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1. Summary

Hughes has continued its command of the


enterprise VSAT market selling close to half
the total enterprise VSATs globally over the Gilat
past two years with annual shipments running 25.2%
at more than 165,000 units – around twice
that of its nearest competitor. The company
maintained its market leadership, not just ViaSat
8.7%
through sales, but also with significant new
developments on both the HN and HX platform
- chief of which has been the introduction of iDirect
the HX260 mesh and multi-gateway product. 5.9%
With a new product sales strategy centred on DVB-RCS
the flexibility and advanced features of the 2.7%
system, the HX is now viewed as the primary IP Star
direct alternative to iDirect’s product 2.2%
Hughes
platform. Discontinued
50.2% Others 3.5%
1.7%
In the satellite consumer market Hughes is
Interactive VSATs - Vendor Historical
primarily focused on subscriber growth and
Enterprise Shipped Market Share
this rose to a healthy 433,000 subscribers in
the US by the end of 2008 – almost 50 per
cent of the North American market. Since
then, the company has posted record 500
subscriber growth, increasing its market share
and, at the end of 2009 had over 500,000 450
sites under its HughesNet® consumer service.
In total, Hughes shipped almost 320,000 400
VSATs across its product lines in 2009 – over
26,000 each month. 2009 also brought the 350
announcement of plans to launch Jupiter, a
Thousands of Subscribers

high-throughput, multi-spot beam Ka-band


300
satellite for North America, with over 100
Gbps of capacity.
250
With a product line that uses the same basic
architecture to deliver internet access to 200
almost half a million subscribers and yet is also
powerful enough to deliver multi-megabit, high 150
QoS meshed links to a specialist application,
Hughes has managed to achieve the virtually
100
impossible. Others can potentially match the
company in different segments, but none can
claim the flexibility and sheer application power 50
across so many potential markets as Hughes
can with its HN/HX family -
96 97 98 99 00 01 02 03 04 05 06 07 08 09*

Hughes Satellite Consumer HughesNet


Subscriber Growth in North America DirecPC 1-way
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2. Market Performance

2.1. Data Sources & Methodology

The information in this Executive Briefing was compiled from the latest 11th Edition of the
COMSYS VSAT Report, unless expressly indicated. Apart from information and product data
already held in our library, primary research was conducted with over 350 operators,
manufacturers and users to gather up-to-date information. Visits have been made to a large
number of existing and potential suppliers and service providers in Europe, Asia/Pacific, Africa and
North America. COMSYS maintains extensive databases on both the interactive star and mesh
DAMA VSAT markets and tracks a wide variety of information for all individual networks. This
forms the basis of most of the statistical analysis in this report.

2.2. Financial Strength

Hughes describes itself as the world leader in $1,200


broadband satellite networks and services, bridging
the best in satellite and terrestrial technologies.
$1,000
The company has dominated the interactive VSAT
business since the early 1980s when it was
instrumental in developing the technology which $800
created the industry. In 2002, before the sale of
some its businesses, it had revenues of
Millions US$

$600
approximately $1.2 billion and employed more than
2,500 staff worldwide. Today, the company is
$400
primarily focused on VSAT design, manufacture and
service and has managed to break the billion dollar
mark once again, recording revenues of $1.06 billion $200
in 2008. Looking at the company’s trading results,
it is clear that being a separate business has been $0
a good move for Hughes. In addition to its VSAT
product lines, Hughes also manufactures a range of
-$200
carrier-class microwave systems and mobile
02 03 04 05 06 07 08
satellite terminals, undertakes large scale
technology development contracts and has Hughes HNS Annual Total Revenues
interests in other software and services companies. Revenues and P&L, 2002-8 Operating profit/loss
The company is also the largest provider of shared
hub VSAT services in the world with leading positions in the consumer and enterprise segments in
North America, in Europe through Hughes Europe, in Latin America and Brazil through Hughes do
Brasil and in Asia through its Hughes Communications India joint venture in India.

2.3. Global Presence

Hughes is the 800 pound gorilla of the VSAT market and even the largest of the company’s
competitors generally try and work around it rather than go head-to-head. Those companies that
let their attention wander or make the mistake that theirs is a segment Hughes has no interest
in, get a rude awakening. The fact of the matter is that VSAT is Hughes and, in many ways,
Hughes is VSAT. The company lives and breathes the technology at all levels from chipsets to
installation not least because it lays claim to have started the industry with its early work in the
early to late 1980s. As its positive financial results have demonstrated every quarter since it
went public in 2006, what sets the company apart today and drives its growth is the service
business. Beyond technology and product innovation, over the past several years Hughes has
successfully morphed into being the world’s leading broadband satellite service provider as well as
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supplying a growing list of operators and service provider customers in the rest of the world with
its broadband technologies and products. As market leader, the company theoretically has
greater price latitude than any of its competitors. Up until the end of 2002, Hughes had won
over half of all the contracts greater than 1,000 sites and accounted for eight of the ten largest
corporate networks in service. The past two years have seen the company win 64 of the 161
largest corporate networking deals amounting to over 120,000 sites.

