STEVEN GRUNDMAN: I think we’ll begin.

Good morning and welcome to the Atlantic Council. I’m Steve Grundman. I’m the Lund Fellow for Emerging Defense Challenges here at the Council. I’m also the producer of this Captains of Industry Series, the next iteration of which – and we’re well into the second dozen of these over the couple years that we’ve been doing it – is going to happen here this morning. That’s our purpose, is to hear from a panel of space leaders – business leaders in the space sector, I should say – who have come here to talk about what I call the space race in business.

The panel comprises – and they’ll be here on the stage momentarily, but let me just reiterate, though I know those of you here in the room have this on a piece of paper – Paul Domorski, who is the CEO of Artel, a com-sat services company; Jay Gibson – he’s the CEO of XCOR, a new business developing a spacecraft that will enable suborbital and then orbital business services; Clay Mowry, the president of Arianespace Inc., the U.S. subsidiary of the pan-European space launch company; Kay Sears, who is the president of Intelsat General, which operates one of the world’s largest fleet of communications satellites, at least by capacity; and Eric Thoemmes, a vice president in the space and missile defense business of Lockheed Martin.

So I belabor the panel in part to make the point of what I think is featured here in this discussion. It took a while for us to put this panel together because I was quite intent on trying to compose a panel that addressed the whole – the whole range – the whole maybe value chain, if you will – of the space sector, you know, from launch and manufacturing of satellites all the way down to the other end of intimate customer services and provision of services that rely on space assets.

So I hope the conversation – and I feel confident, having gotten to know the panelists a little bit – that the conversation will allow us that full breadth of perspective about what’s new in the space sector. And there’s a lot that’s new in the space sector, which is why I thought it would be a good panel to bring here to this series.

A couple of administrative notes to make before we launch into the discussion. First, the event is a public on-the-record event. And also we are livestreaming it. Thank you for those of you who are watching online over the Atlantic Council’s website. The panelists know this, but if I should call upon you during the portion of the agenda that provides for Q&A from the audience, please wait for one of our staff to bring you a microphone, identify yourself and offer your question.

The second administrative note is that we are tweeting this event at the hashtag #ACDefense and the handle – our handle is (@)ACScowcroft. The Brent Scowcroft Center on International Security is the piece of the Atlantic Council where my fellowship in this series resides. And we can even take questions for the panel through those channels if we have staff who are managing those channels and can bring me a good question if it comes over Twitter.

Finally, I want to emphasize the event will end at noon. So, if – and we’ll be in the midst of Q&A as the noon hour approaches. I would appreciate your help pacing your questions, let’s put it politely, to accommodate that deadline as we – as we approach it. Thanks very much.

So I’ve alluded already to the fact that this event marks the beginning of the third year of the Captains of Industry Series, the purpose of which is to make available what I immodestly would regard as the town’s preeminent platform from which senior executives whose businesses address aerospace and defense can address the public interests their companies serve and the public policies that shape these markets. Among others who have preceded this panel on the stage are Dave Melcher, who then was the CEO of Exelis, now as some of you may know is the CEO of the Aerospace Industries Association. He launched this series a little over two years ago. Others, not least, from the space sector who have spoken from this stage include Tory Bruno, the CEO of United Launch Alliance; and Gwynne Shotwell, the president and chief operating officer of Space Exploration Technologies.

By engaging the perspectives of these business leaders, our Captains of Industry Series is cultivating a constituency for practical solutions to the challenges and opportunities lying at the interface of ministries and industries. That’s the – that’s the theme and purpose of this Captains of Industry Series.

As the invitation to this event stated, the space sector has somewhat – for me unexpectedly, I guess I would admit – become one of the most dynamic corners of the aerospace and defense marketplace. That dynamism is marked most especially by the entry of new firms conceiving new products and services to address the changing tastes and preferences of business and consumers, both for information here on Earth and specialized services in space. But it’s also marked by the restructuring and repositioning of established players in the market who are both defending their incumbencies and breaking into new lanes of the market themselves. Not least this dynamism is abetted by governments, whose influence manifests itself both in the form of customers for products and services of these companies, but also as regulators of what and how these companies conduct themselves in the marketplace.

News flow this week, as a for example of that feature of the dynamism, is the passage at least through the House earlier this week of what I think is a conference agreement on the commercial space bill. We may talk a little about that in the panel discussion. Just earlier this week it cleared the House, I would understand.

So a couple weeks ago I was at a conference – the Aviation Week conference in Scottsdale – and I saw my former colleague Jacob Markish make a presentation – a really terrific presentation that I suspect is available elsewhere – on what is new in aerospace and defense, and to sort of respond to the – maybe the cynical view that the dynamism in the defense market in particular has dulled. Jacob has a nice antidote to that. But there were two slides in that presentation, which as I sat there I thought, I got to use those two slides to begin this conversation because I thought they so perfectly put into perspective this range of repositioning, restructuring and entry, which is at least the dominant feature of this thing I keep calling dynamism.

So I’m going to cede the stage to Jacob Markish, a terrific, thoughtful and rigorous – which is a strange combination, often – consultant and analyst of the aerospace industry, who’s a friend, and with whom I’ve worked before, and who I’m just going to cede the stage to so that he can put this little backdrop in front of our panel. Then we’ll have the panel come up. I’ll ask each of the panelists to say something about themselves and their own companies and their perspective on what’s new. Then I will engage a conversation with them. And then, at about 11:30, I’ll try to open up the conversation for questions from those of you here in the audience. So bide your time if you have a question burning in you. At or about 11:30, I will – I will get to the audience, I promise.

Jacob.

JACOB MARKISH: Thanks, Steve. Is this working? (Comes on mic.) Is this working? Great. Thank you, Steve.

I work at Renaissance Strategic Advisors. It’s a consulting firm. And just as Steve mentioned, you know, the animation or the inspiration behind this cartoon – cartoonish slide – has been a fair amount of work that we’ve done in the space sector over the last probably couple of years. And a lot of it as a consulting firm for us, you know, is around helping clients to understand what is happening in the market that they serve, what is happening in the industry that they serve.

And so we’ve had multiple clients come to us and ask us to help them think about the evolution of the space sector – the different facets of the space sector. And so this was one attempt to set the context for talking about that evolution, and what I would argue that it does is it defines or articulates a value chain in the space sector in slightly different terms than traditionally one might have seen. And those terms really are focused on – focused on the two boxes at the top, which is to say that some of the most important dynamics and imperatives driving the space sector today more than before are around content – around generating content and then distributing it to the final user, whether those users are in government or in private sector.

So what we see here is there’s a range of ways that you can generate content, right? You can collect data, whether it’s via satellites or even aircraft or otherwise. You store it, you manage it, you process it, generate, whether it’s imagery or whether it’s more specific or more actionable information than just raw data. Then you have to distribute that data or that content, right, whether that content is a Netflix video or signals intelligence data or navigation data. And that distribution might happen in any number of ways, right, whether it’s through air and space networks, fixed satellite services, mobile. It might be via terrestrial networks. It might be via resale of bandwidth. There’s a lot of different ways to distribute that data. And that is what is generating the value that the end customers and operators really need.

Now, the rest of the space sector, which is hugely important and large and well-known to us in the aerospace defense industry, is in many ways subordinate in the eyes of customers and even investors in many ways to the content generation and distribution. So we have support services, most notably launch services – How do you get your assets into space? – and then support systems, the actual hardware that you’re putting into space or the software that you’re using to help generate content and distribute content. So it’s just a way of thinking about the industry, and one that reminds us that players in the space sector are working in a world that is larger than simply satellites and launch vehicles.

And then to think about some of the specific actors who are in this sector, we’ve populated each of these boxes with a couple of examples – they’re not comprehensive; they’re mostly – they’re more notional or representative – to show some of the players that are acting and generating value in each of those boxes – generating content, distributing it, and supporting that content generation and distribution.

The point to make on this slide – we throw a ton of companies in here, including all the ones that are here today in the panel – the point is that, in this slide, there are many nontraditional actors, nontraditional companies. Certainly we see the Lockheed Martins, the Intelsats of the world, the Boeings of the world, who have been doing this – a range of these different value chain tiers for a long time. But we also see a range of companies, some of which are startups, which are very new to the – to the world, and others of which have been around for a while but have only recently gotten much more active and more prominent in this value chain, you know, whether it’s Amazon or Google or even Facebook participating in certain parts of this value chain, and all of a sudden finding themselves in competition or maybe in cooperation with companies that have been around for a much longer time playing in this – in this broader space sector.

So that’s the introduction I wanted to give. Hopefully it’s a useful construct to work off of, or to debate even. One thing that it noticeably lacks is human spaceflight. We haven’t really illustrated how some of these launch systems and services could translate into human spaceflight. That’s not – that’s not content, it’s a whole different part of the market.

