Intelsat Chief Executive Stephen Spengler. Credit: Intelsat
PARIS — Intelsat Chief Executive Stephen Spengler on May 17 said indications are that the U.S. government, primarily the Defense Department, is renewing its commercial satellite contracts at better-than-expected volumes and prices.
Spengler’s comments echoed those of Eutelsat Chief Executive Rodolphe Belmer, who on May 14 said the spring 2018 renewal season on U.S. military bandwidth-lease contracts had concluded at “comfortably above” 95% of the previous contract volume up for renegotiation.
Intelsat had said 15% of its total government business was coming up for renewal in 2018. For the spring contract “re-competes,” the first of at least two major events in the year, the results are good.
“We had anticipated price reductions,” Spengler said at a J.P. Morgan conference in Boston. “We have renewed and secured about a third of the exposure we have for 2018. Our renewal rate has been good, and so has our pricing. We’ve done better than we anticipated in terms of pricing.”
For Intelsat, the move of some customers, particularly those with managed-services contracts, to ask for pricing in megabits rather than the traditional megahertz metric is not bad news.
“It allows us to control the configuration of the network, the management of the bandwidth, the optimization of the service and to deliver excellent value to the customer,” Spengler said. “It also gives us to retain more value in the transaction. It’s a win-win for the customer and for us.”
The proposal of Intelsat, fleet operator SES and Intel to the U.S. Federal Communications Commission (FCC) on sharing C-band with terrestrial mobile network operators has caused Intelsat’s stock to jump around dramatically in recent months.
Spengler declined to say how much it would cost current providers of satellite C-band, mainly to U.S. television networks, to move them off the slice of C-band spectrum they’re on now to higher in the spectrum.
“I wouldn’t put it in the billions, but its a sizable effort,” he said.
On the other side of the table, terrestrial broadband interests have suggested that the satellite operators could replace much of their C-band business with fiber connections, or move their C-band business to Ku-band.
Spengler said C-band remains a higher-quality transmission pipe than fiber links, and is also superior to Ku-band spectrum.
“C-band is the highest-quality transmission,” he said. “That is what the customers want. Fiber does not provide the same quality. By some estimates, and we’ve seen this in our own network, sometimes you need three fiber strands to get the same level of quality you have with a satellite connection. It has to do with the quality of the fiber, cuts that can happen, and the interconnections you need to connect to remove and rural areas.”
The number of C-band receive-only antennas operating in the United States is not precisely known because the owners do not have to register them. The FCC is conducting a registration process to get an accurate count as part of its debate on whether to open all or part of the 3.7-4.7-GHz spectrum to terrestrial broadband.
Spengler said there are between 10,000 and 15,000 C-band antennas in service. He acknowledged that some could be relocated, depending on the nature of the terrestrial wireless operation that the C-band installation would need to avoid.
Of these, he said 5,000 or 6,000 sites are in remote or rural areas where fiber would be costly.
But what about switching to Ku-band?
“Ku-band really doesn’t have the same performance characteristics as C-band so there would be a drop in performance of some of the C-band systems, like you see outages with direct-to-home television when it rains,” he said. “On top of that, there is no Ku-band available to to this, so it’s really not a viable option.”
Major direct-to-home networks around the world, including in the United States’ most rainy areas, have long moved to Ku-band. Some, such as DirecTV Group, have moved even higher, to Ka-band, whose signal is more susceptible to rain attenuation than Ku-band.
The FCC has indicated it could issue a proposed C-band ruling this summer. That would be followed by a 60-day comment period, leading to a ruling sometime in early 2019. But that calendar is not certain.
Intelsat’s fleet of Galaxy satellites, the backbone of its C-band fleet, is aging. Intelsat has already ordered the first replacement, called Galaxy 30, which will have Ku- and Ka-band as well as a C-band payload for the company’s broadcast customers.
Spengler said Intelsat has some room to maneuver in terms of the timing of the replacement program, but not much.
“Those [Galaxy] satellites are at the end of their useful lives,” he said of the current C-band fleet. “We have committed to one of them…. We have several others coming behind it. Obviously the more clarity we have the better we can assess things. Even when it goes into the factory you still have time to make adjustments.
“But we are starting the renewal process for our North American media customers and they are running seven- to 10-year [renewal durations] for the initial ones we have done. So this will be a major distribution method for our broadcasters for awhile.”
Intelsat has ordered, from Orbital ATK, a satellite life-extension service for two Intelsat-9 series satellites, to be performed by to Orbital ATK Mission Extension Vehicles.
In addition to squeezing additional life from satellites that are functioning well but need fuel, adding several years to their lives gives Intelsat time to sort out its options for future satellites without a lot of capex, Spengler said.
He said the Intelsat-9 satellites to be refueled have steerable Ku-band spot beams that could be used for Intelsat’s mobility customers. Whatever services are made available from the refueled satellites will be billed “at a much lower margin than our conventional services, but it’s well worth it when you look at the benefits.”