It has been quite a year in the satellite industry with major news involving some of the biggest names such as OneWeb and Intelsat. In this roundtable discussion, Via Satellite talks to a number of key industry figures about what they make of recent events. Taking part are Tom Choi, executive chairman of Internet Airspace Exchange; Pradman Kaul, CEO of Hughes; Masood Mahmood, CEO of Yahsat; and Rupert Pearce, CEO of Inmarsat.

VIA SATELLITE: Do you expect the satellite industry to be badly hit by the COVID-19 pandemic, or will it be fairly resilient as many economies enter into some form of depression?

Choi: Satellites provide entertainment and information. During the last Great Depression, Hollywood fared pretty well as people wanted to escape their plight through movies as a form of escapism. Linear television actually picked up in watch times as people spent time at home. I believe our industry will not be in a form of depression, even if the world will be in one.

Kaul: In general, I’m optimistic about our industry. People need communications – probably more so than ever. Despite economic challenges in different places, the industry is resilient globally. In fact, connectivity is emerging as one of the highest priority items that people will spend money on right now. They are spending less on dining out, entertainment, and car insurance – but willing to spend on internet access to work at home and get their children online for school.

Mahmood: Our industry is highly resilient, however, we will not be left unscathed. There will be victims who will not survive the depression, and many who will come out having greatly suffered. It is important to reiterate that we will only survive and grow in the long run if we adapt to new market dynamics if we are agile, and if we are diversified, without taking on too many new financial burdens. We have to do this efficiently.

Pearce: Everyone is going to be hit, to a greater or lesser extent, by COVID-19 and its economic aftermath. But our industry is infrastructure and delivers mission critical services to diverse sectors of the global economy. As such, we are well-placed as an industry to weather the storm and to thrive again in the new reality that emerges post-pandemic.

VIA SATELLITE: LeoSAT gone. Phasor, Speedcast and Intelsat in Chapter 11 or bankruptcy proceedings, and OneWeb recently exited Chapter 11 restructuring. Are we at the start of a highly disturbing era for the satellite sector in terms of high-profile failures?

Choi: The current COVID-19 pandemic is affecting even the healthy companies and many have declared bankruptcy. It’s difficult to stay alive when you can‘t generate revenue but still need to service debt and operations expenses. Companies that have too much debt versus their earnings will always struggle even during normal times. Even with the best ideas or technologies, companies that require continued investment during a crisis will struggle to retain investor interest. What is happening in our industry is not unique to our industry.

Kaul: Despite the recent seismic events, the future of the satellite sector remains bright. If we look at the high-profile examples you’ve shared, there clearly is a common element. They were each deeply in debt – albeit for different reasons – and in need of additional funding. That’s a challenging position to be in under normal economic circumstances. Could they have made their way out of those challenges had COVID not hit? Probably. COVID obviously caused disruption in the financial markets that made it extremely difficult to raise more money. I don’t think these companies are a bellwether for the satellite industry as much as a reminder of the risks inherent in a heavily leveraged balance sheet.

Mahmood: Behind each of these companies, there are incredible legacies, teams and innovations; all the critical components that make our industry survive and grow. While this is already a long list, I think we can expect a few more casualties. However, I do not believe this to be a systemic industry issue — most of us will feel the punch but we will get through this situation, adapt as needed and continue to grow.

The satellite industry has experienced an unparalleled transformation in recent years. We have witnessed revolutionary growth in new services and applications, an acceleration in NewSpace venture funding, major technological advances and a multitude of new actors emerging in the industry. In the midst of this transformation, COVID-19 has come along and knocked the industry off balance. That being said, in some cases it has been a catalyst that has accelerated some events which were likely to occur sooner or later.

VIA SATELLITE: In a recent interview with Eutelsat CEO, Rodolphe Belmer, he says he expects Intelsat to emerge stronger from Chapter 11. Do you agree with this? Do you think the operator is well placed to bounce back?

Choi: Intelsat has a strong management team and Rodolphe Belmer is also a very clever person from my own personal interactions with him. I strongly agree with Rodolphe that Intelsat will arise from Chapter 11 as one of the strongest leaders in our industry.