Otherwise, I’ll leave you with that. I’m told that we need a couple of seconds to set up the stage. And then we’ll have the speakers – the panelists – come up.

MR. GRUNDMAN: Exactly.

Thanks very much, Jacob.

And while they’re resetting the stage, I will simply point out that from the back of the room, where I’ve just been standing, I am aware that the content – the high-quality content of these slides – is hard to see. So I’ve asked my staff to print these two slides and make them available to all of you who are here on the credenza outside the room as you’re leaving – with your permission, Jacob.

MR. MARKISH: Of course.

MR. GRUNDMAN: Yeah, OK. Good.

So if the panelists would please come up to the stage, we will start the conversation.

I’m cognizant of the fact that we have taken a fair amount of time from a short duration that we have scheduled for this event to set it up. I’m actually going to – I’m not going to introduce each of these panelists in detail in favor of you taking the time – I know you have their – maybe not their full bios, but a – but a summary of their respective backgrounds available to you on a piece of paper that was handed out on your way in.

So if all of you would allow, I won’t – I won’t belabor their introduction, other than to say that each of them has a wealth of experience in this sector. None of them are anything like what one would call green or new to this sector. And in many cases I know that their careers have traversed beyond space and into other ranges, products and services of the earth, space and defense sector. So it’s a really well-versed panel and highly qualified, great business leaders in this sector. We’re quite privileged to have them all here.

To get – to further propel the conversation, I have asked each of them to start the conversation by taking just a few minutes to introduce themselves, their companies, and to give me at least a preliminary answer to what’s new from the perspective of their respective companies.

So all of you would know that the Captains of Industry Series is not an earnings call. It’s not a – it’s not a marketing pitch. But at the same time, I always think it’s important for all of us to understand the context from which they’re speaking. And so I have invited, encouraged – in fact, required – each of them to tell us something about their companies so that we know, as it were, where they’re coming from.

So I’m going to try this in – from sort of upstream hardware to downstream services is the way we’ll do this. And I suddenly realize that actually upstream, Clay, of your launch vehicle actually would be the satellite. And so I’m actually going to switch a little bit and ask Eric to kick off. And then we’ll make our way through the rest of the – of the stream, if you will.

Eric?

ERIC THOEMMES: Great. Well, thank you very much, and I appreciate being here today.

What I would like to do is give you a brief snapshot of sort of where Lockheed Martin fits in that scheme. You saw the logo on a number of those boxes previously, so perhaps it doesn’t require much explanation. And then talk a little bit about what I see as effectively a revolution in space and satellite manufacturing, which is I believe complementary to some of the other presentations that you’re going to hear momentarily.

So, last year, Lockheed Martin celebrated its 100th anniversary as a corporation. That’s a long time to be in the aerospace sector. A lot of scar tissue built up over those years, a lot of experience that has been built up. And the point for this panel perhaps specifically is that we’ve been in the space sector since there was a space sector. We helped develop many of the capabilities and systems that exist today, whether that be remote sensing, satellite communications. We were there from the beginning and continue to be there, and I believe to be pioneers. We were pioneers, and we’re sort of revolutionaries today, I would submit.

The one thing that is interesting and perhaps relevant to this panel that I wanted to mention is, for the last almost 30 years, we’ve seen a convergence in commercial and government space. And Lockheed Martin is really focused on that. We have tried to take our products that we have either developed for the government and helped enable commercial markets to emerge as a result of that, or inversely take commercial products and then provide them back to the government, the idea being that there is a significant overlap in both technology, in mission, and in the need. And also, from an industrial base, the people often have exactly the same skills. So if you’re working on a commercial communications satellite one day, you might be working on an Air Force missile warning satellite the next week or the next day. And so the industrial base is very dynamic.

You’re going to hear, I believe, quite a bit about significant changes in the space sector. I won’t go into the services part of this at all. Just I would say that in the manufacturing world there is also a dramatic revolution that’s going on in terms of how we approach design, development and production of space vehicles, and it is intended both to serve our government customers and our commercial customers equally.

Lockheed Martin has developed a concept that we call the digital tapestry. The digital tapestry is all about taking 3D design capabilities, bringing those all the way through the engineering and directly into manufacturing. So, in the past, we would have design and people would do drawings, and then those would be passed onto manufacturing, and manufacturing would then sort of go OK, well, what does this – and try to figure out how to implement that, and in many cases spent a lot of time correcting problems that were not envisioned in the design phase. Today, with digital design, you’re able to actually walk yourself through the entire value chain all the way through the production, and even into operations stuff to some extent, of these satellites. 3D visualization is a major tool in this process, whereby you can actually envision the construction, the manufacturing of satellites while they’re being designed to help improve the design and to eliminate flaws in the process. So the digital tapestry, as we call it, is a very powerful tool. It’s being implemented today. It’s not theoretical. It exists.

Complementing that, of course, is 3D printing or additive manufacturing is allowing us to bring componentry into the space domain that we could not have even designed in the past. You’re able to overcome literally what we thought were laws of physics of what kind of components you could build out of certain materials, what sort of shapes could be built that would be optimized for the mission, for the capability, not optimized for the material you were trying to make them out of. So that’s a very significant development as well.

So, for Lockheed Martin, these ideas are being implemented in a couple of different ways right now. We have taken our workhorse commercial and government satellite platform – our A2100 – and we’ve taken that through a modernization effort over the last several years. We call that our A2100 technology refresh. The A2100TR is becoming a reality today. The Air Force has actually allowed us to take our most recent contracts that we have with them to build early warning satellites and implement that on the SBIRS program, if you’re familiar with the Space Based Infrared Program. So A2100TR is a reality and will be included into a key Air Force program. Simultaneously, it was key to our recent win of the Arabsat commercial communications satellite. And so A2100TR is becoming a reality in both commercial and government domains.

I would close just by saying many people look at Lockheed Martin and say, well, you build big satellites. We know that. That’s all you do. It turns out that actually Lockheed Martin has built more small satellites than any other company in the world. And recently we had the opportunity to submit a proposal, which unfortunately for a variety of reasons turned out not to be the winning proposal, but a company was asking us to bid on a constellation of up to 3,000 small satellites – 150-pound class, low Earth orbit communications satellites. In a few months, we presented a proposal that would have entailed a production run – a very much – almost like a production – like a(n) automobile production run where we would be producing up to 50 satellites per month, and the price that we were envisioning was less than $500,000 per satellite. And that was largely enabled by the design and this digital tapestry that I was talking about earlier. But it was – it was, I think, showing to ourselves and hopefully to the world that there is in fact a manufacturing revolution that’s occurring. And it’s going to change the way we think about spacecraft, the way we build spacecraft, and the way they’re operated in the future.

Thank you.

MR. GRUNDMAN: OK, Eric. Thank you very much.

I’m going to next turn to Clay to talk about Arianespace.

CLAYTON MOWRY: Thanks. And thanks for having me here today.

We were talking a little bit before this panel about new space and old space and the nomenclature there. Maybe I –

MR. GRUNDMAN: Although in that conversation, I promised to call none of the panelists old space. (Laughter.)

Excuse me.

MR. MOWRY: I guess if we were all new space, we’d be in black T-shirts, right, up here? (Laughter.)

MR. GRUNDMAN: Turtlenecks. (Laughs.)

MR. MOWRY: So I would posit, perhaps, that Arianespace was the original new space company. It was actually founded 35 years ago, 1980. I looked up on my phone just before the panel what the top news stories were in 1980: presidential election, war in the Middle East between – involving Iran and Iraq, and increased racial tensions in the United States. I think we probably haven’t moved that far in 35 years.

We were founded 35 years ago to really be a commercially focused space company. That is, our bread-and-butter business is launching commercial telecommunications satellites. It has been for 35 years. It remains about 85 percent of our business base. That’s what we do. And that’s because Europe doesn’t have the kind of throughput in terms of national security and civil space missions that would require a big launch system like what we have in French Guiana to operate today.

We have three systems today – the Ariane 5, the Soyuz and the Vega – that all fly from the Guiana Space Centre in South America. Very capable systems. The Ariane 5 in its debut was about 5.7 tons of performance. We’ve increased that performance now by over 40 percent over the last 20 years of its operation of roughly 20 years. And it’s flown – knock wood – 69 times in a row over the last 12 years, 100 percent success.

So we’ve taken a product that was introduced, we’ve evolved that product and adapted it to the marketplace. My colleagues often tell me, when we started in this business, we were competing against the Space Shuttle, right, that we evolved to compete against Atlas, Delta, Long March, Proton, Zenit, Falcon – all these new systems that have come into the marketplace. And we’ve adapted, and we have to adapt to change. I think it was Charles Darwin who said, it’s not the strongest or the most intelligent that survive, but those that – most that are able to adapt to change that actually are able to survive and thrive in the world.

