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Interview with Matthew Desch, Iridium CEO

May. 24, 2013 - 11:52AM   |  
By AARON MEHTA   |   Comments
Matthew Desch, Iridium CEO
Matthew Desch, Iridium CEO (Iridium)
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Q. How important is the Pentagon to Iridium in 2013?

A. We often talk about the DoD being an anchor customer mainly because they were technically one of our first customers when we started in 2000, in this incarnation.

It has gone from being most of our customer base to only about 10 percent of the business based on number of subscriber units, or 20 percent of our revenues. So they are still our largest single customer, but our commercial traffic has overwhelmed it over the years as we’ve expanded into maritime applications, aviation, the commercial machine-to-machine world and other applications.

Q. Do you expect DoD to grow as a customer going forward?

A. Yes, but I think they’ll be getting a lot more for their money. With all the things we think we can do for the government right now — and it’s expanding — I could see us offering 100 percent more service than we offer today for a small fraction of increased price, and I hope that happens. We’re talking about that now.

Q. Given shrinking budgets, what is the next big change to come to military satellites?

A. The elephant in the room for everyone is that budgetary pressures are relatively new, but will be around for many, many years. It’s going to force the government to think about things in new and creative ways.

There are a number of technical trends — small satellites, electric satellites — but they don’t fundamentally change the ability to do what the government needs to do over the next 10 years. What will is thinking about contracts differently. These aren’t technical issues, it’s how to do business together. I think that’s got to happen over the next three to four years. We’re starting to see some of it, but it’s happening much slower than anyone believes is appropriate. Something like hosted payloads doesn’t require a technology change. It requires a leadership change, a cultural approach to working with partnerships.

Q. Iridium has been a big proponent of hosted payloads. What is preventing them from becoming widespread?

A. I think there’s great intentions between the government and industry, but I think it’s still many years away from the government creating the kind of incentives and doing something different from what they’ve been doing for the last 50 years, which is giving up some control in return for a dramatically lower cost structure. It’s still a real challenge.

Everyone knows it’s a lot lower cost to share a ride and take advantage of someone else who is already spending a lot of money to get a system into space, but there are many cultural and control issues that have blocked it from being anything but opportunistic. Everyone starts by thinking of building a purpose-built system, and only if they have no other choice do they think of using a hosted payload.

The only way to dramatically change that paradigm is if DoD decision-makers ask the question, “have you considered the hosted payload” first. And if it doesn’t work, only then will we give you the money and authorize you to build an independent and custom-built network. But I really don’t think that will happen for a long time, so I think you’ll see more and more deals, but it won’t be this transformative experience everyone knows it could be and should be.

Q. Will budget cuts force the Pentagon toward using hosted payloads?

A. Eventually. But cutting funding makes the problem worse initially, because the natural reaction is to scale back. Long term, if this is the budgetary environment, they’re going to have to think about doing more for less, and one of the best ways they can do more for less is by using hosted payloads and working with the commercial industry.

Q. The company will be replacing your old constellation with the Iridium Next network. How is that going?

A. The first launch is in early 2015, and then the whole network will go up over a period of two years. It really will be replacing as we launch it, satellite by satellite until we complete the whole 66 satellites in the constellation and add the six new spares to orbit.

When we finish it, it means not only will we have another 15 years of operation, but the new network offers higher data speed. We’re excited about Iridium Next, but what’s important is it’s not about “we’re doing OK until Next comes and then we’ll do great.” We’re growing every year, and have been for the last 13 years. Iridium Next allows us to continue that growth for the next 15 years, but we’re still investing in the current network.

Q. You selected SpaceX to launch Iridium Next as opposed to going with the United Launch Alliance. Why go with the upstart company?

A. When we selected SpaceX, we were the first commercial operator to select them, and we knew we still had six years to launch and they were just getting their first launches off the ground. We took a chance on them, but it was a really smart chance. For a fraction of what it would have cost for a more mature platform, we had time to allow them to mature as a company, and they’re making us look very smart by being so successful. It was a risk. But sometimes you have to take risks. They’re shaking up the industry, and that is a major benefit to both commercial operators and government.

Q. What are the positives of operating such a large constellation?

A. The most important positive in our case isn’t just the number of satellites. It’s that we have a satellite over every part of the planet, and that they are all interconnected in space so we’re not relying on ground systems.

When we were considering launching Iridium Next, we could have moved to other architectures. But frankly, the reason why we’re so valuable is our interconnected low-Earth orbiting system, and we wanted to make sure all the devices on our network never saw a transition. Almost every other architecture would have required users to replace their terminals. Ours will be completely backward-compatible, so users won’t see the differences as they transition from the current network to the future network.

Q. And the challenges?

A. There’s just a lot of assets to keep track of. If you have only one satellite, you only have to worry about one satellite. But that’s your whole business. If anything happens to that one satellite, it takes time to be able to replace that.

Another benefit of our network is, it’s extremely resilient and robust. We expect to have satellite outages and problems, but we have spares in orbit we can immediately fly up. And because our network is constantly moving and there’s a new satellite over you every 10 minutes or so, if we have a problem, you won’t even see that problem except for once or twice a day. So it’s a very resilient architecture. I don’t really see the downside to that.

Q. US Air Force officials warn of the need for greater space situational awareness. How do you handle that?

A. These satellites are flown by our technology partners at Boeing, and they’re very sophisticated systems that maintain their attitude and flight profile and such. In the last several years, we’ve been moving them occasionally to avoid debris. We have a very close relationship with the Joint Space Operations Center, where we communicate information about what they know about debris and what we know about our satellites, and if we think there is any chance they can be close to a piece of debris, we have a very defined protocol for moving the satellites.

[Space debris] is a real big issue. It can’t be allowed to propagate further. It can’t be allowed to become a worse problem, and I encourage people to work on it. It has to be taken seriously. However, just like it is possible to keep all the airplanes flying, you can manage with protocols to keep satellites safe.

Q. Has the company felt an impact from sequestration?

A. A little bit, but not really in a big way. It’s more around the ability to do new starts and new ideas and taking advantage of new technology. It means there is less R&D [research and development money] flowing, but it’s not impacting the ability to supply underlying gear to the war fighter. We’re not a project shop. If we did our business by just building new things and focusing on new contracts, yes, we’d be impacted, but we’re thought more of as a gun or a radio, an essential piece you can’t just cut back. ■

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