Friday, July 22, 2005

SatMex Woes Reflect State of Satellite Internet Industry

Mexican satellite operator SatMex filed for bankruptcy protection in its home country a few weeks ago even as its creditors continued to pressure the company to make a similar filing in the US. SatMex filed a voluntary "concurso mercantil", a type of bankruptcy filings in Mexican courts, citing a burden of over $500 million in debt. Whether the Mexican filing will preclude any Chapter 11 moves in the United States remains unclear. A bankruptcy in Mexico gives Satmex more protection because the company isn't liable for back interest payments. Under U.S. bankruptcy law, the company is liable for such interest payments.

Stories of satellite operators losing big money are common in the satellite internet industry these days, in fact, not a single satellite owner operating in the U.S. is making a profit other than SES Americom, a wholly owned subsidiary of SES Global, located in Luxembourg and possibly New Skies, another European operater with CONUS coverage. The other operators in the America's are spilling red ink all over the place.

There is a curious fight underway between Direcway LLC, Starband and Wildblue Communications for domination of the U.S. satellite internet consumer market. No company has ever been able to show a consistent profit in this sector and yet they keep coming with one new offering after another. Rupert Murdock and News Corp saw the writing on the wall and got out, selling 1/2 of their interest and gave up day to day management of HNS which owns Direcway. Starband has financial problems and no one seems to want to own it (Spacenet has it now). I believe Wildblue is on a very short string with investors and needs to show well this fall and winter in order to keep afloat. The break-even for ka band internet is said to be over 200,000 subscribers (Direcway has 250K ku band customers and has just turned a profit I'm told). It will be interesting to see who is standing this time next year in the Consumer marketplace.The Good News in this piece is that early tests of both Wildblue and Direcway 7000 series consumer satellite internet are very encouraging...very good speeds and much lower latency (the deal killer for vpn & voip). New adoptors have been able to do most anything they could do with a DSL or Cable connection with these new systems and if the speeds and low latency hold up over time, people will buy.

Randy Scott


Blogger Jeff james said...

Hello, nice stuff on your site. I need to spend more time on my site about VOIP and other wireless voip stuff. Thanks for some ideas.

7:14 AM  

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