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Hughes Network Systems, LLC
11717 Exploration Lane
Germantown, MD 20876 USA
P: (301)-428-5500
F: (301)-428-1868
By Grand Barber, Executive Vice President and Chief Financial Officer of Hughes
In this issue, we speak with Hughes Executive Vice President and Chief Financial Officer Grant Barber about the company’s major milestones in 2015 and ask him to detail what we can expect in 2016 and beyond.
Q. Last year saw a long list of major achievements for Hughes. Can you summarize the key financial results and how it positions the company for 2016 and beyond?
A. Hughes finished 2015 with another record year in both revenue and earnings. Revenue was $1.35 billion—a first in Hughes history. Earnings also grew, at a faster pace than the year-overyear revenue, which we’re very proud of. As a finance person, you look to grow earnings and generate cash faster than revenue. And as a leader in the satellite industry, it positions us well into 2016 and beyond, because we can leverage that with some of our new initiatives.
Q. Which major milestones from 2015 or expected in 2016 are most notable?
A. Our consumer business is the largest revenue driver and has the highest visibility. In 2015, we crossed a significant milestone of 1 million HughesNet® subscribers in North America. But all three of our other businesses—International, Enterprise (which includes government) and Mobile Satellite—were success stories in 2015, with significant long-term orders and bookings. That confirms our ability to compete and win across all market sectors globally, which bodes well for 2016 and the coming years.
Looking to the near future, the launch of Echostar XIX later this year—with over 180 Gbps capacity—will add significant capacity to grow the North American market, including solid partners in both Canada and Mexico. And the recent successful launch of Eutelsat’s 65W satellite—of which we have leased all the Ka-band payload—sets the stage for us to launch HughesNet consumer broadband service in Brazil during the second half of 2016.
Q. With Hughes launching HughesNet services in Brazil, can you address how long Hughes has pursued this initiative and the type of investments or partnerships required to make it happen?
A. Hughes has steadily built a successful enterprise business in Brazil since 2003 and now has the necessary network operations and customer care to tackle the consumer side. The market demand on the consumer side is clearly there for the taking; and the final needed step culminated last year, with availability of the required Ka-band satellite capacity from a trusted partner and with the ability to launch the service from a regulatory point of view.
Our goal in Brazil is to replicate our successful North American model, where we have retail operations that sell direct, together with a series of wholesale partners, dealers, and agents to reach critical customers we may not be able to reach directly. That model is being established with chosen partners as we speak.
Q. Hughes is both a leading broadband technology and services company. Can you describe the company’s long-term strategy and how it drives ongoing success in both dimensions?
A. If you look back at our history, we were satellite-based. We’ve evolved, as have our customers’ demands and networks. Today, with HughesONTM, we’re able to provide hybrid services, which may include terrestrial and satellite capability, bandwidth management, and failover network management. The compelling benefit to our customers is there’s one throat to grab—one contractual commitment, one bill, and one quality of service, regardless of the access technology. That’s a significant advantage that Hughes offers our customers, domestically and around the world.
Q. Your financial team has been instrumental in helping to grow Hughes and EchoStar overall. Can you tell us more about your team’s composition, strengths and the vision for your organization?
A. We have a unique model. Each one of the business groups has a finance prime who works for them under my guidance. That resource provides financial leadership; and enables the business group leaders to have a key person on their team who can ensure they have all the financial aspects required for their quotes, costs, projections, and activities.
Because Hughes is a multi-billion dollar company serving a diverse base of customers in over 100 countries, my team has tremendous opportunities to move up within the various functions or move across to something new. For example, if you cut your teeth in manufacturing, then roll to International, and on to the Enterprise area, you gain a different perspective and breadth of experience. Each team member has that opportunity at Hughes without having to face a career dead-end and leave the company to gain that expertise.
Q. For the past several years, Hughes has had healthy growth in both sales and profitability. Looking forward to the next 5-year plan, what would you say are some of the key factors to ensure continued success?