The company has built a momentum in the Mainstream NSS

N American Enterprise
Service Shares
0.4% 0.3%
corporate networking sector which is hard to Infosat Spacenet
0.9%
challenge and in certain areas, such as the 24.5%
Stratos
gas/convenience store business, it almost 0.7%

monopolises the segment. This helps it build Telesat


specialisation and recognition in a particular 2.2%

industry, gives it an advantage when bidding for USSC

that same company’s business abroad and gives 0.7%

it a great reference list which inspires Verizon


1.2%
confidence in other potential customers. The
past two years has seen Hughes continue to ViaSat
1.7%
grow its US shared hub service against the
Others
market conditions and its competition. When a 2.7%
company dominates a market to the extent that Hughes
Hughes does – holding three quarters of the 64.7%
managed enterprise VSAT business in North Novanet
America – it becomes hard to imagine that it 0.1%
SkyCasters
1.1%
can grow its share much more, but it has. Its
N American Broadband

Spacenet
Service Shares

progress is inexorable and its customer list is a 1.4%


Tachyon
testament in itself. Its nearest competitor has 1.3%
significantly less than 25 per cent the number Telesat

of sites in service. 7.4%


ViaSat
1.0%
In the consumer market, Hughes has
Others
maintained its position as the largest high- 2.8%
speed Internet by satellite provider in North
America. The past two years have seen the
company up its game several times, first with
the increased capabilities and greater Hughes
bandwidth efficiencies of the HN7000S platform 84.8%
and then with the HN9000 SPACEWAY® 3
terminal. Both initiatives brought service prices
down and significantly increased both speeds
N American Consumer

StarBand
Service Shares

WildBlue
and data volumes. SPACEWAY 3 entered 1.7% 43.4%
operational service in April 2008 and is an
advanced multi-beam Ka-band satellite. On-
board processing supports star, multi-star,
mesh and point-to-point connectivity and allows
the company to finally address the market for
small networks of around 100 sites. Known as
the mid-market, this segment is said to
account for 90 per cent of all the enterprise
networks in the US and so the potential is
dramatic. Although Hughes began using its
high performance SPACEWAY 3 satellite as Telesat
5.7%
part of its consumer service evolution, it has Hughes
49.2%
also begun to sell advanced video and
bandwidth-on-demand services to meet some
unique corporate and government customer needs.
page 4

Internationally, the company also plays a Others

Indian Shared/Captive
BSNL

Service Shares
leading role in all of the markets in which TataNet
2.7% 0.4%
Bharti
it competes and, where it does not have 4.7% 27.8%
its own operation, it is usually the
supplier to the dominant VSAT service
provider.

Hughes Communications India (HCIL) is


one of the most successful of the Indian Essel
2.5%
VSAT operators with almost 28,000 star
data VSATs in service at the end of 2008
Hughes
and booked orders for a further 20,000 31.2%
sites. In total, Hughes has delivered
almost 70,000 VSATs to India for shared
and private services. Its service remains
amongst the largest in the country. The HCL Comnet
company currently operates over 30,000 30.7%
TDMA and broadband VSATs on its various
managed service platforms. Mesh StarOne
Telespazio
Brazil Enterprise

services, based on the HX system, and


Others
Service Shares

5.7%
10.7% 2.2%
SCPC links account for a further 380
sites and more than 20 different Primesys
BT-LA Brazil
customers including several large cellular 12.0%
19.0%
backhaul networks.

Hughes do Brasil informs us that, as of


mid-2009, it serves almost 10,000 sites
for both end-user and operator
customers – up from 6,200 in 2006. The
company has grown by almost 50 per
cent annually since 2006. Brazil has been Hughes
a real success story for Hughes and 17.9%
through careful and intuitive management,
the company has grown from nothing to
Embratel
eclipse former leaders in the VSAT 32.5%
networking business.
Ufinet
W European Enterprise

AGN
Service Shares

Hughes Europe is the largest provider of 4.6% 3.1%


Telefónica Data
9.1% Dexar
enterprise VSAT networks and satellite Satlynx Multimedya
broadband services in Europe. The 9.5% 2.9%
company currently has approximately 10 Eutelsat
enterprise accounts with approximately 4.1%
31,000 enterprise sites in service and Avanti
5,300 broadband subscribers sold 3.7%
through a network of value added Hispasat
resellers. Enterprise reference accounts 3.3%
include Shell, Camelot, General Motors,
Volkswagen, BP and Asda. Hughes
Europe introduced its own version of
Hughes’ Unified Broadband service during
Others
2006 and, since that time has signed four 17.3%
Hughes
major contracts to provide this hybrid
42.4%
VSAT/DSL solution. In total, the company
now supports almost 50,000 managed
sites.
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2.4. Vertical Specialisation

