TAMPA, Fla. - EchoStar's Hughes geostationary satellite broadband business has filed for bankruptcy in the United States, because nothing says 'we're adapting to the future' like seeking protection from creditors after SpaceX's Starlink ate your lunch.
The company announced Aug. 3 that Chapter 11 bankruptcy protection will let Hughes restructure its debt as it pivots to enterprise, government, and defense customers, leaving its legacy consumer internet market to the history books. International subsidiaries are sitting this one out, and services will continue during the proceedings - presumably with the same latency you've come to know and tolerate.
Hughes broadband subscribers have plummeted roughly 21.7% over the past year to around 641,000, chief restructuring officer Robert del Genio said in a court filing, citing intense competition from low Earth orbit (LEO) broadband operators. 'The company does not expect this trend to reverse,' he said, which is corporate-speak for 'we're cooked.'
'LEO satellite competition is structural, not cyclical, and the company's competitors continue to expand coverage and reduce costs,' del Genio added, in case anyone thought this was just a bad quarter.
Geostationary orbit (GEO) can provide broad coverage from 36,000 kilometers above Earth, but that altitude imposes latency of around 600 milliseconds, del Genio said, 'which the company's customers historically accepted as necessary for connectivity they could not otherwise obtain.' Translation: people put up with dial-up-like lag because they had no choice. Now they have Starlink.
By contrast, LEO satellites can deliver latency of around 20-40 milliseconds at speeds approaching terrestrial broadband performance. That's like comparing a horse-drawn carriage to a Tesla, except the horse is also on fire.
While Starlink is by far the dominant LEO broadband player, Amazon is ramping up deployment for its network and expects to start commercial service later this year - because if you're going to kick someone while they're down, do it with Prime delivery.
However, del Genio highlighted a growing opportunity outside consumer broadband, pointing to about $1.5 billion contracted enterprise backlog, alongside recent contract awards from commercial airlines and U.S. defense agencies. Hughes also sees a growing role as a multi-orbit infrastructure enabler, which is fancy talk for 'we'll build the roads even if we can't drive on them.'
While EchoStar has six GEO satellites and 69 terrestrial gateways worldwide, it has also heavily invested in ground infrastructure and managed services capabilities for LEO, including flat panel antenna technologies. Better late than never, right?
Even still, according to filings with the U.S. Bankruptcy Court for the Southern District of Texas, Hughes lacked the cash needed to repay about $1.5 billion of debt by an Aug. 3 deadline. That's the kind of financial cliff you'd rather not approach without a parachute.
EchoStar's broadband and satellite services fell 6.7% year-over-year to $317 million for the three months to June 30. Total revenue declined nearly 4% to around $3.6 billion, while adjusted operating income before depreciation and amortization (OIBDA) jumped to $681.2 million from $279.6 million, driven mainly by improvements in EchoStar's wireless and other segments. So, some parts of the business are thriving - just not the ones named Hughes.
Unlike the prepackaged restructuring for DISH DBS, Hughes entered Chapter 11 without a deal already agreed with creditors. Because why make things easy when you can make them dramatic?