A. One key factor is change. When we handle network management for a customer on a typical 3 to 5 year deal, it’s a certainty that there’s going to be significant change as technologies and applications evolve. Digital signage is a good example. A few years ago, our customers had no idea what it was. Now, they realize that with Hughes as their key partner, we can bring in both customer-facing point-of sale training, inventory management, and employee training, or breakroom TV—all on the same platform. And, we can reduce their overall bandwidth management and costs. This wide range of benefits embeds us into their business fabric and keeps them a happy Hughes customer.
There are many other such product and service related innovations that our stalwart engineering and marketing teams are always working on—too many to talk about here. But that factor of innovation is what defines us and is why Hughes continues to be the leader it is. And with being part of the EchoStar family, we are now also expanding the opportunities to team together. For example, on the EchoStar Mobile initiative in Europe, Hughes is building part of the ground infrastructure. Brazil is another example of joint activity. And Sage by Hughes, the novel home security system developed by EchoStar Technologies, is being launched this year with heavy Hughes involvement from the back-office area to the planning and development of the business. These teaming initiatives open ever more horizons of opportunity and fuel further growth for both EchoStar and Hughes.
February 2016 saw the 33rd running of the exciting Yukon Quest 1,000 Mile International Sled Dog Race, an arduous challenge facing man and animal from Fairbanks, Alaska to Whitehorse, Canada. And for the third successive year, the many judges, staff, volunteers and veterinarians who operate this much followed event stayed connected with each other and the outside world over HughesNet® high-speed satellite service.
HughesNet—the nation’s leading satellite Internet service with over ! million active users—is the Official Communications Sponsor for the U.S. portion of the race. High-speed Internet access and Voice over Internet Protocol (VoIP) service is essential to quickly and efficiently communicate weather updates, course warnings, and other information to make the race safer. It also enables officials to update results on the website and steadily feed information to fans and media around the world.
“So much of executing the Yukon Quest hinges on being able to talk to each other up and down the trail,” said Marti Steury, Yukon Quest Executive Director – Alaska. “Months of preparation go into the race, but with so many people moving around at once, it’s impossible to anticipate everything that can happen. The high quality of HughesNet service enables our race staff to talk instantly and resolve situations quickly and accurately.”
The Yukon Quest officials responsible for major operations during the race—Marshal Doug Grilliot, Manager Alex Olesen, and Head Veterinarian Dr. Nina Hansen—relied in particular on the satellite VoIP service to coordinate operations up and down the course. Telephone access between checkpoints enabled them to speak directly and with their team members to help keep the dogs, mushers, support crews and Yukon Quest staff safe as they crossed the difficult Arctic terrain.
“We don’t have time for committee meetings. We have to decide and go. The Hughes HX system helps us knock hours off the decision-making process. That increases safety levels and our team’s productivity,” Grilliot said.
“The Yukon Quest is the ultimate challenge for our technology— a challenge we’ve met three times now,” said Peter Gulla, senior vice president, marketing, Hughes North America. “Our satellite units have worked in extreme cold over vast distances in all kinds of weather to provide the Yukon Quest with voice and data service for managing the race and keeping the world up to date on each development in real time. We’re glad that we can help the race run as safely and smoothly as possible.”
Hughes partner Will Johnson, owner of Alaska Satellite Internet, installed the Hughes satellite terminals on the U.S. half of the Yukon Quest trail. Johnson flew the Hughes HX systems to six U.S. checkpoints—landing on roads when no landing strip was available—then set them up and managed network operations throughout the race.
The Hughes Defense and Intelligence Systems Division (DISD) partnered with the Australia Defence Force (ADF) and the United States Military at Talisman Sabre 2015, a joint training exercise, to test its advanced Time Division Multiple Access (TDMA) waveform technology. ADF used the Hughes HX System with advanced waveform technology to deliver high performance satellite connectivity and has plans to deploy it in future military exercises.
Colonel Shaun Love, Director Land Network Integration, ADF noted, “Australia is still maturing its understanding of deployed TDMA Satellite Operations, and the support from Hughes was fundamental to both the successful outcome of the exercise, and educating the Army on planning and executing operations utilizing TDMA waveforms.”