As a consequence of its own leading consumer and SME satellite broadband services as well as
those of its operator customers, Hughes is well known for its ability to serve internet access on
both a mass and niche market scale. Something that is sometimes less obvious is the company’s
focus on more specific enterprise and application vertical segments:

Banking: Hughes VSAT platforms are in


Gilat

Banking Segment
use in networks for many of the world’s

Global TDMA Sites in Service


32.8%
largest banks including several national
central banks. At a service level, the
company is believed to have around 35
per cent of the Indian banking market
where it expects to see a huge growth in
the number of offsite ATMs – all of which iDirect
7.6%
are only served by VSAT which is the
most cost-effective, reliable and
responsive solution. In Brazil, Hughes
systems are in use at nine out of ten of ViaSat
the country’s largest banks. Across the 7.9%
world around 50,000 bank branches rely
on Hughes VSATs from Azerbaijan to
Zimbabwe. Hughes Others
42.9% 8.9%
Lottery networks have, over the past ten
years, moved from hybrid
Lottery Segment
Global TDMA Sites in Service

terrestrial/wireless/satellite solutions to
almost pure VSAT. The giant in the
lottery business is GTECH which is not Gilat
only Hughes’ largest customer, but the 36.1%

largest user of VSAT terminals in the


world. Hughes now has more than
100,000 sites in service for GTECH and
it was significant that 2008 saw GTECH
move its 70,000 lottery sites in the
United States to Hughes’ managed
services in a deal worth several tens of
millions of dollars. In addition, Hughes ViaSat
has supplied another 35,000 in other 1.6%

countries around the world, including the Hughes Others


single largest enterprise account ever 62.2% 0.1%

signed with Camelot in the UK for


28,000 which Hughes itself installed in
record time.

Media Distribution began as a focus area in North America, leveraged off the company’s
dominance in the retail and automotive segments. Hughes acquired Helius, a specialist
applications provider that focuses on the IP video market, in 2008 and integrated this technology
into its managed service infrastructure to support digital signage and other IP video applications.
The results were a considerable success with several thousand sites being sold during the first
half of 2007 and major networks provided to the US government’s Social Security Administration
and GETN networks in 2008. Hughes India has also been extremely aggressive in the segment
with a total domination of the digital movie distribution market in the country through customers
like UFO Moviez. The company supports a range of customers with media distribution applications
such as FM radio broadcasts to transmitter towers, consumer and business IPTV that can be
booked on an occasional use basis and specific content on private channels. Retail display digital
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signage is another area of development for the company in Asia, Europe, the US and Latin
America.

GSM Backhaul has been a high growth area for many operators and Hughes has participated
strongly with its own service operations, particularly in India and Brazil, but also in other markets
where operators use its systems in Africa, Latin America and Asia/Pacific. The company has
positioned its HX system as a specialised, cost-effective and flexible solution for cellular backhaul.

Education is a further segment of

Education Segment
specialisation for Hughes. In India the

Global TDMA Sites in Service


ViaSat
company began its own HughesNet Global 19.8%

Education service in 2002 which now


cover 500 classrooms and 5,000 Gilat
students at any point in time. HCIL has 26.4%

also supplied 15 hubs for the Indian


government’s EDUSAT program as well
as services to other private educational
enterprises. In Brazil Hughes manages
over 2,000 sites running distance
education for federal, state, and private
universities and technical colleges. In
China Hughes systems are used by
possibly the most successful distance Others
25.2%
education specialist in the world –
ChinaCast which has more than 6,500
Hughes
sites reaching over 131,000 university
27.4%
students.

Other highly specialised uses for which Hughes has adapted its systems and services include
mobility applications such as its partnership with Row 44 to service the aeronautical industry, a
maritime service covering North America and the defence market where its HX280 system
supports features specifically designed to meet the military’s need for highly customised comms-
on-the-move (COTM) mobile terminals capable of supporting multi-megabit mission critical
applications.
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2.5. Service Efficiency

The company continues to outperform in all aspects of the business - new sales, major upgrades
and contract extensions – and its momentum and expertise make it a hard competitor to beat.
As the enterprise market has become harder with lower cost DSL services, Hughes has met the
challenge with an integrated managed VSAT/terrestrial service, leveraging on its years of
experience running enterprise networks.

