The end of Eutelsat’s consumer internet business

Eutelsat’s June 15 move to sell off its retail broadband business draws to a close a 16-year effort to create a growth engine that never managed to fire on all cylinders. Selling satellite internet to houses across Europe proved surprisingly difficult, and eventually created an insurmountable conflict with Eutelsat’s distribution partners. For those reasons, the company’s exit isn’t a surprise, but a recap of Eutelsat’s botched consumer effort could provide instructive lessons for the growing chorus of operators chasing the consumer market.  

Eutelsat jumpstarted its European consumer internet effort in 2007 with a service called Tooway, formed in cooperation with Viasat. A year later, Eutelsat ordered Ka-Sat, the first all Ka-band satellite over Europe and the Mediterranean basin, designed for residential internet services. Viasat ordered what would become its anchor satellite, ViaSat-1, around the same time.  

From Ka-Sat service launch in 2011 through 2015, Eutelsat enjoyed steady growth, peaking at 185,000 subscribers, mainly across Western Europe. But after maxing out salable capacity, customer attrition took hold (Eutelsat stopped disclosing subscriber numbers in mid-2017 at ~150,000 subs). American peers Hughes and Viasat, facing the same challenge, ordered new Ka-band satellites during that time (Jupiter-2 and ViaSat-2, respectively) that kept their subscriber counts growing. Eutelsat did not. Absent a new Ka-band satellite for Europe, Eutelsat’s consumer business had few avenues for growth. 

Instead, Eutelsat pivoted from a Business to Consumer (B2C) to a Business to Business (B2B) model. Right as Ka-Sat reached its peak in 2015, Eutelsat formed a partnership with Facebook for connectivity in Africa, triggering a slight shift in focus that would grow to dominate the next several years. Eutelsat ordered a Ka-band satellite for Africa, not Europe, and leased capacity to Facebook, not direct to consumers. After a tumultuous flip (resulting from the 2016 Falcon 9 explosion that destroyed an earlier Eutelsat Ka-band payload on the Amos-6 satellite), Facebook withdrew from the program, but Eutelsat’s preference for wholesale broadband capacity sales stayed. 

Eutelsat’s preference for wholesale B2B deals became a source of friction in the following years with Viasat when the two companies created a joint venture to pursue customers in Europe. In 2018, Viasat wanted to continue its B2C approach, seeding the European market for its future ViaSat-3 EMEAs satellite with 1 Tbps of capacity. Eutelsat wanted distributors on a country-by-country basis. After a year of protracted negotiations, Eutelsat dropped a planned $162 million investment in ViaSat-3 EMEA and ordered its own European broadband satellite (Konnect VHTS) from Thales Alenia Space.  

Against this backdrop, Eutelsat’s 2020 purchase of BigBlu Broadband’s European satellite business made little sense. BigBlu added ~50,000 subscribers to Eutelsat’s count and revived a B2C business at the same time Eutelsat was striking up wholesale B2B partners like Orange in France, TIM in Italy, and Deutsche Telekom in Germany. Further complicating matters, Viasat purchased Ka-Sat just four months after Eutelsat purchased BigBlu, leaving Eutelsat temporarily devoid of a core space asset over Europe.   

Divesting from BigBlu last week clears Eutelsat of the snafu it created over the years as it transitioned from B2C to a B2B internet service provider. Despite having only owned the company for three years, it quickly became clear BigBlu wasn’t an easy fit at Eutelsat. Absent BigBlu, Eutelsat can avoid competing with its customers in Europe with its relatively young Konnect and Konnect VHTS satellites that are now in orbit and ready to scale. 

The divestiture is also a sign that OneWeb Gen-2 probably won’t revive a consumer focus. If Eutelsat does try to connect the masses, it’ll do so through resellers, not by going direct. A change in orbits probably doesn’t mean a change in business plans.  

SOURCE: https://www.eutelsat.com/en/news/press.html#/pressreleases/eutelsat-to-dispose-of-its-european-retail-broadband-distribution-activities-325985