Thursday, September 20, 2018

Panasonic adds Inmarsat GX to the Routing Table

Panasonic and Inmarsat have jointly announced an agreement to work together.
  • Panasonic will offer Inmarsat as their exclusive Ka-band satcom supplier
  • Panasonic will continue to operate and grow their Ku-band network 
  • Inmarsat will be able to bundle in Panasonic IFE and support as a part of their offerings
  • Panasonic and Inmarsat will jointly develop a new Inmarsat GX terminal
"Customer airlines will be able to select a product that represents the best that Inmarsat and the best that Panasonic offer together" declared Ian Dawkins, Panasonic Senior VP of Network Operations. "This is far more than a simple reseller agreement." 

Who Owns the Customer?

Inmarsat had prior reseller deals with Gogo.  The Gogo deal soured, and they went on to promote their own network.  Friction occurred when Inmarsat marketed direct to airlines, alongside Gogo.  How could Gogo compete reselling against Inmarsat selling?

Panasonic and Inmarsat are each free to market their combined capabilities in this new agreement. How will that play out in the marketplace? Who can offer the best pricing or features? If they carve up the potential customers, how will they feel about each other if/when any campaigns are lost? Panasonic has a deep portfolio and uses bundling features to undercut competition.  Will Panasonic tie their own hands to make it level-playing field? 

Dawkins alluded to designating one of the two parties 'primary' in each airline campaign.  For Ka-band offers, the proposal will be fully coordinated. For Ku-band offers, Panasonic is on their own.

Who Takes the Risk?

Dawkins would not comment on the specifics of how Inmarsat sells capacity to Panasonic.  

A key aspect in the sustainability of the relationship is how cost are accounted, especially since Panasonic has their own Ku-band network for comparison. Inmarsat will demand payment for using the GX network. Panasonic has many value-added services. There will be revenue. How and where will the profit accumulate?  

There are several key cost points that drive inflight passenger connectivity costs:
  1. Cost to procure, certificate, and install the equipment
  2. Cost to operate the service
  3. Cost to maintain the equipment
The cost to operate the service has the most uncertainty. 
  • How big will a session be?
  • What price-sensitivity is evident in the market?
  • What is the cost of capacity?
  • How efficient is the service managed?
If Inmarsat sells Panasonic raw capacity (GB or mbps), then Panasonic bears the vast majority of the risk. Inmarsat can very well predict their cost of capacity over the next ten years. Panasonic is witness to the market pricing trends to judge if Inmarsat cost is competitive.

If Inmarsat sells Panasonic sessions, and if Panasonic ties the sessions to a Quality of Service (QoS) metric, then Inmarsat bears all the risk.

If I had to guess, I think Panasonic will pay a wholesale rate for capacity to Inmarsat, but with other factors having to do with overall performance, that drives some form of Service Level Agreement. I don't see how to make a gross rev-sharing arrangement work, ignoring cost. Net rev-sharing means every cost gets accounted.

What about Ku band?

"We will promote the Ka service going forward, but if a customer insists on Ku, we will provide a Ku solution," says Dawkins.  On the other hand, this also makes an easy option for customers wanting to upgrade from Ku to Ka, in a sense covering their bases.

"We will have 4000 aircraft on our Ku network. We are spending millions of dollars on our XTS upgrades, with the APSTAR-6D payload, and with XTS upgrades coming to the US and Europe that are not announced."  

Is Ku band fatally flawed? Did Panasonic see the rapids ahead and bail out? For the near-term Ku band is fully capable to serve airline needs, and (I believe) more-so than today's GX. 

The issue remains, as Tim Farrar professes, that Ku HTS investments are paralyzed, and that the risk and timing for OneWeb to emerge as a savior is significant. Yet Panasonic confirms they are investing in Ku XTS in three separate regions; there is movement.

The metrics are clear. Thales, Hughes, O3B mPower, Telesat LEO, and of course Viasat and Inmarsat; are building Ka-band capacity.  There is room for both Ku band and Ka band. Spectrum is valuable in every band. Like nature, nobody lets an opportunity lie vacant. Ku-band slots will stay useful for many, many years. 

Dawkins did not foresee a multi-band terminal (Ku and Ka) in the near term, as they were modest in performance, heavy, and expensive. Dawkins did not close the door, foreseeing enhancements in the future that could make multi-band an attractive option. I can profess that, due to power and heat issues, our best options for large antennas will be single-band (Ku or Ka) for now.

Dodged a Bullet

No doubt Panasonic management is appreciative of the level of investment avoided by leveraging the Inmarsat GX network. It is far cheaper for Panasonic to focus their Ku-band service on their current airplane base, rather than to try to build it out for all the new airplanes connecting in the future, or organically building a brand new Ka-band constellation.

Who owns the customer is the holy grail. In this case, the customer is the airline. In most relationships, three is a crowd. Can Inmarsat and Panasonic serve airlines jointly, without friction? 

Dawkins is certain that this time, it will be different.

How Inmarsat will balance their reseller agreements with Rockwell Collins and with Thales remains to be seen.  Thales, particularly, has been quite aggressive building up their own Ka-band service over North America and seems well positioned to go it alone.

Stay tuned,

Peter Lemme

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Follow me on twitter: @Satcom_Guru
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Peter Lemme has been a leader in avionics engineering for 37 years. He offers independent consulting services largely focused on avionics and L, Ku, and Ka band satellite communications to aircraft. Peter chaired the SAE-ITC AEEC Ku/Ka-band satcom subcommittee that developed ARINC 791 and 792 characteristics, and contributes to the Network Infrastructure and Interfaces (NIS) subcommittee developing Project Paper 848, standard for Media Independent Secure Offboard Network.

Peter was Boeing avionics supervisor for 767 and 747-400 data link recording, data link reporting, and satellite communications. He was an FAA designated engineering representative (DER) for ACARS, satellite communications, DFDAU, DFDR, ACMS and printers. Peter was lead engineer for Thrust Management System (757, 767, 747-400), also supervisor for satellite communications for 777, and was manager of terminal-area projects (GLS, MLS, enhanced vision).

An instrument-rated private pilot, single engine land and sea, Peter has enjoyed perspectives from both operating and designing airplanes. Hundreds of hours of flight test analysis and thousands of hours in simulators have given him an appreciation for the many aspects that drive aviation; whether tandem complexity, policy, human, or technical; and the difficulties and challenges to achieving success.

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