Three’s a crowd?

Tricky thing, announcing a major service launch when you are in  quiet period pre-IPO but Intelsat has managed it with a minimum of publicity, despite the potential magnitude of its plans.

Using a stealthy combination of website updates  and a press release  the satellite major announced it will order at least two new satellites to provide a high capacity Ku-band spot beam service in the North Atlantic and Indian Ocean regions and the platform for of EpicNG.

EpicNG will include a complementary overlay to its fixed satellite network and will be fully integrated with Intelsat’s existing satellite fleet, using a combination of C-band, Ku-band and Ka-band to deliver world-wide broadband coverage.

The satellites will be in service by 2015 and 2016 respectively and if Intelsat’s sales story is right, provide four to five times more capacity per satellite than its traditional fleet with total throughput ‘in the range of 25-60 Gbps’.

Observers at first concluded that this was a total, not per-satellite figure meaning they would provide throughput at rates closer to 12Gbps in service, similar to Inmarsat’s GlobalXpress, including its high capacity overlay beams.

But late last week Intelsat confirmed that the throughput figure of 25-60 Gbps is per satellite – significantly greater than the GX per satellite throughput. The satellites will be integrated into its legacy maritime coverage in a move that will see it compete head-on with not just Inmarsat but Viasat too.

Intelsat has yet to confirm its distribution partners for the new service but the company has clearly decided that three is the ideal number of VSAT players in the maritime communications space, where it has already operated for some years.

PS – Kudos to Intelsat for not being afraid of continuing the buzzword bingo with liberal-use of ‘customer-centric’ in all its material. Services designed for users are something we can all approve of.

Old words for old (and new) problems

It’s good to see a modern maritime journal digging out the language of (almost) another age to describe the current one. This works fine except when the sub-editors are younger than you and therefore baffled by your use of antique terms.

When Safety at Sea described owners as ‘hidebound’ for not investing in more technology onboard ship it was enough to make me reach for my Webster’s, fill a pipe or two and settle by a roaring fire, except that it’s June and I don’t smoke a pipe.

What SASI meant – though the point was that of Inmarsat Maritime president Frank Coles – was that owners are hindering the greater use of high technology applications onboard ship through reluctance to put their hands in their pockets.

Noting that the shipping industry is ‘a fairly conservative place’ is not exactly new though Coles is closer to the point when he says that there is a dearth (there we go again) of talent working for shipowners who ‘grew up in the IT explosion’.

Shipowners he continued were ‘not ready to embrace IT and few shipowning companies ‘have extensive IT environments’. Again only partially true. The clients I work for are as connected as they come – on the landside at least. And when I asked one recently if he could ask the master of a ship something for me, he replied back advising that I could ask the master myself, copying him in. A response was back within hours.

I suspect that the reason why shipping companies have resisted IT onboard ship is partly generational. This is not just that the people that run ships distrust computers as flaky inventions of long haired college drop-outs, but that some owners think these same people should concentrate on running the ship rather than fiddling with computers.

Such computerphobia is far from unique but there are practical reasons too – ships are also places of heavy industry, where chunky bits of equipment hold sway and anything fragile or temperamental could be a risk rather than a benefit.

The other issue is of course, cost. Satcoms equipment – above and below decks – is expensive but then so is launching satellite constellations and providing a service that aims a beam at a target that is moving in multiple directions.

But given that you buy your satcoms with your newbuilding and that you might expect to upgrade perhaps twice in the life of the vessel, the cost is hardly prohibitive. It is more accurate to say that owners think satellite communications are expensive in practice, whereas in fact the price has fallen for a decade and continues to fall.

Coles points out that a service that costs ‘less than 1% of daily running costs’ is hardly prohibitive. Unfortunately for service providers and not just Inmarsat, the recession in shipping provides a perfect excuse for owners to delay investment in new systems and services because they are being massacred by bunker costs and unable to prise better freight rates out of charterers.

The recent ending by Inmarsat of volume discounts and the price rise on pay-as-you-go FleetBroadband may not help his case with his sternest critics, but the central point is true enough – there is no excuse these days for poor ship-shore-ship communications.

