Steve Spengler Reflects on a Tumultuous Period for Intelsat

Intelsat has had a tumultuous 18 months and has made some of the biggest headlines in the industry, going through Chapter 11 restructuring. Acquiring Gogo Commercial Aviation while in bankruptcy in 2020 was a surprise, but the move has already improved the operator’s financials and its position in the mobility market.

Then on Oct. 21, the operator announced another surprise — that CEO Steve Spengler will step down. After almost seven years in the role and more than 18 years at Intelsat, Spengler will retire once the company completes financial restructuring and selects a successor. He will continue to lead the company until then.

Spengler spoke with Via Satellite just weeks before the announcement, in what may be his last interview before retirement. In this interview, Spengler talks about a future in mobility, potential investments in Low-Earth Orbit (LEO), and the operator’s strategy for a unified network.

VIA SATELLITE: Let’s talk mobility. Why did Intelsat acquire Gogo, and why did you feel that you needed to do this to enhance your position in the mobility market?

Spengler: It was an opportunity we felt we could not pass up. They were on the market and Gogo Commercial Aviation had established a strong position within IFC [In-Flight Connectivity]. We felt that enabling that business with a vertically integrated structure could take it to another level. There is also a lot of opportunity within aero connectivity, and we felt that bringing that capability into Intelsat was a way for us to take Gogo’s great expertise in customer experience, combine it with our existing global network, and then build upon that with multi-layered capabilities. The result will be enhanced quality and performance of the services we deliver and an unmatched customer experience.

We accomplished this acquisition during financial restructuring, which is a very unusual and rare accomplishment. The fact we were able to do it speaks to the strength of our underlying business and vision. Our stakeholders still felt they could see this vision, and we will emerge much stronger and in a much better place. We think it is a great way to deliver market-leading quality and performance to our customers and strategically the appropriate thing to do.

VIA SATELLITE: At our recent Connected Aviation Intelligence event, Jonathan Hofeller of SpaceX predicted that within 10 years, 90 percent of airline traffic will be on LEO satellites. Clearly, you have a different opinion. But how will Intelsat remain competitive in the market against the likes of SpaceX and OneWeb who are aggressively targeting this market?

Spengler: Comments like that do validate that there is significant market opportunity in the connected aviation area. There is a long way to go before we fully satisfy all the airlines, passengers, and airline connectivity needs of an aircraft.

I firmly believe it will not be one solution that addresses this need over time, over all world geographies and customer situations. Intelsat has believed for a long time in multi-band and multi-orbit solutions. History will show where we have tried to develop multi-orbit solutions in our company. We haven’t lost that vision or belief. It is far better to have a multi-orbit solution for your customers than just a single orbit solution over time. Our network strategy, while integrated using standards and software-defined technology, is unifying the network by using multiple orbits, multiple frequencies, and layers to get that robust and complete service that a customer might need. That takes sophisticated orchestration of all of those capabilities. It takes virtualization of the network to make it cost-effective and operate smoothly. It will take some years to build, but that is where we want to take this company and our network. I think we are going to be powerful competitors in the long-term in this growing segment.

There will be other excellent competitors in this segment, that is the nature of markets. We will be at the forefront of developing the right kinds of services, the right performance, the right SLA’s [service level agreements], and quality for airlines and passengers. For airline passengers, it is not just about performance and SLAs — it now becomes about customer experience. You have to optimize that customer experience for that airline passenger. That is the laser focus for our commercial aviation area.

VIA SATELLITE: Intelsat has had issues related to finance. The company recently announced a comprehensive debt restructuring. Do you believe the operator has come out the other side?

Spengler: We are almost there. In May of last year, we decided to voluntarily enter a financial restructuring to position the company for long-term health and growth. It was a necessity. We determined it was the best way to get the right kind of liquidity to execute on the C-band project that the FCC mandated. It was the best way for us to continue our investments in our networks and infrastructure. We felt it was the best way to address our historical debt burden. We have engaged in that process over the last year. Fortunately, we continued to do well as a company and serve our customers and continue investments in our software-defined satellites. And, we have acquired an important new part of the company. We have accomplished a lot in this timeframe and feel good we are headed in the right direction. We recently announced that we have reached a deal with our major stakeholders, which is documented in our reorganization plan. This will reduce the company’s debt by more than half from more than $15 billion to $7 billion, which is meaningful. This will position us for long-term success by having the right capital structure and financial foundations. We expect to be able to emerge from the process by the end of 2021.

VIA SATELLITE: Recently, Inmarsat announced plans to build a small LEO constellation to go alongside Global Xpress and its other satellites. Could Intelsat do something similar?

Spengler: To bring multiple communications platforms together into a harmonized service offering for customers takes sophistication and orchestration of those services in a very automated and seamless way for the customer.

We have had a dialogue with our customers over particular satellites, frequencies, orbits, and beam coverages. In time, that has to become invisible and disappear from a customer perspective. What is important for the customer is the quality and reliability of service, the SLAs that we can deliver and the end user experience. We have to take on the complication and the complex parts of bringing different solutions together in a service offering for customers. That is the key to what a unified network is and will be, and the glue that brings that together is the standards-based, software-defined technology used commonly across telecoms networks today. It is leveraging aspects of the network, such as cloud services. It is leveraging the emerging area of virtualization of physical infrastructure. It is investing in the next generation of terminals that can work with multi-orbit systems. There is a lot to go into all of this.