Kaul: I do. Intelsat is one of the largest, most respectable companies in satellite communications. For the good of the industry it’s important for them to be successful. They have been a dependable partner of ours in many opportunities. It is to the benefit of the whole industry that they come out of their restructuring stronger and more agile – and I believe they will.

Mahmood: We have maximum respect for Intelsat and its management’s ability to turn the situation around. Intelsat was in a difficult situation. It is highly leveraged and needs to honor its existing debt, all while paying billions of dollars to see through its obligations prior to receiving its C-band auction proceeds. Once complete, from what I read in the press, this will allow Intelsat to collect almost $5 billion, and that should lay the foundation for a solid future ahead. After the auction, Intelsat should be a more stable and stronger company.

VIA SATELLITE: Which one was the bigger surprise, OneWeb or Intelsat going into Chapter 11? Can you explain your reasons?

Choi: Intelsat had been straddled with over $15 billion in debt for more than a decade. Their competitors have been predicting their demise for as many years. OneWeb going to Chapter 11 was surprising to me because this was such a high profile project and investment by Softbank. I doubt without the failure of WeWork and other investment troubles Softbank would have allowed Oneweb fail to stain their reputation which had been till recent times, very stellar.

Mahmood: Being honest with you, Intelsat was a bigger surprise. One year ago, I would not have imagined Intelsat, with its fleet of more than 50 cash-generating satellites, going into bankruptcy, even with its high debt pile. Intelsat has a sustainable customer base, secured revenues, solid backlog and is on the cusp of pocketing large proceeds from the C-band sale. I guess the timing did not work in the end, with the latter taking longer, and more interim cash needed than originally anticipated.

VIA SATELLITE: Has the optimism around Low-Earth Orbit (LEO) constellations/networks evaporated? Do you expect any of them to be successful?

Choi: Iridium, Globalstar, Orbcomm and others are operating successful businesses at LEO. Matt Desch still has plenty of optimism so it’s not any orbit per say that is good or bad, better or worse. Sound business plans with technology that meets customer requirements will always thrive. Needless to say, as I have expressed many times, LEO broadband is a tough business from a number of technical, regulatory, logistic and market challenges. If you look at SpaceX’s Starlink, what is the difference between their business case and OneWeb? What customers have they lined up they have announced? It will be tough to serve mass market consumers with LEO broadband simply because terrestrial cable, fiber, and wireless will take most of the market and the people living on the fringe of civilization away from wireless towers aren’t numerous enough to justify $5 billion to $10 billion investment that needs to be refreshed every five years. I think SpaceX’s challenge will be to convince investors how they are different than OneWeb when it seems the systems are much more similar than different.

Kaul: Despite the challenges LEO operators are facing, Hughes believes LEO systems – with minimal latency and global coverage — have a role to play in increasingly complex networks, along with LTE and satellites in Geostationary Orbit (GEO) and Medium-Earth Orbit (MEO). I don’t expect LEOs to be the panacea for global connectivity – and never did. Rather, I see LEOs as a part of the complex, multi-transport ecosystem that leverages all types of connectivity to meet the tremendous worldwide demand. Clearly, the initial applications for LEO service will be in maritime, aero and land mobility where its global coverage offers an advantage over other systems. It’s also valuable for enterprise applications where the lower latency suits real-time business needs such as VPNs. In these markets, the cost of the necessary phased array antenna can be justified. However, when it comes to a consumer application for LEO, the cost of the antenna presents a hurdle. The industry has not yet cracked the cost barrier there – but they will. Five or so years from now, I think we will have overcome that challenge.

Mahmood: LEO constellations come with immense challenges. With the exception of Iridium (which was only possible after a successful bankruptcy restructuring), the business case has not been proven yet; needing significant upfront capital from very patient and passionate investors willing to wait many years before seeing any revenues, if they ever come.

At Yahsat, we have always followed a cautious approach and relied on proven business models. We strongly believe in the benefits of GEO satellites as they provide extremely high throughput and they are more efficient in providing connectivity in remote areas, even with some latency that is not material enough for most to turn down the offering if it is priced right. We are closely monitoring LEO developments and always maintain open discussions with the key players. When the time comes, and I hope it will, we will not resist the LEO wave given the benefits it can bring in terms of cost of capacity, and hope to bring it into the fold for our future capacity needs as a satellite broadband solutions provider.

