Mark Dankberg, CEO and Chairman ViaSat, talks to EVA
There is no shortage in the US of entrepreneurs who made a fortune from businesses started off in their basement, garage or spare bedroom. But the number who went on to launch their own satellites and have their own continent-wide distribution capability can be counted on one hand, the few examples being Mark Dankberg, along with his two colleagues, Mark Miller and Steve Hart.
The three started ViaSat in 1986, working from Dankberg’s home. “We started as technical specialists in satellite communications and we’ve grown pretty steadily ever since,” he recalls. ViaSat is now a $1 billion company employing 2,900 people. Dankberg was satellite industry executive of the year in 2004, and was voted Visionary of the Year in 2012, in the satellite industry. An investment of $10,000 in ViaSat shares in 1996, when it went public at $9.00 a share, would be worth some $620,000 today, despite three major stock market crashes over that period.
“We didn’t know what we were going to do when we started ViaSat, but we liked satcoms and we felt we were good at it. We call ourselves propeller head engineers, which meant we were confident that we had a pretty deep grasp of the technology and some ideas about where it was going,” Mark says. ViaSat was started with no big infusion of venture capital funding and simply grew very steadily through organic growth until its IPO in 1996. The initial focus was on VSAT networks (very small aperture networks) for military and commercial customers.
Our ViaSat-2 service is scheduled to begin in 2016 and this will give masses of capacity. We will see at that point if it makes sense to increase the speed, or simply to sign up more customers
“We expanded into Ku-band networks and broadband in the late 1990s. Our biggest customer at the time was the US Department of Defence (DoD) which had a range of requirements that suited our technology skills,” Dankberg recalls. Then in 2000 and 2001 ViaSat began working with Boeing who were involved in trialling the Connexion broadband service for airliners. “We did the ground stations and the airborne networking for Connexion by Boeing, and from there we moved into the in-flight connectivity market for business jets,” Dankberg says.
Around 2007 the US government got very interested in high-speed satellite-based airborne broadband and ViaSat worked on a number of projects for the DoD. Dankberg and his colleagues managed to come up with a way of designing and manufacturing a satellite that would have enormously more bandwidth than anyone had been able to offer before. Until then various companies had done satellite broadcasting for narrowband networks, but not for high-speed data transfer or broadband. The problem was that the restricted bandwidth available on satellites at that time meant that the per-user cost for broadband connectivity would be exorbitant – way out of whack with the cost of terrestrial broadband. So instead of being a benefit to users, in-flight broadband could easily become a bone of contention between the owner and the operator or the satellite connectivity provider.
“Starting in 2008 we started a programme aimed at dramatically improving the bandwidth that a satellite could provide. Our solution provided our first satellite, ViaSat-1 with 140GB of bandwidth, more than ten times the biggest broadband satellite then in orbit,” he comments. The satellite was built for ViaSat by SSL (Space Systems/Loral) and was launched from Kazakhstan in October 2011, coming into service in January 2012. The total cost to ViaSat was around $500 million and Dankberg and his team decided to buy an existing retail facing satellite services provider, WildBlue Communications, for a further $500 million, bringing the total outlay to get the company’s new satellite services on-stream and in operation to over $1 billion.
With the purchase of WildBlue in 2009, the company moved for the first time in its history into owning and operating its own satellite, while providing a range of services to other satellite owners.
“WildBlue was very interesting to us because they already had two satellites in operation and had an established retail customer base of around 400,000 customers. The total bandwidth available to them from their two satellites was less than a tenth of the bandwidth available from ViaSat-1, but they understood the retail business and had all the infrastructure, including call centres, customer support and so on,” Dankberg recalls. The attractions of ViaSat-1 services to retail customers were the cost and the quality. It broadened the satellite services market, making it a real alternative to cable, rather than the only – and expensive – option for people who couldn’t get cable. “Before we bought the company, WildBlue would provide satellite-based broadband to customers at a cost of $50 a month for 1,200Kb download. We could give customers 12Mb download, or exactly ten times the bandwidth, plus 3Mb upload, and all for the same price,” he notes.
The maximum retail demand that ViaSat-1 could handle would be around 1 million users, but Dankberg wants part of the bandwidth, at least, to be available for in-flight use in the business and commercial aviation markets. In fact the company has already signed deals worth $20 million with JetBlue Airways to help the company offer a free “Fly-Fi” Internet access capability to passengers, powered by ViaSat’s Exede Internet service. While JetBlue will be paying ViaSat a usage fee for each flight the whole deal is cheap enough, in the airline provider’s view, to justify offering it as a freebie to passengers to enhance their travel experience. “JetBlue’s take on this is that it offers a free bag of peanuts and a soft drink to enhance its offering in the eyes of passengers, so offering free Internet connectivity gives it another powerful drawing card,” Dankberg says.
The service uses the Ka-band, accessed via ViaSat-1, and it means that passengers will not be competing with each other for very limited bandwidth during the flight. The service from ViaSat-1 is fast enough for every passenger to have quality broadband at their seat. Another US carrier, United Airlines, has also signed up for the ViaSat service. “Demand from business and commercial aviation is likely to total no more than 1% or so of our capacity, so we are free to sell to residential customers without compromising our service either to them or to our business aviation customers,” Dankberg says. The footprint for ViaSat-1 is the continental US, with some coverage in Hawaii, Alaska and Canada.
ViaSat’s earlier business aviation customers, principally Bombardier and Gulfstream, along with a number of US government aircraft, have been broadband customers for a while on a different Ku-band based service. ViaSat’s Yonder Internet for business aviation uses the company’s near-global Ku-band network and is the fastest business aviation service available. Recently, the company also announced a new tier of service called Yonder VIP for transport-size aircraft.
Ka-band coverage is not extensive enough right now to serve global business jet flyers, so the company remains committed to improving and optimising its Ku-band network for that market. But Dankberg and his team are busy making long-term plans to migrate customers across to Ka-band, including ViaSat-1 and future, even more powerful Ka-band satellites.
In May 2013 ViaSat announced that it had started building its second satellite, ViaSat-2, with bandwidth economics that will be more than twice as good as its predecessor, ViaSat-1. The footprint for ViaSat-2 will be the whole of the continental US, down to the Gulf of Mexico, the Caribbean and across the North Atlantic to Europe. “Our ViaSat-2 service is scheduled to begin in 2016 and this will give masses of capacity. We will see at that point if it makes sense to increase the speed, or simply to sign up more customers,” he comments. The company’s second satellite looks likely to carry about a 25% higher capital cost than ViaSat-1, but the bandwidth increase will be so much larger, Dankberg says, that the economic case for the additional satellite really makes itself. Funding will come from a combination of equity and debt and the company has had no difficulty to date in tapping the markets as required.
Moving to being a satellite owner and provider has been a huge move for ViaSat but it has once again proved the strength of the vertically integrated business model that Dankberg uses. “The way we have grown is to develop ‘adjacent services’, things that logically follow from what we are already doing, even if they require us to invest in more skills,” he says. Looking back Dankberg reckons that the whole journey has been really fun and deeply satisfying, and the best is still to come. “We have a tremendous and growing consumer market. The in-flight market is now really picking up and the government market, too, is going exceptionally well. We feel that we have tapped into a very good market and it’s a really fun time for us,” he concludes.