ChannelsSpring04 Channels Summer 2005
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A Publication of SUMMER 2005 PAGE New Broadband Service Plans for North America and the DW7700 Bring Welcome Changes ▲ ▲ 6 Executive Corner Continued ▲ 4 Executive Corner ▲ 3 One-Stop Shopping for Broadband ▲ 2 ▲ 1 One-Stop Shopping for Broadband DIRECWAY Helps Siberian University Spread the Wealth of Knowledge ▲ One-Stop Shopping for Broadband Continued 8 ▲ News Bytes ▲ Coming Events To Every Season… After over a year of questioning about who would be our new owners, what would happen to SPACEWAY TM, and what changes might occur in our core business, spring arrived, and with it the clouds of uncertainty began to clear. Now, with the acquisition behind us and new opportunities ahead, it seemed the perfect time to sit down with CEO Pradman Kaul to discuss the new HNS, LLC. What does the new ownership structure mean for HNS moving forward? Captain D’s: Good Value Means Good Business 7 Executive Corner Convenience, Reliability, and Scalability of DIRECWAY ® Unified Broadband tep into the workday of an IT manager for any multi-location enterprise and you may wish you hadn’t. It’s not an easy job. Faced with pressure to provide every site, rural and urban, with access to the same company-critical applications, these folks spend their days managing complex, disparate, and often patchwork networks. And if that isn’t enough, they face pressure to provide nationwide coverage and uniform reliability, while delivering greater bandwidth at lower cost. Sound impossible? S continued on page 7 Details on Page 8 There are two important things to consider about our new ownership. First, DIRECTV has retained 50 percent ownership in HNS–demonstrating confidence in us and the potential for a strategic relationship between them and our consumer segment. Second, SkyTerra and Apollo have investments in other satellite companies, like Intelsat, MSV and Sirius, so there is a potential for synergies with these entities that will undoubtedly create new opportunities for growth. And where do you see growth headed in 2005? In what segments do you see opportunity? We’re expecting growth across all our segments. In North America, we see continued steady growth in our core large enterprise segment, and now a rapidly expanding potential to penetrate small and medium enterprises (SMEs). Currently, we’ve installed about 40 to 45,000 continued on page 2 Executive Corner continued from page 1 terminals in that segment, but the opportunity is in the millions. There is a tremendous untapped market with SMEs, and we have to figure out how to best reach that market through our distribution and channel capabilities. In the consumer segment, experts tell us there are about 10 million households in the US that will not have access to cable or DSL—even 5 years from today. So our strategy is to target this underserved market and not compete directly against DSL and cable. We currently serve about 200,000 consumer customers, so this addressable market offers big opportunity for growth. Internationally, we expect growth in the same segments as in the U.S., but at different rates in each region. We look to grow our own service companies in Europe, India, and Brazil and to grow other international areas, either through partnerships, or through other service providers that have invested in HNS products and services. In the U.S., how will the rollout of Unified Broadband change or enhance HNS’ position in the marketplace? What we’re seeing with Unified Broadband is the potential for a subtle change in our mission. Up to now, we’ve always been a leading provider of broadband satellite products and services. It’s clear as we look at the market today, and for opportunities for growth, many of our enterprise customers are looking for hybrid solutions, combining the strengths of satellite and terrestrial networks. They want the best overall solutions, and at each individual site. At the same time, our customers prefer having a single provider for their entire network. Because of what our customers told us, six months ago we decided to start testing the waters and we 2 received a tremendous response. We are therefore expanding our mission from “satellite only” to “managed network” services provider. On to the future of satellite and satellite technologies—what is HNS’ strategy for SPACEWAY? We will keep one of the three SPACEWAY satellites that we were constructing. We plan to launch SPACEWAY 3 at the end of ’06 and we expect to be in service in ’07. As we’ve been saying for the last few years, we remain committed to and very excited about SPACEWAY. We believe that SPACEWAY’s fundamental advantages of increased capacity, through-put speeds and flexibility will expand the size of our addressable market by a factor of 4 to 8 times. on our back as we’ve learned to deal with the consumer, which is very different from a business user. I’m sure WildBlue will do well, but it may take a little while to get there— just like it took us. Published quarterly by the Corporate You’ve been a leader in the satellite broadband world for many years and seen a lot of changes over those years. Looking back, what do you see as the most significant