ViaSat Formalizes Agreement with JetBlue Airways for Ka-band In-flight High-Speed Internet Service

ViaSat Inc. and JetBlue Airways have reached a definitive agreement to deploy the first Ka-band commercial aviation broadband network using ViaSat-1, the world's highest capacity Ka-band satellite. The agreement formalizes the memorandum of understanding, entered into last September, in which the companies announced their intention to create the industry's best in-flight broadband for commercial aviation, using ViaSat's innovative Ka-band satellite technology. Ka-band has the ability to offer higher transmission speeds, more bandwidth for each customer, and more attractive airtime pricing than other high-speed in-flight Internet access alternatives. The agreement includes an order valued at over $30 million for Ka-band airborne terminals and services to outfit the JetBlue fleet of more than 170 aircraft.

"Over the past few months we have worked closely with JetBlue and LiveTV to finalize a user-friendly and scalable satellite network for in-flight broadband," said Mark Dankberg, ViaSat CEO and chairman. "We believe the economics of Ka-band will create an environment that will engage more passengers and offer a broader range of online experiences in the air."

Under the agreement, ViaSat will provide satellite broadband terminals for installation on the airline's Airbus A320 and Embraer E190 aircraft along with two-way transmission bandwidth services using the WildBlue satellite broadband network, including the high-capacity ViaSat-1 satellite. JetBlue will be the first airline to receive the ViaSat Ka-band system, and those initial installations are expected to be quickly followed by deployment onboard the Continental Airlines fleet, as announced on March 22 by JetBlue's wholly-owned subsidiary, LiveTV, and subject to final agreement. Installations are expected to begin in 2012.

"We believe JetBlue, LiveTV, and ViaSat make a great team, enabling our customers to stay connected, informed and entertained while in the air," said Robin Hayes, JetBlue chief commercial officer. "Together, we will introduce a product that will give customers true social networking connectivity at altitude – a 21st Century product that will scale with the ever-increasing reliance we all have on our personal communications devices. We will also have the flexibility to design content and price-points around customer's needs, whether that be emailing or streaming movies, at a much more competitive price point than today's ground-to-air products."

The system, the first of its kind for commercial aviation, must be certificated by the Federal Aviation Administration. LiveTV will manage the certification, integrate the ViaSat broadband and related components onboard the aircraft, and provide the Wi-Fi enabled services into the cabin.

"We have been waiting for the right technology to deliver the highest speed and lowest cost connectivity to an aircraft," said Glenn Latta, president of LiveTV. "Our partnership with ViaSat will deliver a system that puts the airline back in control, allowing airlines the freedom to bundle and price the service in ways consistent with their brand."

The in-flight Ka-band system being developed for JetBlue is also a key step in ViaSat's expansion of its successful Yonder® global mobile satellite network to Ka-band in key international markets. ViaSat is adding capacity from regional partners to the network, such as Eutelsat in Europe and Yahsat in the Middle East, which will be accessible to a rapidly growing base of aviation, maritime, and government subscribers now getting high-speed access from Ku-band satellites.

ViaSat To Buy Internet Provider WildBlue

ViaSat Inc. (VSAT) agreed to acquire satellite-Internet provider WildBlue Communications Inc. for $568 million in cash and stock in a deal that comes as Liberty Media Corp., owner of 37% of WildBlue, is reordering its holdings.

WildBlue, which provides high-speed Internet access largely to rural areas, is more than one-third owned by a Liberty Media tracking stock, Liberty Entertainment (LMDIA). Those operations are in the process of being spun off completely from Liberty Media, a deal which many have expected will ease a potential acquisition of DirecTV Group Inc. (DTV). Liberty Media owns 52% of the largest satellite-television provider in the U.S.

ViaSat, a provider of satellite and other wireless-communication products, said WildBlue has over 400,000 customers. The deal paves the way for an expansion of WildBlue's broadband service using ViaSat technology, including a ViaSat-1 satellite scheduled to launch in early 2011, ViaSat said. WildBlue developed its satellite in 1997 and launched its commercial service in 2005.

By joining forces, the two companies seek to reduce the long-term costs and risks of expanding Internet access via satellite. The spread of these services has been impeded by hefty start-up costs, as well as technical challenges that historically made it hard for satellites to compete with cable- and phone-based rivals on price and quality.

Under the agreement, expected to close between January and April, ViaSat will issue $125 million of stock, within a range of 4.3 million to 5.7 million shares. The company has about 32 million outstanding. It will also pay $443 million of cash, but the cost will be $68 million less when accounting for the cash on WildBlue's books. The company will need financing to pay for the cash portion of the takeover. WildBlue's owners, which also include Kleiner Perkins Caufield & Byers, Intelsat Ltd. and the National Rural Telecommunications Cooperative, will be able to nominate one person to ViaSat's board.

The company reported improved results in its latest quarter amid what ViaSat Chairman and Chief Executive Mark Dankberg in August called a "robust" order pipeline.