The tide is certainly turning. A recent conversation with a Northern European owner found him reporting that there was ‘no way’ he could go without providing email and even internet access to his crews if he wanted to retain them. Operating specialist high end ships made this an easier call, but the this how the trickle down began on Vsat and that shows no sign of stopping, helped by more innovative software and applications provided by independents.

In the same week, Inmarsat announced its long awaited multi-voice service, otherwise known as the Vocality Box, for Fleetbroadband, allowing up to nine simultaneous telephone calls to be made through a single terminal.

Thrane & Thrane has already announced that multi-voice will be available across its SAILOR FleetBroadband range with upgrades available for existing terminals. The primary advantage is that with multiple handsets integrated to a single terminal, dedicated voice lines can be made available anywhere on board, ‘from the engine room or canteen on a merchant vessel and the public areas on a passenger vessel, to the saloon and staterooms aboard a luxury vessel,’ said T&T’s Casper Jensen.

The extra phone lines will be charged by Inmarsat at the same per-minute tariff for both pre-paid and post-paid calls and will support the free-of-charge ‘505’ emergency calling capability that connects the vessel immediately to a Maritime Rescue Centre.

Ever the combatant, Coles went further than merely welcoming the launch. He claimed the service was ‘superior to internet calling solutions and more cost-effective than accessing multiple voice calls on a standard VSAT,’ something his competitors are bound to throw fire at, Greek fire if they have their act together by Posidonia.

Intelsat unveils IPO plans – yes you read it here too

OK so we’re hardly the first with this – and frankly not the most insightful at this stage but here’s some news the market has been expecting – .

We’ll come back to this in due course – not least because opinion seems to be a little divided as to whether this is interesting or not.

Satellite Today noted that ‘the potential IPO looks as though it will finally happen and will be ‘very interesting’ according to Sarah Simon, a satellite equity analyst at Berenberg. Unfortunately Satellite Today’s paywall prevents us from knowing more at this point.

The Reuters piece seems to take the opposite view – Francis Gaskins, a partner at IPOdesktop.com describing the IPO as  means to pay down debt rather than plan for growth. You can read it for yourself of course but Gaskins called the offering was not “particularly exciting”.

We’ll come back to this in due course – perhaps to look at how the IPO fares in this terrible equity market, but also to take a look at Intelsat’s maritime play, which claims speeds of 50MB, which if accurate, puts it ahead of Inmarsat’s Global Xpress.

Frank Coles interview Part 3 – Inmarsat will compete to survive

So far Inmarsat Maritime president Frank Coles has put up a robust defence of the company’s strategy and an informed one too. His time served at SP GlobeWireless, where he sold Inmarsat and its alternatives, gave him enough of an insight into how the company worked to make his move there to run the maritime business a natural one.

I was keen to know whether Inmarsat would completely take the gloves off against its competition. After all, they have used every trick in the book against him and in the sound and thunder stakes they are certainly getting the column inches. Volume is not always a good indicator of quality, however, so just what is the strategy?

“Perception is reality to some extent and I’ve been very specific; we are not going to go direct to customers, but we are going to go after Iridium and KVH and competing VSAT offers,” he says.

The upshot is that if its channel partners are selling those products too, it might receive less favourable treatment from Inmarsat – though the airtime rates it receives are common to all DPs.

“Inmarsat has to grow its business and though some people want Inmarsat to sink quietly, we are a public company with customers, employees, a board and shareholders and we have a responsibility to each of those,” he adds.

Though the channel partners ‘are free to sell whatever they want,’ in reality that means that the Coles business plan is to churn KVH and Iridium. He has tasked the Inmarsat sales force to go after that business; channel partners will receive a competitive hardware and airtime offer to bring new customers to Inmarsat, but he reserves the right to target the same customers using other channel partners too if they don’t play ball.

“That is competition. Iridium is doing the same thing in giving away their hardware free any chance they get. KVH’s entire marketing plan is anti-Inmarsat not pro-KVH. Are we supposed to continue to be stately old chap who stands there and gets kicked? If you want to compete with the big boys then you have fight like them.”

His trump card is that Inmarsat unlike its main competitors, is financially stable and its networks fully-funded, giving it a reliable sustainable service but he is clearly frustrated that some partisan reporting and PR spin dressed up as industry opinion has made those competitors look like a serious alternative.