So what are we doing? What’s new? What are we moving forward with today? The Ariane 6 is going to be our next evolution. It’s a new launch system that will be built by Airbus Safran Launchers, which is soon to be our majority stakeholder in Arianespace. That system is going to have over 10 ½ metric tons of performance going to orbit. It has solid core boosters around that main stage. These solid boosters are also going to be used for the Vega light launch system that we’ve put in place. And we’re going to be able to get volume in terms of manufacturing, production and launch operations through that to be able to lower the price per kilogram to orbit.

What’s happening with my customer base? So I have some of my customers here on the panel. We’ve seen a lot of evolution right now in the satellite sector. Eric talked a little bit about added manufacturing and rapid prototyping and development, be able to take new technologies in the manufacturing sector. And that’s certainly going to change the speed and design function of commercial satellite construction, both on the small and the larger platform.

But we also see the advent of electric propulsion. Electric propulsion, or ion propulsion, as it’s often called – it’s not a new technology. It’s been something that’s been around for a long time. But it’s now being rapidly adopted by our customer base, not only for in-orbit station-keeping but for orbit raising. And so this is something that launch companies are having to evolve and adapt to, the advent of that technology being adopted in the commercial sector.

High-throughput satellites. These are satellites that have 10 times or even more – in some cases 100 times – the throughput capability of existing satellites that have been manufactured. And what’s that going to do to the marketplace that’s out there now for commercial satellite services?

The advent of small satellites in large constellation formats, and this is both in the communications and the Earth observation world. And so this past year we signed two huge landmark contracts, one with a company called OneWeb that’s going to be launching 900 satellites into low Earth orbit to bring Internet to underserved areas of the world, and another with a company named Google, you might have heard of, their Skybox constellation; they acquired Skybox last year. We’ll be launching some satellites next summer for them in the Earth observation sector. So a lot going on.

We now have more launches – like you were saying, with the small satellites, we have more launches going to low Earth orbit than we do to geostationary orbit. So it’s quite a change and shift for Arianespace, and we look to continue to adapt and try to thrive in that sector.

MR. GRUNDMAN: OK. All right, good.

I’m going to skip one down the row in order – excuse me, to come to Jay, who if I may put it is at the hinge between spacecraft and launch and services, which I hope you’ll explain why I – why I think of it that way.

JAY GIBSON: Sure.

Well, and under full disclosure, Steve said that this was a panel of very seasoned people except for me. (Laughter.) I’ve been with the company about 10 months. So I don’t mean to insult the rest of these folks.

But we’re the black T-shirt guys. We’re the – we’re the small company that I think is reflective of where this is all going on the privatized side. You have a couple guys that sat around a table a number of years ago and says, what is going to make space truly commercial? What is going to drive that? And if you listen to everyone talk that is struggling in this industry to continue to progress, you hear constantly: it’s reusability. When you get to reusability, you start to achieve what then brings us into a commercial environment, which is frequency and affordability. And when you do that, you open up the market to all kinds of interesting things. You allow the market to drive who you are and what you do.

So fundamental to who we are in a launch world is propulsion. And so we developed – started out developing engines that are highly reusable. And when you listen to other folks talk about the current state of engines, they’ll tell you yes, we want to get to the 10, to the 20, to the 50, maybe to the 100 times. Well, what we’re talking about and our technology is the thousands of times that an engine is reusable. And with a low service. And again, there what we’re doing is we’re driving frequency and affordability. We’ve coupled that with a very simple spacecraft in what we do that is very unique is everything is horizontal takeoff and recovery. So we can operate from a number of different fields and what – as I’ve said, you could very well be an American Airlines or Southwest Airlines plane and then right behind you is us. We’re low toxicity, so you can operate in that environment. Again, what this does is drive access to first in our case sub-orbital and then on to using this technology to an orbital environment.

We really have four lines of business in our company. We sell our engines. We develop the technology. And then we produce these engines to support other launch environments – to provide a segment of economics there for them. We also will make and produce our vehicles for others to use, which would include either direct sale or a wet lease type of environment. And then we can directly provide payload deployment, whether that’s scientific missions, whether that is SmallSats. And then the third would be a tourism type of environment.

One of the things we’ve done recently is in this emerging market, we have to be very much market driven. And part of that is we have to be driven by speed to market to keep up with this emerging market. So one of the things we’ve done recently is we just had to find who we are and where we’re going to go. So we did put together those four lines of business and say, this is what we do.

Prior to being here, I was with Beechcraft. I led several business units there. And I happen to gotten to know our products very intimately. And frankly I’ve described to the market. They say, well, who are you guys? I say, you know, we’re the king aerospace, you know? Pretty simple. We’re a platform to allow mission deployment to a sub-orbital and orbital environment. You decide what you want on there. That’s not our – ours is to provide a mission profile that’s very frequent and affordable and dependable, then allows the marketplace to say, that’s a good business model for us.

So that’s who we are at XCOR.

MR. GRUNDMAN: And though you’ll sell your engines, you’re going to build and operate the platform yourself?

MR. GIBSON: That is correct.

MR. GRUNDMAN: OK.

I will next turn to Kay Sears from Intelsat General.

KAY SEARS: OK. Thanks, Steven, and thanks to the Atlantic Council for the opportunity to be on this panel.

So Intelsat is – we’re not old space. We’re old and new space, I think. We’ve been around for 50 years. We are very much in that content distribution component of Jacob’s model. But instead of broadcasting 50 years ago the first man on the Moon video and perhaps carrying the telephone conversations between the Kremlin and the White House, that content has definitely evolved.

So now our platform of 51-plus at any time geostationary satellites as well as about 37,000 miles of fiber carries a different kind of content. We carry rural telephony, for example. Let’s remember there’s still about 4 billion people that are not connected. And the name of the game right now for business and for power is connectivity. Information is – has got to move at the pace of business. And so – and when I think about the kinds of traffic we’re carrying today on that platform – that global platform – we’re still trying to work to connect those 4 billion people with some of the most basic telecommunication services. So rural telephony would be one of those.

But then you have a whole host of new applications that are driving content. The Facebooks and the Googles. But everything that’s going across the Internet. Even in the video domain, we’re carrying MPEG-4 video, we’re carrying three dimensional video. For the U.S. government – if you think about some of the applications there – what the Predator and the Reaper are trying to transmit off of those airborne platforms. As you fly from here to California and you use your Wi-Fi on the plane, that’s going up and over satellite. So all of these new applications are very content laden. They require a very cost effective and global distribution network.

So Intelsat is focused on keeping pace with that content distribution feed. And some of the things that are really driving that, I would say, would be mobility. Everybody wants to take all their content with them wherever they’re going. And that requires more powerful satellite. It requires a lot of new innovations on the ground and in the handheld devices.

So some of the things that my colleagues have talked about – let’s talk about the satellite itself. Huge innovation happening there in terms of the digitalization of satellite components. The ability to build a satellite now that has 10 times the throughput that a – that a satellite had in the past. We’re also seeing a lot of software-defined – let’s remember this market changes incredibly fast. No one can predict anymore what applications will drive the business in five years. So we’re really pushing our manufacturers to come up with very flexible payloads that we can reconfigure on orbit to address those new applications or where the populations and demand happens to be. We’re driving our launch partners like Clay to really come up with very affordable, flexible and rapid access to space. So those are some of the things – metamaterials, as an example – we’re driving new user terminals down to a very small size. We’re putting them on planes. We’re putting them on trains. We’re going to put them on cars. So all of these things are driving huge new content – massive content. Not even to mention in the future that our refrigerator’s going to talk to our iPhone and we’re going to have to carry that kind of traffic too.

So Intelsat is making some bets in this new space environment. We’re investing in companies like OneWeb. We see very complementary networks between LEO and GEO. We’re investing in companies like Kymeta and Phasor to drive the user terminals so that people can stay connected no matter where they are and where they’re moving. So those are just a few things that Intelsat is doing to keep pace with this new space business.

MR. GRUNDMAN: OK, that’s terrific. All right.

And then all the way down at the end of the – or up at the end of the stream would be a company like Artel.

Paul?

PAUL DOMORSKI: Well thanks, Steve. Thanks again for the invitation.

So when Jacob showed you the chart, we’re in the upper right-hand quadrant. So as I look to the kind of the left and I look to the right, we have no satellites. So maybe I’m in the wrong room. (Laughter.) But having said all of that, you know, knowing that I’d be on a panel like this, we manage between 2(,000) and 3,000 – between two and three gigahertz worth of satellite capacity. So that equates to something like 25 satellites, 50 transponders.