The following figure attempts to give an operator’s view 2,500


of the shared hub market, offering a comparison
between manufacturers of the number of hubs they
have sold to service providers and, on average, how
many active, billing terminals each hub supports. As 2,000
can be seen from the chart, Hughes leads in this area
maintaining a significant advantage over all of the other

Terminals in Service/Hub .
vendors.
1,500
Customers purchase Hughes VSAT systems because it
is the market leader, understands competitive pricing
and has cutting edge products, but also because there
is a confidence that the company will always overcome 1,000
any problems and the system will work reliably.
Furthermore, being a leading service provider that uses
its own products adds immeasurably to Hughes’
advantage when operators are deciding on Hughes 500
technology versus the competition. Hughes has
managed to walk the tightrope between innovation and
proven reliability which service providers in the
enterprise business require to the exclusion of almost 0
anything else. The company’s delivery of DVB-S2 ACM
Gilat

ViaSat

DVB-RCS
Hughes

iDirect
Others
on its platform more than a year ahead of anyone else
and the recent release of groundbreaking mesh and
multi-star capabilities on the HX system are cases in
point and there are examples of operators who have Active Terminals in Service/Hub
gained a critical advantage in the markets as a result.

2.6. System Leadership

Hughes’ presence casts a shadow over almost every player in the market. Its dominance of the
enterprise VSAT industry is remarkable in the fact that the company has been able to sustain its
lead for over twenty years and that it has rolled with the punches and constantly responded with
new developments which has kept it at the forefront of an intensely competitive market. Looking
back, the company’s product releases either catch the wave or begin it in the first place and the
engineering machine which lies at the core of the business is continually advancing the platform
and introducing new features. It doesn’t like to abandon a product line and is committed to
maintaining its customers’ investment in its infrastructure through backwards compatibility.
Hughes is the only company which has been able to demonstrate sustained leadership in
technology, market share and financial results in the VSAT business. Whereas GE, NEC, AT&T,
GTE, Contel, Qualcomm and Scientific-Atlanta have all fallen by the wayside, Hughes has powered
on through both their successors as well as newcomers. This undoubtedly gives its customers a
confidence which cannot be matched by others.
page 8

iDirect
11.2%
iDirect
9.8%
Gilat Gilat
21.6% ViaSat 28.3%
9.4% ViaSat
4.2%

DVB-RCS
DVB-RCS
2.1%
5.1%
Others
6.9% Others
4.7%
Discontnd
0.1%

Hughes Hughes
48.6% 2007 48.0% 2008
Interactive VSATs - Vendor Enterprise
Shipped Market Share

Almost invariably Hughes’ partners and operators have been strong, well connected and have sold
well. It is no coincidence that operators of Hughes hubs have, on average, many more billing
VSATs on their systems than their competitors or that the company’s ship to service ratio is the
highest of any of the major vendors. Another advantage of being number one in the market and
first into new regions has been that it has had the pick of the partners on offer. However,
Hughes has also proved itself to be perfectly capable of managing foreign business on its own and
in many of its ventures it has either bought out its original partner or assumed complete
management control of the business. The only times when it has had an obvious problem have
been almost exclusively when it had a minority position and in most cases it has exited from these
ventures. In terms of simply running its VSAT business from a basic value perspective, the
company has managed the two parts - international and North America - almost flawlessly.
Historically, it has of course, made mistakes including taking its attention away from customer
support, assuming an arrogant stance on some occasions and taking its foot off the development
pedal when, we assume, the demands on resources of SPACEWAY increased during 2000.
However, all these issues have largely been temporary and the company continues to march
forward seemingly inexorably.

Hughes has consolidated its early lead in the satellite broadband Internet access market and,
together with its enterprise business, the company has now manufactured and shipped more than
1.9 million Hughes broadband terminals. Combined with the PES system, over 2 million units have
been produced. This market is one which feeds on volume and, once again, Hughes stands head
and shoulders above its rivals. It alone has a highly successful service business that fuels its
manufacturing arm and challenges its engineers to improve product performance and quality while
driving down cost. The threat from the standards-based DVB-RCS system vendors has
evaporated, but iDirect continues to be strong in the small network segment, Gilat remains
extremely aggressive in the enterprise and ViaSat is a focused and very worthwhile competitor in
the consumer market. All are credible competitors and, we would argue, essential to keeping
Hughes on its toes, but it is interesting to note that in each different segment of the market, all
these companies have the same thing in common – their biggest competitor is Hughes.
page 9

3. Platform Features

Hughes is the only vendor with both a strong hardware business and a large service operation
with strength at all levels - technical, operational, sales and financial - to make a real difference in
the VSAT and the satellite marketplace. It faces competition from many sides, but this is no
different from how it has always been and now some of the newcomers need to look over their
shoulders to see what’s coming up behind them. This is especially so for those in the specialised,
high value, niche markets which Hughes has clearly targeted for its substantially enhanced HX
platform. One of the most impressive points about Hughes and its product line is that, from a
consumer to an oil rig, the same basic system is able to deliver world class performance and
consistently win half of the business on offer across so many different segments of the market.
It is easy to criticise a market leader, but market dominance of this magnitude does not come
from doing things wrong.