Coles is aware of the risks of being over-aggressive against its detractors but he says that even the Inmarsat channel partners are growing tired of reading claims by rivals of services that can never be realised.

“We’re seeing that more and more. The people that understand the market understand what we are doing and that we can be relied upon to deliver. Our track record speaks to that and our future commitment is just the same.”

Inmarsat’s Frank Coles on value, competition and fiery pitchforks

To say that Inmarsat is in the spotlight at present is an understatement. Successive waves of vested commercial interest, personal opinions and a dose of righteous Greek indignation have been washing around its feet after the communications giant announced a wave of price rises effective May 1.

I took the opportunity to talk to president of Inmarsat Maritime, Frank Coles at the recent CMA Shipping 2012 event to get a clearer picture of the changes and the results will appear here in three parts. The first discusses his theme at the conference – value versus cost, while subsequent pieces will look at VSAT strategy and the taking the fight to the competition.

In fact the prices rises – like the indignation, rabble-rousing and fiery pitchforks – are not quite what they seem. The changes stem in part from a reorganisation in January this year which saw new business units formed to focus on increasing the company’s sales and marketing efforts and in targeting its competitors’ business.

Coles says the big picture is to get closer to its customers, though channel marketing, through DPs and their SPs will remain the source of the majority of revenues.

“I realise that when partners see Inmarsat calling on a customer they get nervous but over 80% of our business is still indirect and in maritime we have no desire to change that. The channel has the relationship and the regional knowledge that we don’t have,” he says.

Coles says he wants to make a break with the past by focussing not on churn (where customers hopped between DPs and SPs chasing lower rates) but on growth. And though he accepts the market timing could be better, he says Inmarsat will be able to take back customers with a better proposition by persuading them to think more about value than simply cost.

“Owners are focussing on the wrong thing when they talk just about cutting costs. At $30 a day with Inmarsat you can send 3-400MB of data and for $50 a day you can send 2-3GB. For $100 a day you get unlimited amounts of data, whether you use that data for weather routeing or fuel optimisation of virtual arrival and save yourself multiple tonnes of bunkers which cost you $750 a tonne.”

It’s a well-worn adage that cutting costs by itself doesn’t save a business money and he says the majority of Inmarsat customers are at the point where they should be realising a return on their investment in satcoms system rather than seeing it as an obstacle to profitability.

“New FleetBroadband customers are spending around $30-50 a day – more than that if you include voice and crew calling so it’s not hard to account for that in reasonable usage. Utilising the umbilical cord between ship and shore and the right tools to save money, means you can get back the investment in the communications in one day.”

Supporting his case is the evidence that the industry has followed a natural bandwidth migration path, from B to Fleet to FB, a journey that will ultimately lead to Inmarsat Ka-band VSAT. Arguments about the value of its services, versus its public service GMDSS remit and the fact that it must also operate at a profit, have been around for years but he says there are Fleet customers spending thousands of dollars a month who could save straight away by moving to FB.

If that is the case I wonder then why has he hiked the price of Fleetbroadband? Like every other punter and interested party I have read one wave after another of supposed outrage at the price increases on FBB. Turns out they are right in one sense only.

“There is no price hike. We have increased the price on pay as you go because it offers no value to anyone including ourselves. We have reduced the price of every bundle of every package of data up to 15 gigabytes. It’s a much more efficient model for us and it puts us in tune with the market.”

Prices have risen for Existing and Evolved services, (Inmarsat-B & Fleet) because of the smaller numbers of people using them despite the infrastructure that must be maintained to support them, but he says the changes here and to FB were discussed with channel partners for some time.

“The net result is that it shouldn’t be any more expensive for shipowners who are using our services day to day. Lots of customers are sitting on FB and only using it as a backup but I believe you should pay for convenience.”

Inmarsat finally gets a right to reply…

Interesting to read Frank Coles, president of Inmarsat Maritime making a strong riposte to the AMMITEC letter in the latest issue of DigitalShip (http://www.thedigitalship.com/conferences/2006/news.aspl), which along with MaritimeInsight has at least provided some balance to the more numerous but far more partisan forums elsewhere.

It’s been a sobering process to watch Inmarsat’s competitors and their paid consultants thrashing away at Inmarsat as if it was some kind of maritime Aunt Sally for whom no criticism is low enough. In running AMMITEC’s complaint and Coles’ answer DigitalShip has done what no one else has so far bothered to do – set out the argument and let users make up their minds.