changes in the industry? I’m also excited about the economics of SPACEWAY. Today, when we lease space segment capacity from a fixed satellite services win in the market. We provider, that provider Now with the new have to beat our bills us at relatively ownership structure high gross margins, as competitors. And we behind you, what do much as 70 to 80 perhave to provide our you have to say to cent. However, when HNS employees, customers with the we become the owners business partners, of the satellite, those highest level of and customers? margins become part of services and our financials. Today, a I think it’s very simple. products.” transponder leases for We’ve had 3 to 4 years about $1.5 million a Pradman Kaul, of turmoil and unyear. If we reach our Chairman and CEO certainty. During this goal of employing the period I’ve been very equivalent capacity of proud of our employees for their 65 to 70 transponders on SPACEWAY loyalty and their ability to stick to by 2009, we will therefore achieve their tasks. 2004 was a very good an approximate $100 million margin year for HNS financially, even under enhancement to our P&L. this cloud of uncertainty. Obviously, when there’s competition, we expect that it’s going to make us work harder. However, I believe it might take them longer on the learning curve than they might expect. We’ve been in the market for about 5 years and have a lot of scars Channels / Summer 2005 / www.hns.com Hughes Network Systems, LLC. Channels may also be found online at www.hns.com. Click on News & Events and select the Channels Newsletter sub-menu. Correspondence is invited and should When I started in satellite over 30 years ago, earth stations were 95 ft in diameter and cost $10 million. Today, we have earth stations that are .7 meters in diameter and cost $500. To me, that evolution is probably the best evidence of the significant changes that have occurred. And the fact that there are 27 million homes in the U.S. alone receiving TV by satellite, and another “We know what we’ve 250,000 getting broadband by satellite got to do. We have to is truly incredible. Looking to the launch of WildBlue, how do you see them as a competitor? Communications Department, Now all that’s behind us and it’s clear where we are headed. The objectives of our owners are very closely aligned with ours. We know what we’ve got to do. We have to win in the market. We have to beat our competitors. And we have to provide our customers with the highest level of services and products. And that’s much easier than what we’ve been through. ■ be directed to: Arunas Slekys, VP Corporate Marketing Email: aslekys@hns.com Telephone: 301-428-5502 Fax: 301-428-5588 Hughes Network Systems, LLC. 11717 Exploration Lane Germantown, MD 20876 USA For more information about Hughes Network Systems’ products and services, business news, and professional opportunities, please visit our Web site at www.hns.com. SPACEWAY is a trademark of Hughes Network Systems, LLC. All other trademarks are the properties of their respective owners. Special thanks to our contributors: Kathy Bell, Judy Blake, Emily Green (Viva Productions), Jerry Johnson (Brodeur Public Relations), Wendy Schneider-Levinson, Rob Shultz, Arunas Slekys, Vera Tipugina, Julia Voblikova, and Alex Zavistovich ©2005 Hughes Network Systems, LLC. All information is subject to change. New Broadband Service Plans for North America and the DW7700 bring welcome changes Enterprises can expect a new era of performance and flexibility he name of the game in today’s market is flexibility. And when making any investment in IT networks, enterprise customers want flexible, cost-effective service plans to support the changing needs of their business. Why, then, has choosing a high-speed broadband service plan sometimes seemed to be more complicated and confusing than doing your taxes? T Hughes Network Systems is changing this paradigm by introducing a menu of packaged service plans that will make it easy for IT managers to make costeffective choices and empower organizations with the flexibility to grow and adapt. “These generic offerings will speed up the whole process of deploying broadband services for enterprises that want to reap the benefits of a fast, ubiquitous network,” said Mike Cook, senior vice president of sales and marketing for the North America division. These plans add real value to a company’s bottom line by delivering four critical success factors: u u u u A wide range of service plans A clear migration path into the future Ubiquitous coverage A single vendor solution prevention/security applications. Enterprises can choose the appropriate plan for their applications and number of users, enabling them to run their organizations more efficiently and cost-effectively. Moving from one plan to another to meet new demands can be as simple as a phone call. HNS’ new broadband service plans are based on its advanced new family of broadband satellite routers—the DW7000 series. The DW7700 is the first product in the family to roll off the production line and will begin shipping in June. The DW7700 is a true enterprise-grade IP networking platform that delivers the required throughput and performance to support the full range of high-speed