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Viasat cuts staff, sizes up LEO satellite opportunity for rural broadband

Satellite broadband company Viasat has cut about 5% of its workforce and imposed a hiring freeze as part of a bigger cost-cutting initiative to reduce some pandemic-related pressure from a sharp drop in air travel.

Meanwhile, Viasat is also sizing up opportunities with low earth orbit (LEO) satellites that could position the company to participate in the US Rural Digital Opportunities Fund (RDOF).

Viasat, which supplies broadband to hundreds of jets, laid off about 300 employees and is "going through a series of additional furloughs" in areas that are being impacted in the near-term, company President and COO Rick Baldridge said last week on the company's fiscal fourth quarter earnings call. Viasat, he added, has also imposed a hiring freeze.

Most of those cost savings are to help compensate for the financial impact on Viasat's in-flight connectivity and support business rooted to the pandemic. Viasat ended the quarter with 1,390 aircraft in service via its commercial in-flight connectivity business.

"Because of the downturn there, there's just a lot less demand for work in that area, and that's the dominant area where you'd see the cost reductions," company Chairman and CEO Mark Dankberg said on the call.

As explained in this investor letter, Viasat is also reducing costs to help maintain the schedule for ViaSat-3, a set of satellites that will enable the company to provide global broadband coverage. Per its latest plan, the first ViaSat-3 bird is set to launch in mid-2021 to serve the Americas; followed six months later by a second covering Europe, the Middle East and Africa. The third bird in the ViaSat-3 constellation, set to cover the Asia-Pacific region, is expected to launch in the second half of 2022.

Weighing the LEO opportunity
Viasat is also looking into building a constellation of nearly 300 LEO satellites that could deliver broadband service at latencies low enough (less than 100 millisecond) to qualify for a piece of the $20.4 billion in subsidies that's up grabs over the next decade via the FCC's RDOF initiative.

The FCC's proposed RDOF Phase I rules released in May exclude all satellites (including LEO) from eligibility in low-latency bidding. But Viasat believes if LEO satellites are eligible for the low-latency tier in Phase II (or if the proposed rules for Phase I are later changed to support LEOs), it could provide a low-earth orbit solution that could "compete very effectively."

According to SpaceNews, Viasat's proposed LEO constellation of 288 satellites would operate at 1,300 kilometers using the same Ka- and V-band frequencies it's currently authorized for medium earth orbit (MEO) satellites. Viasat effectively wants to transfer its existing MEO approvals to a LEO constellation.

"Basically, what our filing does now is just lowers the orbit from MEO to LEO," Dankberg explained on the earnings call, noting that the potential for funding is "certainly … the most obvious attraction to it."

Dankberg is confident that the key issue is not the basic shift in altitude from MEO to LEO but the potential impact on spectrum interference. "The main burden is to show that the constellation, as modified, would not cause any more interference to other constellations that would have been generated by the original filing," he said. "That's really what the test is."

Assuming that the FCC does allow LEO satellites to be eligible in the Phase 2 part of the RDOF, the "opportunity for funding is far in excess of the increase in what the constellation would cost," Dankberg predicted.

Viasat, which had some success against low-latency terrestrial bidders in the prior Connect America Fund II auction, claims that its LEO application is both "optimized for RDOF" and a more efficient option than other LEO-based offerings. Viasat claims that each of its LEO satellites would support five to ten times the capacity of other licensed LEOs and reduce the number of satellites required.

Elon Musk's Starlink, for example, has already launched more than 400 of its LEO satellites, stepping it toward a plan to deploy more than 4,000 satellites for its initial constellation.

"Less than 300 in total could have as much capacity as thousands of other satellites, and would comply with proposed space safety rules," Viasat explained in its investor letter.

SpaceNews notes that Viasat's LEO ambitions face an uphill battle in part because the FCC does not view RDOF as an "appropriate venue to test unproven technologies using universal service support."

Financial update
Viasat's fiscal Q4 revenues climbed 4% to $592 million, versus $557 million in the year-ago quarter. ARPU, aided by a shift of customers to higher-speed plans, also rose to $93.06, up from $81.99 a year earlier.

Viasat added about 4,000 fixed satellite broadband customers in the period, extending that total to 590,000. That final tally does not include about 2,000 subs that were tied to the FCC's Keep Americans Connected pledge, which called on ISPs to not terminate service and waive late fees if a customer could not pay the bill due to disruptions wrought by the pandemic.

Viasat said it expects fixed satellite broadband growth to continue into fiscal Q1 as more consumers work or school from home alongside a decline in a satellite pay-TV service that is being partly overtaken by broadband-delivered OTT video options.

"We are seeing, even among the relatively recent case of subscribers we have, more interest in the higher bandwidth plans," Baldridge said. But he also expects the bigger near-term driver to Viasat's fixed broadband satellite business to center on ARPU rather than outright subscriber gains.

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— Jeff Baumgartner, Senior Editor, Light Reading

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