Wiring the Oceans: SatCom Comes of Age

Unlike most sectors of the shipping industry, orders for satellite communications (satcom) equipment and services are on the rise. Major contracts awarded in the past several months further wired the oceans to meet the growing demand for broadband. What happened in full-service land-based offices 15 years ago is happening with maritime satcom on ships today. Only a satellite system can bring broadband on-the-move access to most ships, and there are many options for companies looking for satellite solutions.

Cruising With BroadBand

The cruise market was the first to adapt VSAT (Very small Aperture terminal) to serve passengers with services that are now being adopted by merchant vessels for economy and efficiency and also for crew welfare. Low-cost broadband calls – 10 to 20 cents a minute using Voip (Voice over internet protocol) versus previous phone charges of $2 to $3 a minute – can be made to family and friends back home. Inbound telephone numbers posted on the ship company’s Web site via a toll-free 800 number ring onto the ship. “that has changed crew welfare tremendously,” said Eric sung, CEO of Intellian technologies USA in Irvine, Calif. and CEO of its parent, Intellian technologies Inc., headquartered in South Korea.

Many passenger ships have automated teller machines (ATMs) while vendor and casino transactions move across the VSAT link for credit card authorization and verification. In the past five years there’s been an evolution of cell towers on cruise ships so passengers and crew can use their own cell phones at sea, a seamless system that allows callers to receive their phone charges directly from their cell-phone provider. “A number of vessels are putting in Internet kiosks as work stations for crew members to catch up on their e-mail or send messages home or make their own planning arrangements,” Sung said. “That makes it a lot easier to keep the crew happy and connected to the family. Some ships operate with two VSAT systems, one for vessel operations or mission-critical functions, the other for crew welfare and morale.”

In the face of a worldwide recession, Intellian, founded six years ago, has seen its revenues in 2010 grow by over 80 percent from the prior year. The company does not reveal dollar figures. The outlook for the maker of marine antennas is “very strong,” said Sung, who predicted revenue growth of 70 percent to 100 percent in 2011.

The satcom market “definitely” is moving towards broadband technology, affirmed Susan Agemy, Vice President for Product Engineering at Miramar, Fla.-based MTN Satellite Communications. The decision facing fleet owners is which technology to adopt – the Iridium OpenPort solution, FleetBroadband or one of the flavors of VSAT available. Then comes the choice of minior standard VSAT product. “The larger shipping companies are making that decision now,” she said, with some having chosen to go with pay-bythe-minute services such as Iridium OpenPort or Inmarsat FleetBroadband where they can commit to a specific capacity level. “Other companies that are more IT savvy are going more towards the VSAT always-on connection, where there are no pay-by-use fees,” she added. “There is a fixed monthly fee for a circuit size, and they pump as much voice and data as they see fit.”

Becoming Affordable

In the past, communications to ships were expensive and reserved for essential business operations and safety. “But today, because it’s less expensive and we’re also able to offer more capacity – and that’s the key, greater bandwidth – it means all of a sudden there are more applications that can be offered to, not just the operator or the ship’s officers, but also the crew, one-way and two-way,” said Andy Frost, Vice President of Marketing and Business Development for GE Satcom, a wholly owned subsidiary of General Electric based in Stuttgart, Germany.

GE Satcom offers telephony, Internet access, e-mail and video conferencing “all at a fraction of the cost compared with the past,” Frost added. “We can do all that and deliver daily TV content so the crew keeps in touch with current affairs and sports developments as they happen, rather than waiting for the next time they reach port.” An important new element built into broadband technology for crew welfare is medical support. An injured crewman or passenger can receive access to a high level of medical personnel or medical technology by sending photos or images and receiving medical advice through video or audio transmission.

“Satcom has really become a must-have item on a commercial vessel,” contended Paul Comyns, Intellian’s Vice President of Global Marketing. “It’s nearly a required element for operating a ship at sea so having that level of communications with voice and data or e-mail connectivity has really made it so much easier for vessels to operate with special tracking, vessel monitoring, engine and spare parts management.” As electronic links tighten between ships and shore, commercial vessels and cruise lines are able to maintain constant contact with their home office operations to receive instructions, report weather changes and exchange real-time information on everything from fuel optimization and weather routing to ship position and available cargo.