service plans, today and well into the future. Plus, it comes with two LAN ports, a serial port for legacy protocols, and an RJ-11 for dial backup, thereby giving IT managers flexibility in configuring all their remote branch offices. The DW7700 will work in existing DIRECWAY broadband networks, protecting clients’ past investments. This feature also means that certain locations within a network, such as distribution centers that run more bandwidth-intensive applications, can have higher level service plans than stores or smaller branch offices. “Businesses don’t always know where they will be two years down the road,” continued Cook. “Now they don’t have to gamble with their network investment. A single vendor, Hughes, can provide a robust network solution that easily grows and changes with them, and supports their mission-critical applications every step of the way.” Hughes’ new broadband service plans offer the bandwidth and performance choices to support a wide range of applications—from simple credit authorization, to remotely accessing data, to transfer of bandwidth-intensive media files for training, digital signage or business TV, to loss t has been over three months since Internet protocol over satellite (IPoS) became the first global standard for the industry. Following ratification by ETSI (European Telecommunications Standards Institute) in February 2005 of the original TIA (Telecommunications Institute of America) standard approved in 2004, most recently ITU in Geneva has also ratified IPoS. What is the market impact, now that the world’s major standards setting bodies have approved the IPoS standard? I "Now ratified and approved by the three major standards bodies, IPoS opens the door for greater optimization and economies of scale throughout the satellite industry," said Pradman Kaul, CEO of Hughes Network Systems. ”It translates into more opportunity for suppliers to accelerate cost reduction and for service providers to expand addressable markets in all segments.” For HNS, it means double-digit growth rates in terminals and new DIRECWAY subscribers. All DIRECWAY terminals are IPoS compliant, representing well over 500,000 sites worldwide. And the latest generation DW7000 family of highspeed routers is expected to further increase the significant lead of IPoS compliant systems over competing systems. Channels / Summer 2005 / www.hns.com 3 Captain D's Good Values Mean Good Business ost businesses have a set of core values that define their organizations. Captain D's, a national restaurant chain that provides quality seafood at competitive prices, is no different. Everyone at Captain D's, from the CEO to the fry captain, operates under six core values that together uniquely describe Captain D's approach to serving seafood–F.A.S.T.E.R. M However, five years ago, faster would not be the best adjective to describe Captain D's delivery of employee training. The restaurant chain struggled to find a streamlined approach to training over 5,000 employees located in various states throughout the southeastern U.S. Traveling to training sites, or mailing training tapes and materials, meant high costs, inconsistent quality, and timing issues—since locations in Florida, for example, couldn’t even count on getting their training information at the same time, let alone locations in other states throughout the southeast. 4 Channels / Summer 2005 / www.hns.com Today, thanks to the combined efforts of a dedicated internal IT team and HNS, Captain D's employee training program is not only faster, but the restaurateur has also enhanced customer service, significantly decreased training-related travel costs, and won national accolades from the restaurant industry. Upgrading to a Broadband Network For years, Captain D’s relied on its transaction-based satellite network from HNS. However, when the company realized it could achieve even greater productivity by implementing a broadband network to handle its new browser-based applications, Chris Crabtree, vice president of Information Services, called on HNS for a solution. “The upgrade to broadband was a big decision for us, so we devoted a lot of resources to evaluating options and providers,” said Crabtree. “We looked at DSL, cable, satellite, and frame relay solutions, but ultimately came back to HNS, based on network performance and their ability to meet all of our business requirements.” Once Captain D’s was ready to proceed, the HNS team installed DW4020 satellite terminals at all the restaurants to enable broadband communications between headquarters and the stores. From improved quality of training, to decreased travel costs, to increased customer satisfaction, the decision paid off exponentially. Top-notch Training Delivery of training was a critical factor in Captain D’s decision to upgrade to broadband. Given the varied geographic regions and numerous locations, training programs often arrived late, got lost in transit, or by the time managers could get employees together to administer the training, they were out of date. This led to a lack of continuity in the Captain D’s customer experience. In some cases, recipes were different, or promotions were run at different times—or perhaps not at all. Thanks to the