In this podcast, Lisa Scalpone, Vice President and General Manager for
Viasat Brazil, talks about recent developments in South America. With some contract issues now cleared up, Viasat has been able to step up the pace in its
partnership with Telebras — Brazil’s state-run telecom. In addition to thousands of installations already completed at schools, health centers and other government facilities in Brazil, work is underway to add more types of connectivity services around the country using Brazil’s SGDC-1 satellite.
This podcast was recorded May 31, 2019, just after the final contract was approved and just before Scalpone and other Viasat personnel attended the Abrint telecommunications conference in Sao Paulo, Brazil.
Lisa Scalpone, May 31, 2019
Alex Miller: Hello and welcome to the Viasat podcast. I’m Alex Miller with corporate communications and we’re here today with Lisa Scalpone, vice president and general manager for Viasat Brazil. In 2018, Viasat entered into a partnership with Telebras, Brazil’s state-run telecom. Since then, more than 4,500 broadband access sites have been installed along with the major ground components linking to Brazil’s SGDC-1 satellite. And just recently some final legal hurdles were cleared that enabled Viasat and Telebras to move even more quickly with installations. So Lisa, what are these new developments mean for the Viasat-Telebras partnership. What were those things that you needed to get past?
Lisa Scalpone: Hi Alex. The things we needed to get past was approval from a court called TCU. In Brazil, the court system is much more complex than the court system here in the U.S. and there is a separate court system for federal contracts because Telebras is a state-owned company — 80 percent state owned. They are required to put all of their contracts through TCU and the TCUY judges - or ministers as they’re known - approved the contracts and they look at whether the contracting process was legal and whether it’s a balanced contract. So, as per the normal process our contract was submitted to TCU. Last week, I think it was last week, we got approval from TCU that the contract was fully approved. So we’re pretty excited about that that we have official sanction from the TCU and the contract itself was a novel application of a law in Brazil allowing for public-private partnerships — and also a new kind of business model in which we do a revenue share with a state-owned company - Telebras. So it took the court a thorough analysis to figure out exactly how we were planning on operating this thing and they found it fully legal so we’re really excited about that. What it means for us is that we can fully launch the business. While we have launched the Telebras customers - mostly public schools - already, from the commercial side of the capacity - the capacity that Viasat itself will monetize, we had not launched because each site that we launch requires an investment. And with the legal uncertainty over it we couldn’t invest in these sites with the uncertainty of knowing whether we could keep them and keep providing service. The other practical matter is we felt uncomfortable recruiting for our Viasat Brazil company because we couldn’t guarantee that we had TCU approval.
Alex Miller: Right. And I would imagine that whenever you know as we grow globally, and you go into different countries there’s always going to be a fair amount of, you know, things that you’ve got to figure out and how each country works.
Lisa Scalpone: Yes the glass half full approach to our delay in launching is that because we were working hard on the GESAC sites -- that’s what we call Telebras customers - mostly schools - we learned the country and we got a year in the country where we studied the market. We learned about the usage. We learned about how to get from point A to Point B in Brazil. And of course it was more challenging than we thought. So it’s good that we have we have that chance to do that.
Alex Miller: So I think you touched on a little bit but can you talk a little bit more about the relationship with Telebras and how it’s structured - like who does what?
Lisa Scalpone: And that is part of the complexity. This is a really different agreement than anything that’s been done before. So the satellite itself is a basically a Brazilian asset. It’s got two kinds of payloads: An X-band that is operated by the military and the Ka-band payload, which is the Telebras payload, and that’s what we share with Telebras. It’s ... 42 percent will be used for Telebras government customers and 58 percent is Viasat’s to monetize, and there is a revenue share that kind of goes both ways under that agreement.
Alex Miller: And then we’re also using some partners on the ground in Brazil to help with installations and things like that.
Lisa Scalpone: Yeah. And if you look at the actual duties within the operation of that payload it’s actually pretty interesting. So while we operate the baseband gear, Telebras brings the fiber - they’re a fiber provider - they bring the fiber that goes to the gateways. They also do the large antennas at the Gateway and the RF gear. They do the first line of customer support to their customers and we do it for ours. We also provide network monitoring. So if you look at a diagram, it’s spliced up between the two of us which of course means we have to be completely coordinated and work well together.
Alex Miller: So Brazil had this satellite in place and they needed a ground system and we were able to get in there very quickly. How did we get in there as quickly as we did to get that ground system up and running?
Lisa Scalpone: Satellite is useless without its ground network. For us since we use SurfBeam 2 technology — this is a technology that we’ve had since ViaSat-1 — we understand it, we know how to deploy it, it’s used in other networks around the world. So we quite literally put a bunch of our employees from the U.S. on a plane and they kind of moved in down there and brought the network up quickly.
Alex Miller: So Lisa you referenced that many of the sites installed so far in what’s called the GESAC program have been schools. So can you talk a little bit about what they had before and how this new service has been helping them?