Pearce: There remain several LEO networks in construction or development and there must be a reasonable likelihood that one or two of them make it to cash flow break-even and viability. All new satellite programs involve a long journey to viability – a period of sometimes many years to cross hugely challenging technological, legal, regulatory, commercial and financial hurdles just to earn the first dollar of revenue. It is not for the faint-hearted and is liable to be disrupted along the way unless the plan is both resilient and agile. But it can be done in LEO – Iridium is proof of that.

VIA SATELLITE: Do you think the U.K. government’s move to invest in OneWeb is a good or bad move? What does this mean for the overall space industry?

Choi: I see that the U.K. government’s move into OneWeb will surely lead to more investment in R&D and increase the number of job opportunities in space for the U.K. Irrespective of the outcome of OneWeb’s commercial outlook, the U.K. will have much more capability to mass produce satellites. This bodes well for the industry in my opinion.

VIA SATELLITE: Over the last few years, the satellite industry has often talked about mobility as being a key for growth. Given how the aviation and cruise market has been hit, will this lead to some long-term damage to the satellite industry?

Choi: Mobility demand has dried up with airliners grounding their planes and no one flying. This sector will return eventually but it will be several years before it is back to normal. Mobility providers who made big commitments to satellite operators are all asking for relief and eventually it will be impacting the Fixed Satellite Service (FSS) operators. Fortunately as demand for mobility dries up, demand for broadband will replace it so I believe the pain will only be felt in the short term for FSS operators.

Kaul: I see the impact to the mobility verticals as a short-term blip. Mobility services are crucial for aero, maritime and land applications. When the industry recovers, the markets will improve. I don’t think it’s a long-term issue.

Pearce: No. All the evidence shows that demand for mobile data connectivity continues to grow strongly and that we are only at the beginning of the mobile data revolution in the aviation industry. There is even an argument that the short-term impact of the Covid-19 pandemic will stimulate the digitalization of the aviation industry, placing global satellite connectivity at the heart of increasing automation and real-time digital services to commercial aircraft. Other gains include massive carbon footprint reductions, meaning cleaner skies and dramatic steps towards ensuring the global aviation industry operates responsibly.

VIA SATELLITE: Given the demand for connectivity has reached new heights as more and more people work remotely, do you believe this is a great time for the satellite industry to become a bigger part of the global communications network?

Choi: I strongly believe that the current FSS satellite operators and mobile operators have a golden window of growth waiting for them. Population densities will decrease with people moving away from big urban city centers to more rural and suburban surroundings. These are the areas where broadband is needed and is underserved. Rural areas outside of New York city have seen vacation home prices triple during this COVID19 crisis. If broadband was prevalent and affordable, many more people would choose to move away.

Kaul: Demand has been solid and continues to grow. We acquired more subscribers than we anticipated in the first part of this year. Business is doing well – and the demand we are experiencing only validates the need for our satellite Internet service and connectivity solutions.

Mahmood: Absolutely. Given what’s happening, it is even more important that we continue our fight to bridge the digital divide. The demand for connectivity will drive governments to ensure connectivity anywhere and everywhere. While terrestrial is making strong progress in serving these needs, we all know that satellite is the only option to ensure affordable, ubiquitous coverage. The new IoT (Internet of Things) revolution and 5G rollouts will enable satellite to have an even more prominent and relevant role. 5G will need satellite to integrate into the mainstream, to achieve full interoperability with the end-to-end 5G ecosystem and standards. 5G brings many opportunities for the satellite industry to offer a much wider range of services and applications, while supporting GSM operators with their ever-increasing backhaul needs.

Pearce: It is not about connectivity for its own sake but rather the value that digitalization can bring to whole industries. From our own experience, we have seen the ongoing transformation of the commercial maritime industry as resilient, seamless global connectivity has enabled the industry to introduce novel business and operating models, driving efficiency, new revenues and a cleaner and safer industry. We see the way that commercial satcom is increasingly working alongside government-owned infrastructure, delivering new, highly flexible, interoperable capabilities to enable governments to support and protect their citizens. And while the commercial aviation industry has been impacted in the short term by COVID-19, I have no doubt that the dual trends towards In-Flight Connectivity and the connected aircraft will continue apace over time, delivering a more efficient, greener and safer global aviation industry.