Sukawaty: When you are in the satellite business, there is no question that the biggest risk you take is the investment of new satellites. It is a hugely capital intensive business. That said, the I-4 program was the biggest single risk.

   I see the upcoming Inmarsat-5 as a less of a risk than the I-4 program, because it is so clear where the market is going. There is a strong demand for broadband, and this allows us to be much more confident in the experience we deliver to users. It is much more like the experience that is delivered to office and home users.

   The Inmarsat-5 program also has slightly less capital involved ($1.2 billion versus $1.5 billion), but still a big risk. I think it is a calculated risk based on our understanding of the market. We know the demand levels are there in the prime markets we serve. From the inside we don’t see it as a huge risk, but from the outside, when you invest that amount of capital, then yes it is a risk. I think that anyone that bets against that in the future is missing the boat.

 

Sukawaty: I think we’ll see the real ramp-up in 2013 and beyond, but in terms of the acceptance of Ka-band, for sure, the biggest global government customers as well as some of the biggest commercial customers, are already accepting Ka-band. I don’t think there is any question that these are higher-powered satellites with much more radio frequency available than you ever had at Ku-band or L-band. You are talking about 1.5 GB versus 200 Mhz. That allows us much higher throughput.

   People like to talk about rain attenuation and other things, but with today’s interfaces and modulation encoding, the differences between transmissions are miniscule and undetectable. You certainly can’t overcome the law of physics, but you can drive in a higher-powered signal with higher compression and detection, and create a highly resilient signal. The trade-off is that you get huge throughput advantages. I think the move to Ka-band is inevitable. I think Ku-band is crowded and eventually, over time, will fall by the wayside.

 

Sukawaty: It is absolutely true that loans were given to two of the MSS players that would not have been given by commercial banks. They were government-based loans. Why weren’t commercial banks going to give the loans? Well, do you think these markets are large enough for them to generate sufficient cash flow and pay it back? That is why they could not get commercial loans. Governments aren’t always so discerning.

   The big question now is, as these loans are drawn, can they be serviced? I think you will see defaults on these loans in the future, and then you will see either consolidation or companies disappearing. I think it is inevitable. The market is not big enough. The new services that are launching are not even high-speed data services. They will not be able to support those loans with the amount of revenue that is available. I think you will start to see this shakeout during the next two to three years. It will play out through either short-term or long-term loan defaults.

 

Sukawaty: I think the industry has its challenges, both in the fixed and mobile satellite industry. Governments can’t seem to keep their hands off of it with things like loan guarantees. Certain governments launch satellites where there is already enough capacity. That is one of the challenges the industry faces on an ongoing basis. The satellite and space industries are very strategic for global governments, which can complicate things for commercial operators. It doesn’t make things impossible though.

   You have seen players like us navigate the waters and do quite well. Leading a satellite company, you have to have your wits about you and invest wisely, and also focus on the customer and what the customer needs rather than what the technology can deliver. We have seen hard lessons learned by people who have launched products and services while assuming that customers will come. It does not work like that. This is a demand-driven industry.