The comsys VSAT Report

The comsys VSAT Report 14th edition VT idirect Market Summary & Company Profile

1. Summary VT idirect (idirect) has built a following in the VSAT market that can be compared with Apple s brand in the PC industry. As the de facto standard in corporate networking idirect has for many years developed features and capabilities for specialised service areas, including maritime, aeronautical, cellular, government and military. idirect has not only invested heavily in its engineering capabilities, but it also has its eyes on the longer term future and the company has therefore added experts with the objective of ensuring that it is positioning itself, its technology and its customers abilities to participate in a future satellite market that looks more and more likely to change manifestly over the next two to five years with the development of ground systems increasingly becoming an essential integrated component of the spacecraft design. idirect has a clear vision of the objectives for its development efforts on both the Evolution and Velocity product lines and aims to provide the highest level of flexibility and investment protection for customers. The company s management has continued to innovate, develop and deliver its product lines whilst restructuring the company to meet the needs of its vastly larger customer base. idirect is providing its customers with a smooth and cost-effective transition to take advantage of the latest developments the satellite world has been experiencing. idirect Government has been spectacularly successful in many ways and has a significant position within the US DoD network infrastructure. As idirect s development has gathered pace, so idirect Government has been focused on how these technology innovations are applied to the unique demands of its military and government customers. idirect is the largest enterprise VSAT systems vendor in terms of revenues at 36 per cent and has maintained approximately a 20 per cent share of all shipped enterprise VSATs over the past five years, cementing its position as the third largest in the world as measured by shipped units. Gilat 17.8% Others 14.8% Hughes 27.2% idirect 36.0% ViaSat 4.2% idirect has a vast and diverse customer base and has been determined to support its operators whilst also providing them with a smooth and costeffective transition to take advantage of the latest developments the satellite world has been experiencing. System Vendor Shares 2016 Enterprise TDMA Hardware Revenues ~ Susan BULL Senior Consultant COMSYS

All Enterprise VSAT Service Revenues (Billions US$) All Enterprise Sites in Service (000s) 2. Market Statistics Data Sources and Methodology The information in this Executive Briefing was compiled from the latest 14th edition of the COMSYS VSAT Report. Apart from information and product data already held in our library, direct contact was made with almost all of the organisations in the report to gather up-todate information. Visits have been made to a large number of existing and potential suppliers and service providers in Europe, Asia/Pacific, Latin America and North America. COMSYS maintains an extensive database covering all VSAT networks and tracks a wide variety of information for all individual networks. Our research and database form the basis of most of the statistical analysis in this report. Enterprise Market Total service revenues dipped in 2015 largely a result of slowing site demand, rapidly falling space segment pricing and an intensely competitive market led by growing consolidation, the beginnings of a realignment and restructure of the VSAT operator market and, of course, the pullback in the resource segment which had a major negative effect. $9.0 $8.5 1,700 1,600 In the fixed network market, we have long been seeing evidence that the role VSAT is playing is increasingly dependent on either the lack of alternatives or adding the unique diversity that satellite brings to a network. In some ways it can be argued that this effectively reduces VSAT s role to that of the last resort solution. $8.0 $7.5 $7.0 1,500 1,400 1,300 However, an alternative argument - and the one that we subscribe to - is that VSAT technology is slowly, but surely, assuming a more embedded role within the total communications solution that a customer requires from their service provider. $6.5 08 09 10 11 12 13 14 15 1,200 Enterprises are increasingly demanding universal high bandwidth connections of 20 Mbps or more across all of their sites uniformly, regardless of location and this looks very positive for VSAT. These services, which we describe as augmentation as opposed to extension, offer real promise for VSAT solutions and will leverage the existing integration with terrestrial connectivity to ensure that latency-sensitive traffic is directed over lower rate, but lower latency terrestrial connections whilst anything else is directed via the VSAT link.

Mobility has become the number one specialist, high-end area for VSAT that is growing and managing to maintain margins at a better rate than fixed terrestrial networks. The maritime, aeronautical, military, DSNG and other mobility areas are probably at least five years behind what has been happening in land markets and expansion is becoming fast and furious. Even in the economically challenged commercial shipping market, fleet owners are now seeing the positives in investing more to reduce costs, increase safety and efficiency and improve crew welfare, although the latter is no longer the principal decision driver. Beyond the maritime and aeronautical markets, the largest segments of demand for corporate VSAT services are government, utility, and cellular backhaul. The former comprises of networks for Ministries of Foreign Affairs (embassies), military (both tactical and non-tactical) and emergency response. Demand from utility segment is derived from offshore oil & gas, land based drilling and mining with the oil & gas sub-segment far outstripping mining in terms of the size of the addressable market and the level of advanced applications in use. Other COTM and COTP applications (like DSNG) have all been growing very well, as has cellular backhaul.

