Satellite News Interview with D.K. Sachdev
Prominent Satellite Engineer Offers Tips On Building Cost-effective, Profitable Systems
D.K. Sachdev is the founder and president of SpaceTel Consultancy, a Vienna, Va.-based provider of management and engineering support to broadband, multimedia, Internet, telecommunications and digital satellite broadcasting companies. As a pioneer in digital radio satellite systems, Sachdev was senior vice president of engineering and operations at Washington-based WorldSpace Corp. from 1996 through 2000. In that role, he was responsible for the engineering, deployment and operation of its broadcast and business networks, as well as its two in-orbit satellites and a planned third spacecraft. While at WorldSpace, Sachdev also led the evolution and early stages of engineering development for U.S. satellite radio service provider XM Satellite Radio [XMSR].
For almost two decades ending in 1996, Sachdev was at the center of Washington, D.C.-based Intelsat’s global telecommunication network expansion. After establishing an in-house technology development team in the early 1980s, Sachdev led the development, procurement and deployment of 16 new satellites (Intelsat 7s and 8s) that now form the backbone of the networks used by Intelsat and its spin-off, New Skies Satellites.
Prior to moving to the United States in 1978, Sachdev held senior positions in the Indian Telecommunications Service and private industry. He earned a B. Sc. degree from the University of Allahabad and a post-graduate degree from Indian Institute of Science in Bangalore.
SN: A large number of start-up satellite companies have gone bankrupt or are struggling financially. As someone who has been the top engineer at the world’s largest satellite organization as well as a number of entrepreneurial ventures, what business strategies would you recommend to enhance a company’s chances for profitability?
Sachdev: I have indeed been fortunate to lead several first-rate teams during my career. Some of our recent financial difficulties are a fall-out of the general downturn in the telecommunications and the dotcom sectors. There were other factors in specific cases, such as dramatic changes in the underlying demand profiles during the long build-out periods and the inability of such systems to create alternate sources of revenues. A safe business strategy in these uncertain times would be to keep the system simple and flexible with modular growth architecture if feasible.
SN: Unlike the early intergovernmental satellite organizations, the new systems of today typically provide end-to-end solutions. They offer satellite TV, satellite radio and two-way Internet broadband services. What are your thoughts on this trend?
Sachdev: For over two decades, satellites were mainly used for what we would today call trunking and program distribution. The investments in international satellites were a small fraction of the total investments in end-to-end switched international networks, largely government-owned. Therefore, there was less direct financial community scrutiny. In spite of this, it is indeed credible that the operating organizations and the industry managed to consistently reduce unit costs, demonstrating our own version of Moore’s Law, if you like.
Satellites are intrinsically best when used for point-to-multipoint broadcast applications. However, direct services to the end customer had to await the availability of high power satellites, digital compression advances and availability of powerful error-correcting techniques imbedded in mass-produced ASICs [application specific integrated circuits] or chipsets. With the optical fibers taking up the bulk of the trunking traffic, these direct-to-user services are indeed becoming the mainstay of our industry, although international trunking traffic still continues to grow quite well.
SN: What business-management principles would you specifically recommend to ensure the success of the new-generation, end-to-end systems?
Sachdev: First and foremost, focus on the consumer. What his preferences are, what is the overall demand profile over time and the associated price elasticity, etc. Confirm the cost and market-acceptability of the consumer equipment before firming up the rest of the architecture, including the satellite. Keep in mind, that while the satellite will last 15-plus years, the consumer preferences, protocols, ASIC technology will change every few years. The chosen architecture should therefore allow such generational changes on the ground. Quite often, making the satellites application-specific can provide competitive advantages and higher capacity. Such enhancements must meet the tests of firmness of demand and the confidence in meeting the build-out schedule.
SN: Satellite systems face the challenge of recouping high investment costs that frequently top $1 billion. What can engineers, who do not make the final business decisions, do to help companies steer the design and building of systems to maximize the chances that investors will recoup their costs?
