Technology Won’t Decide the Ka-band vs. Ku-band Battle for HTS Satellites
The current debate about the advantages of Ka-band vs. Ku-band for next generation High Throughput Satellites (HTS) misses the point. Endless pages have been written about Ka-band advantages of higher theoretical throughput vs. Ku-bands superiority in sub-optimal weather vs. the costs of end user equipment. Focusing on these technical issues misses the larger point of the strategic issues that will likely drive marketplace acceptance.
The old adage “satellite wars are won on the ground” is likely to be true with Ka vs. Ku-band HTS. While it’s possible that either Ka-band or Ku-band will be a technical disaster making it commercially unviable, the odds that a large portion of engineers missed this is highly unlikely. While they will have differences, both are likely to ultimately work reasonably similarly from a customer’s perspective. Rather, the Ka-band vs. Ku-band is likely to follow the path of previous battles over technical approaches, ranging from the battle over railroad track widths (gauge) in the mid 1800s to VHS vs. Betamax of the 1980s and the more recent GSM vs. CDMA battles. In each of these, the battle for the market had nothing to do with the technical advantages of either approach. Rather the winners were based on decision by those who controlled enough of the market to force it on the rest.
In the case of the railroads, there were over a dozen different standards for railroad widths before 1860. It wasn’t until the Eastern railroads using 4’ 8 ½” gauge rails convinced the new railroads in the west to adopt the same standard that the others were put in such a minority position, they finally had to undergo the expensive conversion process or retrofitting their tracks.
With Betamax vs. VHS, most people agreed that Betamax offered superior picture quality. But JVC (who controlled VHS), quickly licensed its technology to a multitude of manufacturers, driving prices lower and creating competitive innovation. The death knell for Betamax was the greater availability of Hollywood movies on VHS.
The European standardization on GSM has quickly built demand for hardware using that technology. Hardware manufactures spent tens of billions of dollars developing and improving it. Despite the success of CDMA in the US, the use of GSM as the defacto European standard has given it such a head start, that most other countries have simply copied it.
With HTS, there is no new market to connect to as with the western expansion of the U.S. railroads, no content issues as with VHS vs. Betamax and no regulatory commitment as with GSM vs. CDMA. However, support from the hardware manufacturers and sales channels is critical. In these areas, Ka-band has the advantage. Ku-band HTS is largely an Intelsat approach (along with a few much smaller players). While the Intelsat’s EPIC satellites will have C-band and Ka-and coverage, they seem to be emphasizing the Ku-band capacity, leaving them the odd man out in the HTS world. Intelsat is the world’s largest satellite operator, giving it significant influence in the industry. But its financial situation undercuts this influence. It will be a challenge to convince manufacturers and sales channel partners to make significant long-term commitments to a technology from a company that is in the financial distress Intelsat faces.
A full analysis of Intelsat’s financial position is beyond the scope of this posting. However, Intelsat’s riskiest bonds are rated CCC+ by S&P (Caa2 by Moody’s). This rating places the debt well within the “high yield” (junk) category, four levels below investment grade. S&P defines the CCC rating as: “Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.” Even Intelsat’s safer bonds are rated B by S&P (B3 by Moody’s), three levels below investment grade. S&P defines the B rating as: “More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.” Should Intelsat be forced to restructure, they will likely find it hard to continue to spend large amounts of money developing a new HTS market.
Ka-band HTS solutions include the SES-backed O3B, Viasat’s Exede and Hughes Network Systems/DISH’s Jupiter platform and Inmarsat’s Global Express, to name a few. This is a powerful collection of players. While the hardware for each will not be completely interchangeable, many of the components and engineering analysis will be complementary. If a hardware manufacturer needs decide between Ka-band development with several possible major customers or Ku-band development with one potential major customer that has financial challenges and a few smaller customers such as Thaicom, the choice seems simple.
Intelsat, however, has made a clever move to attempt bridge this potential problem with influencing distribution channels. It has secured prepayments from resellers, largely to fund construction of its new EPIC satellites. This has the resellers significantly invested in the outcome and less willing to quickly switch to other approaches should Ku-band get off to a slow start. Harris CapRock, KVH, MTN and Panasonic Avionics - four important resellers and manufacturers – seem to support Intelsat’s Ku-band approach. Of course, Intelsat also benefits from its large Ku-band customer base. Its Ku-band HTS approach may help them convert them to HTS more economically. But Intelsat will need to be careful about aggressively converting existing customers to a new system that will undoubtedly have much lower pricing on a per MHz basis.
It remains to be seen if Intelsat’s moves will be sufficient to overcome the collective power of the other market participants. Another possibility is that two standards thrive side-by-side as the PC and Mac have done. However, history suggests this rarely happens.