Boeing's Purchase of Hughes Presages A Major Change in Company Emphasis

E-Bird and Wideband Boeing Satellite Systems recently scored two major victories: In a European breakthrough it contracted for its first satellite with Eutelsat, for a small Boeing 376HP broadband communications spacecraft, called e-BIRD. From its orbital slot at 25.5 degrees East, it will provide Internet protocol services to Europe via spot-beam coverage and a payload of 20 active Ku-band transponders. And at the other end of the scale, Boeing was chosen to lead the Wideband Gapfiller Satellite system which will provide communications to support the warfighter. Based on one or more of the largest Boeing 702 satellites, the $160.3 million contract could eventually be worth $1.3 billion. Wideband Gapfiller incorporates such features as the ability to refocus its spot beam on different regions, while tremendous processing capability means bandwidths can be broken up into arbitrary channel widths. "So it's not a transponder per se, you can get as much bandwidth as you want wherever you want," says Boeing Satellite Systems VP Ron Maehl. Boeing uses three basic buses for both commercial and military satellites: The 376 bus is a 2 kW, spin-stabilized satellite that appeals largely to customers that have big fleets but need to fill a specific gap. It is the cheapest spacecraft but the highest cost per transponder The 601 and 601HP 4-to-8 kW satellites are claimed to be the world's most popular spacecraft. "To get it to nine or 10 kW is virtually impossible, so we have a gap between it and the 702," says Ron Maehl. "We can take a 702 down to that size, but that is just like shrinking an airplane-it is never as efficient as a stretched version." The 702, with 15 kW of power, is the world's biggest, most powerful production satellite. It is extremely expensive, but offers the lowest cost per transponder as it can carry 100 of them (think of it as a Boeing 747 in terms of costs per seat mile). It can provide multiple beams, and can be refocused onto different areas should a customer's business strategy change. -J.M.

Last October Boeing became the world's largest maker of satellites when it bought the spacecraft business of Hughes Electronics.

Now it sees satellites-and especially space-based services that depend on them-as the major growth engine in the Boeing Company.

Linking aircraft and their passengers with computers on the ground and with each other, to the Internet, and to satellite-based air traffic control are just some of the opportunities.

"Big as it is, Boeing did not have a communications capability," explains Ronald Maehl, senior business development VP at Boeing Satellite Systems. "So our space and communications fits with commercial airplanes-then we have the whole picture. The communications capability is significant if we are going to be a large systems integrator-which is what Boeing really is."

Even in its core business-satellites-BSS is unique in that it is active in both government and commercial businesses, and unusual in the latter in that customers are mostly international and not government-to-government. The cycles in each balance each other out (giving Boeing an advantage over the ups and downs of its competitors), and cross-fertilization has brought the most advanced capabilities into the commercial world.

Revenues last year topped $2.1 billion, split 50/50 government/commercial in a mix that can swing 70/30 either way in any given year. Backlog now is a healthy $6 billion.

"Except for Lockheed on both sides, we see different competitors in each market," says Maehl. "They have tried to migrate but not succeeded. So we see Lockheed and Loral on the domestic commercial market, but we don't see Loral at all in government business. Our main competition on the military side is TRW, and we don't see them on the commercial side at all."

Maehl estimates Boeing Satellites has a 30% market share of the $3.2 billion commercial market this year. Its two European competitors-Alcatel and Astrium-"are coming on strong," he says, but Boeing sees them just as much as partners as they bring other skills to the table (Alcatel, for example, is a telecom company that owns massive communications networks itself).