Philip Harlow President and Chief Operating Officer, XTAR

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Xtar LLC, established to sell X-band satellite capacity to government customers on a commercial basis, has nearly doubled its sales in the past three years and is assessing its options for fleet growth, which may include a venture into another frequency band.

Rockville, Md.-based Xtar operates the Xtar-Lant satellite and the Xtar-Eur X-band payload on another satellite that collectively provide 1.44 gigahertz of capacity from Denver east to Singapore. The satellites were launched in 2005 and 2006, respectively, and Xtar has struggled to sell their capacity, which can be used only by government customers. The company is a joint venture between New York-based Loral Space and Communications and the Spanish Hisdesat consortium, which owns the satellite hosting the Xtar-Eur payload.

Contracts with the U.S. Department of State and with companies that resell capacity to the U.S. military account for about 80 percent of Xtar’s sales today. Starting next year, the military will have more leeway to bypass these third-party resellers, called integrators, and contract directly with satellite operators like Xtar.

Hisdesat, the primary seller of Xtar’s capacity to non-U.S. governments, provides bandwidth to numerous European nations and is beginning to make headway in Latin American markets.

Philip Harlow joined Xtar in June after retiring as an officer in the British army and holding positions with several satellite communications firms, most recently serving as CapRock Communications’ chief technology officer. Xtar’s parent companies expect more from the firm, and increasing revenue by 15 to 20 percent next year should be possible, Harlow said.

In the long term, Xtar will seek to increase its global coverage with new satellites or hosted payloads, Harlow said. The company hopes to benefit from a partnership between Spain and Norway that was announced in September. The two nations chose Hisdesat to buy and operate a secure communications satellite, and Xtar may be able to market a portion of its capacity, he said.

Harlow spoke recently with Space News staff writer Turner Brinton.

 

How is the company doing financially?

We’re in an enviable position. We’ve grown in terms of revenue about 90 percent over the past three years, most of which has come in the last two years. I think we’ve done well, but we have lots of runway left and there are lots of opportunities that we’re going after. We’re looking forward to another good year next year, projecting something like 15 to 20 percent growth.

 

The U.S. military is boosting its X-band capacity via its Wideband Global Satcom (WGS) satellites, with three on orbit and more on order. What does that mean for commercial X-band capacity providers?

I think the marketplace for commercial X-band is firmly established with ourselves and other companies that are making sales just as successfully as we are. As we move forward, we’re going to see a greater reliance on commercial X-band. You can imagine a point where we come to a steady-state environment where we don’t have surges in Iraq and Afghanistan. Then the WGS system will become the norm. Therefore, it seems to me the norm for surge requirements in the future will be reliance on companies like Xtar to provide access to the same frequency bands they operate with their own satellites. If we continue to stay very close to the end users and know their requirements, we will be more successful. We have to work hard to keep that relationship tight.

 

Isn’t there a great deal of uncertainty in a business model based so heavily on demand generated by conflicts or emergencies?

From a business model perspective, putting all your eggs in one basket is always a risky proposition. The good news for me is all our eggs are not in one basket as I am not relying on just the U.S. military. We sell to a number of other allied governments and to the U.S. civilian government sector as well. There’s a lot of diversity in our portfolio today and we’re working very hard to expand that diversity.

 

How do you plan to expand your fleet?

The Xtar-Eur and Xtar-Lant satellites had a design life of 15-plus years, and after launch, we projected them to operate between 15 and 18 years. So we’re not yet planning to replace those two spacecraft. But certainly we are interested in expansion. In particular, the agreement between the Spanish government and the Norwegian government, which is resulting in the Hisnorsat satellite, is of particular interest to us. We expect it to result in additional capacity for us in a slot somewhere over the European to African arc, which will enable us to expand our reach further east and increase our capacity. That’s going to be launched in about 2014.

In addition, right now we’re talking to customers and seeing where they have interest in additional capacity with greater geographic reach. We’re trying to put together the business case to either launch a new spacecraft or put a hosted payload on somebody else’s spacecraft. We’re seeing specific interest in more capacity over Southwest Asia and the Asia-Pacific arc and more powerful capacity over Africa, so there are a lot of options geographically. And of course you read the same newspapers as I do about North Korea, so there could be some interest there in the coming months and years. One of the other facets of growth could be moving into the military Ka-band or other frequencies.

 

Xtar, like many companies in recent years, launched its systems without firm commitments from customers to buy most of the capacity. Has your business model changed since then?

Xtar has believed in this model from the beginning. The partners are very strong and very supportive of Xtar. We have seen considerable growth in the last three years in particular, and everything the military is projecting about their requirements shows an upward dependence on commercial bandwidth. We believe in this market and we’re not going anywhere.

Xtar is a specific niche. We sell X-band services to the government. We’re not a broadcaster, and we don’t have the ability to fill up the entire spacecraft prelaunch to 80 percent capacity for direct-to-home providers. We’re not able to sell that capacity to cellular backhaul providers. Our focus is on the military and government sector that we support. And we all know what they can and can’t do in terms of prelaunch commitments. Certainly if we could launch a spacecraft preloaded, we’d love that. But the reality of the world is somewhat different. So decisions that were made some time ago may not be valid today, and decisions I make today may not have been valid 10 years ago.

The bottom line is whatever way we decide to go, whether it’s new spacecraft or hosted payloads, or maybe a different frequency band, it will be founded on a very strong business case because we have to support the investment of our owners. And it will be based on a certainty on our part that we can effectively support our end users’ requirements.

 

What military applications rely on Xtar’s capacity?

Many places where Xtar is being used are those where military X-band terminals are already deployed. If a soldier has an X-band terminal, he or she doesn’t want to buy a Ku-band terminal or Ka-band terminal. So where a unit deploys with X-band terminals and there’s not available WGS capacity, we’re a natural fit for them. We’re often used when units send out small detachments with small dishes, as our satellites can provide high-throughput services to 1.2-meter dishes and even smaller. We’re also pushing large amounts of data back and forth to both Iraq and Afghanistan using our spacecraft today. From small dish to large dish, we work very well.

On an absolute basis, we’ve seen an increase in usage of our capacity by the Pentagon since the WGS satellites launched. I think that’s probably driven by the fact that where WGS is deployed, they simply don’t have enough capacity for everything they need to do in the region. There are three spacecraft deployed around the world, but the one over the Pacific doesn’t support Afghanistan. Our job is to be there when WGS cannot.