Space Segment Provider Launches Into New Markets

Tradition-oriented firm expands portfolio by offering new services.

Changing market demands have prompted a major satellite telecommunications company to diversify its services. Moving beyond its traditional niche leasing transponder space on its large constellation of spacecraft, the company is branching into new areas such as broadband and cellular services. The Washington, D.C.-based firm also is a major provider of video, data and voice communications to the U.S. government.

In recent years, the commercial satellite communications industry has been troubled by technological change and stiff competition from terrestrial fiber optic networks. To survive, many companies acquired smaller regional firms or diversified their portfolios into other communications markets. Commercial profits stagnated, but the industry has benefited from increased government business since 2001.

As a leading global satellite telecommunications firm, Intelsat Limited has weathered the changing market environment and has evolved into a flexible organization actively seeking new business opportunities. Founded in 1964, it was originally an intergovernmental organization known as the International Telecommunications Satellite Consortium. In its decades of existence, the firm helped create live international television links and pioneered early Internet demonstrations.

Intelsat became a private company in 2001 after more than 35 years as an intergovernmental body. While the firm has adapted to the times, the entire telecommunications industry has changed since 2001, explains Ramu V. Potarazu, Intelsat’s chief operating officer. Privatization has permitted the company to diversify its portfolio beyond satellite communications to provide end-to-end solutions such as teleports, fiber optic lines, broadband and wireless services. Other offerings include Internet protocol gateway services, end-to-end broadcasting and bundled networking. He adds that the company is concentrating on broadband services in 2004.

With a constellation of more than 25 satellites in geosynchronous orbit, Intelsat provides communications coverage for 99 percent of the planet. The firm also has acquired additional business since its privatization, with a list of more than 600 clients worldwide compared to the 420 it had when it was an intergovernmental organization, he says.

While this large fleet of spacecraft makes the company a leading provider of commercial services, government sector applications also represent a major source of business. Intelsat formerly provided telecommunications services to the U.S. government through Comsat, its North American service branch. Because Intelsat was an intergovernmental organization, satellite capabilities were sold through the signatory nations and bodies that made up the organization. But in 1998, when Intelsat obtained rights to provide direct satellite access to the United States, Comsat ceased to exist.

In 2003, the company launched a new subsidiary called the Intelsat Government Solutions Corporation. According to its president, Susan Miller, although Intelsat had provided government services for decades, it lacked a specialized branch to meet specific customer needs in the federal marketplace. Today, all Government Solutions personnel are cleared to work with classified information, she says.

Aside from traditional satellite telecommunications services, the company provides managed solutions and end-to-end services such as network design. Miller notes that these packaged offerings are becoming more important as government demand increases.

Intelsat’s Government Solutions branch has a variety of government customers, from major departments and bureaus to defense contractors and small businesses. The company provides similar services in Europe, where it works with individual governments and their ministries, including the U.K. Ministry of Defence, and with major international bodies such as NATO.

The company supports U.S. military operations across the Middle East and Southeast Asia with satellite capability for video, data and telephony. The demand for these services is very steep and will continue well into the future, she says. In the past decade, beginning with the first Gulf War, the need for military satellite communications services outstripped the capability of the government’s fleet of dedicated spacecraft. This forced the U.S. Defense Department to augment up to 70 percent of its bandwidth capabilities through leased services on commercial satellites, she says.

Although there was a brief lull in demand during the mid-1990s, it jumped again after 2000. From 1991 to 2001, government demand for satellite bandwidth grew more than tenfold. Miller adds that projections out to 2015 indicate this consumption will increase by another order of magnitude. A major technological cause for this demand is the expansion of high-quality video capabilities out to front line tactical units. “You are talking about tons of bandwidth. Some of the UAVs [unmanned aerial vehicles] like Global Hawk have satellite links for high-speed video resolution that require multiple transponders for just one unit,” she explains.

Intelsat’s Government Solutions is working with contractors such as the Bechtel Company to provide communications services to contractors and U.S. forces operating in Iraq. Intelsat has provided Bechtel facilities with earth stations for voice and voice over Internet protocol communications back to the United States and Europe. As a service provider for the region, Intelsat takes customer orders and configures, exports and licenses the equipment. Once the equipment arrives, the company then installs and maintains it. “We grow with them [contractors] as they’re opening up operations in camps. If they are moving from Baghdad to Tikrit, we follow along and put in the capability and grow it to meet their demands,” Miller says.

Besides an active government market, the company is poised to increase its presence across the continental United States with the acquisition of Loral Space and Communications Limited’s North American satellites. Pending Federal Communications Commission approval, the $1.1 billion purchase will add five additional Telstar satellites—four in orbit and one scheduled for launch this year—to Intelsat’s constellation.

The purchase permits the company to cover all of the 50 states, which will greatly enhance its voice, data and government business units, Potarazu says. Before privatizing, Intelsat was not permitted to provide service to the Midwest—its service restricted to the territory east of the Mississippi River and west of the Rocky Mountains.

The Loral acquisition and an initial public offering scheduled for this summer place Intelsat in a position to enter new areas, such as the burgeoning wireless market, aggressively. The company is concentrating on services such as cellular backhaul, the connection of two wireless cells to a main communications backbone. Potarazu notes that Intelsat expects cellular backhaul to be a major revenue generator in 2004.

The ubiquity of wireless communications devices such as personal digital assistants and cellular telephones also is driving changes in the satellite telecommunications market. Emerging bandwidth-sensitive applications, such as broadband, are driving commercial demand. These new technologies demonstrate that, while the need for communications has not changed, the mechanisms have, Potarazu explains. “The fundamental question that each one [operator] needs to ask is, Is anyone communicating less? The answer is no. It’s the means that are changing, and people want more bandwidth and faster speeds,” he says.

Many global markets also are just beginning to open to these services. He notes that a large part of the world is not yet connected to the Internet. Other areas, such as Asia, present growth opportunities for applications such as broadband.

Potarazu predicts in the next two to three years the industry will undergo a round of consolidations as many regional telecommunications providers are acquired. This is an attractive option for many companies because of the high cost of entering the market from scratch, he explains. Consolidation also will help ease the oversupply problems that have affected the satellite telephony market over the past few years. He adds that this overabundance exists in markets that are already saturated, while many parts of the world are only lightly connected to the global telecommunications grid.

Government use also will continue to rise. Potarazu notes that five or six years ago, U.S. troops were not sending e-mail home. Satellite communications enables these links. Because of the changing needs, one of Intelsat’s challenges is determining future applications and services. “Whether it’s Internet access through broadband, direct to home [satellite service], bundled services or new applications like cellular backhaul, distance learning and telemedicine—we need to be able to provide solutions to the right people on those networks,” he says.

A new generation of more powerful and capable satellites also is helping the company provide more services to its customers. New Ka-band spacecraft with multiple spot beams are more capable of meeting market changes. Digitalization and compression technologies also enable the spacecraft to react to service requests, he says.

Because it takes an average of 36 months to put a satellite in orbit, the entire constellation must be able to react to market changes, but achieving this is an evolutionary process. “A lot happens in the marketplace in 36 months. You need to bring some flexibility to this model,” Potarazu offers.

Potarazu foresees a continuing convergence of video, data and voice telecommunications services. These changes will lead to the development of new applications and products. “Because users do not want multiple antennas or telephone lines for separate applications, there is a growing convergence of services and equipment to meet their needs,” he says.

Additional information on Intelsat is available on the Word Wide Web at http://www.intelsat.com.