Pradman Kaul, Chairman and CEO, Hughes Network Systems LLC
Following several years of transition, Hughes Network Systems LLC established itself as an independent entity in January 2006. Since then, Chairman and CEO Pradman Kaul has found that life free of the demands of a corporate owner brings a mixed set of circumstances.
“It’s made things much more focused and simple, but it’s more difficult because you don’t have the bigger entity protecting you,” he says. “You don’t have the ability to hide under somebody else if things don’t happen like you expected them to. Instead, you are totally exposed to the world. We tend to like this. We would much rather be judged on our own performance.”
The best part of independence has been the ability to make decisions with the best interest of Hughes in mind, Kaul says. In the past, he has seen plans sometimes trumped by the interest of others.
“When we were part of Hughes Electronics and then DirecTV we were 100 percent owned by those entities,” he says. “What that really meant was that we not only had goals and targets we set for ourselves, but we had goals and targets that were set by the parent corporation. We now get to operate independently, with the primary focus being improving value for our shareholders. We don’t have to make a decision that may not be in the best interest of Hughes but rather in the best interest of a sister division.”
Hughes has suffered from these decisions in the past, such as when DirecTV took the Spaceway-1 and Spaceway-2 satellites — key components of Hughes’ planned broadband offering — and modified them to provide high-definition TV services. “From a Hughes Network Systems perspective, it was a big blow,” Kaul says. “We lost Spaceway for a couple of years.”
Provided there are no more unexpected delays, such as the January failure suffered by Sea Launch which forced Hughes to switch launch providers, Hughes is set to launch its broadband service with Spaceway-3 in the 2008 first quarter.
Kaul spokes with Via Satellite Editor Jason Bates about the transformation of Hughes and the launch of Spaceway-3.
VIA SATELLITE: Who do you report to today, and are they happy with your performance throughout the past year?
KAUL: If you look at the different communities we serve, first, of course, are our shareholders. They are looking for a better return and more value. They measure us by stock performance, and our stock has performed very well. So our shareholders should be happy.
The second most important community is our customers. We are continuously coming out with new technology, new offerings, new services and new platforms, and we have been getting a really good reception. I think our customers’ satisfaction level in our enterprise business is the highest it has ever been. I believe that constituency is very happy.
The third community is our employees, and we are hiring new employees every day. The opportunities for employees to grow have improved dramatically, so that constituency is very happy.
You take our shareholders, our customers and our employees, and I think all three constituencies feel better about Hughes today than they did a year ago.
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.