We’re the largest provider of satellite services to the Department of Defense and Department of Homeland Security. So while the satellite is important to our customers, it’s all about the application. It’s all about, you know – in a dangerous world, it’s all about the things you see about in the news. It’s all about what happens with drones, what happens with the UAVs and the impacts of satellites on those. Which are best?

Our customers come to us and they ask us to be able to – you know, they’re like every other customer. They want the most for the least, and they’re under pressure because of budget issues that are going on. So they come to us and say listen, here’s my application, here’s where I need you expertise, and I need your help in being able to meet the demand. Because they’re patriots. They’re people that are trying to keep us all safe and we try and help them every way we possibly can.

So that constitutes being able to blend technologies, form – sometimes we take two satellites that have different complementary things – we provide it to them as kind of a package. Sometimes what’s – increasingly, they’ve coming to us about it saying listen, here’s my need. And while I may not be able to afford sat-com, I need some terrestrial to be able to put together with that so I’m able to provide more of a solution for them so there able to deal with their budget woes that they have today that’s out there in the market.

So we’ve kind of morphed from being almost exclusively a sat-com provider to being able to provide terrestrial networks. So we have an MPLS network that’s over in – mostly over in the unsafe areas. And we, you know – we put circuits into through-partners in places like Iraq and Bahrain and all those kinds of places so that when they come to us, that we have some other capabilities to help them in that area. So we are a terrestrial provider for Department of State. We’re a terrestrial provider to Social Security Administration – helping them with, again, providing some sat-com solutions with some terrestrial things that they’re – that they’re seeking.

So our goals are just to continue to know what’s out there. So that’s why I was encouraged to able to be here today to hear about all the new things that are happening in the market. And then being able to have kind of conversations with our customers to talk about some of those changes that are happening in the market. Kay’s got some new technology that’s coming on. We’re been talking to some of our customers about that. I’m sure there will be some other things that we’ll have in the future to be able to talk to them about as well. And, you know, we’re trying to do things like provide subscription services to them. Some of them don’t want to be in the business of maintaining terminals, don’t really want to be in the business of being able to buy bandwidth, they just want a solution. So some of our things we’ve had conversations with them are in that kind of context.

And it’s all about, you know, what the Department of Defense and Homeland Security is looking for us to go ahead and go do. So we have, you know, lots of conversations at army bases and all kinds of places like that, understanding what their needs are and then helping to work with them to create the best possible solution for our customers.

MR. GRUNDMAN: OK, terrific.

I wonder if I could start the conversation by simply remarking upon that, you know, dynamism – this word I keep attributing to the sector, I think correctly – generally is correlated with growth or at least change. And so could one or more of you give us a sense – either in dollars or bandwidth or headcount or something – of the pace of growth of this industry, say, over the next five years? (Laughter.) Well, let me ask it this way: Either in your business or yours, what’s the capacity? How is the capacity of a given satellite changing to accommodate that growth? Kay can talk about that, maybe.

MS. SEARS: Yeah, so our Epic platform, which we are launching the first one with Clay in January, will have about 10 times the throughput – total throughput. And the way that we do this is through the creation of a multispot pattern across the coverage. So instead of a wide beam satellite, you know, like you might have one beam over the United States, we have a lot of smaller spot beams. That does a couple of things. First of all, it increases the downlink power so that you can use much smaller antennas. But is also allows us to reuse the spectrum over and over again. So the total throughput of the satellite goes up and that means the cost per bit delivered for our customer goes down.

And this gets at the affordability, because I think it’s not just in the launch business where we need to be affordable. We have to be affordable on the platform side. Affordability will drive new applications, especially applications like the Internet of things. So the Epic constellation that we’re building right now and will launch over the next few years will really target mobility and these new kinds of Internet of things applications.

MR. GRUNDMAN: OK. If I were to say – right, I’m not the guy on the panel who has a long history in the space sector, although I know a thing or two about it. But allow me sort of the uninitiated question. I’m hearing about Millennium. I’m hearing about OneWeb. I’m hearing about Space Box. Are those the most interesting things? Or put those in context. Is that the most interesting new thing going up into space? Is it just another thing? Put those things that – we do, you know, the uninitiated hear a lot about these services, if only because of the count of satellites that they’re talking about is astounding. How should we understand that news flow?

MR. MOWRY: Well, I would say this: so back in the –

MR. GRUNDMAN: OneWeb.

MR. MOWRY: OneWeb. So we’ve done a contract to launch. We have 21 launches for OneWeb, which is over 600 satellites that we’re going to put into space.

MR. GRUNDMAN: In 21 launches?

MR. MOWRY: In 21 launches. Right. That’s their initial constellation deployment. Virgin Galactic has another I think 39 launches that they’re going to conduct. Much smaller. We’re going to put 30-plus satellites on a single booster to put them into space and try to launch them in about an 18-month period of time.

So that’s a huge deployment, very rapidly, and a system that’s going to cover the globe. Kay mentioned about 4 billion – 3 to 4 billion people in the world do not have broadband access because fiber doesn’t get to where they are in remote places of the world. And so these companies are trying to bridge that divide. They’re using a combination of small satellite technology that Eric talked about with a rapid production line. And capability in these satellites that was here before, you couldn’t put it in that kind of a small package – something at 150 kilogram or less a package.

You’re talking about an evolution on the ground in terms of the antenna design. And then also using WiMAX WiFi, LTE 4G-type networks on the ground to distribute that content. So you don’t have to change your phone on the ground. You know, we have tablets now that are – Fire Tablet from Amazon is less than 50 bucks, right? So you can overcome the price point on the ground. And you can even have even smartphones that are much cheaper than that in the marketplace to be able to access the Internet with a mobile platform. And satellites, because of their unique capability to be able to connect areas to where it’s too expensive to run fiber, could really be a game-changing technology in these areas. And so connecting those people I think potentially has a lot of – a lot of growth for the industry. I haven’t seen any studies that really talk about the actual figures there, but certainly there’s a ton of investment that’s going into this sector.

I think the other thing is these Earth observation platforms that are out there now. And that’s not only the technology involved in building a small satellite. So Skybox, for instance – the satellite could, you know – it’s not quite on this table, but it’s about this big by this big, their spacecraft. And it has sub-one meter resolution capability. So it’s really a fantastic – now there are some physics involved, right, with optical satellites. But it’s really quite a capable system. But really the heart of that is in the software on the ground and their ability to fly a complex constellation with very few people. And so the ability to take the ones and zeros that are coming from space – to be able to manipulate that data in a way and using computing technology and software – and advanced software and computing technology to be able to take that data and make it into something where there’s a value chain value added on that. That they can sell that data or use that data in a way that’s going to make money for the end-user – with the end-users.

So that really is what I think is changing the equation.

MR. GRUNDMAN: Kay.

MS. SEARS: I just think another symptom of this new space business, so you have a very established operator like Intelsat investing in OneWeb. So –

MR. GRUNDMAN: OK, I wanted to pull that thread, because you’d alluded to it.

MS. SEARS: So why? Why would we invest in –

MR. GRUNDMAN: Why are you investing in OneWeb?

MS. SEARS: Well, let me tell you why. (Laughter.) So we see – we see OneWeb as very complementary to our geosystem. Just for what Clay is talking about, you know? Let’s keep in mind OneWeb is as much a wireless play on the ground as it is in space. And that’s another really important component of this new space business. Satellites are incorporated into the ground network. We don’t – you know, we can’t separate the space and ground layer anymore. We really have to combine them in.

So we’re – so OneWeb is going to do a great job collecting all of that local access. And some of that access is destined for places other than the local community. And that’s where the satellite component comes in. And we’re both at Ku band – much of the Intelsat network is at Ku band. OneWeb is also going to use Ku band. And we’ll be developing terminals that will be able to work LEO and GEO at the same time.

So this is a whole new, you know, revolution in terms of how we’re going to be able to move data around using LEO and GEO space to do that. So we don’t – we see OneWeb as a partner. And I think that’s another symptom of the new space business. It is all about partnerships. It’s expanding so rapidly and changing so rapidly, one company cannot address all these users at – you know, on their own. So you really need to partner and be creative in how you combine your networks and your capabilities.

MR. GRUNDMAN: And do your – Paul, you’ve alluded to the fact that you were working both terrestrial solutions and com-sat solutions in a manner that might be transparent to the customers actually.

MR. DOMORSKI: Yeah, they really don’t want – I mean, when they come to us, they’re looking for more than solution. They’re looking – they’re looking for us to – they’re obviously very interested in all the things that we’re talking about today. They’re very – you know, our customers are very educated. They’re very knowledgeable about these things that they want some of them now. But they also get to a position where they have to deal with the realities of what the business is today.