3.1. The Hughes Product Family

There is a differentiation between the HN and HX, although it is not necessarily immediately
obvious. Originally designed to meet the needs of large enterprise networks and the mass
consumer market, the HN System nevertheless shares substantially all of its architectural DNA
with the HX. The HX System is positioned as a more scalable system with enhanced quality of
service features, offering greater granularity than the HN System along with higher transmit data
rates and support for specialised applications.

The HN/HX is a powerful platform which combines the functionality of greater processing power
with high inbound speeds and yet manages to retain the price points which have made Hughes’
products such a compelling value proposition for so many operators and networks across the
world. When we first reviewed the system in 2005 we suggested that it would be a hard product
to beat. Since then Hughes has won more than 45 per cent of the orders placed in the global
enterprise market and shipped more than 380 hubs. It is all too easy to forget the scale of
Hughes’ achievement with the HN architecture. This is a product that scales from networks of a
handful of high-value sites demanding individual QoS to millions of consumer subscribers – no other
vendor is able to come close to such a claim. By rights, this should be a system of compromises,
kludges and shortcomings, but instead it commands around half of annual global sales and leads
each market in which it plays in terms of features, performance and price. With such a
competitively positioned product and a reputation for delivering advanced features on time and
providing a high level of support, Hughes is very hard to beat.

IP Routing: The Hughes remote terminal is a fully featured IP router with almost too many
standards-based IP protocols, services, performance and security features to list out. One
protocol that the company did not support until relatively recently was BGP – an essential
component required to integrate with MPLS. In a major bid the customer specified that BGP
must be an option and a competing vendor believed that their product held a critical technical
advantage over Hughes – it having taken them over a year to add BGP to their platform. However,
within a few months Hughes was able to turn in and demonstrate fully featured support for BGP,
illustrating the sheer strength in depth of Hughes’ engineering resources and its strong IP
expertise. IPv6 is also on the roadmap for a future release.

Cost of Ownership: One of Hughes’ initial design criteria for the HN system was to minimise cost,
especially considering the product had originally been intended for developed world consumer
markets. Even today this remains the case, but functionality and capability have increasingly been
integrated into the terminal. Bandwidth efficiency has also become a key element in new
systems. Hughes has committed major R&D efforts in this area, working towards substantially
improving the operational cost of owning its system as well as further enhancing its efficiencies.
The HN7000 is now available in three packages – the base HN7000 which has a single Ethernet
port, the HN7700 enterprise version and the HN7740 VOIP version. The terminal introduced
page 10

several important new features including inbound transmit rates up to 1.6 Mbps, turbo coding on
the inroute and DVB-S2 with ACM on the outbound channel as well as expanding the capability to
support all the fixed satellite frequency bands. It also incorporated more processing power and
greater memory, so more concurrent advanced and data intensive applications can be run through
the terminal.

Bandwidth Efficiency: Hughes has committed major R&D efforts to further improving its platform,
working towards substantially improving the operational cost of owning its system as well as
further enhancing its efficiencies. The HN architecture employs a high speed DVB-S2 outbound
carrier which is scaleable from 1 to a maximum 121 Mbps, depending on the transponder and the
link budget. DVB-S2 with adaptive coding and modulation (ACM) was a key development and
Hughes delivered the technology a full year before any of its competitors. The past two years
have seen Hughes continually add new features to the HN/HX Systems. It brought in integrated
encryption of traffic over both the inbound as well as outbound channels and AIS – Adaptive
Inroute Selection - a form of ACM for the inbound channel. Hughes’ design incorporates adaptive
inbound FEC coding, automatic alternate symbol rate changes, by frequency hopping the remote
to a different inbound channel, and dynamic uplink power control. The last of these has also
allowed the company to decrease the minimum required spacing between the return channels.
With this closed loop control between the hub and remote, the system continually and
automatically seeks out the most efficient transmission based on the link between each individual
remote and the hub.

The inbound channels consist of a series of receive demodulators and the access scheme
supports dynamic load levelling which provides optimised utilisation for Internet access. In 2008
Hughes introduced a new range of configurable burst demodulators for its hubs – compatible with
both the HN and HX platforms. These take the name Configurable Demodulator System (CDS) and
support multiple channel demodulation across a defined frequency range. The CDS comes in two
basic flavours – 10 Msps and 2.5 Msps. – with each able to demodulate up to 9 channels
simultaneously, all of which can be configured with different modulation and FEC rates. Not only
does this approach bring the total cost of ownership for an inbound channel down substantially, it
also further enhances Hughes’ AIS feature. Further bandwidth efficiency improvements are
planned with the addition of 8PSK modulation on the inbound channel.

