On Nov. 28, Intelsat Ltd. said its Intelsat Americas-7 (IA-7) satellite, a Space Systems/Loral (SS/L) 1300 satellite, experienced a sudden and unexpected electrical distribution anomaly that caused the temporary loss of the spacecraft at approximately 2:30 a.m. EST that day.

“The satellite was actually functioning normally up until it failed so there wasn’t any kind of indication [that it was about to fail],” Intelsat Spokeswoman Jodi Katz told Satellite News. “It was very sudden.”

The satellite, which was operating at 129 degrees W, was launched in September 1999 by Loral and was expected to live for at least another 10 years.

“The end of the orbital maneuverable life [of IA-7] was November 2015,” Intelsat Vice President of Investor Relations Dianne VanBeber said, though she noted that the end of the satellite’s orbital design life was November 2011.

The satellite failure has not halted plans for the Intelsat Americas-8 (IA-8) launch, which is currently scheduled for launch on Dec. 17 by Sea Launch LLC. The IA-8 bird is also an SS/L 1300 satellite. The failure also has not halted the production of the 1300 satellites, John McCarthy, director of communications for SS/L told Satellite News.

What is important to note is that the failure could also have an effect on the pending purchase of Intelsat by Zeus Holdings Ltd. According to Intelsat, the total loss of the IA-7 satellite would give Zeus the right not to complete its acquisition. Zeus had agreed to purchase Intelsat in a transaction valued at around $3 billion earlier this year (SN, Aug. 23, p. 1).

“Zeus has advised Intelsat that they are evaluating the impact of the failure on the transaction,” Katz said. A representative of Zeus Holdings did not respond to a call from Satellite News seeking comment.

Minimal Revenue Impact

Although the satellite is no longer operational, the financial impacts of the catastrophic failure appear on the onset to be minimal for Intelsat.

VanBeber declined to say specifically how much revenue was lost due to IA-7 going dark, but said impact in terms of either revenue or net income was “immaterial” because the company was able to restore so much traffic on other Intelsat satellites.

Katz added that the company had some of its customers up and running again within a few hours. “All the customers on the satellite were notified as quickly as practicable and then [Intelsat] immediately started moving customers to other satellites, offering different capacity and alternative capacity to try to get them back up and running as soon as possible,” Katz added.

“We were fortunate in that we were able to very quickly restore service on other Intelsat satellites for the most part,” VanBeber said. “We were pleased with the amount of traffic that we were able to get restored within a very short amount of time.”

But while Intelsat may consider its losses to be immaterial, the extent of the financial damage to its customers is starting to become apparent. Intelsat had about 20 customers that used capacity on the IA-7 satellites. Among the customers were satellite Internet service provider Starband Communications Inc., financial services firm Edward Jones, the Nebraska Lottery and the Playboy Channel.

Brian Rockey, spokesman for the Nebraska Lottery told Satellite News editor Gregory Twachtman in an exclusive interview that early estimates on how much revenue was lost during the outage and transfer was about $200,000 to $250,000, but he added it would be a few days before the exact total could be determined.

“Our retailers were unable to sell Lotto tickets on Sunday (Nov. 28) and most of Monday (Nov. 29),” Rockey said. “By Monday evening, we had technicians in the field that were able to start changing the orientation of the dishes at each location. That process is continuing.” As of about 12:00 p.m. EST on Dec. 1, Nebraska Lottery had more than 500 of the about 950 lottery sales sites back online with an alternative satellite and the remainder were expected to be reoriented by the end of Dec. 1. “The one good thing is that [the satellite failure] occurred on a Sunday, which is the slowest sales day of the week. Monday is also fairly slow.”

Starband may also be looking at potential revenue loss issues going forward. While a call to the company was not returned by press time, according to a report in the Nov. 30 Washington Post, the satellite failure stranded about 20,000 Starband customers without Internet access. And according to that report, Starband’s capacity had not yet been transferred to another satellite. Intelsat’s Katz would not confirm nor deny any circumstances surrounding specific customers on IA-7.

For Edward Jones, company spokesman John Boul told Satellite News that he did not know when the company would have information on the financial impact this failure had to its business. However, when the company found out there was a problem, a contingency plan was immediately put in place, Boul said, including redirecting the dishes to a different satellite (he said the capacity was being filled by a satellite operated by Panamsat [SPOT]) and relying on the telephone to help complete securities and other financial transactions. The company also has taken about 300 associates who hold securities licenses from their normal day-to-day duties to help process orders.

Satellite is “a major part of the way we communicate,” Boul said, noting that the company uses satellite technology not only for relaying financial communications, but for inter-office communications as well. Boul said that as of about mid-day on Dec. 1, more than 3,500 of the satellite dishes that connect the just under 9,000 office locations in the United States and Canada had been re-pointed to the new satellite.

Intelsat also declined to say whether it would be on the hook for any financial compensation to its customers resulting from the IA-7, as precise terms with Intelsat customers are “confidential,” but Katz added that any penalties that Intelsat might have to pay “would not be financially material.”

A Harbinger Of Doom?

For one of the IA-7 users, the failure may serve as justification for a corporate decision to move its communications services from satellite to a terrestrial-based communications system.

“We are in the process of moving to a terrestrial system,” Edward Jones’ Boul said.

Boul noted that the company has been using satellites to serve its communications needs since 1989. At that time, he said, “It was more dependable than landlines. Because it was satellite, we weren’t restricted to where we could locate branches.” Edward Jones has a wide spread network that covers many urban, suburban and rural areas. Satellite “also allowed us to use video,” he added, which the company uses as a training tool for employees as well as for other customer relations functions and events.

“In 1989, you didn’t have fiber optic everywhere and all the capacity that’s available now,” along with greater capacity on the wireless systems, Boul added. “Within the next few years, the intention is to be off satellite and onto a fully terrestrial system.”

Boul added: “Even though [the IA-7 failure] is sort of a big deal because it went all the way down, we have had other instances where for whatever reason, such as storms or weather, there have been some minor problems with [our satellite connectivity]. Terrestrial has now become a more dependable alternative.”

Whether other companies follow suit to move their communications infrastructure from satellite to terrestrial networks, be it via wireless or fiber connectivity, remains to be seen. But satellites should continue to play a vital role in providing secure links as well as redundant communications capabilities. Companies within the satellite industry also have begun offering hybrid solutions, giving customers the best of both worlds in terms of communications infrastructure and warding off direct competition from the fiber and wireless industries.

(John Boul, Edward Jones, 314/515-2000, Jodi Katz, Intelsat, 202/944-8223; Dianne VanBeber, Intelsat, 202/944-7406; Brian Rockey, Nebraska Lottery, 402/471-6104; John McCarthy, Space Systems/Loral, 212/338-5345)