So they’re looking for sort of that blending of – I call it kind of the, you know, some of the traditional services. But around the edges, they want to be able to have the new technology that’s there. The more they – more they – you know, the kind of almost like the terminals on that end, they want all the convenience of today’s technology. But at the same time, they want the connectivity in, you know, who knows where in the world.

MR. GRUNDMAN: I guess like lots of businesses as they mature from the end-user’s point of view, all of the stuff which in the early days of the industry were forefront – the satellite, et cetera – are going to become invisible to us. How all the data gets to us as consumers, businesses or consumers will be – you know, it’s not something that we’ll particularly concern ourselves with, I would guess.

Eric, did you want to –

MR. THOEMMES: I would add even the government-owned systems are experiencing, you know, perhaps a more modest but nonetheless a revolution. So the government is clearly looking to continue the leasing of commercial capacity, which is significant. But they’re also looking to dramatically increase the bandwidth of their government-owned systems. So the Navy’s narrowband system is going from what was traditionally a transponded spot beam system, where it had pretty finite capacity, to at 3G – essentially a cell tower in the sky where you’ll have point-to-point capability and everybody with the right terminal can communicate with anybody else with that same terminal.

So that type of technology that the Navy has in their mobile user objective system, or MUOS as we fondly refer to it, is very much – and even in the protected com, the strategic command and control domain, we’re seeing dramatic increases in the amount of bandwidth that’s required and more for tactical use as opposed to just strategic use, which requires significant increases in capacity.

MR. GRUNDMAN: You know, this conference that I alluded to when I was introducing Jacob turned out perhaps by design to focus a lot on the Pentagon’s let’s call innovation initiative. There are various manifestations of it – the innovation initiative, the third offset, the secretary of defense’s outreach to Silicon Valley. And low and behold, one of the very first things that was said in this – in this panel discussion concerned the convergence of commercial and military technology.

I supposed what I’m introducing here is a question asking about the interface – the commingling of perhaps a sort of rarefied space industry with a – with a high tech, let’s call it for the sake of a shorthand Silicon Valley. Do each of you have some interface or observation about how the really new businesses of the commercial economy are affecting – are affecting – either from the technology point of view or conceivably, as customers – your businesses?

MS. SEARS: I’ll take a shot at that. I think it’s – first of all, it’s really important I think to understand that what drives – what’s driving the commercial demand is the same applications that drive the government, right? So video for example is one of the largest government applications as well. The collection of data like our remote sensing systems, like a Skybox Imaging, right? The government has their own satellites to do that. But what they’re collecting is very similar. And what they’re trying to move is very similar.

I think in their outreach to Silicon Valley what they’re trying to grasp is how to change the business model, because that’s what really has to – has to modernize in the government. Commercial is going to be there to meet a lot of the communication and imaging needs that the – that the military and the government is going to have in the future. The key thing that has to change is how they go about acquiring that.

And that’s where I think to Paul’s point we’re seeing a lot of the government start to talk about buying services instead of leasing bandwidth. Do they need to own and control their own systems, or can they rely on the commercial sector? Because we’re moving at a much more rapid pace and with business models that make a lot of sense for the military to take advantage of. Let me buy what I need when I need it instead of building a satellite program that’s going to over 25 years outdate them very quickly in terms of technology. And where within the military application space can I take advantage of what commercial is already going to do? There will always be very highly protected and important military missions that Lockheed and others will address with their own satellite systems. But there’s a vast majority of what the military can do in the future they can do it very well on commercial systems.

So they look at Silicon Valley – really, they should be looking at some of the other companies that even aren’t in Silicon Valley to say, how do I take advantage of where you guys are going? And it’s really about the business model too.

MR. GRUNDMAN: Mmm hmm. Eric?

MR. THOEMMES: If I could pile on to that, because I totally agree with what Kay just said. If you look back at sort of how the commercial space sector emerged, it largely was driven by government investments into government systems for uniquely government purposes. And then that was sort of the industrial and technology base that fostered the commercial space sector. We’ve seen that completely over time shift to where now it’s the commercial sector that’s largely driving the government’s appetite and interest. And the technology is largely being originated or matured in the commercial sector, and these ideas are now going to be flowing into the government. So you see almost a complete reversal of the flow of technology.

And I mentioned the convergence – it’s not that suddenly today we see this happening. It’s actually been happening over time gradually over about a 30-year period of time. You know, our government satellites are largely based on a commercial design that originated them. When I mention this technology refresh of our commercial, the reason we’re doing that is not just because we want to be more competitive commercially, but we want a product that then the government can then leverage into their systems as well. So I think that’s an increasing and accelerating trend.

MR. GRUNDMAN: So, if I may – I mean, this was a – both of these responses are quite articulate on exactly what I think Secretary Carter is looking and hoping for and something of an antidote if I may say it to some of the cynicism of some of the prospects of that initiative out of the Pentagon that I more generally hear.

Even more technically, if I – not that you weren’t speaking also technically, but are there technologies – semiconductor, software, materials perhaps – that are in the commercial sector – again, let’s use the shorthand, although it’s not quite correct – Silicon Valley that are turning out to be – to be important to the technical innovations in your systems?

Jay, you got anybody scouting through Silicon Valley for solutions to your technical problems?

MR. GIBSON: Well, I’d say because of who we are you’re not going to see a lot of overlap with the Valley. That’s really where our customers are. I would say – back to your earlier point, if you’re interested – we started out purely as a commercial endeavor. We don’t really have any subsidies or relationships with the government to provide us funding. And we don’t have a large financial benefactor that has a passion for the industry. So we’re truly – not only are we the black t-shirt guys, we’re the one black t-shirt guys that we turn them inside out and look for the couches for the change. (Laughter.) But what this does is this produces a very innovative, very agile and very aggressive environment.

What’s interesting is we believe there’s applications for our mission profile in a national security environment. Coincidentally, our spacecraft will fit in a (C-)130. You can fly multiple times a day above the threat zone. And most recently I’ve met with some folks inside the building across the river and discussed who we are and what we do. And they said, we’re very interested in that. Now look –

MR. GRUNDMAN: So maybe spin back on, I guess one might – (inaudible) – to call it.

MR. GIBSON: Well, and I’ve looked at them and said, we have no interest in doing business with you. (Laughter.) And I got an odd look, but –

MR. GRUNDMAN: Unless they’ll make a contribution to the laundry fund. (Laughter.)

MR. GIBSON: Well – and I’ve been on both sides. And I know how it works. And you chase that – like moths to the flame, you chase that down. And you find yourself perhaps now structuring yourself and doing business in way you really didn’t want to, I said.

But what we will do is we’ll be successful commercially, and then you can call us in a far 12 environment and buy all you want, which gets back to part of what’s been said here. So short term perhaps some of our shareholders might think I’m not very bright, but I’m hoping we’re setting ourselves up to truly have a good relationship for us and for them to buy the services as they need and have a very long, profitable relationship versus in our case just seeking funding.

MS. SEARS: If I could – it’s accepting that commercial model, right, versus you changing to fit into the government model I think is kind of what you’re saying, right?

MR. GIBSON: Absolutely. I mean, again – I’ve seen it from both sides and I know how it works and you can’t be partly pregnant.

MS. SEARS: Right.

MR. GIBSON: I mean, you have to either –

MR. THOEMMES (?): You’re either buying on price, or you’re not.

MR. GIBSON: – go that way, or go this way, and –

MS. SEARS: Well, we’re trying to save the government from their own faults, right? Which is they do need to break that model. That they’re going to go out to Silicon Valley to hear what? They’re going to hear the same thing we’ve been saying back here in Washington D.C., which is we’re a service based company. We can build great economics into your business as well. But you have to be willing to accept that model. So let’s get an acquisition approach that allows you to take advantage of all this new technology that commercial is investing in.

Because investment doesn’t just come from Silicon Valley. All these companies up here are investing, you know? Lockheed’s investing in new – in new technologies for their spacecraft. Clay’s investing in new – in a new launcher. I’m investing in platforms, you know? But we’ve got to make sure the government is poised to take advantage of those investments. When they go to Silicon Valley, they’re going to hear the same thing except that that audience is not as used to serving the government as we are.

MR. MOWRY: I want to get back to your technology question for a second.

MR. GRUNDMAN: Please. Mmm hmm.

MR. MOWRY: So there are a lot of – a number of them were mentioned here, but maybe just to pull them out a little bit.

MR. GRUNDMAN: Please.