Backwards Compatibility: The HN7000 is fully backwards compatible with all the products since
the 4000 series and requires only a software upgrade to the NOC. Maintaining the value of a
customer’s infrastructure has always been an important issue for Hughes and it managed to
maintain backwards compatibility on its original legacy ISBN/PES system for 15 years before the
trend towards IP finally forced it to break away with a completely new design in what is now the
HN system. This entire branch of Hughes’ VSAT family tree, from the original 4000 to the latest
HN7000S and HX50 terminals, operate on the same hub equipment, network management
system and back office (OSS and BSS) software. Only the specialised HX200, HX260 and HX280
units are limited to the HX platform. On the hub side, both Hughes systems – the HN and HX –
are able to support CDS and older RCD (Receive Channel Demodulators) in the same hub and
same network so existing users can simply expand their systems without any costly hardware
upgrades.

3.1.1. The HN System

Efficient Scaleable Internet Access: Alongside the HN’s secure and scaleable DVB-S2/ACM
forward channel, the inbound channels access scheme supports dynamic load levelling which
provides optimised utilisation for Internet access. The HughesNet inbound architecture provides
for a variety of Inbound Quality of Service (IQOS) features including guaranteed minimum
bandwidth for a remote or group of remotes. The IQOS features were developed to address
particular QOS requirements in the large scale consumer and enterprise markets. Hughes
believes that its method of supporting Internet access services is more efficient than its
competitors. In the first instance, the fact that the terminal is inactive when not used for a long
page 11

period of time means that the system overhead is low in comparison with systems which require
the transmission of regular timing bursts. The company claims efficiencies in excess of 90 per
cent - in contrast to the theoretical maximum loading of 36 per cent and practical limit of 20 per
cent for a contentious access TDMA slotted Aloha scheme. It believes that systems which use a
mix of contentious access and reservation modes cannot reach its level of bandwidth efficiency.

Manageability: Another area of development on the system has been with respect to the network
management system. This has taken two main thrusts. The first is improved usability with a
better front end and new GUI interface allowing an operator to monitor the health of the network
more quickly and in a more understandable and intuitive way. The second revolves around
increased configuration and control, with simplified and appropriately grouped tools. The HN NMS
has never been short on functionality or capability – this is not an area of concern for operators of
the system that we have interviewed – but the knowledge and training required to reach the
functions, which are often buried deep in the system, has been a source of complaint. Hughes
aims to remove these issues with its new NMS software, the configuration and control elements
of which were released at the end of 2009 to compliment the new “dashboard” that was delivered
earlier in the year.

Application Reach: Hughes’ core market remains the enterprise and one of its real triumphs has
been in its delivery of a system and terminal which leads both the consumer and enterprise
segments of the market in functionality and price competitiveness. Its abilities in the enterprise
network are demonstrated by the evolution of the platform to what is now a high speed IP
networking device in the form of the HN7700S. The enterprise market has changed considerably
over the past few years with the provision of basic broadband access for both large and small
businesses now a significant market. Larger corporations continue to require higher levels of
application support, yet are also beginning to demand broadband as a basic service to underpin
many of the web-based applications they are either running or plan to introduce. Clearly, the
HN7000S range of terminals represent Hughes’ integrated product suite to meet this demand.
The system is no less competitive in the consumer world and the addition of integrated VOIP
support is likely to be increasingly important as more operators attempt to reach further down
the market from the SME to the larger consumer opportunity. As this happens, particularly
outside North America, Hughes expects that its Ka-band capabilities will allow it to continue to
play a strong role as Ka-band capacity comes online.

3.1.2. The HX System

The HX system designed specifically for smaller networks with a high quality of service
requirement. Hughes took the basic structure of the larger HN system – including the DVB-S2
ACM outbound, inbound access schemes and the management system – as the core of the HX.
For this reason, observers can be forgiven for initially thinking the HX is little more than a cost
reduced version of its larger brother, but this is not the case.

Quality of Service: The ability to delivery high levels of guaranteed service in a much more granular
way that large scale enterprise systems need, or can even cope with, is one key feature and this
was possibly the largest task that Hughes set out to deliver in its HX system. As a
consequence, despite the fact that the company had a great deal of technology which could simply
be lifted out of the HN system, most if not all of the QoS software systems, including the
algorithms, needed to be completely re-designed. The company also wanted to raise the maximum
transmit rate of the remote terminal and to design an architecture that was both low cost and
yet scaleable. Traditionally, Hughes has been highly focused on maintaining backwards
compatibility in its systems, but as the HX system was targeted at new markets it was released
from this constraint and had a clean slate on which to start.