DIRECWAY® broadband satellite service, Captain D’s is now better able to deliver and monitor training to ensure that the employee and customer experience is consistent everywhere, and everyone receives training and promotional materials simultaneously. In fact, since deploying training by satellite broadband, Captain D's has experienced a decrease in worker compensation claims and an increase in customer satisfaction levels. The chain also has significantly reduced travel expenses since employees are able to train remotely. “Broadband satellite really enables us to be proactive with the business,” said Crabtree. “Every day at 2:00 pm EST, we poll our restaurants. Through DIRECWAY, we are able to get a snapshot of our sales that day. If there is a region or store that is performing extremely well, we contact that store to identify best practices and share its success with other stores, as well as use their success as a recruitment tool for franchises.” According to Crabtree, the DIRECWAY system provides a great sense of comfort to prospective franchisees. They know that by simply putting a satellite dish on their roof, they can instantly become integrated into Captain D's corporate culture and benefit from their national programs. The company also uses DIRECWAY for credit card processing. By moving from dial-up to broadband satellite, Captain D's has shortened the time it takes to authorize a credit card. More importantly, it allows stores to move customers through the line more quickly, resulting in greater customer satisfaction and increased traffic. Looking Forward According to Crabtree, “HNS’ DIRECWAY service creates a national information highway that enables Captain D's to move its business forward. Our plans call for a number of new technology initiatives, but, whatever decisions we make, we know that HNS will be a central part of our operations.” Bottom Line Benefits Captain D's employees are not the only ones realizing the benefits of DIRECWAY. The new system has allowed Captain D's to take their business operations to the next level in terms of management and customer service. Channels / Summer 2005 / www.hns.com 5 Helps Siberian University Spread the Wealth of Knowledge That depth of academic experience and access to a treasure trove of research materials is what draws students from other educational institutions and libraries to Tomsk State University. According to Dr. Vladimir Demkin, the university’s prorector, the distance learning capability provided by DIRECWAY brings academics throughout Siberia rapid access to a wide array of courses and information—creating a new capability to improve the quality of education in the entire region. The decision to adopt DIRECWAY technology was an important technological advancement for the university. Prior to DIRECWAY, Demkin noted, the 340 schools that make up Tomsk State University were linked to the Internet through terrestrial lines—both DSL and dial-up connection. “We understand well that online technology is the only means of providing the quality of education comparable to a traditional classroom,” said Demkin. “Unfortunately, existing terrestrial lines cannot provide the quality of communication needed for online distance learning. That is why we decided to implement the DIRECWAY satellite service.” According to Demkin, the deciding factor in selecting DIRECWAY was the broadband capability of the system and its DW6000 remote terminals. DIRECWAY provides more than enough capacity for the massive amounts of data required for educational and research-related pursuits. The configuration of the DW6000 terminals also is well suited for educational purposes, Demkin added. T o those outside the Russian Federation, Siberia conjures up desolate and backward images. Though admittedly remote, the region is far from backward. In reality, it is home to some of the country’s most respected institutes of higher learning. Chief among those is Tomsk State University, which is now using DIRECWAY® broadband satellite for distance learning and for cooperative educational projects with other academic institutions throughout Asiatic Russia. Founded in 1878, Tomsk State University was the first institution of higher education in Siberia. In 1998, Russian Federation Presidential Decree No. 30 placed the university on the “National List of Institutions of Greatest Significance to the Cultural Heritage of the Peoples of the Russian Federation.” The Russian Ministry of Education ranks Tomsk State University fourth among the country’s classical universities. Today, with an enrollment of more than 22,000, the university prepares students in 75 disciplines and specialties. The Research Library is the university’s crown jewel. In 1934 the library earned the designation of “scientific institution,” and in 1969 it became the methodological center for libraries of institutions of higher learning in Western Siberia. By 1990, it had been included on a list of Russia’s greatest libraries. 