Lisa Scalpone: So this is pretty exciting for us to give schoolchildren internet - sort of the highest order use of our service I think. So the schools had a variety of possible solutions. Some had none. Some had some legacy Ku-band service, which you know it’s going to be limited in throughput. So that means maybe one device can be connected. It’s going to be limited in speed so you might not be able to get a streaming video or high quality streaming video. You may say ‘why do schools need that?’ Well they use video instruction tools like the Khan Academy. So it’s really important to have streaming video and lots of students on it. So we’re well over a million students now if you count up the student body at the schools installed already.
Alex Miller: Wow that’s great. And so have we been hearing from some of the teachers and students about how they’re enjoying the new speeds?
Lisa Scalpone: You know because it’s a Telebras customer I don’t hear directly from them but what we can see is the usage on the network which is exactly what you’d want to see. It’s at the right hours, the school hours. It’s heavy usage. You see the video streaming suggesting they’re doing, you know, distance learning and similar activities. So we’re pretty excited about this. I mean we’re over half way to our goal of the current allotment of GESAC.
Alex Miller: Well that’s great. So we’ve spoken before about how the bulk of Brazil’s population is on the coasts where they’ve got access to high speed options like 4G mobile and cable and fiber and so Brazil’s government like a lot of governments wanted to give people in more rural areas access to broadband. So some of these are pretty remote places -- even in the Amazon rainforest -- and you alluded to it earlier but how much of a challenge has that been?
Lisa Scalpone: So it has been an interesting and difficult challenge getting to the remote sites. You know Brazil is about 210 million people. So you know maybe two thirds the population of the US and Brazil in the USA are roughly the same size but the U.S. has probably four times as many roads. And of the roads that Brazil has maybe 5 percent are paved. So we need to get our satellite equipment -- the dish and the modem and the transceiver -- to every single site. Getting from point A, the warehouse, to the site is way more challenging. Because in the U.S. you put it you know you have a distribution center it goes on a truck — and the creativity of the installer in getting to a site is not necessarily what you’re what you’re worried about. And in Brazil the local knowledge of how to get from point A to Point B is absolutely critical. It may require a motorbike, a truck, a barge, going over paved roads, going over washed out roads that require a detour. You know we’re not ruling out things like small planes.
Alex Miller: So that’s really going to bring internet to a lot of people who may not have had it before. And to make it affordable?
Lisa Scalpone: That would be the ultimate goal -- to make our service cost effective enough because these are low-income communities. That’s why they don’t have good internet. But we need to make sure the service can be affordable in the home. And it may be a tough challenge to do that if the you know each home needs its own terminal. It might be easier to get the costs down if use a single terminal and then distribute the Wi-Fi.
Alex Miller: And so in addition to everyone on land, there’s a fair amount of maritime activity along the coasts as well, correct?
Lisa Scalpone: Yeah and SGDC, they actually designed the satellite so that there are a couple beams that are out covering those platforms the out in the ocean.
Alex Miller: Thinking a little bit more about the things that satellite will bring, in addition to just being able to get online for people, you know, doing anything from social media to emailing or Skype or things like that. What are the things that reaching those sort of poorly connected populations bring on a socioeconomic basis?
Lisa Scalpone: So you know a couple of things there. One is the SGDC-1 satellite is really unique in the world. Our deal is unique in the world. And the program is unique in the world. This is a satellite that had two purposes. One was it needs to be economically viable on its own. So the Brazilian government built this with the goal that it ... it needed to make a reasonable return on the investment. We absolutely agree that’s the right way to go. But there is a second purpose and that’s the social purpose. It was also built by the state to benefit exactly the populations we’re talking about. So you know this is I think first of all it’s great for Brazil to be on the leading edge of a new kind of program -- one for the people that actually works. And so that’s why we feel this burden to make sure that it actually works and that’s why we split up the capacity. Half of it’s going to be used for really just straight social benefit purposes like the schools and half of it needs to be a commercial product that that gives Telebras a return on its investment. The service itself though that’s another way that Brazil will benefit.
Alex Miller: So what’s next in Brazil?
Lisa Scalpone: You know right now since we just got TCU’s approval, now we can go back and start the hiring we just talked about in Brazil. And you know when we’ve talked to candidates over the past year one of the things they -- if they know about us that they’ve brought up is they say they believe in the program. They’ve they followed as SGDC’s development. They were rooting for, you know, Telebras to launch the service and they want to be a part of it.
Alex Miller: So, you are getting ready to head down to Brazil here pretty soon. So what’s on the agenda.
Lisa Scalpone: So yeah I’ll be down there next week at the Abrint conference. That’s a conference in Sao Paulo. That is for telecommunications and internet providers. So again being being part of the Brazil industry now we’re happy to participate in some of these activities and I’m also down there recruiting the team ... the Viasat Brazil team.
Alex Miller: That’s great. Well Lisa thanks so much for taking the time to talk to us. It’s an exciting time for our business in Brazil and for the Brazilians who are going to be benefiting from all this. So we’ll catch up with you in a couple more months and see how it’s going.
Lisa Scalpone: Thanks Alex. Thanks for talking about Brazil. And I think Viasat has tremendous opportunities down there and we’re hoping to do a lot of good work.