Inmarsat: Maritime satphone customers okay with satphone service price hike

Inmarsat may have raised prices on handheld satellite telephone services, but its customers reportedly remain loyal and its maritime VSAT rivals were supposedly mistaken about the effect of its new pricing policy.

The London-based satcom company reported that it currently controls a 10 percent share of the handheld satphone market. 65,000 customers are active Inmarsat subscribers.

Rival mobile satcom service providers Iridium Communications and KVH Industries have alleged that Inmarsat is losing customers because of price hikes and the failure of a new Inmarsat L- and Ku-band product to win market favor. But Inmarsat declared that its decision to raise prices on certain services did not have any negative impact on its core maritime customer base.

In the last few years, Inmarsat has broadened its business scope in reaction to two separate threats. The first threat were the satellite telephone handsets produced by Iridium, Globalstar, and Thuraya, which took land-mobile communications business away from Inmarsat.

Inmarsat counterattacked with the introduction of its IsatPhone Pro in 2010. IsatPhone Pro was a lower-cost alternative to competing satphones, and Inmarsat intended to take a 10 percent share of the satphone market with it.

In an Aug. 3 conference call, Inmarsat Chief Executive Rupert Pearce said that the company's 10 percent goal had been reached with the sale and activation of 65,000 IsatPhone Pro handsets. “We have successfully reinserted ourselves into the satellite-phone sector,” Pearce said.

The second threat was directed at Inmarsat’s key maritime market. Iridium and other companies were selling Ku-band VSATs that offer far higher throughput than Inmarsat’s L-band satellite network, for lower per-megabit cost.

Inmarsat initially responded with its $1.2 billion, three-satellite Global Xpress program. The company then introduced its Xpress Link dual package to entice customers to subscribe to Inmarsat while waiting for Global Xpress.

In mid-2011, Inmarsat purchased maritime VSAT provider ShipEquip. It combined a ShipEquip Ku-band VSAT antenna with a separate, smaller antenna for Inmarsat’s Fleet Broadband L-band maritime service to create the Xpress Link package.

Customers who purchased Xpress Link will get Global Xpress hardware once the latter system is operational. Inmarsat also increased the prices of earlier-generation Inmarsat B and Fleet products to encourage customers to migrate to Xpress Link.

Inmarsat also modified its Fleet Broadband pricing policy so that customers will pay a fee for Fleet Broadband even if they never use it.The new pricing aimed to discourage ship owners from using the Inmarsat product as a rarely-used emergency backup to a VSAT antenna produced by a rival company.

Iridium and KVH sought to turn Inmarsat's new pricing policy against it. Iridium Chief Executive Matt Desch cited Inmarsat as one the main reasons Iridium’s maritime VSAT business is growing. “Inmarsat’s helping a lot with their price changes,” Mr. Desch said in an Aug. 2 conference call, claiming that their rival company was “competing with their customers and a little confusion as to their strategy.”

Similarly, KVH Industries claimed Inmarsat’s Xpress Link service has failed to challenge KVH’s TracPhone V-series of Ku-band antenna. KVH reportedly shipped over 2,500 maritime VSAT systems. Later in 2012, it plans to offer a new C-band product with a 90-kilogram antenna with dual Ku-/C-band links and a global reach.

In comparison, Inmarsat’s Xpress Link is comprised of a 1.7-meter-diameter global VSAT Ku-band antenna that weighs twice that of the planned KVH product. And that's not including the 60-centimeter Fleet Broadband antenna. Or the refrigerator-sized assembly that both antenna are attached to.

KVH Chief Executive Martin Kits van Heyningen opined that Inmarsat's Xpress Link was “not an elegant solution.” He also claimed “that doesn’t seem to be getting a lot of traction in the market right now.”

Mr. Pearce rejected both assessments by Inmarsat's rivals. “We are not seeing a material erosion of any kind in the maritime market,” Pearce declared in the Aug. 3 conference call. He pointed out that more than 30,000 Fleet Broadband terminals had been installed by now. Those terminals included the nearly 2,300 units installed during April, May, and June. “The VSAT incursion,” he dismissed, “which was never particularly material, has slowed considerably.”

Mr. Pearce also made an issue of how KVH’s C-band product would encounter regulatory issues when used in certain regions less than 200 nautical miles from shore. Inmarsat spokesman Christopher McLaughlin expanded on Mr. Pearce's declaration by explaining that terrestrial wireless operators in certain regions generate interference over the C-band.