Talisman Sabre 2015 was the sixth biannual joint training exercise conducted with ADF and the United States Military. Thirty thousand Australian and American forces participated—the largest exercise of the year for ADF. Hughes DISD spent a year participating in trials leading up to them and provided Field Service Representatives in support of the SATCOM architecture deployed.
“Advanced TDMA waveform technology is critical for efficient global military satellite communications,” said Dan Losada, senior director at Hughes DISD. “Hughes is pleased to see the Australian Defence Force experience stronger battlefield communications with our technology and we look forward to continuing to support the Australian Army in the future.”
Hughes award-winning technologies and services transform daily lives of millions around the globe.
For Hughes, 2015 was a banner year. Revenues and new orders each exceeded $1 billion, HughesNet® crossed over 1 million active users in North America, and globally Hughes surpassed 5 million terminals shipped to customers in more than 100 countries. And if any further testimony was needed of its combined leadership in broadband technologies and services, the Federal Communications Commission reported that HughesNet Gen4® delivered advertised download and upload speeds at higher rates than any other Internet Service Provider (ISP)—satellite or terrestrial broadband provider—in the U.S. All of these metrics are impressive, but the real and tangible results can best be seen in how Hughes technologies and services are changing the way we live, work, and play—around the world.
Web Access and So Much More
The Hughes Jupiter™ System, which powers HughesNet—the world’s largest satellite broadband network with over 1 million subscribers in North America—has now become the leading choice of operators around the globe for delivery of satellite broadband services in both enterprise and consumer markets alike. In North America alone, service volume for over 1 million subscribers downloading more than 150 million web pages daily, equates to peak traffic reaching 90 Gbps. Whether users are surfing Amazon, or downloading from iTunes, or Skyping with friends, that traffic represents a transformation in how we shop, share information, post photos, listen to music, and keep in touch. It also points to a shift in how we watch movies and TV shows, with streaming video accounting for an increasingly larger percentage of both uploads and downloads. Each year, we witness dramatic changes in how we tackle everyday activities—all made possible by the types of high speed services delivered by Hughes technology.
The Broadband Boost
As the 2012 report, The Impact of Broadband on the Economy by the International Telecommunications Union (ITU) noted, this is not just about delivering connectivity for social communications. “It is about leveraging the power of broadband technologies to make the world a better place.” For example, the report cited that every 10% increase in broadband penetration yields an increase of approximately 1.2% in GDP per capita, across both developed and developing economies alike.
For countries like Brazil, which has large populations outside urban centers unserved or underserved by terrestrial broadband, there is great anticipation—by businesses and consumers— surrounding the launch in mid-2016 of HughesNet® satellite broadband service and its ability to have a positive impact on Brazilian communities and their economies.
Developing communities also demand strong public service infrastructures. Broadband connectivity augments the delivery of critical utility services, including electricity, gas, water, and telephone. Beyond merely boosting local economies, these services transform the living conditions of people around the world.
Data Driven Business Decisions
For enterprises, large and small, broadband plays a central role in both customer and employee-facing operations. For example, in the retail sector, a Hughes Guest Wi-Fi solution enables shoppers to log-in to Wi-Fi services inside the store which in turn activates “presence analytics.” The Hughes solution then provides the retailer with report data in real time about the customer’s activities within the store.
How does that impact a store’s operations? It allows the retailer to make real-time decisions to benefit the business as well as its shoppers. Perhaps the manager decides to open up more checkout lines to reduce wait times; or analyzes foot traffic and reconfigures store displays for better engagement and interaction; or uses insights to target stronger in-store promotions or offers. For the shopper, it means enhanced and personalized service at the point of sale.
More often than not, all of this simply happens behind the scenes. And we see the end results when the coffee pot turns on, the emails arrive, the video streams, and the salesperson offers assistance. In a million different ways for millions around the globe, Hughes technologies and services make daily life better.
