of the FCC.

A quad-play is everyone’s favorite target; voice, video, data, and mobile. Ergen may be positioning his assets for a final move — but you’ll still need Southern exposure.

If you’re after 4G spectrum in the United States, the go-to people include McCaw, Falcone, and now Ergen. Clearwire, the spectrum Godfather, was notable by its silence, (so far) at Mobile World Congress in Barcelona.

Tim has the final word.

Related DailyWireless Space and Satellite News includes; Charlie’s Big Play , FCC Green Lights Lightsquared, LightSquared: In Trouble?, Lightsquared Unfurled, MetroPCS Eyes TerreStar, SkyTerra 1 Launched, Broadband Satellites: Black Hole?, MSS: Stuck in Space, Satellite with 328 ft Antenna to Launch, SkyTerra 1 Launched, Broadband Satellites: Black Hole?, LightSquared: Phase 1, LightSquared: 5K Basestations by 2011, LightSquared Announces LTE Network, FCC Okays Terrestrial LTE for SkyTerra, TerreStar Successfully Launched, AT&T/TerreStar Ready Satphone Service, TerreStar Phones Home, Motorola + SkyTerra Team for 700 MHz/Sat Radios, TerreStar’s 60 Ft Antenna Deployed in Space, TerreStar Successfully Launched , Eutelsat Launches Ka Band Internet Satellite , O3B: Funded for Launch, Satphones Maneuver, WildBlue: $30M, Shovel-ready, Alvarion, Open Range To Build 17 State Net, WiChorus Ropes Open Range, Satellites Collide, AT&T/TerreStar Ready Satphone Service, Godzilla SatPhones WiMAXed , WiMAX and/or Satellite

Posted by Sam Churchill on .

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