idirect Continues to Dominate Hub Sales idirect offers a VSAT platform that supports two product lines - the established and proven Evolution and latest idirect Velocity product lines. Both product lines leverage common hardware such as the hub chassis, universal linecards and a series of remotes to provide the highest level of flexibility and investment protection for customers. The company s cost effective and innovative hub solutions coupled with high levels of functionality and ease of use has made it almost a de facto standard within many of the most valuable vertical markets. idirect has accounted for approximately half of all the hubs sold every year since 2006 and was clearly the vendor responsible for the rapid growth in hub sales in the years prior to this. Gilat 26.4% Others 12.9% Hughes 8.1% Newtec 6.4% idirect 46.3% idirect Shipped TDMA Hubs 2015/16: 510 of 1,102 In essence, idirect redefined the hub market and has dominated sales ever since. The company s re-drawing of hub pricing structure also catalysed another trend in the market which is an increased willingness for operators to make quick investment decisions in order to take advantage of market demand that has a limited window of opportunity. Once again, this has enabled greater flexibility within an operator s business model by enabling the exploitation of a market that might not have been possible before. Service providers who have purchased idirect s systems have informed us that they have done so because it offers them a highly flexible and functional platform, yet does not require them to make a huge upfront investment in a hub system. Operators like Level 3, RigNet, Orange Business Services, SpeedCast and ITC Global with whom we have talked, inform us that it is the feature set which idirect s product supports more than the low entry cost which has driven their decision to purchase the platform. The latest series of Universal Line Cards serve both the Velocity and Evolution hub systems. The ULC-T maintains existing DVB-S2 ACM support, but incorporates the latest DVB-S2X outbound carrier bringing a carrier rate to about 120 Msps which, with higher, more granular modulation rates up to 256APSK, can push data rates up to 500 Mbps.

Corporate Leadership The idirect Evolution product line remains the number one platform in the high-end corporate networking segments of the market. The system is installed on more vessels, more aircraft, more tactical military vehicles and more drilling rigs than any other. Cellular backhaul is a particular application that idirect essentially opened up to the TDMA business. Global TDMA Sites in Service idirect 45.6% Aeronautical Demand in the mobile and semi-fixed segments of the VSAT business has grown strongly over the past five years and idirect exploited its dominant position in the high-end maritime and oil & gas markets to good effect. Following adoption of the system by several of the larger providers in this segment the company has essentially managed to position its product as the de facto standard in this area. Through a combination of an extremely professional, well thought-out sales strategy and the integration of features such as a Global Network Management System, communicationson-the-move and an enhanced mobility capability that automatically switches satellites when a user moves from one footprint to another known as Automatic Beam Selection (ABS), idirect technology is now often seen by the end-users themselves as the optimum solution and it is they themselves which are sometimes demanding it of their operators. This has persuaded almost every single operator in this high-value and very specialised segment to implement the idirect platform. Intelsat selected idirect for its maritime offering, incorporating idirect's Global NMS with automatic beam selection technology, as have the vast majority of others in the segment - the most recent COMSYS Maritime VSAT Report found that 75 per cent of the top 20 operators made use of the idirect system which accounted for half of all vessels in service on VSAT platforms. An impressive feat in any industry. idirect 60.0% idirect 27.2% idirect 40.5% Maritime Cellular Backhaul Military/ Defence

3. Key Developments Platform Harmonisation: There is much more behind the idirect story than just statistics and presence. 2008 brought the introduction of the company s third generation platform the Evolution and 2015 saw the launch of the latest generation, idirect Velocity. Velocity brings substantial scale and has been designed specifically to support services on current and future generation high-throughput spot-beam satellite systems, particularly those requiring mobility. Over the last year idirect successfully created platform commonality with the introduction of Universal Line Cards (ULCs) compatible with Evolution and Velocity and a series of interoperable remotes (X7, 9-series and iq series). This development simplifies its customers business growth by providing a seamless migration path as and when the customer determines and maximizes their current platform investments. idirect s focus today is to refine and enhance its platforms and features that have formed the basis of its dominance in so many valuable verticals. These features range from simplicity of installation and management through to sophistication of handling mobility, bandwidth management and network roaming functionality. With individual spacecraft moving from a few beams to many hundreds and data throughputs rising from kbps to tens or even hundreds of Mbps, every VSAT system vendor is facing huge development hurdles. As one of the leaders in the ground segment hardware business, idirect is right in the middle of all this and working hard to ensure that its customers retain the long term trust they have both in the platform and in their supplier. Over the past ten years idirect has not lost sight of the core markets that form the bedrock of its business and, in fact, the company has spent considerable resources helping to expand and develop segments for its customers while also reinforcing its own dominance in these areas.

