Harry C. Stonecipher
Chief Operating Officer
The Boeing Company
"Lighting Up the Sky - The Future of Satellite Communications"
Satellite 2001 Conference
Washington D.C. Convention Center
March 29, 2001
Thanks, Jim. After a stirring introduction like that, I really feel that some sort of disclaimer is in order before I even attempt to convey my view of the future in satellite communications.
With that in mind, I will tell you a story about one of the real heroes of science, James Clark Maxwell, the greatest theoretical physicist of the nineteenth century. This is a story with a touch of stardust and romance.
Using equations determined by simple laboratory experiments with electric and magnetic fields, Maxwell was able to calculate the speed of light - which had been previously determined through various means of measurement. In doing so, Maxwell apprehended the nature of light. He realized that light consists of electromagnetic waves within a particular frequency range. Such waves activate "electrical antennae" in the retina of the eye, with the lower frequency waves appearing as red and the higher frequency waves as violet. To this day, we are indebted to Maxwell for his explanations of the phenomena of light and accompanying optical properties.
On the evening of his great discovery, Maxwell took a stroll in the garden. A young woman was with him and, when she remarked at the beauty and wonder of the stars, Maxwell told her that she was walking with the only person in the world who knew what starlight really was. And so, amazingly enough, he was! We must assume that she believed him, for the woman became his wife.
Unlike Maxwell, I do not have a brilliant blinding insight to impart to this world, or this audience. I would be taking you down a different sort of garden path if I pretended I did. What insights and observations I have to share with you are those of a businessman with a reputation for being a tough, results-oriented son-of-a-gun. And maybe that is the right approach at this juncture.
When I think of our technology-blessed but, all too often, bottom line-challenged industry, there's another story that comes to mind. It is of a less exalted nature. It comes not from the gold-embossed pages of high science, but from the spools of celluloid that define popular culture today.
Many of you, I'm sure, remember the scene in "Raiders of the Lost Ark" where Indiana Jones is confronted with a technically advanced member of the saber-twirling class. This bearded marvel puts on an awesome display of swordsmanship. It is preliminary to the main event, and it is aimed at impressing everyone in the vicinity. However, before he can strike a blow, Indiana Jones, quick to adapt in any situation, pulls out a simple pistol and shoots him dead.
Whether you twirl sabers or satellites, the moral of this story is that those who live by the sword will be shot by those who don't. And that, it seems to me, is what happened to some of the companies that have failed or run into deep trouble in offering satellite-for-phone services. As a result of being overly enamored with their own handiwork, they didn't pay attention to what the other guy might do . . . with a simple little device like this (pulls out a cell phone and holds it up). Nor did they pay enough attention to what the customer or consumer really wanted.
Viewed from a business perspective, satellite communications is just one of several possible ways of transmitting voice, data and images over long distances. No one who pays for the service really cares how it works . . . only that it does work . . . meaning it is cheap, instantaneous, and clear as a bell.
Once upon a time, satellite communications had every advantage. Unlike most of you, I can remember what trans-Atlantic telephone conversations were like in the pre-satellite era. Not only was it very expensive, but there was lots of static on the line and the transmission wasn't quite instantaneous either. You would speak into the phone like this, then hold it away from your ear for a moment, while you waited for your words to carry - not optically, but electrically - across the ocean.
Then along came the first communications satellite in 1965. James Maxwell, who understood light, also understood that all forms of electromagnetic radiation - not just visible light, but radio waves, microwaves, even X rays - propagate at a speed of 186,000 miles per second, or the speed of light. He would have instantly appreciated the advantage of using satellites to relay radio signals at light speed from one place on earth to another.
For 20 years or more, satellites enjoyed a huge advantage over cable in performance-for-cost in carrying messages over long distances. As one of NASA's historians recounts, and I quote, "In 1965, when EARLY BIRD was launched, the satellite provided almost ten times the capacity of submarine telephone cables for almost one tenth the cost. This cost-differential was maintained until the laying of TAT-8 (the first trans-Atlantic fiber-optic cable) in the late 1980s."
