Profile: Taking a Risk on X-Band

by and

Profile: Denis Curtin, Chief Operating Officer, Xtar LLC

Taking a Risk on X-band

In an industry that is renowned for its risk takers, Denis Curtin can line up with the best of them as the head of a company that did not flinch as it was making and winning a very big bet with the launch of its first satellite.

Xtar LLC won that bet in February when it successfully launched Xtar-Eur, the world’s first commercial X-band communications satellite, without insurance on a version of Europe’s Ariane 5 launch vehicle that was making its first flight following a disastrous December 2002 launch failure that destroyed two satellites.

The reportedly low price they got for the launch is expected to help their business case — as is a commitment from Spain to buy some of the satellite’s capacity. The satellite also will provide coverage over Africa, Europe, the Middle East and part of the Indian Ocean on a bandwidth that is reserved in the United States exclusively for military use.

But the company’s big bet is that the Pentagon — now that the satellite is operating successfully in orbit — will step up and buy enough of that unique commercial X-band capacity to make Xtar LLC a profitable company.

To date Xtar’s only declared customer is the Spanish Ministry of Defense, which has leased three and one-third of Xtar-Eur’s 12 X-band transponders for about a year, until the Loral-built Spainsat satellite is launched in early 2006. Space Systems/Loral of Palo Alto, Calif., also built Xtar-Eur.

Xtar LLC, which is 56 percent owned by New York-based Loral Space and Communications and 44 percent by Hisdesat Servicios Estrategicos S.A. of Spain, now hopes the U.S. government, which refused to commit to any purchases until the satellite was operating in orbit, fills up the remaining 75 percent of the satellite’s capacity.

“We’re now in discussions with a number of agencies,” Curtin said. “The process started after we got on orbit. We talked to them beforehand, but the serious process starts afterwards. How long the process is going to take, I’m not positive of that.”

Curtin, who joined the company in October 2003 and led the Loral team that negotiated the joint venture between Loral and Hisdesat that formed Xtar in 2001, spoke with Space News staff writer Jason Bates and Editor Lon Rains .

Do you think you have this market to yourself, or will competitors crop up?

We’re far ahead [in this market] for a somewhat unique reason. A U.S. firm cannot file for X-band in the United States because it’s a U.S. government frequency. So I couldn’t go and file with the [Federal Communications Commission] for an X-band license. The way we were able to do this was that we have filed through Spanish orbital slots. The Spanish did the filing for us, we’re working with them so the slot we have at 29 degrees east is a Spanish slot.

Are you completely dependent on the U.S. government or is there enough business around the globe to make your business plan work?

This is certainly built on the assumption that there is a big U.S. market. When this whole thing was being put together, the U.S. government was very supportive of the project in an indirect sense. There clearly was a U.S. government interest in having this project go forward. I think they saw that they would use this capacity.

When you look at U.S. Department of Defense budget planning, do you see positive signs for your offering?

The positive sign is the growing demand. That’s the real sign. Almost 80 percent of their communications requirements right now are met by commercial providers. We think we have a unique solution because we’re X-band. We want to get a piece of that, and we think the uniqueness of our solution should help that.

Will the U.S. government’s thirst for bandwidth fuel your revenue stream for the long term?

There is a growing demand and it is both in terms of military applications in places like Iraq and Afghanistan, and there is a growing need beyond that. The Department of Defense, the intelligence agencies and the Department of State are obvious users. I think there are secondary users that we will have to develop like the U.S. security market.

Some Army officials have expressed concern about not having enough money to take advantage of commercial services. Does this concern you?

In terms of the X-band terminal, I don’t think that’s an issue. There are a lot of existing terminals that could use [some of our satellite’s] capacity already. We have found there are a number of groups that have gone out already and are getting retrofits or new terminals so they can use all of the satellite’s capacity.

Can your system provide interference-free communications on the move with a 30-centimeter dish as the Army says it needs?

I think it’s something that’s certainly got to be looked at. I think that a lot of development right now has been with Ku-band, and I think there have been some real concerns that groups have found in testing Ku-band on the move. Some companies are looking at switching to X-band because they think they have a better shot at doing it with X-band than they can with Ku-band.

Will the U.S. government continue to need your service after they launch their next generation of communication satellites?

The amount of growth for communications is far beyond anything they’re going to put up — DSCS, Wideband Gapfiller, Transformational communications — you name it. So there is a growing market for commercial capacity and we believe that we can fit into that market very well with the X-band capability because it’s much closer to what they’re used to using now.

How much demand will there be for your services from Spanish Ministry of Defense after the launch of Spainsat?

The transponders they will take from us until Spainsat goes up at end of this year will become backup capacity. That particular capacity we can lease, but if they have a need for it, they can claim that capacity.

Having said that, we are in conversations with the Spanish Ministry of Defense because they have other requirements beyond what Spainsat will achieve, but there are no commitments or anything at this point.

What percentage of the satellite’s capacity do you have to sell to be profitable?

We really haven’t gotten enough customers to have that in mind. I’d love to be able to give you that answer. My investors ask me regularly as well, and they get the same answer.

Have you started thinking about a second satellite?

The second one is Spainsat for us. That completes our initial network for a total of 20 transponders. Now we clearly have had thoughts about where do we go from here, but to be honest I think let’s get this under our belt, make sure that what we’ve done here is correct and it works and we can lease this.