Eutelsat and ictQatar announced in May a strategic alliance for the joint procurement of a communications satellite to be positioned in Eutelsat’s 25.5 East orbital slot. ictQatar is the Qatari Supreme Council of Information and Communication Technology, the Persian Gulf emirate’s telecommunications regulator and technology administrator.

While the details of the arrangement were not immediately announced, a strategic alliance generally signifies a contract-based relationship, often looser in structure than a joint venture (in which the venture partners usually form a new business entity that they jointly own and operate to embody their venture). The Eutelsat-ictQatar alliance partners followed up in July by announcing the decision to procure the Ku/Ka-band 1300 series satellite from manufacturer Space Systems/Loral. Eutelsat had originally planned a smaller satellite for the slot, but with ictQatar sharing the financing and the payload, a larger satellite of greater capacity was in the cards. The satellite will provide coverage of the EMEA (Europe, Middle East, Africa) region, and the footprint, of course, includes the Persian Gulf region.

The strategic alliance to finance, manufacture, insure, launch and operate the satellite can be said to represent an evolution in the hosted payload model. In its basic form, the model contemplates the ownership and operation of a satellite and most of its payload by a commercial operator, while a dedicated payload procured by a government/military customer rides aboard, hosted by the commercial operator but isolated from the commercial payloads. The model presupposes applicability for the vast majority of government/military payloads that do not require the most secret or hardened capabilities of dedicated military satellites.

Given the burgeoning needs of military customers especially, and the extreme cost overruns and delays often afflicting milsat programs, hosted payloads look to be indispensable to those customers as well as good business for commercial operators. Moreover, a hosted payload can belong to a private or commercial party rather than a government or military one. In either case, the hosted payload owner receives the benefit of the satellite’s power, antenna, transceiving and attitude control, along with ground-based tracking, telemetry and control. The satellite operator gets another customer, possibly improved fill rates and, sometimes, the justification for a larger, more powerful satellite.

In September 2009, Intelsat announced that the Australian Defense Force had agreed to purchase a specialized UHF-band payload on board the Intelsat 22 satellite scheduled for launch in 2012. That hosted payload and associated services contract were valued at $167 million, but the satellite clearly is an Intelsat bird. Intelsat also hosts the Cisco-built Internet Routing in Space (IRIS) payload aboard Intelsat 14 as a military demonstration flight jointly managed by Intelsat and Cisco, an example of a hosted commercial party payload. (The payload is designated for commercial use after the military demonstration, and in July, Cisco signed a deal with Astrium Services to study applications of space-based IP routers).

Joint operation of a satellite payload is not unprecedented, but in the Eutelsat-ictQatar case, Eutelsat clearly brought to the table the exclusive satellite operator capability, while ictQatar brought the infrastructure market mandate to justify a larger payload and the financing to pay for it. ictQatar, in its statement announcing the alliance, referred to the need to “secure our strategic interests in communications capabilities in terms of broadcasting, communications, government services and … other future innovative services that our local market will require.”

Some may quibble with whether the Eutelsat-ictQatar strategic alliance is a species of hosted payload or not, but in an era of vanishing credit facilities and the emergence of export bank and government agency credit financing as necessary to major satellite procurement, that would be a silly quibble to make. The Eutelsat-ictQatar alliance contemplates the public sector customer taking a bigger ownership piece and responsibility for the overall satellite than did the Intelsat-Australian Defense Force deal. The alliance also represents a model in which a new or replacement satellite may be both justified and possible to finance that would otherwise not be or to allow a public entity to participate in a procurement when a stand-alone procurement would not have been justified by its needs or mandate, or permitted by its budget. This is another — and innovative — way to spread costs, share capacity and offer wider service.

Owen D. Kurtin is a founder and principal of private investment firm The Vinland Group LLC and a practising attorney in New York City.
He may be reached by e-mail at [email protected].