HughesNet is the founding sponsor of the STEM Pillar Award, one of four Youth in Action (YIA) Awards, given to an outstanding 4-H’er who will serve as a yearlong STEM ambassador for both 4-H and Hughes. This year’s winner is Thaddeaus Hughes, an 18-year old from McLean County, Illinois. He has been instrumental in bringing science, technology, engineering, and math (STEM) education to his community, creating competitive robotics teams, and mentoring middle and high school students. During his stint as Ambassador, Hughes will attend a Congressional breakfast, publish a blog and video posts, speak with the press, and attend local events.
The National 4-H Council’s 4-H YIA Award is one of the highest honors a member can achieve. Winners are eligible to receive up to $15,000 in scholarship funds and one overall winner is chosen annually as part of Grow True Leaders Week. With a shared passion for STEM, the National 4-H Council and Hughes have partnered to inspire the next generation of scientists, building future leaders and powering our country’s competitiveness in the global economy.
On March 1, 2016, the HughesNet®/National 4-H Council partnership was named a Halo Award finalist for excellence in cause marketing in the education category by introducing youth to STEM and igniting their interest in science activities. Sponsored by the Cause Marketing Forum, the Halo Awards recognize the most effective partnerships between companies and nonprofit organizations.
“Each year, as cause-related marketing gets more sophisticated, we receive an increasing number of strong submissions into the Halo Awards. Being named a finalist is an industry honor and demonstrates a level of accomplishment in campaigns that combine purpose and profit,” said Cause Marketing Forum President David Hessekiel.
“We are thrilled to see our partnership with HughesNet be recognized as a Halo finalist for cause marketing,” said Jennifer Sirangelo, president and CEO, National 4-H Council. “This honor is a result of committed teams that, in just two years, have built a world-class partnership that exposes underserved youth to a life-changing range of experiences and opportunities in the STEM fields.”
At this year’s Satellite2016 industry conference in March, the Mobile Satellite Users Association (MSUA) honored Hughes as a “Company to Watch” with two innovation awards. In the Top Government Mobility Satcom category, Hughes was named for its HM300, a rugged, commercial off-the-shelf and ultra-compact X-band terminal with the smallest footprint offered in the industry that can operate on any X-band service. In the Top Aeronautical Mobility Satcom category, Hughes was named for its advanced HM200 airborne modem and antenna.
The event drew a crowd of over 80 satellite professionals from more than 35 companies, with nominations representing innovations in aeronautical, government, machine-to-machine, maritime and emergency response communications.
For the second year in a row, the Hughes Channels Newsletter has been awarded the Platinum Award, #4 in the top 25, and Best In-House Inspire Award from the League of Communications Professionals (LACP). LACP’s goal is to promote best-in-class practices in communications and recognize those who demonstrate exemplary communications behaviors. According to LACP, each competition routinely includes hundreds of entries from Fortune 500 organizations, non-profits, and corporations from a range of industry sectors.
Arunas Slekys, vice president of corporate marketing, commented, “This is a testament to our winning team that consistently gets out the stories of how Hughes innovations are changing lives for the better. Congratulations to Eric Gann, Aaron James and the Corporate Marketing Team, supported by PUBS, Graphics and external support groups, Kim Murphy (lead writer), Design Pond (lead designers), and Rockville Printing (printer/eBook).”
For distributed enterprises, the branch is where 80% of employees work and where most of the business is conducted. Not surprisingly, many are moving to a new IT architecture where cloud and Internet-based applications play an increasingly critical role and are seeking a Next Generation WAN architecture that will enable this transformation. Achieving high capacity and efficient application performance that is both secure and cloud-friendly is the primary challenge—with the right economics for large branch network deployments. An emerging solution which promises to meet these requirements was discussed at the recent Hughes User Group (HUG), namely Software-Defined WAN, or SD-WAN, with the following capabilities:
As both a technology and services leader with a long history in managing large enterprise networks and optimizing broadband performance, Hughes is in a unique position to deliver SD-WAN across all verticals.