In fact as Coles points out, the real change in this debate is that Inmarsat has never really talked about price to this degree. As a wholesaler it traditionally left end-user pricing to its channel partners and their service providers.

That changed to some extent with the acquisition of Stratos and subsequently ShipEquip but this battle was always coming down the pipe. One of my regular questions to Inmarsat when writing on Lloyd’s List a decade ago was when they would renegotiate the LESO agreement and get in the game of selling direct.

These days the DPs have consolidated to the point where users get small variances in cost and flavour of services. SPs are probably the more agile in terms of seeking tailored packages to fit end users. Talk to them as I have recently in Singapore, Stamford and Japan and they are concerned about the effect on margins; but there is no suggestion that they think the howling inaccuracies and misleading marketing of the opposition present a viable alternative.

As already pointed out on the blog, Coles reminds readers that GMDSS is a free service, which is not the same as saying Inmarsat-C traffic is free. He also takes a dig at competitor constellations as being unable to provide the kind of uptime and service reliability demanded by IMO to support GMDSS. Rumours last week that one Inmarsat competitor was recalling a bad batch of handsets does little to erase such doubts.

Coles goes on that the price increases on E&E services are an understandable adjustment to an evolving market situation. Some owners and managers clearly think 10 year-old data speeds and service levels are OK, but would they accept the same on land? If so, we’d all still be on dial-up, but in any event, he says there are no plans, as AMMITEC claims, to retire Fleet.

Coles is pretty upfront too about the changes to FleetBroadband pricing – not just that the package prices have stayed the same or come down – and he mines a theme he’s been scraping away at since before CMA.

Inmarsat is keen to move the debate away from the negative implications of cost and towards the sunlit uplands of value. Coles argues FleetBroadband used as a back-up should cost more because the customer requires on-demand flexibility when the VSAT crashes.

“We have asked users for a $3 a day commitment” he says, an “annual fee of $1,095 equivalent to one and half tonnes of bunker fuel,” which he thinks could be claimed back many times over by better use of satcomms to power smarter shipping operations and the use of techniques such as virtual arrival and weather routeing.

There is no doubt that increasing the price of FBB as a back-up to competing VSAT systems will be unpopular among customers who are using it for just this purpose, but it hardly seems a stretch to suggest that users should pay a premium for convenience, especially when Inmarsat is offering its own VSAT stepping stone Xpress Link with FBB back-up ahead of the full Global Xpress service in due course.

He says that small customers concerned about price rises will be given the option to use a ‘small boat package’ to which they can transition and it’s probably fair to say that there will be low cost operators out there for whom the minimum required satcoms connectivity will be just about enough.

This underscores the point that has struck me repeatedly over the last couple of weeks. As Inmarsat’s detractors have lined up to take a kick, I have never once had the feeling that they had the user’s interests at heart. Instead it seemed to me they were using a sense of moral outrage as a smokescreen to sell alternative solutions.

Inmarsat may be combative in its style and certainly far from perfect, but it appears to have less to hide than its competitors, despite having a considerable amount of skin in this game. For that at least, it deserves the fair crack of the whip that DigitalShip has given it.

More positional play pre-Global Xpress

While a few lone voices in the satellite communications community seem determined to spend the majority of their time bemoaning the evolution of systems and services, others are preparing and positioning for it.

A case in point is the renewed interest by Cobham in Thrane and Thrane. Despite some rather obscurely-worded press releases (thanks IR department!), the nuts of this seems to be that Cobham, having been rebuffed earlier this year, has decided that its earlier offer of DKr420 per share is still good enough, now that now several institutional investors have helped it build its stake to 25%.

The news (and the press release) is somewhat passive-aggressive. Cobham says it normally only buys targets on the basis of 100% agreements, but in this case seems prepared to wait for Thrane’s management to come around. It has substantially sweetened the deal by promising to move its SeaTel marine antenna business to Thrane’s Lyngbo facility, while leaving the incumbent management in place, minus its chairman who resigned on 26 March.

In terms of stake requirement, Cobham has another 25% or so to go before it gets to the level it needs, but the company has said that it would be happy to start at that level and work towards 100% over time.