6 Channels / Summer 2005 / www.hns.com The advantage of DIRECWAY for students was immediate. “Students can now make better use of the Internet: The quality is better and the speed is higher, too!” Demkin said. He recounted a recent experience in which a DW6000 terminal was installed in a village school, enabling the village students to videoconference with teachers and students at Tomsk State University. “The quality of images and voice was great. It was really amazing to students and teachers who were not used to such quality of service,” Demkin commented. In 2000, one-way terminals were installed in 35 villages in the Tomsk region, Demkin said. Soon the university plans to install approximately 20 DW6000 two-way terminals in the same region, and work is in progress to obtain licenses to install the service in 26 additional locations. Educators from Central Siberia recently celebrated the launch of the new DIRECWAY network at Tomsk State University. At the launch event, attendees observed a multicast TV transmission for distance education, and a videoconference was set up between the University and two remote locations. Following the event, Demkin was characteristically enthusiastic. “[DIRECWAY] is the best solution we were able to find on the market,” he said. “I am very glad that Tomsk State University bought DIRECWAY equipment from Hughes Network Systems.” n One-Stop Shopping for Broadband continued from page 1 For many IT managers, it’s a constant struggle. The quest for the right network service plan, or combination of plans, presents a web of frustrating choices, complex management tasks, and major expenditures of time, people and money. Consider DSL. Securing nationwide coverage could easily require contracts with 30 different vendors. Not exactly the picture of efficiency. Unfortunately, one-stop shopping for broadband hasn’t been a real option for IT managers—until now. In June 2005, Hughes Network Systems introduced the ultimate in convenience, reliability, and ubiquity of service plan options— under the single umbrella of DIRECWAY® Unified Broadband. This one-stop, end-to-end managed network service combines satellite and terrestrial platforms to provide the optimal network for a particular customer’s business strategy. Finally, there is one single enterprisegrade solution that covers all the bases, both today and well into the future as the business grows. And yes, it’s affordable. DIRECWAY Unified Broadband means availability and affordability of broadband access everywhere, whether at HQ and remote branches, or for telecommuters. Costs can be justified for large offices with hundreds of people, through to medium and small remote offices alike. What Businesses Really Want Price isn’t the only concern for customers. Ask any IT manager (who has two seconds) and they’ll tell you they want a network that is scalable, secure, and simple to manage—with service levels they can count on. DIRECWAY Unified Broadband is an enterprise-grade solution that speaks to customers’ needs. “DIRECWAY Unified Broadband introduces the simplicity, convenience, and availability enterprise customers have been waiting for,” said Mike Cook, senior vice president of sales and marketing for Hughes’ North America division. “As the name implies, it unifies multiple access technologies and service providers into a single network with one interface and one service agreement. Businesses across North America will finally be free to focus on their core objectives—not having to manage multiple vendors and technology options.” The DIRECWAY Unified Broadband suite of services combines all relevant satellite and terrestrial transport options, thereby enabling the network to be optimized to the cost and performance targets of the enterprise, while still retaining the benefits of a single vendor solution. Changing the Vendor Paradigm “DIRECWAY Unified Broadband is as much a mindset as it is a service,” said Cook. “It’s about giving customers the right broadband solution for their business, no matter what pieces are required to put the end result together. Business can turn everything over to Hughes and concentrate on their own goals.” A true turnkey managed VPN solution, DIRECWAY Unified Broadband lets businesses select and tailor enterprise-grade service levels to match their requirements. Customers can choose between standard access and managed network offerings, with either private “There are no limitations network or Internet topologies. now. Only powerful network The comprehensive service solutions tailored to our includes ordering, provisioning, installation, maintenance, and customers’ business goals.” customer support. Whether built with DSL, satellite, other technology, or some hybrid, each network is fully scalable to efficiently support the introduction of new applications and shifts in customer strategy. DIRECWAY Unified Broadband delivers the precise services required to keep track with business growth and changing objectives. This results in a network that is as agile and flexible as the business itself. What more could a large enterprise want? The Best of Both Technologies DIRECWAY Unified Broadband means networks are tailored to the requirements of the enterprise. Satellite broadband brings the advantages of ubiquity, highly efficient multicast and broadcast delivery, plus long term costeffectiveness. On the other hand, DSL terrestrial transport offers an efficient environment for certain latency-sensitive applications. When