Low Cost with High Functionality: As a consequence, the HX offers an almost unique combination
made up from the advantages of highly scaleable, efficient, low cost technology taken from a
proven and successful product coupled with a hub systems and IP architecture designed from the
page 12

ground up. Hughes has long term plans for the system, but in the present version there are
several major differences between the HX and the HN:
 Quality of Service capabilities are significantly expanded with the ability to set service
guarantees by individual remote terminal and specific application. These include:
 Constant bit rate providing a uniform transmission rate to avoid jitter in applications
such as voice and video.
 Minimum committed information rate (CIR), guaranteeing the throughput of a
connection, with fixed steps to a maximum limited rate.
 Minimum CIR with best effort to a maximum limited rate
 Best efforts services - weighted fair queuing
 Class-based weighted prioritisation
QoS is also tied to an operator-defined priority queue which sets four levels of IP traffic and
allows the system to prioritise and rate limit the least critical traffic in an ordered fashion.
 Inbound transmission speeds have been raised from the maximum of 1.6 Mbps on the
HN7000S terminals to 3.2 Mbps on the HX terminals.
 Optional 256 bit AES encryption and other security features
 Optional spread spectrum operation for mobile applications.

Terminal Range: Hughes currently supports four HX terminal models all of which operate off the
same hub chassis with the HX50 serving as the base model.
 HX50: uses the same enclosure as the HN series, operates with the standard Hughes
proprietary RF range, has one serial and two Ethernet ports and can be expanded with the
same range of appliances available in the HN series.
 HX200: differs from the HX50 in that it can support higher symbol transmission rates (up
to 6 Msps versus 1 Msps) and comes in an enclosure which is both stand-alone and rack-
mountable. It is able to operate with either the Hughes proprietary saturated RF unit or
industry standard linear L-band BUCs. The terminal can also support spread spectrum
inbound channels as an option (which requires additional equipment at the hub) and has the
ability to take a GPS reference for mobile services.
 HX260: is where things become really interesting because the terminal supports all the
attributes of the HX200, but adds a fully featured mesh capability.
 HX280: is the “Rolls Royce” of the range, incorporating all the features of the HX system
as standard as well as several specific capabilities. These include spread spectrum and
other mobility functions, AES256-based FIPS 140-2 cryptographic security and Enhanced
Signalling Security which protects all data, management and signalling traffic.

Vertical Market Application: The HX system provides a solution platform for operators focused in
highly defined market segments such as the booming maritime stabilised business, oil & gas,
embassy network, GSM backhaul and multi-national corporate segments. Specific features have
been incorporated for high speed satellite backhaul circuits from the GSM operators and the
military’s need for highly customised mobile terminals capable of supporting multi-megabit mission
critical applications. The combination of a low entry point and a DVB-S2 ACM outbound channel,
especially in a market struggling with rising prices across the world and a real lack of satellite
capacity in some regions, has proven to be an attractive one. Additionally, the system offers
many of the advantages of the HN in that the HX50 terminal is priced similarly to the HN7700
due to the fact that it comes from a heritage of huge manufacturing scale.

Unparalleled Flexibility: The HX hub sub-systems incorporate a greater level of integration which
reduces the cost and size of the NOC. This was achieved by combining the IP and satellite
gateways, consolidation of ports and reducing the number of servers. The development of a
standalone, frequency scanning demodulator – the Configurable Demodulator System (CDS) –
which is able to support multiple inbound channels is the main foundation for the technology which
underlies the HX mesh networking abilities. When we reported about the HX in our last report
page 13

the direction and ambition that Hughes had for the platform was clearly laid out. However, when
Hughes announced the HX260 at the beginning of 2009, the mesh feature surprised even us with
its level of functionality and cost effectiveness. The new platform is designed to operate not just
as a full mesh, peer-to-peer network, but as a multi-star or hybrid network. The system uses the
CDS technology as its basic building block, although for mesh a 2 Msps unit is used rather than
the 2.5 or 10 Msps units available for the hub. The HX260 demodulator incorporates the same
technology as a hub station CDS which allows it to receive and demodulate up to four channels
simultaneously, each with different data rates, modulation and FEC. Thus, a network can be
quickly set up, controlled ultimately by the HX hub, with any-to-any connectivity between HX260
remotes. Additionally, the low cost star terminals – the HX50 and HX200 – can be integrated
seamlessly into a hybrid mesh/star solution all employing the latest, most efficient systems in the
market.

Multi-Gateway/Multi-Star: The HX has another trick up its sleeve, however, with a separate
gateway option. An HX gateway consists of a Traffic Manager (two for a redundant arrangement)
and up to eight mesh units (based on the CDS technology) – HX260 routers – which together can
support 16 Msps of capacity running up to 32 channels. The system can start small with a
Master Traffic Manager and a single HX260 (CDS) and grow incrementally, adding redundancy if
required. Several HX gateways can also be used in the same network controlled by an HX DVB-
S2/ACM hub. This allows multi-star networks to be deployed extremely cost effectively because
(we have left the best bit to last) the list price on the HX260 modem is $3,500 – effectively less
than 25 per cent of the cost of other TDMA mesh modems. Towards the end of 2009, Hughes
also released a software upgrade increasing the maximum inbound channel rate from 2 Msps to 6
Msps offering the ability to raise carrier rates for the star element of a network to around 9
Mbps.