The offer has four weeks to run and comments made by Thrane management to the FT suggest that it too, is happy to wait to see if a white knight emerges. It’s clearly a risk, since Cobham, while describing its offer as final, says it reserves the right to increase it if a third party comes into play.

For Cobham, the logic of acquiring Thrane is undisputable. Itself a specialised manufacturer of C and Ku-band satellite terminals, Thrane’s expertise in the L-band space makes it a natural fit to position Cobham as the a leading supplier of next-generation services to the maritime industry.

Cobham has already made its first move, securing a $40 million contract as the first maritime partner for Inmarsat’s Global Xpress Ka-band broadband service, scheduled for availability by 2015. Before that date arrives – and even after it does, Cobham will be able to service XpressLink, the stepping stone to Global Xpress by bringing the businesses together.

Once Global Xpress gets into gear, it could be the major supplier of ground equipment, a prospect that must be as clear to Thrane’s management and investors as it is to those of Cobham.

Inmarsat gets it in the neck (and elsewhere) over price rises

Maritime communications giant Inmarsat is the target for a stinging letter of rebuke from the Association of Maritime Managers in Information Technology and Communications (Ammitec), which lists a series of ‘serious objections’ to Inmarsat’s intention to raise its prices from May 1, 2012.

The letter, published during the recent DigitalShip Cyprus conference leaves no room for doubt as to the group’s gripes about Inmarsat’s plans and its feeling that the London-listed company is ‘abusing its position’ as a ‘monopoly’ operator of safety services.

This first refers to Inmarsat’s intention to lift the price of telex communications via Inmarsat-C by 15%, though it neglects to differentiate between the telex service and free GMDSS distress transmissions. Ammitec promises to take the matter to Inmarsat’s regulator IMSO and says the issue should be referred to the IMO Comsar sub-committee.

The group’s real beef however is the planned price increase on Existing and Evolved (E&E) services, notably Inmarsat Fleet, launched in 2002. By raising prices, Inmarsat, it says, is effectively putting this service beyond economic use and forcing users to migrate to the newer FleetBroadband service.

Just as invidious, it says are the planned price rises to the much newer FleetBroadband pay as you go service, which it calls ‘unsupportable’ in a broadly similar argument to that around E&E – that Inmarsat is forcing the pace of change rather than letting the industry evolve at its own speed. Many shipping companies, it says bought FBB on release (when the price was low) and they are clearly disgruntled that Inmarsat is raising prices when costs are high elsewhere and earnings low.

What the letter doesn’t mention is that the prices for FBB plans and packages are not rising – only the pay as you go option, which many people thought was under-priced on release – so owners paying for a managed plan won’t feel any pain.

The letter’s wrath seems to have run its course by the end of page 2 and Ammitec, while noting Inmarsat’s ‘blatant disregard for long-term loyalty’ says it would welcome the chance to discuss the issues with Inmarsat as well as with ‘the wider maritime community’.

All gripping stuff but it does beg a few questions not mentioned by the competitors that have seized on it as proof that Inmarsat is punch-drunk and reeling.

First, according to the programme, Inmarsat Maritime President Frank Coles was present at Cyprus so why no debate there and then?

Second, surely IT buyers don’t imagine that prices only go up when times are good? If so they should check with their colleagues in the chartering department on the price of bunkers lately.

And at the risk of brickbats and worse I have to say, that given my 16 years of reporting on shipping, I have found the concept of ‘long-term loyalty’ to be a rare commodity in maritime communications. Price is king and churn is a fact of life that keeps the sell-side on its toes. As the letter itself notes, if customers were to stay with the E&E services then Inmarsat would get a huge payday, so they will probably move to FleetBroadband – a service which is comparatively cheaper than either Inmarsat-B or Fleet.

Finally it is simply inaccurate to call Inmarsat a monopoly. With the exception of the IMO-mandated GMDSS service, Inmarsat has more viable competition now than at any time in its history.

In a highly commercial market like shipping, Inmarsat must understand the risk it is taking by raising prices now. For the most part, owners, managers and their IT departments are able to vote with their feet. Whether they choose to do that over the next 12 months or so will demonstrate how serious they are about taking the fight from Cyprus to 99 City Road.