the two technologies are deployed together in a load-sharing or backup configuration, network availability of nearly 100% can be achieved. But what drove HNS, a leader in satellite network technology, into the terrestrial world? “Hughes has been managing satellite enterprise networks for Fortune 500 companies for over two decades,” said Cook. “Today, more enterprise locations are under Hughes management than any other managed network provider. So DIRECWAY Unified Broadband is a natural extension. It simply turns what we’ve been doing into a packaged service and builds upon our experience in managing mission-critical networking.” Of course, HNS will continue its focus on developing satellite technologies and expanding its leadership in the satellite market. “But we’re always on the lookout for new ways to give our customers what they need, using satellites and beyond,” added Cook. DIRECWAY Unified Broadband also leverages Hughes’ extensive experience in program and network management, with integrated service management, 24/7 proactive network monitoring, dedicated program management support, nationwide on-site maintenance, turnkey nationwide network deployment, and comprehensive service level agreements. Put simply, DIRECWAY Unified Broadband serves up the best new way of doing business in an affordable, tightly bundled package. “Hughes is an essential strategic network partner for any enterprise. DIRECWAY Unified Broadband allows us to provide exactly the right cost-effective solution to the enterprise and to continue to ensure that the network keeps pace with the changing needs of the business. For Hughes, the scope of our service offerings just got lot bigger. Our market opportunity just got a lot bigger and we look forward to being able to provide many more services to existing customers.” Channels / Summer 2005 / www.hns.com 7 ■ Hughes Network Systems Increases Presence in Asia/Pacific Region New regional office opens in India to support HNS office in Indonesia, this new office will lead HNS’ sales and marketing activities in the region. customers throughout Asia/Pacific Hughes Network Systems, LLC has announced that it has added a regional office in India to expand its sales throughout the Asia/Pacific market. Mr. Raj Bajaj has been appointed Asia/Pacific Regional Director and will be based at the HNS India headquarters in New Delhi. With support from the existing September 13 – 16 COMSYS VSAT 2005 London, England September 18 – 20 Retail Summit Phoenix, Arizona October 26 – 27 SATCON 2005 New York, New York November 6 – 9 FS Tech Grapevine, Texas HNS shows continued growth in consumer and small business segment HNS has been operating throughout Asia/Pacific for twenty-five years serving major industries such as banking and financial services, retail, automotive, oil and gas, lottery, government agencies, and telecommunications service providers. HNS continues to achieve record growth in its DIRECWAY® consumer and small business subscriber base. During Q2 2005, HNS’ total subscriber base has reached more than 250,000 customers, achieving double digit growth from Q4 2004. ■ Mobile Satellite Terminal HNS first to manufacture Class 1 terminal that Coming Events ■ DIRECWAY Hits Quarter Million Subscriber Milestone will work over Inmarsat I4 Satellite System The first Inmarsat Broadband Global Area Network (BGAN) Class 1 terminal to work over the new Inmarsat I4 satellite system is an exciting new offering. HNS will wholesale the product to distribution partners who will bundle it with the Inmarsat service and sell to end customers. The unique features of the Class 1 HNS 9201 broadband satellite IP terminal are: Highest data rates offered by Inmarsat: 492/492 Kbps transmit/receive Up to eleven simultaneous users Simultaneous use of all four interfaces: Ethernet, ISDN, USB and WLAN WLAN access point built in Selectable IP Quality of Service (QoS) Rugged design for permanent outdoor installation “HNS pioneered broadband by satellite to the consumer market and we are the leader in providing broadband services by satellite. For the past several years, we've continually improved both the quality and the speed of our broadband Internet access service,” said HNS executive vice president Paul Gaske. ■ packetPointe Communications Provides DIRECWAY Broadband to Maverik Country Stores Maverik reduces operational costs with enterprise-wide broadband satellite service packetPointe Communications, an enterprise solutions provider, is providing DIRECWAY broadband satellite services to all 170 Maverik Country Stores, Inc. fuel and convenience store locations. Before selecting DIRECWAY, Maverik researched and tested a number of data connectivity options, including dial-up, frame, and cable. Satellite proved to be the perfect fit. It is fast, reliable and cost-effective at every location. To read the full press releases of the above news bytes, go to www.hns.com and select News & Events, then Press Releases. If you would prefer to receive this publication electronically, please email your request to Channels@hns.com. First Class Mail U.S. Postage PAID 11717 Exploration Lane Germantown, MD 20876 USA Germantown, MD Permit No. 4413
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