Pradman Kaul, Chairman and CEO, Hughes Network Systems LLC

VIA SATELLITE: Did you see the Sea Launch failure?

KAUL: I was watching. My reaction, clearly, was disappointment. Then your brain starts moving forward and asking, “What do I do now?” Our job is to put Spaceway-3 up as fast as we can. We have had so many delays in the program, and so many events have occurred throughout the last three or four years. We’ve gotten so close to having Spaceway, and something or other has happened that we couldn’t control. So it was again the fear that this could mean another big delay. There was a lot of consternation and disappointment.
We went to work immediately to see what choices we had to get Spaceway up as soon as we could. We were very fortunate that we found there was a possibility that Arianespace could accommodate us. Today, we have contracts with Arianespace and with Sea Launch, and based on everything we know today, it looks like Arianespace will be ready first. Signing the additional contract did cost more money, but our job is to get Spaceway-3 up as fast we can.

VIA SATELLITE: Do you face the same market today that you envisioned when you started the Spaceway program?

KAUL: When we started in 1998 we were aiming purely at the enterprise market. We really hadn’t considered making a big play in the consumer, residential or small business market. Since then, we have found these markets to be robust and have been exploiting them with Ku-band technology. That has become a big piece of our business, and our current view of Spaceway-3 and the whole broadband market is that while there is a solid enterprise market, similar to what we had envisioned in 1998, Spaceway will also address the consumer/small business market.

VIA SATELLITE: Are your current customers still interested in Spaceway-3?

KAUL: Many of our enterprise customers are clearly very interested and still see the value, because there is still value for them in the types of features and services we can offer with Spaceway. So we are hopeful. We just have made them get ready for a switch so many times.

VIA SATELLITE: Which customers will you move to Spaceway-3?

KAUL: Every new customer we sign will go on Spaceway. We also will start coming up with programs to transition some of our existing enterprise customers. Throughout the next three years or so, we expect to transition 40 to 50 percent of our customers.

VIA SATELLITE: Will you eventually have customers exclusively on Hughes-owned satellites?

KAUL: If you look out 10 years, I would say no. We lease a lot of space segment, more than a 100 transponders in the United States alone. We have them for different periods of time. We’ve carefully looked at phasing them down, but we still expect to be a major user of Ku-band transponders for a long time, but hopefully we will have a lot of customers on our own satellites.

VIA SATELLITE: Is the consumer market big enough for two players?

KAUL: We cannot compete with DSL and cable for broadband data from an economic perspective. That means WildBlue and Hughes are serving underserved areas where you cannot get DSL or cable. That is a market of 10 million to 15 million households in North America. So the market we are addressing is significantly smaller than what DirecTV or satellite radio would be addressing. So we’re not going to get to that scale, and we’re not fooling ourselves.
But in terms of WildBlue, I think this market of 10 million to 15 million households is plenty big enough for two companies. Since WildBlue has come on, the number of subscribers we have signed per month has increased. People know this technology exists, and I do not think we are taking customers away from each other. I think the market is there for both of us, and I think they will be successful and we will be successful.