Start Small: Of almost equal importance, the combination of the CDS and Hughes’ release of its
own hub modulator, has allowed the company to re-package its IF channel hub hardware
components. From a point a few years ago where a new IF chain would effectively require an
operator to purchase another hub, Hughes is now able to provide this capability for around
$70,000 – making it the first vendor to meet iDirect’s strategy head-on with an alternative
product. Considering the HX also has its mesh and multi-star capabilities, it is clear that iDirect
now has a serious competitor in the market segments which it has dominated and essentially
made its own for the past six years. Without question the HX system has breathed new life into
Hughes’ ability to address the total potential market rather than just the medium to large scale
opportunities. It also makes the Hughes product suite much more attractive to smaller
operators who are able to enter service with less upfront investment, grow different service
offers incrementally, flexibly and cost-effectively and yet have the potential to scale up to serve
massive networks if required.

Operators who have bought the system, several as a replacement or service platform upgrade to
competing products Hughes has targeted, tell us the HX’s capabilities are impressive and it
delivers exactly the kind of service that it was designed for. What is more, many operators are
looking for some kind of technical differentiation and, as a new product with a strong heritage, the
HX offers this as well as the security of stability. Hughes is a bankable name in this business and
its engineering capabilities are well known and respected, giving the customers we have
interviewed a sense of assurance with respect to the future of the platform and the support from
its manufacturer. Now the HX has industry-leading mesh and multi-star capabilities, it will simply
have to be on the shortlist of every procurement

3.1.3. Ka-band Platforms

It is hard to consider the HughesNet consumer service anything other than a great result for
Hughes. Over 500,000 subscribers is a considerable achievement and one that proves that a
market for consumer satellite broadband services undoubtedly does exist. The company’s
advanced OBP Ka-band spot-beam satellite, SPACEWAY 3, now serves as the primary satellite for
page 14

the service and was supporting almost 150,000 subscribers at the beginning of 2009. Hughes
has a defined and viable roadmap for the next few years as well as a truly integrated business –
from the design, manufacture and supply of the terminal to the ownership of the satellite and
provision of the service. As a consequence it would seem to us that Hughes has finally reached
the summit of a strategy which its vision put in place many years ago.

SPACEWAY 3 cannot be described individually as either a ground or a space platform, it is a


converged solution with the satellite and terminals integrated in a single design. It provides
coverage of all US states and most of Canada’s population. The satellite can be configured with a
capacity plan allowing between zero and 50 Mbps of capacity for each uplink cell to optimise the
spread of its available bandwidth across the system coverage. Each uplink cell has seven downlink
micro-cells – 784 in all – which the satellite sweeps constantly to deliver up to 440 Mbps. When
there is no data destined for a cell, the satellite bypasses it, thus automatically delivering the
downlink bandwidth where required. All user terminals are able to communicate directly in mesh
configuration with traffic being switched and routed on-board the satellite. We like to think of
this as “liquid bandwidth”, but Hughes describes the service as “Broadband Dialtone”. Whichever
is a better description, SPACEWAY 3 is possibly the most advanced commercial spacecraft ever
to be launched and has the potential to make a huge impact on the VSAT market in North
America.

In June 2009, Hughes announced its plans to launch Jupiter, a high-throughput, multi-spot beam
Ka-band satellite for North America. Jupiter will support more than 100 Gbps of capacity over
the United States and Canada when it is launched in early 2012 and will significantly augment
SPACEWAY 3’s capacity, becoming the primary consumer platform and freeing up SPACEWAY 3
for more enterprise and government services. In Canada, Barrett Xplore, the largest reseller of
satellite broadband service in the country which already has a SPACEWAY hub in service, signed a
$100 million agreement with Hughes to acquire approximately ten per cent of the capacity on
Jupiter to deliver broadband services in Canada.

Hughes’ HughesNet consumer service shows the value of its strategic positioning as the company
is able to carry its consumer service through the resources that it has in place for its enterprise
business which, in turn, feeds off the volume generated in the consumer business. Longer term,
Hughes’ VSAT platform development is most likely to focus on the next generation Ka-band
terminal and COMSYS expects that most new functions and features for this will also be
incorporated into an equivalent Ku-band platform.

4. About this Report

This Report was created for Hughes by comsys from extracts from The VSAT Report, 11th
Edition. No new material was generated for these extracts which are wholly-based on
comsys‘s independent, third-party analysis. The information, facts and opinions expressed in
this report belong to comsys and have not been written for or sponsored by any company or
party mentioned. More information on comsys, the 11th Edition of The VSAT Report and how to
purchase it can be found at www.comsys.co.uk.

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