4. Platform Enhancements The new remote terminals and hub line cards that have been released are all compatible with both platforms. Velocity is readily suitable for large scale, highly complex networks managing service plans and bandwidth across spot beam and next generation satellites. The introduction of the ULC (Universal Line Card) and iq Series of remotes brings the power of DVB-S2X to both systems and more than doubled gross carrier rates. Maximum throughput able to be achieved on the 9-Series remote terminal has been boosted to an aggregate in excess of 150 Mbps, equating to 120 Mbps download and 30 Mbps transmit as an example. However, data processing and power are not everything PPS rates, maximum IP sessions, acceleration, optimisation and other things can all effectively slam the door shut on increased throughput. All of these things need extensive software updates to keep pace with rising data rates and idirect has committed a great deal of resources to upgrade these capabilities and unlock the potential of its platforms. DVB-S2X: idirect s latest system design incorporates its own state-of-the-art programmable chipset which enables it to fully exploit the features of the DVB-S2X standard and the power of HTS satellites. This allows operators to change features and functionality with minimal intervention and quickly react to the rapidly changing demands of the market. Coupled with the introduction of virtualisation on its idirect Intelligent Gateway which will, ultimately, also bring cloud computing to the system, the company aims to expand the markets and applications for customers that use its latest network platform. Remote Portfolio: Two further remote upgrades have been added to the company s range of remotes. The improved efficiency and greater bandwidth capabilities the latest version of DVB adds in the form of DVB-S2X is also seen as an important and vital addition. Highthroughput spot beam satellites are bringing far greater bandwidth requirements for gateway uplinks to individual beams. DVB-S2X supports these needs, but also brings more efficiency something that every VSAT operator desires and requires a completely new core chipset for the remote. idirect is bringing this to market in the form of its iq series of remote terminals which are compatible with both the Evolution and Velocity. The new iq series of remotes simplifies idirect s offering for the commercial market with its three remote hardware options desktop/indoor, rack-mount and board level terminals with the capability and functionality defined by software. In effect, any one of these types of terminal can be enabled with any feature, function or application based on different software licences offering operational freedom and flexibility that enables a major competitive advantage to the users of its platforms. The second development is an EC (Embedded Computing) remote version of remotes which initially comes in the form of the X7-EC. This integrates enhanced computing capabilities within the remote allowing support for a greater range of applications, such as 2G, 3G and 4G/LTE cellular backhaul, and third party software features from the likes of Cisco, Sevis and XipLink for things like acceleration, optimisation, encryption and routing. The introduction of L2oS (support for OSI Layer 2) mentioned previously allowing operators to incorporate their own Layer 3 networking functionality is assisted by the EC capabilities which allows this to be embedded more efficiently.

