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In the synergistic cycle we are experiencing in the broadband business, market demand for services drives technology and product development, which in turn fuels demand for ever more bandwidth-hungry services, spurring the next wave of new products to deliver them. That positive feedback cycle has validated our company strategy started some years ago of expanding beyond supplying technologies and products to become a leading broadband services company, yielding more predictable recurring monthly revenue together with equipment sales.
Consider the fact that three years ago, 35 percent of our international revenue came from services. Today that number stands at 60 percent. And companywide, it is approaching 70 percent. Let’s take a look at some of the important trends we’re seeing around the world that are contributing to that change.
Having saturated most high-population markets, many cellular GSM operators are now seeking ways to cost-effectively expand services to rural and more remote areas. Unlike microwave, cable, or fiber backhaul technologies, for which costs are labor intensive and distance-related, satellite backhaul is proving to be an economically feasible answer. Hughes is already delivering these solutions in many countries, including Indonesia, Bolivia, Russia, and Brazil. Some governments—Brazil’s, for example—are tying the deployment of GSM backhaul in rural areas to the granting of licenses. Market estimates exceed 100,000 cell sites globally that can be reached cost-effectively with satellite backhaul, bringing communications to rural and remote populations.
Recognizing the social and economic importance of broadband access, particularly in the area of education, many countries are providing funding to fuel its expansion through the creation of universal service obligations, by which operators are required to provide broadband services to rural areas. For example, Mexico is providing distance learning through its e-Mexico project, which today has over 50,000 points of presence. Another example is in India, where the government is subsidizing communications through HughesNet kiosks, which serve as mini-Internet cafés to provide pay-as-you-go Internet access to the community, as well as eGovernance services such as issuing certificates, deeds, and driver’s licenses.
Starting in the U.S. with our SPACEWAY® 3 satellite system launched over two years ago and spreading to Europe with the launch of Avanti’s HYLAS 1 satellite this summer, Ka-band technology is quickly expanding across the globe. The reason is simple—customers want higher speeds and more sophisticated applications at lower prices. With a larger bandwidth than Ku-band, plus frequency re-use capabilities with spot beams, Ka-band satellite technology enables the delivery of higher speeds at lower costs, creating fertile ground for the expansion of affordable, high-speed broadband communications.
Today, many companies are seeing the benefits of outsourcing their network services. Because their business is to sell products or services not related to networks or communications, they don’t want to spend time and resources focusing on their networks. By providing a value-added managed service that’s both cost-effective and reliable, Hughes is well positioned to assume this role for all corporations, as we are doing today for large enterprises like BP across Europe and Camelot in the U.K.
Hughes is one of the most innovative technology and service providers in the world. As the top broadband satellite service provider, we must not only design for the lowest cost and highest performance, but also constantly provide new features to deliver successful services. That gives us the unique ability to set up any organization with instant service provisioning capability. We can provide market-leading, proven technology together with the required service provisioning, customer care, and back office systems. If someone has the desire and the funding to become a service provider, Hughes can help realize that within months. That’s a unique capability.
Hughes products and services are present in more than 100 countries, and all of our markets are experiencing growth. Hughes do Brasil, our growth superstar, has been growing at an average rate of 35 percent for the past four years, with customers in a variety of markets such as education, banking, and cellular backhaul leading the way. We serve many customers across the Asia/Pacific region, including Indonesia, Malaysia, and Japan. We provide comprehensive system solutions in the Middle East and Africa, including a substantial network that provides voice, video, data, and security observation to embassies in Saudi Arabia. In Russia and the CIS countries we provide a range of broadband satellite solutions to a rapidly growing base of service provider customers, now numbering over 20 with nearly 30,000 broadband sites. And in India and Europe, our service companies are thriving.
Satellite technology has emerged as a vital element of the communications toolbox and we have only begun to scratch the surface of its potential. Our goal is to continually build on its capabilities and to provide the solutions and applications customers need, with the objective of reaching a sustained and profitable growth rate of 20 to 25 percent per year. To help fuel this growth, we are seeking ways to partner with successful service and systems integrator companies where the fit is complementary and increases value for all parties.
How do we succeed? By listening to customers and their needs—and then designing solutions that will serve them economically. If we can do that, our growth can be beyond anyone’s imagination.