Analyst Report Broadband/Connectivity/Telcos

Hughes’ success formula for thriving within the broadband satellite industry

Pradman Kaul, President of Hughes Network Systems, LLC.

Chasing global pursuits within broadband satellite technology and services, Hughes is investing in today to lay down stronger foundations for a connected tomorrow. SatellitePro ME, in conversation with Pradman Kaul, President of Hughes Network Systems, LLC, learns how Hughes is securing its future through its portfolio of services and global partnerships.

Back in 1973 in the US, seven engineers and a lawyer with start-up capital of $40,000 got together to start a company called Digital Communication Corporation from a garage in Rockville, Maryland, where they began designing circuit boards for telecom-related products. Over the years, that company has grown into Hughes Network Systems, a $2bn company with a global footprint across continents through its numerous subsidiaries and partners.

An in-depth understanding of the market and an astute business strategy have fuelled Hughes’ growth trajectory in a highly competitive market under President Pradman Kaul, one of its founders.

Recalling the early days, Kaul says: “When we started in 1973, we were the only commercial company to use digital techniques in satellite applications. We were a group of individuals who were working for Comsat Laboratories and were united by our passion to serve this industry, so we started this.”

In its 46-year history, the company has gone through various mergers and acquisitions, the key ones being acquisition by Hughes in 1987 and EchoStar in 2011. Hughes has seen tremendous growth in these years, due to its various partnerships globally.

Today, Hughes has subsidiaries on every continent and sells equipment all over the world. Kaul credits it to a “simple philosophy”.

“We entered into partnerships to expand our international influence and presence. We first started companies in the US, as that was home base, and then slowly expanded into Europe, Brazil and India. As we continued to grow, we started looking for partners in markets that we were not serving directly. Africa and the Middle East were clearly an important part of that strategy. Since we didn’t have a local presence in these markets, we looked for the best partners we could find,” he explains.

In 2018, that strategy led to a joint venture between Yahsat and Hughes to provide satellite broadband services in the Middle East, Africa and southwest Asia markets.

“Yahsat already had satellites serving MENA and had a solid distribution presence. We didn’t own any assets there, so we invested $100m into the company to buy 20% equity while Yahsat owns an 80% stake.”

Last month at the Satellite 2019 show in Washington, DC, the two companies announced a new partnership in Brazil – this time with Hughes having an 80% stake and Yahsat 20%.

Kaul says: “Yahsat is the logical partner for Hughes in Brazil as we continue to expand our services and meet growing demand across consumer, enterprise and carrier markets. In Brazil, we have had a presence for over 10 years. We started here by offering business enterprise-related networks and then in the last few years went into the consumer business, offering direct-to-home services. Here, Yahsat didn’t really have a strong local presence. It had just launched a new satellite over Brazil with a payload from Al Yah 3. It worked to its advantage to partner with somebody who already had good distribution and capability. As we are already partners in another market, it led to this new alliance.”

Kaul adds that there was no financial transaction in this partnership.

“We launched two payloads – Hughes 65 West and Hughes 63 West – and Yahsat has its payload. When we looked at the footprints of all our beams, we realised that we could achieve a lot more if we combined our assets. But the assets we were contributing here are significantly greater than Yahsat’s. They are contributing the payload of the satellite and some gateways. Our contribution was our payloads, our satellite gateways and the business. An asset valuation exercise showed that we would get 80% and they would get 20%.”

Brazilians throughout the country will benefit from the capacity, scale and operational synergies of this combined entity as they connect the unconnected and enable businesses and communities to thrive, says Kaul.

Brazil is at the heart of another partnership between Hughes and Facebook to provide affordable internet access, through a programme that both companies are exploring extensively across the world, both individually as well as in partnership with various entities.

Launched recently in Brazil and Mexico, the Community Wi-Fi programme offers HughesNet Wi-Fi hotspots supported by the Facebook Express Wi-Fi platform. HughesNet Wi-Fi hotspots empower local merchants in villages and towns to offer affordable internet access to customers on a prepaid basis, employing a solution that combines a Hughes satellite VSAT (very small aperture terminal) and Wi-Fi equipment with Facebook’s Express Wi-Fi platform.

“Community Wi-Fi works on a similar principle to the phone booths of the past, where everyone could not afford to own their own phone. Everyone may not be able to afford a $50 internet connection every month, but may be able to afford $5. They could come to a kiosk that is potentially located in a grocery store to access that service.

“We are working with Facebook to provide such a service in other countries, where Facebook is putting together the infrastructure. It is putting together the back office and the ability to bill and do the logistics, as well as provide the access points for the hotspot. We are providing the connectivity from the hotspot to the network switching centres and data centres.

