Few people have been more frustrated at the U.S. government’s sluggish reaction to industry-provided hosted payload opportunities than Matt Desch, whose company plans to start launching its $3 billion second-generation telecommunications satellite constellation in 2015.
Called Iridium Next, the constellation represents arguably the biggest and rarest of such opportunities: It consists of 77 satellites, including 11 on-orbit spares, operating in low Earth orbit and providing global coverage. The company had reserved space and power aboard each satellite for government-owned payloads, and had factored the resulting revenue into its business plan.
A key difference between government and commercial space programs is schedule adherence: Government agencies, for a variety of reasons, are far more tolerant of program delays than commercial satellite operators, who count each day their hardware remains on the ground as lost revenue. So when the U.S. government — which expressed interest in the Iridium Next opportunity — couldn’t pull together a credible plan that matched the deployment schedule, Desch took matters into his own hands, committing scarce capital to the Aireon hosted payload venture for air traffic management.
Aireon, a partnership between Iridium Communications and Nav Canada, will place payloads aboard the Iridium Next satellites capable of relaying high-integrity GPS signals from commercial jetliners flying transoceanic routes or over remote land areas. This precise position-location data will enable airlines to save on fuel costs by flying more efficient routes and even make midflight route adjustments. According to one study, industrywide fuel savings could be in the billions of dollars in the first dozen or so years of Aireon operations.
Desch’s decision is not without risk. Building the Aireon terminals and integrating them on Iridium’s satellites will require an investment in the hundreds of millions of dollars — Iridium so far has committed $27.5 million — over and above the base cost of the next-generation constellation, which is stretching the company’s capital resources to the limit. Moreover, it isn’t clear that Iridium will have any co-investors in the venture.
But there is also tremendous upside and not only in Aireon’s revenue-generating potential and the flow-down work it is providing to contractors like Harris Corp. and ITT Exelis: Iridium and Desch are pursuing a hosted payload model that is not dependent on a government funding commitment and could be creating a new business in the process. Here’s to Desch for taking that kind of risk. May the appropriate reward follow.
