Intelsat CEO Steve Spengler. Photo: Intelsat

OneWeb‘s recent filing for Chapter 11 bankruptcy protection, as well as the earlier failure of LeoSat, has again put the debate around long-term business plans in Low-Earth Orbit (LEO) into sharp focus. It is a question that Intelsat CEO Steve Spengler is often asked. Given Intelsat’s attempted merger with OneWeb, in the second of this two-part interview, Spengler discussed Intelsat’s capital expenditure plans, and whether the company will look to change its mix of satellites in its fleet going forward.  

[Part One: Intelsat CEO Steve Spengler Talks C-Band, Covid, and Chapter 11]

VIA SATELLITE: Are you surprised at what happened with OneWeb? What are the long-term implications of the failures of LeoSat and OneWeb?

Spengler: No one wants to see any industry player struggle. It is very unfortunate that OneWeb has stopped operations for now. We will see what they do in their restructuring. But it is not a day that anyone is happy about, for sure. I think looking at the LEO business case, and we have spent a lot of time on this, given our potential merger that didn’t come together with OneWeb. I would say it is a challenging business case. It is challenging, not because of technology, because the technology is there in different forms. However, it is extremely expensive to build. You have to outlay billions of dollars before you get one dollar of revenue. It takes a lot of time to build, it is extremely expensive and then you need to have a ramp of services that is pretty steep once you get going. So, the business case is challenging. It does not mean that companies cannot overcome that and have a longer term view of things, but it is very tough.

What we saw was a way to support that business case by developing LEO and [Geostationary] GEO services together. We still feel that LEO is a great complement to the GEO services we provide in that there is great value in integrating and packaging services in multiple orbits for various purposes. We still see the value of that. We still see potential partnerships we could look at. We will stay close to that area. It will take time to develop. It is a new area. It is an unfortunate setback. But, we will see how others develop in that sector.

VIA SATELLITE: Would Intelsat be interested in these assets going forward given they are up for sale?

Spengler: The 74 satellites themselves need a network, and they need hundreds more satellites, and a lot of ground facilities. So, I think the main question is the value of the spectrum rights. It seems to be an area that people are focusing on, but with those spectrum rights comes the obligation to build out the network. I would say this is not at the center of our strategy, but I would not specifically comment on [it]. We will see what they put on the market and how they try to monetize it.

VIA SATELLITE: In terms of capital expenditure plans, and considering what we talked about in terms of LEO, has your opinion shifted in terms of whether to invest in GEO or LEO? How do you see the balance going forward? What is the next stage of your capital expenditure plans?

Spengler: What we are seeing right now is that there is a great opportunity with the advent of software-defined, flexible satellite platforms. These next-generation [High Throughput Satellite] HTS platforms are extremely compelling. They are going to deliver very high performance. They are going to be extremely flexible because of how they are architected with software configurability when in space. They will have excellent economics. In fact, on the economic front, we believe they will be every bit as, if not more, competitive as other GEOs and [Non-Geostationary Orbit] NGSO.

We are very focused on this. Software-defined HTS will be the next generation of our network, and we think the flexibility that it allows will be ideal for the applications we are focused on, such as mobility of various types. It is not just a satellite. When you look at this next generation, it is really about a system. With these very flexible satellites, they come with a very flexible and dynamic ground system as well. We are spending a lot of time on that as well, as that area develops. We are going too see all kinds of services and solutions integrate into that architecture. This is where we see the future. The key to this is not just the network and the system, but the services that go with it. It is an opportunity to develop and really bring to market highly integrated managed services for numerous sectors of the market. So, we are pretty focused on this, and bullish on the future for these types of networks.

VIA SATELLITE: Do you consider LEO a “must have” component now for Intelsat?

Spengler: I wouldn’t see it as a “must have,” but I do see an NGSO component as a “nice to have.” We think that it could be an important complement to a GEO solution. Obviously, NGSO systems can provide services in certain latitudes where GEOs are going to be challenged. It has lower latency characteristics that may be helpful for some services. We think it is very complementary, and we hope to have it as part of our offering over time as we develop this next generation of the network.

VIA SATELLITE: Intelsat also joined the HAPS alliance this year, along with some pretty significant telcos. What is the significance of being part of this alliance from Intelsat’s point of view? 

Spengler: I think the HAPS alliance and our involvement in that is a great way in how we view innovation and opportunities for the future. We were founding members of the HAPS Alliance with telecoms, technology, and aerospace players. We wanted to explore the capabilities of these new technologies. We see it as complementary to the things we are doing in space, and so it is very interesting as a part of the future network architecture that we are potentially building. Working with broader telecoms industry players is extremely interesting to us. It indicates that satellite interoperability with HAPS is a path where things will move. We see services as more integrated, more hybrid. The key to making this work is standards and interoperability is key. It is an area of innovation and exploration for us. We will see if something evolves here, but we wanted to be close to it and see what it evolves.

VIA SATELLITE: I have often wondered, for example, why we have not seen a big deal with a satellite operator with a mobile operator like Vodafone. Is this something you see happening in this decade?

Spengler: As you know, Intelsat has been a provider to mobile operators all around the world for years. We are providing, not just space capacity, but also managed services. We are also providing some very unique solutions for rural connectivity with our partner Africa Mobile Networks. Satellite is an important part of the infrastructure. In general, I would say mobile operators are probably going in the other direction. They are looking to outsource parts of their network where they saw the economic value. They have outsourced and sold their tower infrastructure as an example. We are providing end-to-end services for some mobile operators, where they would have done that in the past. They are looking at ways to do things more cost effectively and not so focused on doing everything in-house. This is where we come in.

I will say one thing that is very, very important. What we are seeing over the past few years is seeing an increasing engagement of mobile operators in the “non-terrestrial” world. You have the HAPS Alliance. It is not a coincidence that a lot of mobile operators are in the HAPS Alliance, because they believe there are other technologies that could be enablers for them to extend the reach of their networks in remote and rural areas, where it is cost-prohibitive to do by fiber or microwave.

The other example is satellite technology as part of this infrastructure. One of the things we have been working on is connectivity within the 5G standard bodies. We are a member of an organization called ATIS, and they are one of the 3GPPP standards organizations regionally. Intelsat has chaired the non-terrestrial networks working group in that organization, which includes satellite and mobile operators. For the first time, the 3GPPP organization made the decision to incorporate non-terrestrial technologies, meaning satellite and maybe HAPS, into release 17 of the 5G spec. This is a real breakthrough. Satellite was never part of 3G, 4G and being part of that specification is an indication that the mobile industry wants a solution as part of the package of capabilities to bring to market and help them reach everybody in their service areas in a cost-effective way. We think there is a lot of opportunity and potential there.

VIA SATELLITE: How do you see the balance between video and other services for Intelsat going forward?

Spengler: We have had a strong networks business. Our networks and video business are very similar in size. So, our robust networks business will continue to grow in size. Media is important. We serve quite a few media brands that are distributing their content around the world on our network. We see that our neighbourhoods, whether for DTH or for cable distribution are still strong. But, those content owners are focusing on cost control. They want to make sure they are operating as efficiently as possible. Media is still important. Digital media content is growing dramatically. Digital content in a non-linear format, so things such as streaming and other kinds of formats, is a huge part of the data stream that is in the networks business. Cisco and others think this could be 80% of the data stream going forward. You only have to think about all the video we are using during this pandemic. Media content/video content will continue to be important in the networks business. We need to do things to support this movement towards digital content across our networks.