Seamless Integration with Core Network: An additional initiative has been the addition of L2oS, essentially pulling down the OSI Level 3 Application layer. This removes any conflicts that might occur between the satellite implementation of application support and the functionality provided through a terrestrial service. This allows carriers and operators to add their own Layer 3 networking functionality in order to implement a variety of converged network architectures, which eases the ability to integrate a VSAT connection into a hybrid terrestrial network. There are many instances where this has become a necessity, but cellular network extension is probably the largest and most obvious today especially due to the move from 2G voice-based systems to 4G/LTE data intensive applications. In essence, idirect s implementation of L2oS removes the specific routing provided by the VSAT system s Layer 3 support and instead simply leaves this functionality to third-party devices, such as Cisco, that the operator already uses as part of their total network infrastructure. Data transport is decoupled from the overlaying network and whilst functions like optimisation and acceleration are still supported, an operator is able to seamlessly move to any new capabilities added to telecommunications networking in general and not face the task of revising or replacing the interface and translation between a third-party router and the routing in the idirect platform. This brings a greater level of simplicity and flexibility and positions idirect s VSAT platform as an open (very long) Ethernet cable. Of course, for operators with applications like ATM banking networks, established Layer 3 capabilities make implementation easier and cheaper because a third party router is not required, but L2oS empowers customers to configure their own networks without impacting the underlying satellite network infrastructure. Higher & Higher: idirect expects to introduce 64APSK and higher rates by fully adopting the DVB-S2X standard with higher MODCODS up to 256APSK and finer granularity in the future for HTS services on Velocity and Evolution. We understand that the company s roadmap also aims to leverage DVB-S2X for much higher powered mobility deployments implemented through a next-generation mobility modem which will have two 500MHz multi-demod receivers, allowing for seamless beam switching at 500MHz. An option will also be to configure each receiver to support up to three lower rate inbound channels as required. This highly powerful remote will be able to process two 500 MHz carriers in DVB-S2X at 256APSK and therefore is on target to exceed 1 Gbps of throughput per remote where the link supports it. The product is expected in 2018 and, idirect believes, will be far superior to any other aero remote on the market. Military Developments: idirect has now moved to development of new software versions for specific business segments and during 2016 the defence market saw the introduction of idx 3.4 which brought a number of upgrades. Alongside the addition of FIPS 140-2 Level 3 to the system, idirect has released its Velocity/Evolution compatible DLC (Defence Line Cards), upgraded the 850mp manpack board-based remote to the 950mp as well as a new compact Series 11000 Tactical Hub designed to reduce size, weight and power (termed SWaP). The tactical hub incorporates DLC-T and DLC-R line cards with four inbound channels as standard as well as a small form factor NMS, PP and Layer-3 switch. It has also introduced two defence-specific aero terminals the 9800AR (Aero Rack-mount) and 9800AE (Aero Enclosure) upgrading the previous 8-series versions with all the performance of the 9- Series, but with embedded computing and switch in a certified chassis and ultra-high speed comms-on-the-move (COTM) to support supersonic connectivity.

5. Future Direction With new HTS satellite designs emerging with features like beam hopping and time slicing allowing greater payload flexibility and the introduction of the DVB-S2X standard, idirect decided some years ago to invest in the development of a system-on-a-chip (SoC) specifically for VSAT systems. This has allowed idirect to specify its own particular requirements in the design and performance of the latest DVB-S2X ASIC and integrate support for super frames and beam hopping. It also places it in the position to easily innovate and initiate future enhancements to the product which will exploit the full capabilities of its own waveform. Final Thoughts: The company has encountered some issues, but in our view it has responded with integrity, compensated and aided those customers with the biggest commitments and managed a difficult situation well. We believe that the company would also probably admit to the fact that the huge increase in data throughput requirements that has arisen as user rates have exploded caught it on the back foot. The 9-series, iq series and upgrade to DVB- S2X and Velocity are a great response and will bridge the gap that many operators are teetering over. We see that the company has now got it, hence the renewed focus on technologies that are likely to become relevant further in the future. It is remarkable that the company should have come from that point to the third largest supplier of systems in the enterprise market in such a short time and the leader in terms of enterprise TDMA hardware revenues. Despite the commitment it has had to deliver for Global Xpress, IntelsatOne Flex and Telenor and the need to bring Velocity to commercial availability, the company has thankfully not lost sight of the fact that Evolution has been tremendously successful and its commitment to continued development alongside Velocity and the support of an established and smooth upgrade path should any operator decide to initiate it must be a comfort to its customers. The Evolution platform has been a great success and proven to be a strong platform for the constant development of new and innovative features that have maintained the company s edge in its core segments. Velocity initially looked to be a step-change which would move the capabilities the company can deliver on to an entirely different level, but whilst there is no doubt that the new platform opens up the HTS market for idirect, existing Evolution operators will be able to take advantage of almost all these new features and capabilities without having to throw away their current infrastructure and without missing a beat. The company has managed to diversify and expand the markets that its system can address whilst maintaining its current customer base and it is unquestionably working hard to get on top of all the challenges the market is bringing to bear. The path towards development of a firm future platform foundation has been long and hard for idirect and its customers, but with the finalisation of S2X, the iq Series, Pulse, next generation management system, and the compatibilities between Evolution and Velocity, the promise of ground-breaking future innovations in mobility, throughput and networking from idirect could re-ignite the acceleration to the front line of competitiveness and uniqueness for operators that the company enabled in the past. idirect has integrity, commitment and innovation in its blood and despite how different it is from the company we knew five years ago, its genes remain the same and it undoubtedly has a strong foundation and product suite with which to grow.

6. About this Report This Report was created for idirect by comsys from extracts from The VSAT Report, 14 th Edition. Most material was generated from extracts of our report which is 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 14 th Edition of The VSAT Report and how to purchase it can be found at www.comsys.co.uk.

comsys llp london United Kingdom Telephone: +44-1727-832288 Email: comsys@comsys.co.uk Web Site: www.comsys.co.uk comsys