“FB is only one aspect of Community Wi-Fi. We are also pursuing this concept in other countries on our own.”

Sharing more information on its Wi-Fi projects, Kaul says: “Hughes customers have deployed over 32,000 of these satellite-enabled community Wi-Fi hotspots in Russia, Mexico, Brazil and Indonesia, bringing the benefits of internet access to more than 25m people around the world. FB is only one aspect of Community Wi-Fi. We are also pursuing this concept in other countries on our own.”

In addition to making internet access affordable and widespread, Hughes is working towards offering higher speeds at lower costs.

“Connectivity should be ubiquitous. People may use different words to describe it … but the basic idea is to connect everything together economically and at high speeds,” says Pradman Kaul, President, Hughes Network Systems.

“Our 2021 launch will leverage the capacity on the Hughes JUPITER 3 ‘ultra-high-density satellite’, designated EchoStar 24, to offer speeds of 100Mbps and higher to the subscriber. JUPITER 3 is expected to have a total throughput of more than 500Gbps. The coverage will be optimised to cover areas where we anticipate more demand rather than offering a uniform blanket coverage. All our traditional markets, including consumer, enterprise, aeronautical, cellular backhaul and community Wi-Fi, will be served,” says Kaul.

The Hughes stand at Satellite 2019 in DC.

Hughes has so far operated in the GEO space, but with low-Earth orbit (LEO) satellites gaining significance, Hughes has been working closely with OneWeb to develop the ground infrastructure to support OneWeb’s LEO constellation.

“We have an investment in OneWeb and are the prime system architects building equipment to support multiple satellite access points in gateway locations around the world, each including a custom switching complex, outdoor modems and power amplifiers,” says Kaul, adding that he believes the world needs both LEO and GEO satellites – a solution that leverages the advantages of both will succeed.

“LEOs give you coverage, as they cover every square inch of the globe. Geostationary satellites offer power, high density and frequency for a region. The coverage of a LEO combined with the power and frequencies of GEOs will offer the best solutions.”

The company is especially looking at the Middle East and Africa markets very closely, owing to their scattered populations and the increasing demand to serve unserved as well as underserved markets.

“There is a huge demand in the Middle East market,” confirms Kaul. “The geography of the Middle East is such that the populace is dispersed and has underserved and unserved markets, and that is an opportunity for us to justify an entry.” Other factors that make this market attractive include “good investment potential, strong economic ability of the subscriber and an increasing paying capacity”.

In markets where the subscriber base isn’t as affluent, like parts of North Africa, Hughes is exploring Community Wi-Fi to serve the entire region.

To service Africa better, Hughes also entered into a partnership with Eutelsat last month. To enable services on Eutelsat’s new satellite KONNECT, a new-generation high-throughout satellite (HTS) for Western Europe and Africa, Hughes (through its JUPITER system) will build a significant part of the ground network system, which is expected to launch in 2019.

“Our new launch for 2021 will leverage the capacity on Hughes JUPITER 3 ‘ultra-high-density satellite’, designated EchoStar 24, to offer speeds as high as 100 Mbps and higher… JUPITER 3 is expected to have a total throughput of more than 500Gbps,” says Pradman Kaul, President, Hughes Network Systems.

The JUPITER System is a next-generation platform for VSAT networks, designed and optimised for broadband services over both high-throughput and conventional satellites. Incorporating the wideband DVB-S2X industry standard and designed with a powerful system on a chip, JUPITER enables very high overall efficiency and fast packet processing rates. It powers HughesNet, with 1.3m subscribers across the Americas. Kaul says JUPITER is becoming the de facto standard for most operators, as a result of which most services are available on the platform.

Another big emerging market for Hughes is Asia Pacific (APAC), says Kaul, as the company heads to ConnecTechAsia in Singapore.

“APAC is such a large region, which is largely dominated by India and China. Both have huge populations. India, for instance, may have only 300m sophisticated users in a country of 1.3bn people, but that small number is the size of the total US population.”

He points out, however, that it is difficult to enter these markets due to commercial and licensing regulations. Still, Hughes secured a big win in India early this year when Hughes Communications India (HCIL) received a Flight and Maritime Connectivity (FMC) licence from the Indian Department of Telecommunications. This allows it to provide in-flight connectivity (IFC) and broadband services to Indian and foreign airlines as well as shipping companies operating in the country.

With its footprint across the globe supporting the satellite broadband industry, Kaul is confidently eyeing the future. “The future is connectivity, and we want to be the company that offers the customer the ability to connect. Connectivity should be ubiquitous. People may use different words to describe it, some call it IoT, but the basic idea is to connect everything together economically and at high speeds. Technology must help to increase throughput and speed, lower costs, improve reliability. Those who do that well will win, and that is our endeavour.