Imtech signs up as first Global Xpress VAR

Systems integrator Imtech has signed up as the first GX re-seller, marking the start of Inmarsat’s delivery plans for its ambitious global Ka-band VSAT service. More on this to come, but just to note an early lead in the satcoms bingo stakes to Frank Coles for use of ‘game-changing’.

See full release below:

IMTECH MARINE SIGNS M.O.U. WITH INMARSAT TO BECOME GLOBAL XPRESS™ RESELLER

March 30, 2012 – Inmarsat (LSE:ISAT.L), the leading provider of global mobile satellite communications services, announced today that it has signed a Memorandum of Understanding with Imtech Marine to become the first Value Added Reseller of Global Xpress™.

Global Xpress will be the first global Ka-band network, offering the shipping industry true broadband speeds and reliability: up to 50Mbps through a 60-100cm antenna. Inmarsat will make XpressLink available to Imtech Marine to offer a bridge to GX with a bundled package of Ku-band VSAT and L-band FleetBroadband.

“Global Xpress will be a world-first in maritime communications, and we are delighted that Imtech will be a frontrunner in offering this solution to the maritime market,” said Eric van den Adel, Managing Director of Imtech Marine. “We already enjoy a strong working relationship with Inmarsat, and this MOU is a significant step in bringing our two companies closer. The combination of Inmarsat Ka- and L-band with Imtech Marine’s remote monitoring solutions and our extensive network of 88 offices in 25 countries will deliver real benefits to our customers.”

“The combination of game-changing solutions with the global distribution and support capability of Imtech Marine delivers a compelling proposition for customers,” said Frank Coles, President, Inmarsat Maritime. “Imtech Marine is one of the industry’s leading installation and support groups. We look forward to welcoming them as the first Value-Added Reseller for Global Xpress.”

Imtech Marine is a leading systems integrator and full-service provider of maritime technical solutions. The company, in particular through its Radio Holland brand, has extensive experience of Inmarsat FleetBroadband, VSAT and integrated maritime services.

You know it when you see it – how innovation is back on the agenda

Lloyd’s List’s Liz McCarthy was one of the few journalists to give the CMA session on best operational and financial practices a fair crack of the whip. Despite the fact that the organisers had changed the session title, the running order, and the idea behind it, there was still plenty to absorb.

If owners are content to moan about high bunker prices, then presumably the evidence that BP Shipping had saved $1.5m on bunkers by combining satellite communications with Virtual Arrival principles will fall on deaf ears.

There are other areas, too where owners and managers need to work smarter, not least in increasing the volume of ship to shore data while also managing the paperwork burden. More technology onboard ship comes with risks too, but if properly managed by an owner who takes responsibility for ship crew and cargo, then there is no reason these bugs cannot be ironed out of the system.

Liz quotes Inmarsat Maritime president Frank Coles as saying that:

“it was possible to save as much as $100,000 a year per ship by using efficient communication, and with unlimited internet access available for $100 per day or $3,000 per month, the cost of rolling out wifi on ships was easily recuperated.

His company’s clients had reported significant savings across their businesses; $32,000 per year crew-related cost savings, information technology efficiency saving $20,000 per year and route optimisation saving $30,000.

At a time when owners are looking for viable options to shave money off their total fuel consumption — as prices continue to hover at record levels in the $700 per tonne range — numbers like this start to look extremely attractive.”

But there are reasons for caution too. As Liz’s article continued:

“The internet was a cause for concern regarding navigational safety, panellists at the conference believed, with at least one example already of a collision created after a crew member on the bridge was browsing the web rather than looking where the vessel was heading, Mr Coles said.

He added that some of Inmarsat’s shipowning clients stated specifically that they did not want wireless internet connection on the bridge, to ensure due diligence while performing navigational duties.

Just as trucking companies would not want drivers text messaging while on the road or airlines allow pilots to surf the net while flying a plane, area restrictions could support internet use in shipping.

Other services being looked into are whether the internet can be switched off when the ship approaches coastal areas, such as 30 miles offshore, to ensure all crew are alert and not distracted by phones or computers.”

Read Liz’s article in full here (http://www.lloydslist.com/ll/sector/ship-operations/article394589.ece) – LL sub needed – sorry, I don’t make the rules.