Enter the Hughes SD-WAN Solution, which leverages the HR Branch Gateway and is powered by ActiveTechnologies™ and the soon-to-be-launched ActivePath™. ActiveTechnologies transform ordinary broadband connections into enterprise-grade high performance networks and include:
Hughes ActivePath™ is the newest addition to the Hughes ActiveTechnologies suite for Intelligent Path Control—enabling the simultaneous use of multiple WAN connections at a branch site—and is a core technology underlying the Hughes SD-WAN Solution. ActivePath incorporates novel algorithms and techniques that exploit the use of multiple paths to improve application performance and increase resiliency. For example, it substantially reduces detection and failover times of network error conditions—from tens of seconds to just a few seconds. Network error conditions include not just outages, but also degraded conditions where the connection is still operational but intermittent, or ‘flaky.’ With such rapid recovery from WAN path failures, many data applications will continue to operate uninterrupted; for certain applications, such as VoIP, ActivePath supports hitless recovery, where no packets are lost even when a WAN path fails or degrades.
Ultimately, a Hughes SD-WAN Solution powered by ActivePath and the overall capabilities of ActiveTechnologies will deliver superior performance in a distributed networking environment—with the reliability and consistency required for mission critical applications, including offloading Internet traffic directly from a branch location. Most importantly, Hughes delivers it as part of a fully managed HughesON™ solution for enterprise WANs, resulting in Next Generation IT performance and productivity at the branch.
Look for ActivePath to launch later this year!
With the explosive growth in cloud and rich-media applications deployed at branches, distributed enterprises are seeking Next Generation WAN architectures that deliver high performance, better resiliency and security. Software-Defined WAN (SD-WAN) offers a compelling solution, along with improved flexibility and agility.
SD-WAN incorporates advanced technologies that leverage all WAN transport technologies, support secure VPN connections, and offload Internet traffic directly from the branch. A key component is the use of intelligent path control to improve application performance and increase resiliency.
A Hughes SD-WAN Solution powered by ActivePath and related ActiveTechnologies delivers superior enterprisegrade performance with the reliability and consistency required for mission critical applications. It also is part of a fully managed HughesON solution to simplify the design, implementation, and management of enterprise WANs.
An SD-WAN Powered by ActiveTechnologies
Hughes recently announced a major software upgrade adding significant capabilities to its industry-leading JUPITER™ System, the world’s most widely deployed highthroughput satellite (HTS) networking solution. These new capabilities extend the range of applications that operators can offer customers and maximize the economic potential of HTS satellite capacity.
Available immediately, the new JUPITER System 6.0 release includes enterprise features that expand market opportunities for operators, such as enhanced routing, satellite backhaul for 3G/4G LTE cellular networks, and dynamic satellite backup for terrestrial services. In addition, enhanced mobility features enable effective integration of the JUPITER System with transportable antenna terminals for services such as satellite news gathering and mobile banking, which have already been successfully implemented with several customers.
New Capabilities Equal New Markets
“The new enterprise features enabled by the JUPITER System 6.0 have opened up a number of new markets for our services,” said Gustavo Arditti, Director Negocio Satelital AMEP Telefonica Global Solutions - Media Networks. “They pave the way for our partners to engage with various enterprise opportunities, including the small-to-medium enterprise market segment.”
JUPITER System 6.0 also includes complete Virtual Network Operator (VNO) capabilities that maximize HTS capacity by allowing operators to allocate bandwidth, set up and manage multiple VNOs. Each VNO can create and manage its own independent set of service plans and subscriber base.
“In addition to enhancing the feature set of the JUPITER System, we also have increased its performance,” said Dave Rehbehn, vice president, International marketing, Hughes. “The JUPITER System 6.0 increases the return channel rate, enabling service providers to deliver higher value services for the applications that demand very high speed return channels, such as satellite news gathering.”
The first implementation of the JUPITER System 6.0 is at Media Networks Latin America, a business-to-business unit of Telefonica Digital, which is using it to launch new offerings to businesses throughout its service region. In addition, RSCC in Russia and Turksat also have upgraded to the JUPITER System 6.0 in their respective service areas.