Well, you have probably heard the ancient curse, Whom the gods would destroy, they first reward with 20 years of success. With the coming of optical cable a dozen or so years ago, satellite's share of total telephone traffic between the United States and Europe has gone from 60% or more to just 5%. Except for remote areas, it became cheaper to route calls across the Atlantic by cable rather than satellite.
If you think of light as encompassing all forms of electromagnetic radiation (some inside and some outside the frequency range of the human eye), what TAT-8 did was to end satellite's monopoly over the power of light for long-distance communications. Suddenly, it was possible to transmit voice, data and images across the oceans by reflecting light through very fine glass fibers. Like the Greek god who offended his fellow Olympians by delivering the gift of fire to man, fiber optic technology delivered the gift of light to the cable layers . . . and the ditch diggers. It gave them light in a pipe.
At the same time, microwave towers and relay stations have provided another powerful and cost-effective means of harnessing the power of light in point-to-point, terrestrial communications. Of course, microwaves have been a critical factor in explosive growth of cellular phones.
So what competitive advantage, if any, still resides with satellites, after the tens of billions of dollars that have been spent on other delivery systems that also utilize the power of light? Satellites have only one competitive advantage that I can see, but it is an extremely important one. And it will only become more important in the years ahead.
Satellites provide not just two-way communications capabilities, but a true bird's eye view of a large part of the earth's surface. As a result, satellites can be used for point-to-multi-point communications, with minimal infrastructure cost compared with cable systems and no difficulty in traversing the infamous "last mile." Without having to cut a ditch, you can beam TV programs, music or other communications direct to any number of fixed sites on the ground. Still further, because of having a bird's eye view, satellites offer a great way to reach mobile platforms both on the ground and in the air.
While satellites-for-phone may have lost the opening battle to land-based, cellular systems, that could change as the telephone itself changes and becomes more multi-functional. Meanwhile, satellites are doing more than just holding their own in other parts of the marketplace in communication services. Satellite television, for instance, is on a roll - gaining market share at the expense of cable TV - thanks mainly to recent advances in high-powered satellites and digital compression. We have also made some progress in reducing cost to orbit. Without a doubt, however, our commercial and our military customers expect a whole lot more progress in this area, and we have to make sure they are not disappointed.
Since launching its first satellite in 1993, DIRECTV, the nation's leading digital satellite television service, has signed up more than eight million customers. DIRECTV started out serving people in rural areas, but now it is capturing more and more business in areas served by cable TV. It is not hard to pinpoint the reasons for DIRECTV's success. It gives subscribers more choices than analog cable systems - offering 210 channels to just 90 for most cable operators. In addition, it provides a clearer picture and sharper sound. And it's relatively cheap as well, costing $32 per month for a typical subscription package, or about the same as the basic analog cable package. As a business formula, the ability to offer more value for the money is pretty hard to beat.
And now we are seeing a whole flood of new satellite broadband services that could not only duplicate, but far surpass the success of satellite television. These include digital radio by satellite, digital first-run movie delivery by satellite, and high-speed on-line Internet connection via satellite not just to the home and office, but to airplanes, cars and other moving platforms.
All of that makes this an exciting time for Jim Albaugh's operation. In one way or another, Boeing Space and Communications has a hand in all of those ventures. We are being stretched in the best possible way. We are learning a lot, and we are discovering all kinds of new friends, customers and partners. In this fast-changing field, what really counts the most is how smart and cost-effective you are in "networking" in a human or business sense, even more than in a technical sense. As Phil Condit, who is my boss, likes to say, "None of us is as smart as all of us."
Less than two weeks ago, a Sea Launch Zenit-3SL rocket successfully lifted off from a floating launch platform on the Equator and placed a digital audio satellite into Geosynchronous Transfer Orbit. Named "Rock," this Boeing-built satellite is the most powerful commercial satellite up there - with 18 kilowatts of total power at the beginning of its 15-year life in orbit.