Satcom is not at a breakthrough point with a flood of new technologies, but it is at a level where broadband is “becoming affordable,” noted Tore Morten Olsen, CEO of Marlink, an Oslo-based global provider of voice and data solutions, who has seen prices drop as much as 20 to 30 percent over the past two years. In September Marlink announced a renewed agreement that significantly expands its contract with A.P. Moller-Maersk, one of the world’s largest shipping lines. In partnership with Vizada, an independent provider of global satellite communications services, Marlink will provide FleetBroadband airtime services to an additional 200 vessels. The deal brings to 370 the number of A.P. Moller-Maersk vessels sailing with the service. In October, Marlink debuted a new Access Controller system that enables seamless and cost-effective management of a ship’s onboard satcom network. Compact and lightweight, the system can be installed on any vessel to make switching between VSAT, OpenPort or FleetBroadband systems quick and easy, helping users efficiently manage costs.

“The whole satcom market is at a very pivotal point,” observed Peter Broadhurst, Sales and Marketing Director at Sea Tel, which is owned by Cobham PLC, headquartered in Dorset, England. Sea Tel is a TV and VSAT antenna manufacturer that figures it has about 35,000 marine antennas in the field and claims 85 percent of the antenna market for the cruise industry. Four to six cruise ships are launched yearly “and we generally get all the systems on those ships,” he said. “There’s a lot of change happening. There are new service offerings to end users and new antenna manufacturer entrants,” he continued. “Ka-band is the big talk, and a number of Ka-band satellite operators will be launching satellites over the next few years. We can see a trend, definitely, towards smaller, low cost antennas, and we can see a trend towards more bandwidth requirements by the end user.

Bottom-Line impact

It’s how satcom brings profitability to shipping companies that will dictate how fast VSAT and other communications systems are adopted into commercial shipping. “Price pressure has been considerable,” Sea Tel’s Broadhurst noted, “from pushing back on us and us pushing back on our suppliers and shipping companies pushing back and demanding the lowest price. Price pressure through a recession is probably the hardest thing. I expect margin erosion just about all the way down the value chain.” Although the industry has been hit hard in the recession, Broadhurst sees trade volume beginning to pick up. He predicts a slow recovery and looks for consolidation among satcom companies, with some failing and others being swept up by mergers and acquisitions.

“It’s going to be a slow recovery, like all the economists ashore are saying, but it does seem that the trend is improving,” he said. “The next 24 months is the period in which I expect the majority of satcom consolidations to be done.”

Business overall at Denmark’s Thrane & Thrane is doing “very well. We’re doing fine,” said Jens Ewerling, Product Line Manager for the company’s maritime satcom operations. “The commercial shipping business has been picking up for the past three to four months,” he reported. “There was a slight slump, a bump in the road for 2009 and maybe a little bit into 2010, but it wasn’t that bad for us. The business didn’t collapse by like half. We got through it quite well, driven by a huge surge in demand for Inmarsat broadband terminals. Our business with FleetBroadband has tripled in a year.”

Thrane & Thrane is more than a satellite company; it also makes GMDSS (Global Maritime Distress and Safety) System 6000 consoles for large ships of all sizes. The units will be on the market in the first quarter of 2011. “We have a flurry of new products coming,” Ewerling said. The System 6000 integrates an entire communications console containing everything needed by a commercial vessel of more than 300 tons, for which a GMDSS is mandatory.

The company has a 120-page product catalog that includes a positioning device that transmits the position of a vessel back to shore over satellite and is price-tagged from $2,000. A broadband system can run up to $50,000 “and everything in between,” Ewerling said. Consoles, “allowing for there being a million different versions,” cost in the area of $20,000 for smaller units, with large ones priced between $35,000 and $40,000.

There has been a renewed interest in the maritime satcom industry with the broader availability of broadband. “Until two-and a-half years ago there really was only very, very narrow band services, unless you spent an absolute fortune on VSAT,” Ewerling pointed out. “But it’s all consolidating now, all going toward broadband. Three to five years ago, an antenna for broadband at sea cost $70,000 to $100,000 plus a hefty tab for a satellite link. Today, you can buy a terminal for around $6,000 for the smallest one,” Ewerling said. “It’s become a totally different ballgame.” MarEx