MR. MOWRY: So Kay talked about metamaterials. So flat panel designs that you don’t need a dish that’s actually tracking the spacecraft in orbit. It’s able to see spacecraft as they’re passing over. And the flat panel could be on a car, it could be on a plane, it could be on the top of a roof of a building – easy to install. It’s not like you have to point the dish and do – so this kind of thing – and if they can get to a point where this is a low cost material – so companies like Kymeta, which I think Bill Gates has invested quite heavily in this company – these are companies that are game-changing. You know, for us it’s the use of carbon fiber, it’s advanced materials, advanced manufacturing techniques to try to reduce the weight of the launch vehicle itself and to try to increase the performance of the system of what we’re doing.

I think you see a lot with software on the side of the software business – to be able to take either the ones and zeros coming from space and to take that data and be able to process it quite rapidly, see the changes in the data – patterns – you know? How many cars are in a parking lot is the one that’s always used. So a lot of other applications you can look at for agriculture or for business and economics on the ground where you’re taking advanced computing and software and be able to find a real actionable, serviceable product at the end of that day.

And so these are the types of things that we’re seeing that are advancing the case of space today that really we hadn’t seen here before, I think. And we talked a little bit about software-defined satellites and being able to take what was military technology I think originally and to adapt that technology so you have what is in effect a fungible satellite. So they’re building a big GEO satellite, it’s going to last 15 years designed life in orbit. But in the old days you had a beam shape that was fixed. So it was very difficult to move that satellite around to some other part of the world and be able to utilize it, right? So now you’ve got a software – a defined satellite that can really reconfigure the beam on its own. So you’ve got a fungible asset much like a commercial aircraft, by the way, that can be repositioned and sold to another airline. And you can think about the financing the other downstream pieces of that. Those assets are now fungible – they can be resold, they can be financed much more easily like an aircraft.

MR. GRUNDMAN: OK. I did say I would turn to the audience. I’m going to do that after one last question. So queue your questions.

My last question actually picks up from something that we were talking about in the so-called green room and that is how crowded low Earth orbit is getting. And I wonder if I could just revisit that topic if only to sort of put on the public record a certain degree of alarm, actually – maybe a considerable alarm that I was hearing about the problem.

Anybody want to animate my question there? There’s a lot of stuff in low Earth orbit. It’s getting crowded. Thousands of – thousands more satellites are scheduled to be put into low Earth orbit. Maybe let me reform the question: does government need to do something to more effectively regulate the traffic that we’ve got coming?

MR. THOEMMES: So I would point out that, you know, the government is often talking about space as a congested, contested and, you know – so congested is the –

MR. GRUNDMAN: Even today it’s congested.

MR. THOEMMES: And before even today it places a premium of space situational awareness – knowing what’s there. But even then it requires something beyond that. Certainly you have to start with ability to not only identify objects, but also maintain custody of them – where are they going? This gets into a whole conversation about resilience, which is very important to the government about how survivable are our systems in potentially conflict environments and the like. But it all starts with being able to have very good space situational awareness in the first instance. Beyond that, I’m not an authority to speak on regulatory changes that are required, but presumably the government will have to deal with the problem of, you know, just a(n) increasingly congested environment in space.

MS. SEARS: Yeah, I would just say – I mean, if we want to commercialize space, which we all do, it is a domain that requires protection. It’s a limited resource. We have to protect it. And so I think what we see right now is we see the U.S. government really – they take on the burden and the responsibility of space traffic management, specifically the JSpOC – the Joint Space Operations Center – does that. They do it free of charge and they do it for any space-ferrying individual, entity, university or country. And the real question is: can they continue to play that role when space is increasing in the number of objects on an exponential platform?

So what is – what is going to be the future role of the JSpOC? You know, should they be the space traffic managers? There’s talk right now – there’s debate going on as to whether there could be some kind of FAA role or more of a global, international role in order to do space traffic management. Because we’re not the only ones putting up a lot of things into LEO and GEO, right? The whole world is. So we do – you know, I’m not one to ask for regulation, but we need to be on top of this so that we don’t ruin the space domain for all of the people that want to commercialize space.

MR. MOWRY: There’s a tragedy of the commons at play here, right? I mean, we all need to be able to use that and operate in that – in that domain. And so if we don’t find ways to act as good – as good actors – good players in that domain, we’re going to have problems as we look to field more of these systems.

MS. SEARS: We can’t have people launching things that they can’t control, that they can’t maneuver, that they can’t track. And they’re just throwing that responsibility to somebody else right now. That can’t – that is not a good position to be in.

MR. GRUNDMAN: Jay, I’m sure you – I’m sorry, Paul?

MR. DOMORSKI: Oh, I was just going to say in the view from the coalface is there is no doubt that where there are more and more issues of interference, we get called by a customer – I was at an air force base two weeks ago and I got kind of this lecture where somebody said I had bought a home but it looks like – more like a condo – and the point being that there are by virtue of the fact that there are other satellites that are in there and they’re getting interference issues that are popping up and they’re looking for sort of solutions to that problem. And that’s before all this great stuff gets launched today.

MR. GRUNDMAN: Right. Right. They call the homeowner’s association?

MR. DOMORSKI: Yes, exactly. (Laughter.) Exactly. (Laughter.)

MR. GRUNDMAN: Jay, I can imagine a future customer of XCOR who wants you to go up there and clean something up.

MR. GIBSON: Oh I think that I would say what’s being said: yes, yes and yes. (Laughter.) However, I look at it as great opportunity. (Laughter.) So if we can provide – any of us can provide affordable, frequent access, that ecosystem starts to take on a life of its own. I’d love to be waste management and say, I got it, I figured out how to deal with debris. And you start to generate its – again, its whole economic model of its own. So I think there’s great opportunity there.

MR. GRUNDMAN: OK. All right, and – oh good, excellent. I will start right there – the gentleman in the third row. Hold your hands up if you have questions so I can register where I’ve got them here for a second. OK, let’s go. Michael – we’ll go pretty quickly, please, I would ask each of you.

Q: Michael Bruno with Aviation Week and Space Technology.

Traditionally, the businesses cases for space work has been measured in decades. It takes deep pockets to get into it. Fleets of birds cost a lot of money and the business cases are long term. Is that getting any shorter, or do you still see long term plans for return on investments?

MR. GRUNDMAN: Anybody?

MR. MOWRY: I think for the new space companies it’s definitely a shorter timeline, right? So if you’re talking about these guys who are building small satellites that are able to produce those satellites rather quickly – not in a traditional two-three year time frame to build a big geostationary platform, but in less than 18 months or sometimes even a year or even less if you’re talking about CubeSats – these guys are looking for launch opportunities from my company much more quickly than a traditional player. We would typically sign a contract about two years out from launch. They’d sign the satellite contract about three years out, the launch contract would be about two years – 18 months out – and then actually get to launch. These guys are looking at much more compressed timelines. And it’s something we need to adapt to.

MR. GRUNMAN: OK. There’s a question here at the edge. And then when we’re done, I’m going to go to that gentleman right there after that.

Q: John Sheldon, Atlantic Council.

Question for the whole panel. Given the dynamism you’ve been talking about, given the convergence between government and commercial, what are the implications long term for the U.S. export control regime for space issues?

MR. GRUNDMAN: Export control.

Q: I know it’s a poisoned chalice question. (Laughs.)

MR. MOWRY: I used to be an expert on this, so maybe I’ll wade into it with a –

MR. GRUNDMAN: Please.

MR. MOWRY: I’ll tiptoe into it. So I used to run the Satellite Industry Association a long time ago. And that was a huge issue before us and thankfully after almost a decade of work now a lot of the control for commercial communication satellite technology has been returned to the Commerce Department. And we’re seeing a lot of companies start to adapt to that new system of licensing that should be a lot easier, particularly for working with allied nations. And so that’s hopefully going to free up a lot of this stuff that’s really the commercial off-the-shelf type of communications satellite technology that doesn’t really need to have those kind of high walls, particularly when you’re dealing with allied nations and you’re talking about building and selling something that’s going to be put into orbit and the access to that technology is not going to be readily available to anyone to be able to thwart.

I would say on the launch piece of it: it all stays on the ITAR. So all my licensing still has to be done under State Department control – under defense controls. And so not that much has really changed from my side because launch technology is a protected technology. But I will say this: the government has done a very good job trying to adapt – try to be quick and responsive. I think today the issue right now is that transition to the Commerce Department. And some companies doing dual licensing on two different tracks. And that’s a bit of a(n) administrative headache – and wondering what’s on what list and trying to make that work in a practical sense is going to take a little bit of time. But once I think that you get through that interim period, it’s going to hopefully be a much better process.

MR. GRUNDMAN: OK. This gentleman here. Then I’m going to come to – as courtesy to my – to Jacob. Go ahead.

Q: Thank you. Roy McCaul (sp), independent analyst.