"Rock" has a partner, named "Roll." Sea Launch, which is 40% owned by Boeing, is set to launch that satellite in early May. With the two, XM Satellite Radio is creating and packaging up to 100 channels of digital radio, including music, news, sports, talk, comedy and children's programming. The pair of satellites - "Rock" and Roll" - will transmit directly to vehicles, homes and offices coast to coast. This will be radio of a quality - in choice of programs, clarity of sound and freedom from unwanted commercials - that a lot of people are going to love.
The beauty of Sea Launch is, of course, the advantage that comes from being able to launch from the Equator, which allows a rocket to lift heavier payload into high orbit at point above the earth where communications satellites have maximum exposure to the earth's surface. DIRECTV was Sea Launch's first commercial launch customer, and we used a proven Russian and Ukrainian rocket system to launch that and five subsequent payloads. Going back a few years - to the Cold War - who'd have thought that Boeing would be collaborating with the Russians in beaming rock music and popular television to millions of people?
We are rubbing elbows with the entertainment world in other ways as well. A satellite's inherent capability to deliver point-to-multi-point information allows it to send one movie to thousands of theatres in a matters of hours at a fraction of traditional cost. What's more, with digital transmission, there is no deterioration in quality no matter how many times a film is shown. The last screening is a good as the first. Along with Miramax Films and AMC Theatres, we demonstrated how that works last November. Just a few weeks ago, we had a feature film premiere at a Disney theme park that was digitally transmitted and projected. That's the first time that's ever happened, but it won't be the last.
I think that we are all going to find that satellites . . . and the Internet . . . were made for one another. The phone and cable companies are having trouble keeping up with the demand for high-speed Internet services. This really opens the door for satellites.
Just a few months ago, HUGHES Electronics - DIRECTV's parent - announced the launch of a new high-speed, two-way, online service called DirecPC. Users download data on a pizza-sized dish that can also handle DIRECTV. This could be a very exciting development. Like DIRECTV, DirecPC is aiming to deliver a better product - that is to say, faster, more reliable, always-on Internet service - at the same price as DSL or cable. And it will be able to offer a bundle of services - telephone, television, radio and Internet.
I cannot pass up the opportunity to put in a quick plug for Connexion by Boeing. Through this service, initially targeted for commercial airplane flights of more than an hour's duration, you will soon be able to log on to a new two-way broadband Internet connection from your airplane seat. You will be able to surf the Web, send and receive e-mail, watch live TV, trade stock, and access your company's Intranet, all while speeding along at close to the speed of sound. This service will turn the airplane into an extension of your home or office. You might even experience the sensation of arriving "too soon" - obliged to abandon your workstation.
I know some people have expressed skepticism about the breadth or depth of this market. Let me just say a word about how we see it. We foresee $5 billion a year or more in potential revenues in about ten-years time, based on a capture rate of 30% of people flying for more than one hour in airplanes of more than 100 seats. We think people will be willing to pay $10 or so per hour in order to be truly connected and productive while in flight.
Just about everything I have said about the satellite's advantage in having a bird's eye view is doubly true for military customers. No less an authority than Ronald R. Fogleman, the former Air Force Chief of Staff, predicts that by 2020, directed energy weapons in space will be the centerpiece of the US military arsenal. Certainly, satellites are literally at the apex of any kind of System-of-Systems approach to defense and deployment. They are the key to giving our warfighters not just air superiority, but information dominance.
In closing, we can acknowledge that the satellite industry has experienced a few setbacks in the last couple of years. But there is no reason at all to be pessimistic. Where we have gotten into trouble, it has been because of errors in business judgement. If I may say so, the rocket boys (and girls) are not about to lose to the ditch diggers.
Just as the earth is surrounded by space, we are surrounded by opportunity. We may no longer hold a monopoly on the power of light to provide long-distance communications. But we have the next best thing. We are the potential master of a large part of all that we observe. Unless I am very mistaken, satellites are going to be lighting up the sky - and driving the future of communications - for a long, long time to come.