ViaSat's new satellite will have nearly all of its capacity aimed at regions where Wild Blue is most capacity-constrained, including large parts of the Eastern U.S. and sections of the West Coast. While initially targeting millions of rural customers for whom satellites currently are the only feasible way to access the Internet, the expanded service will eventually also compete head-to-head with broadband services provided by cable-television and telecom rivals in suburban areas. According to some ViaSat projections, the combined entity could attract as many as 35,000 customers a month. That would be a substantially higher rate than during Wild Blue's first months of operation.

ViaSat gambles on future of broadband satellite

ViaSat gambles on future of broadband satellite, hoping to draw rural customers with no access to high-speed Internet service. It's been 16 months since ViaSat Chief Executive Mark Dankberg unveiled plans to build a $400 million broadband satellite – calling it the biggest growth opportunity the Carlsbad company might ever see. And it's been 16 months since the company's shares tanked, falling 29 percent the week after the announcement.

Building its own satellite is a swing-for-the-fences strategy that could transform the company but could also strike out. Today, ViaSat has invested $100 million and counting toward the satellite, which is under construction at Space Systems/Loral in the Bay Area. It's on schedule to launch in about 20 months. ViaSat's effort to build its own satellite rests on a theory that is somewhat unproved: Are millions of rural households outside the reach of cable or DSL willing to pay the monthly fee and installation costs for high-speed Internet service via satellite? The answer is not as obvious as it might seem in the Digital Age. Current satellite-based Internet providers have less than 1 percent of the market share of total broadband subscribers in the United States.

When the Pew Internet and American Life Project asked households in 2007 and 2008 why they hadn't signed up for high-speed Internet, more than half said they didn't see the point. Price was the second-largest factor for not subscribing. The Obama administration, however, definitely thinks there's a need. The economic stimulus package includes $7.2 billion to give all Americans high-speed Internet access – especially those in rural areas where cable or DSL isn't available. That's why ViaSat and the satellite industry have become more vocal recently in touting their broadband programs. They want to make sure that satellite has a seat at the table with all the other technologies competing for stimulus funds.

The monthly cost for satellite broadband isn't much higher than for cable or DSL. It's more the upfront costs. Upfront fees vary, and specials can lower them. But to get satellite broadband service, households need a dish and modem installed. While the equipment can be purchased or leased, upfront costs and installation often range from $200 to $600.

Although ViaSat's satellite is nearly two years from launch, the company hopes that ViaSat 1 will benefit from federal programs encouraging expanded broadband access. ViaSat 1will be a new generation of satellite aiming to have a tenfold increase in the broadband capacity compared with existing satellites from competitors WildBlue Communications and Hughes. That translates into faster service for customers. ViaSat1 is proposed at 100 gigabits per second total capacity. It promises to deliver download speeds to Internet subscribers of between 2 megabits to 10 megabits per second.

WildBlue and Hughes, the largest companies offering satellite Internet service in the United States, each has about 10 gigabits of capacity. Existing satellite plans offer download speeds of 512 kilobits to 1.5 megabits per second for basic service. Faster speeds are available, but the monthly fees are well over $100. Viasat is proposing to provide just a lot more bandwidth than either of the established services, that's everything in a nutshell about what the differences are. While some Wall Street analysts see promise in ViaSat's satellite venture, it's an expensive gamble. There could be technical delays, which can quickly jolt costs skyward. Moreover, the satellite industry is littered with epic money-burning failures. And it takes years to build a satellite – leaving room for competing technologies such as WiMax or fourth-generation cellular networks to gain a foothold in rural markets. But perhaps the biggest risk is whether demand really exists for high-speed Internet outside of regions covered by DSL and cable at proposed prices. Analysts estimate that 10 million to 15 million households in the United States don't have access to broadband through cable or DSL. Existing satellite Internet providers combined have only 875,000 subscribers out of the 106 million households with broadband. There's certainly not a large percentage (of the population) in US that can't be reached by cable or DSL. Satellite has been available to fill that gap, but the problem has been the pricing has not been attractive. They haven't really established a huge user base.

Basically the market is constrained. It seems WildBlue does not have much capacity left in high-demand areas. Neither does Hughes. One question is how big would the market be if you went in with 10 times the bandwidth those guys have? ViaSat believes that it would be much bigger – particularly if it can offer high speeds at roughly the same costs. It expects retail prices for the service will cost about $50 a month for a basic plan, which is competitive with existing broadband services today. The company does not want to sell directly to consumers. It plans to be a wholesale provider of bandwidth to Internet service providers, or ISPs. WildBlue could be a potential ISP partner. So could rural telephone companies and satellite TV providers.

Founded in 1986, ViaSat spun out of San Diego wireless pioneer Linkabit. Its bread-and-butter business is making complex communications equipment for the military, such as modems that fit in the nose cones of fighter jets to allow pilots to see data from the battlefield.