A question for Clayton Mowry: in the transition from GEO to LEO, what sort of robotic technologies set you apart possibly as a European company? And are you not cooperating with Swiss Space Systems to develop a debris catcher in space?

MR. MOWRY: I’m not aware that we’re cooperating with Swiss Space Systems, although I’m aware of what their proposing for a launch system to low Earth orbit. Robotic technology – jeez, again, I think it’s a bit far afield in terms of – you’re talking about orbital debris removal or in manufacturing?

Q: Launch into LEO – remote controlled launch and launching small satellites into low Earth orbit.

MR. MOWRY: So our low Earth orbit systems – we operate two systems: the Vega and the Soyuz system, alright? So the Vega system’s our new light launcher. It’s flown five times. We in fact have a launch coming up on December 2nd with the LISA Pathfinder mission. So far 100 percent success for launching Google Skybox next summer on that launch system.

And we’re looking at different types of deployment mechanisms to be able to do much more of a standardized approach to deploying these constellations. And so in a – in a typical GEO world, I’m doing two satellites at a time. We know what the standard transfer orbit they’re going on. They’re all going more or less the same place, same time and same kind of performance.

With a low Earth orbit system, it’s a lot more complicated. You’ve got different local times. Some are dawn-dusk, others are at 10:30 in the morning, others in the afternoon local time. Ascending node, descending node – some guys want to go to 600 kilometers, other guys 500 or 700. So you have to have a system that’s flexible enough in upper stage that can drop people off at different orbits and then to de-orbit itself so that we don’t leave debris up there.

So these are technologies we’re moving quite rapidly to be able to upgrade that system – more launch performance, standardized launch environment and be able to really rapidly deploy a lot of these constellations. So it’s a challenge, I’ll have to say. It’s not something that, you know, getting our minds around this and working with ELV, who’s our prime contractor for Vega. We’re really trying to push hard to do that quickly, but we’re not maybe as fast as the Silicon Valley guys. The launch technology – the physics involved – are a little bit harder. But we’re getting there. I think by 2018, 2019 – we’re going to have a very, very capable system.

MR. GRUNDMAN: OK. We’ll take Jacob’s question, and then we’re going to take a question from this gentleman here on this – on the aisle.

Q: Folks, a really good discussion, I thought, and a lot of it touched on couple of different ideas – or many – that could fundamentally transform the entire on-orbit and also launch infrastructure. Sort of the hardware that we have both flying into space and back as well as in orbit.

Does each of you – or any of you – have a vision for what things might look like in space five, 10 years from now? And it – will they be dramatically different, alright? Will it be thousands of satellites supporting thousands of reasonable flights? Will it be not that different from today? What’s your – what’s your vision of the future?

MR. GRUNDMAN: Eric?

MR. THOEMMES: I’ll offer the thought that we’ve seen evolutionary approaches to space development as being a very good way to bound both risk and cost.

Now that’s not to say that you’re not going to have any breakthrough, revolutionary approaches. But when I talked about convergence, as I mentioned earlier, that’s not something that happened just overnight. It happened over a period of time. And so I think it’ll be a combination of new – even the – by the way – even the distributed small satellite Iridium – we should remember back – I mean, it’s flying 70 or 80 satellites. And so – but that approach – and those were built and launched in a very similar fashion – many at a time, very rapidly, very low cost. So I think it’s going to be a combination.

Some of the government missions don’t lend themselves as well to sort of quick – I mean, we’re still bound by the laws of physics. So small satellites can do many things very well. Large satellites do other things that only large satellites, at least for now, can only do. I think – and I don’t mean to wander into your domain too much, but – you know, in the future, I think reusable launch is going to be absolutely a game-changer whenever we can get some of the key breakthrough technologies. We’re still somewhat bound to traditional propulsion technology and I think we’ll see that change eventually.

MR. GRUNDMAN: Anybody else? Paul? OK.

MR. DOMORSKI: I might add, just as maybe a little bit of an outsider – I mean I see parallels to what happened in the – in the terrestrial world. I mean, if you look at what happened when, you know, you had the Bells and the Baby Bells and ILECs and CLECs and all that sort of stuff that happened. And then ultimately you ended up having a windowing, if you will, of the – of the different networks that existed out there in the market. And I think that’s probably inevitable at some point in time where there will be some sort of survival of the fittest and some sort of coming together of technologies in some sort of things.

I mean, OneWeb is kind of a classic part of that. But invariably there’s going to be kinds of survival of the fittest, if you will, and parallels in my mind to what happened in the – in the telephony in the data world.

MR. GRUNDMAN: OK.

MS. SEARS: I’ll just add – I think our vision of the future would have us see much more from the manufacturers of digitalization of our satellites. Therefore very highly flexible, shapeable beams will be able to allocate power, will be able to change frequencies in orbit. We would envision in five years that we would have in-orbit refueling capability. And Intelsat will be taking advantage of that to extend the life of that very flexible satellite. We’ll see launch costs and launch systems introduced that would allow us to complement our large GEO satellites with maybe some smaller, more mission-centric satellites. I think all of those things.

And then on the ground, we’re going to see very highly mobile antennas using the electronically steered arrays. Things like Phasor and Kymeta will be deployed by then. And we’ll be interconnected potentially with OneWeb within five years.

MR. GRUNDMAN: Thank you. Right here. And then I’m going to go to this gentleman in the third row. Please.

Q: Hi, Stephen Ganote from Avascent.

We’ve talked a lot, I think, very interestingly about essentially democratizing or making more affordable access to space, right? Modularity, in-orbit propulsion, SmallSats production lines – you know, interoperability between fiber and satellite. There’s a lot of talk in the industry right now about supply-demand balance and if you look at the amount of capacity going up and you take ViaSat-2, 3, 4 seriously, you’re throwing a lot of capacity at orbit with demand that’s coming, but you don’t have, you know – if you’ve got a 50/50 LEO to GEO mix in your satellites over the next few years, what’s the revenue and backlog mix GEO to LEO, right? So there’s a pretty clear imbalance in favor of traditional geostationary satellites.

But you throw up that much capacity that clearly cheapens the price per megabit – the price elasticity there. So where might the demand trigger come in terms of pulling that capacity up to meet – the supply to meet the capacity? Else we risk as some of us lived through 15 years ago the last LEO boom that resulted in a lot of bankruptcies and a pretty, you know, significant drop in the industry that was saved only by government demand for, you know, for three or four years. So kind of wondering – all that capacity driving down the price per bit: what gets triggered in terms of the application that might take up that capacity to a point that makes this more economic?

MR. GRUNDMAN: So a skeptic to the presumption that we can never have enough capacity. Kay, you want to –

MS. SEARS: Yeah, sure. So, again, I think – you know, I like to look at this in two ways. First we still have the problem of connecting 4 billion people. And we’re talking about basic, rural telephony – we haven’t even gotten to the use of Internet in that kind of way. So we need to do that. That’s going to drive demand, especially in some of the BRIC countries – you know, Brazil, and Russia, and India and China. So there’s a lot of that – in rural Africa, for example. So there’s a lot of demand that we believe will come from that. Very price-elastic demand as well.

The second piece of that though are applications that are enabled by this cost per bit – this lower cost per bit and the capability of higher powered satellites. And we believe – just think about the connected car. Just think about the amount of data that a connected car would drive onto a system. It’s absolutely mind boggling to think about. So the Internet of things and the devices that are out there that are potentials to be connected even at GEO – even without the LEO constellations – things that can actually talk to GEO are expanding exponentially. So there are applications that will be triggered by the capability of space and the fact that the price per bit has gotten to a point where the investment of making that available – connected car probably being the best example – could proliferate.

MR. GRUNDMAN: Anybody else? What about these? Is there – is there the potential for competition with terrestrial cellphone towers?

MS. SEARS: Well, but think about that. I mean terrestrial drives local content. That content has to be collected and distributed. When you’re using your iPhone, much of what you’re sending is not going locally. It’s going someplace else. You’re drawing from the Internet. Satellite has a huge play in all of that globally. We may not feel that here in the United States, but when you look abroad, we have a huge play in that globally.

MR. GRUNDMAN: Right. A five-gigabyte plan used to be more than you’d ever possibly need. Well it ain’t anymore.

MS. SEARS: Right. (Laughter.) One of the applications over the top of the terrestrial network – unclogging the terrestrial choke points – this is another place where satellite will help dramatically. You know, when we start connecting all of these devices, they will be connected locally. We will choke the fiber system. So satellite provides a very good complement. Over the top of that fiber system will be satellite capability.

MR. GRUNDMAN: Still, perhaps a salutary, cautionary note there, Steve. Thank you. Could I get a refresh of hands who have questions? OK, sir.