In December 2015, the U.S. Federal Communications Commission (FCC) released its fifth annual “Measuring Broadband America Report–2015.” The FCC report evaluated satellite, DSL, cable and fiber Internet access services from 16 providers, covering over 80% of the country’s residential marketplace. It found that the HughesNet Gen4® service exceeded advertised download and upload speeds at higher rates than any other satellite or terrestrial broadband provider. Download speeds were consistently more than twice advertised, even during peak usage times. Similarly, upload speeds were more than 1.5 times advertised speed.
“The FCC’s report is especially gratifying because it confirms that HughesNet Gen4 consistently delivers on the performance promised to our customers,” said Mike Cook, senior vice president, North America Division at Hughes. “It gives validation to our entire team of engineers, technicians, customer service representatives, channel partners, and installers who work tirelessly to bring the many benefits of Internet access to our ever growing base of subscribers, no matter where they live or work.”
In addition to over-delivering on promised speeds, HughesNet was one of the top ISPs in limiting network packet loss, which is typically caused by network congestion and can be an important factor in the perceived quality of online applications.
This is the first time HughesNet Gen4 has been evaluated in the “Measuring Broadband America” report, which is published annually by the FCC to document the evolution of broadband service quality, including download and upload speeds and the performance of specific applications, such as Web browsing, VoIP, and streaming video.
JUPITER to Power Access in Bolivia
Entel Bolivia, a leading telecommunications provider, selected the JUPITER™ System to serve as the platform for a new high-availability satellite broadband network which will extend cellular and Internet access to remote areas of Bolivia.
Hughes will provide a JUPITER System gateway and approximately 550 terminals to power Entel’s delivery of Internet access service and for satellite backhaul of 3G and 4G LTE cellular base stations. The services will operate in the Ku-band satellite spectrum over the Túpac Katari 1 satellite.
FLA National Guard Modernizes its Connections!
Hughes was recently awarded a contract by the Florida Army National Guard to provide a managed broadband network across select Florida National Guard locations. The network, separate from the secured DoD network, will be used to deliver HughesON™ managed solutions, including high-speed Internet access and Wi-Fi services to National Guard personnel and their families and visitors.
“This contract will modernize the personnel-facing services of National Guard installations statewide with a robust network to keep both their staff and visitors connected,” said Tony Bardo, assistant vice president for Government Solutions at Hughes.
Hughes will provide wireless Internet access for staff and visitors at up to 65 Florida National Guard armories, enabling email and streaming media services using their personal devices, as allowed by the content restriction system. With Guest Wi-Fi, visitors will be directed to a browser-based welcome screen featuring content developed by the Florida National Guard.
StarGroup Plans Major Service Expansion
Mexico-based service provider StarGroup has chosen Hughes and its award-winning JUPITER™ System as the foundation for its soon-to-be-launched high-speed satellite Internet service in Latin America. The contract calls for Hughes to supply a JUPITER gateway, high-performance Ka-band terminals and a comprehensive suite of managed services for operational and customer support. As part of the initiative, StarGroup has leased a significant portion of the Mexico capacity on EchoStar XIX, scheduled for launch in late 2016, to expand its satellite service offerings in that country.
Under the initial agreement, Hughes will install a JUPITER gateway in the city of Arica, Chile, and manage the gateway for StarGroup remotely. The JUPITER System’s flexible configuration management and application programming interfaces will enable rapid integration with StarGroup’s existing financial and customer support systems. StarGroup’s plan is to effectively create and manage a range of budget-friendly service plans for its subscriber base, with Hughes providing tier two and tier three call center support, freeing StarGroup to focus its efforts on sales and marketing.
Fun and Gaming in Argentina
SPTI-Boldt Group Argentina, a major telecommunications service provider, has selected Hughes to provide an additional 2,000 Hughes broadband satellite terminals in support of SPTI-Boldt’s lottery network. SPTI-Boldt has been providing service to Banco Provincia using a Hughes broadband satellite system since 2009 to connect 4,000 lottery sites in the Buenos Aires province.