Sachdev: First, resist the temptation to add a new technology simply because you have waited for years to fly it. Any enhancement or technology must pass through added-value analysis. Second, keep in mind that consumer-based demand patterns have much higher volatility than long-distance telephony or even Internet. Therefore, maintain as much system flexibility as possible. Third, strive hard to meet the build-out schedule you promised.
SN: Are there any other important ways that engineers can help executives make wise business decisions?
Sachdev: Often the eventual enterprise success is locked in by the selected system architecture. Conduct a thorough total system trade-off analysis for all plausible scenarios with as accurate a calculation of costs as possible before recommending a specific approach and system. Fortunately, the satellite industry today provides a comprehensive set of capabilities in terms of power, mass, large deployable reflectors and on-board technologies to cater to practically any scenario. Along the same lines, the microelectronics and consumer equipment manufacturers are almost continually adding new capabilities and lowering costs.
SN: You have discussed the value of building fungible satellites in the past. Why is this concept so important?
Sachdev: Even during the less turbulent 80s, we used to joke at Intelsat that very few satellites get used precisely as they were planned for. Even today, major networks in the consumer-oriented business have used modular-architectures with wide-area beams, thus giving them the ability to go where the demand happens to be. That is what I have lately referred to as fungible designs. If somebody has moved your cheese, you should be able to find another and digest it.
SN: Differences of opinion exist about whether commercial geostationary satellites should be as technologically advanced as possible, in light of their life expectancy of 15-plus years, or only functional enough to fulfill a particular mission? What is your view?
Sachdev: As far as the bus or platform is concerned, certainly all qualified technologies that add value to the project through increased reliability, availability and lifetime should be adopted. As regards the payload, there should be enough flexibility to counter the anticipated uncertainty in demand. In many cases, this is more easily said than done. If dramatic changes are foreseen within the lifetime, a modular augmentation of capacity through co-located satellites is a proven tool.
SN: The satellite industry’s high-profile bankruptcies suggest that Wall Street bankers have lacked the knowledge needed to distinguish financially viable satellite systems from those with unworkable business plans. What advice can you offer to assist investors in recognizing the systems that are worth backing?
Sachdev: First, watch-out for the gee-whiz factor wherever it raises its head: the newest technology, biggest all-singing-all-dancing satellite, ultra-fancy consumer equipment etc. If it is a direct-to-user system, dig deep into the consumer demand data profiles. If there are alternative media around the corner or already in existence chasing the same demand, look for the portion the new system can indeed capture in the presence of competition. While an underserved demand sector can be a good niche, there may be adverse financial reasons why that demand is underserved. Ask about alternative architectures considered and reasons for their rejection. Go beyond prices and ask for internal cost-drivers, if possible directly from the engineers. Insist that the management team has a senior executive responsible for consumer equipment alone from day one.
SN: With broadband providing the next wave of demand that cable, digital subscriber line (DSL) and satellite services are vying to serve, what should satellite companies do to ensure they carve out a profitable niche?
Sachdev: In the case of DBS, it took several iterations before viable systems like DirecTv [GMH] and EchoStar [DISH] were established. Instead of trying to stay in a particular niche, today they compete head-on with cable in terms of channels, quality and price. For broadband, the market may not permit several iterations. Therefore, let’s hope we get it right the first time. No market niche will stay that way for 15-plus years. Therefore, the broadband systems should be competitive with cable and DSL in all respects. If the present costs per consumer are too high, the overall system architecture should be re-optimized in order to eliminate any excess capacities or functionalities that contribute to non-competitive costs.
SN: I have heard people blame engineers for Iridium’s bankruptcy. The criticism is that the engineers designed and developed a $5 billion-plus system that realistically could not generate anywhere close to the kinds of revenues needed to cover its costs. What blame would you assign to engineers for that failure?
Sachdev: Failure, just like success, is difficult to pin down in complex enterprises. Iridium was a daring venture in all respects: business model, technology, international reach and the size of financial stakes. In my view, a number of unfortunate circumstances came together. While the high cost of the phones and their late availability certainly had an adverse impact, the biggest factor was that the demand patterns changed dramatically during the long build-out period. The busy executives who were the prime targets already had cellular phones by the time the system was completed. This factor has been confirmed by another system that followed with cheaper phones.