Q: I’m Pat Host from Defense Daily.

MR. GRUNDMAN: Hold on one second, Pat. We don’t have this thing going. Help me, please.

Q: There we go. Hi, I’m Pat Host from Defense Daily.

Kay, why didn’t the Virginia Commercial Space Flight Authority pick up the tab for the balance of repairs at the Mid-Atlantic Regional Spaceport?

MR. GRUNDMAN: And then if you could hand that microphone to the gentleman in front of you.

Q: Kay? I will in just a second. (Laughter.)

MS. SEARS: I would have to defer that to the Mars team and –

Q: But you’re on the board.

MS. SEARS: I am on the board. I’m not at liberty to talk about it, though.

Q: What kind of message does it send –

MR. GRUNDMAN: Pat. Thank –

Q: What kind of message does it send when –

MR. GRUNDMAN: Pat. Pat. Thank you. Thank you very much. (Laughter.) The question to this gentleman with the white shirt on.

Q: Thanks. I’ve got a question for Lockheed definitely, also for XCOR. Anybody else pile on. There was this fellow who used to work for you guys at Lockheed – Augustine, I think – who said a lot of things. And I love some of the pithiness because a lot of things he said I think are sort of half-true, but you learn a lot by trying to figure out what part of it’s true and what’s not. But there was that famous line about, you know, it’s a perfect track record in the defense industry for commercial diversification – it never ever works.

So Lockheed Martin is itself a counterexample, because you guys do commercial stuff and as you were saying, I think you did a really good job of laying that out. And I mean, I could point to Boeing, I could say all the helicopter companies including yours – they do commercial and military. But they’ve been doing it – they’ve all been doing it for a very long time. So you’ve sort of built up institutions for knowing how to do both, and there’s a cost to doing business for the government’s side.

Then I got the XCOR guy here who says, yeah, forget that. DIUx, whatever – I’m not interested. I’m just not going to do that. DOD very much wants people like him to come in too. You guys are already there. I wondering: did Norm have this exactly backwards? That the track record for commercial diversification into military businesses is really, really bad, or really hard to do? And is that then actually a source of competitive advantage for you all?

MR. GRUNDMAN: OK, thank you.

MR. THOEMMES: I’ll try to derive an answer. So what I would say is we hear the term commercial used a lot. And it means a lot of different things depending – and so you really have to sort of get into: what do you mean by commercial? There are very few purely commercial plays in the space arena that don’t to some extent lean on some government investment. There are some, but not that many. And perhaps there are going to be more in the future. I think communications now is certainly one of those that exists purely as a commercial business. Having established that, now commercial capability can be leased back to the government. So it was those sort of commercial investments that created it.

But if you look at most of the examples that I’m aware of – launch being certainly one of those – the government has always been asked to come in and whether you want to use the word subsidize or invest to help enable the emergence of a commercial player there. Certainly the EELV program was like – NASA’s commercial crew and cargo programs are essentially really government programs, but they’re being run through a commercial business model – back to Kay’s point about it’s a lot about the business model. So I think you have to really get in and look at each one of these examples case by case.

You know, yes, there have been a number of examples where we said, there’s a commercial market place. I’ll go back to the EELV example. It was postulated that there was going to be this humongous growth in launch opportunities, largely foiled – I think we’ve heard the reference to the crash of the last round of LEO, projections about where that was all going. So that actually took down the EELV program as a commercial program along with it. And the government had to bring that back essentially as a – as a government program. That’s not to say that the government didn’t get significant benefit. They also got significant benefit out of Iridium, even though that crashed as a commercial endeavor and went bankrupt, and then the government has now bought into it. Now it’s a – it’s a going venture.

My only point really being is significant government investment is often required to help enable these commercial ventures. Not always, and I know many of the new space – so-called new space players – shun government investment because they’re afraid of the strings that could come attached to it. But many of them have only succeeded through government investment.

MR. GRUNDMAN: It must be said that another feature economically of dynamism is failure – is enterprises coming and going. And so when we see that in this exciting space sector, let’s not please write the stories that said it was all a, you know, a mirage. Because that would be – that would be the wrong inference to draw.

Well, we have time here at the top of the hour just for me to allow each of you to put a final word on the proceedings. And if you’re struggling for something to say, my question would be the one you might choose to answer, but you don’t have to, is: what are the fundamental things that still apply? We’ve talked mostly about what’s new. But what are the fundamentals that still apply and will have to apply for this exciting industry to realize its great ambition?

Maybe we’ll just walk right down the line, please.

MR. THOEMMES: Sure. So we haven’t directly talked about cost. And obviously cost is a huge motivator for the government, for the commercial. So innovation is not only pursued for the sake of capability, but it’s also pursued for the sake of reducing cost. And increasingly we’re not going to be able to justify – whether they’re government programs or commercial programs – at the same cost structure that we’ve gotten used to. So I think all of us in the collective space sector are grappling and I think making great progress in terms of reducing overhead, reducing cost and innovating for cost reduction.

MR. GRUNDMAN: Thank you very much for coming and participating today.

Clay?

MR. MOWRY: I’ve been doing satellite launch for over 20 years. I’d say this today is the most exciting time I’ve ever seen in the commercial space business – right now. It is changing very rapidly. There’s a lot of private sector investment that’s coming into play. All this launch capacity, as some of the folks in the audience talked about, is coming online. It is a very exciting time, and watching companies both old and new adapt to those new and changing markets is really going to be, what’s the key driver for this business as we go forward?

You know, just a few things from the launch perspective – we’ve got to get better, more responsive, more standardized. We’ve got to be able to adapt our launch systems and be able to serve our customers better and more quickly. And so I think we’re all working to do that right now.

MR. GRUNDMAN: More standardized and adaptable. Hard tasks.

MR. MOWRY: Well, it’s – there’s two things.

MR. GRUNDMAN: I’m not picking on you. I’m saying that’s what it requires.

MR. MOWRY: No, no – there’s two pieces of that. One, I mean it’s making it easy for your customer to come. Here’s the interface, here’s the environment you’re going to fly in. You design the satellite to that, well we’re going to put you up there very quickly. So when I say standardization, it means making it easier for them to ride with us.

MR. GRUNDMAN: Yeah. Paul. And thank you, thanks very much.

MR. DOMORSKI: Despite all the things – thank you, thank you very much for the opportunity to be here.

I mean, despite all of the things that are going on, it always comes back down to the value proposition. I don’t care where you are and what the technology changes. It’s all about the application of that technology for the customer. And at the end of the day, customers want to be near people who can help them. And if you can provide help and provide objective advice to them and help them with the issues and problems that they’re dealing with, they want more of your time.

So they want to know about all the new things that are going on. They want those things today. But they also have very, very really sort of conflicts in their world. They have budget pressures. They have technology pressures. They have things they bought in the past and are looking for people who can help them sort of sort through all that. And it sounds like we got great things that are going on in the future, and I’m sure that the market will be bright for those things.

MR. GRUNDMAN: One of the fundamentals that still applies is customer’s needs are complicated. And just that. Jay. And thank you, Paul.

MR. DOMORSKI: Thank you.

MR. GIBSON: So Steve, thanks for allowing us to participate. To what Eric said, I would just say amen. That when you think back where all the cellphones you have 25 years ago – if you’d envision that you would today do your banking, book your travel, you probably would have said no. No. No way. But when something becomes very affordable, very frequently available and very capable, the free market does a wonderful job of finding a way to utilize it. And I think that’s exactly where we’re going to be.

Someone describes us, say, well you guys are just kind of like – be like Boeing. I said, that’s OK with me. So – (laughter) – I think that’s where we’re going.

MR. GRUNDMAN: Mmm hmm. OK. And finally, Kay. Thank you.

MS. SEARS: Thank you for this opportunity. I would – you know, one thing that hasn’t changed since I’ve been in the satellite and space industry: it’s always been competitive. So any company that stood still and didn’t innovate isn’t here today. So we’re still here today – Intelsat. We’ve been here for 50 years. We’re going to continue to innovate.

Space is cool again. Satellites are cool again. That’s great. I think this new space business is all about partnerships. It’s all about the value chain. It’s relying on partners in the value chain to deliver their piece of it so we can all take advantage of the new technology.

MR. GRUNDMAN: Thank you, and thanks to all of you. So this conversation lived up to my every – pretty high expectation of what we could get out of it. And I thank the panel very much for putting some meat to those bones. Thanks very much to all of you for coming, for asking questions – very great, intelligent questions – and for those of you who may have been watching online.

I’ll repeat that those two slides – I believe, Alex, please confirm for me – the two slides that Jacob used are available to you in paper outside the room. Watch this space. We will do more of this in the year ahead. Thanks. (Applause.)

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