VIA SATELLITE: Does that involve investing in LEO assets?

Spengler: It involves being part of the LEO ecosystem – yes, and MEO [Medium-Earth Orbit] perhaps, and even HAPS [High Altitude Platform Stations] could fit into this. All of those elements would play together in this. As we are talking about our network plans right now, we will share more with the marketplace as we establish partnerships and make headway.

VIA SATELLITE: SES has MEO, Telesat is building Lightspeed. Eutelsat is invested in OneWeb. Can Intelsat survive and thrive without having a non-GEO element in its service offerings?

Spengler: We are creating a unified network, a network of networks that has multiple orbits, multiple frequencies, or bands which we do today, and multiple layers. Multiple layers are an essential element. The depth of capacity and service capability required is significant for many of the applications we are talking about. It is not about having uniformly distributed coverage of the globe. You want to have the depth of capability in the right places to accommodate demand and intense applications. That is where a software-defined architecture is paramount. Software-defined satellites can provide the right type of capacity or power and bandwidth in specific places where the traffic routes and demand are located. That is all part of the architecture.

VIA SATELLITE: What are your capital expenditure plans? What is the next wave of innovation you are looking to bring with your next satellites?

Spengler: We have embarked on what I call the first phase of our network investment plan. This phase is an initial investment of more than $2 billion that will start to build this unified global 5G network. It is designed to be an augmentation to the global telecoms infrastructure. It is an extension of the networks out there today that need to be extended into various service areas. This will enable greater scale and economics.

So, what is happening right now with that $2 billion initial investment? Part of it is going into developing our 5G initiatives and building out our 5G terrestrial core. Our software-defined satellites are part of that plan, of which we have invested in the first two. Then, it’s beginning to deploy these satellites on a global basis. There is more to come there.

It’s also an investment in the development of terminals through terminal partnerships that will enable us to have the right performance, the right form factor, the right costs and capabilities of a multi-orbit, maybe even multi-band capability, which is very important. That work is underway.

Finally, we are exploring how we might operate in terms of what we are doing in non-GEO orbits and investing in network orchestration and virtualization. That is the gamut of the types of things we are doing in our investment phase. All of this investment builds upon the strength of our current network and our current customer base. We are committed to serving the four sectors we have served over the years: mobility, networks, media, and government.

We talked about the investment plan, but the network plan speaks to our quality of service and customer experience. We need to get the bandwidth capabilities in the right place, making provisioning easier, making it easy to turn on and off service on the network. This is where software-defined solutions come in.

For our customers, they need the always-on streaming experience on an aircraft or a great experience for people on a cruise ship or merchant ship workers. Network operators need quick and efficient ways to extend terrestrial networks. And governments’ multi-faceted missions demand security, immediacy and flexibility. This is what is driving our strategy. Our investment plan is geared around that.

VIA SATELLITE: How do you think the satellite industry will partner with telcos in the future, like OneWeb’s distribution agreement with AT&T that was recently announced?

Spengler: I think we are going to see more of these deals. It is the nature of global telecoms to have partners across the industry. In my view, a lot of this will be done around standards, and how to deliver at scale for customers. Partnering with multiple entities creates some of that scale and synergy for getting those right solutions together. This is important in advancing the ecosystem. No one company can do everything, and anyone that says that they can do everything, is not being completely frank about their capabilities. It takes multiple technologies, approaches, and capabilities to build a truly global, robust, unified network architecture. We feel we can leverage solid relationships we have with other satellite operators and with mobile network operators that we have worked with for decades. We have technology providers as partners, so all of these partnerships are going to be critical. Partnerships like these will cut across the sector to a large degree.

VIA SATELLITE: There was a lot of talk at SATELLITE 2021 about more open ground systems and standards. Do you believe the ground players are keeping pace with the likes of Intelsat and their needs on the ground?

Spengler: The ground part of our system continues to innovate, and there are some great partners in this space doing important things. We like to encourage them to keep thinking about the bigger picture when looking at open networks and leveraging standards. That has the potential of opening up the market and creating more demand and opportunity for all of us. If we can make the services more accessible and economical, easier to deploy and more robust, we become more valuable. If we can plug and play with an MNO or media company, it can be hugely beneficial. We will keep encouraging technology partners on the ground to look at the big picture and look at the opportunities to create open networks, leveraging software-defined technologies and virtualization.

VIA SATELLITE: Are they ‘getting it’ though?

Spengler: I think some are getting to yes. We are having some discussions with ground technology partners that are very sophisticated about open network architectures and how standards and virtualization can be transformative.

VIA SATELLITE: It has been quite a time for Intelsat as well as the satellite industry as whole. What do you make of events in the industry over the last 12-18 months? Why are you optimistic that Intelsat is well positioned to take advantage of future growth?

Spengler: There has been massive and rapid change that we have faced in the last 18 months. It has been quite remarkable. I firmly believe that we have the right strategy in place that will lead to a paradigm shift in our segment and will help us integrate — or re-integrate — into the global telecoms industry. I think that integration with the broader telecoms industry has not been a real feature of satellite communications. We have been a little bit apart, and now we have a chance to fundamentally change by investing in a unifying network.

That is what we are trying to do. Our view is that a unifying network with an open architecture that enables a collaborative ecosystem on behalf of our customers’ experience is the key differentiator. This unifying network must be standards- based, interoperable and capable of connecting our customers with multiple types of communications technologies from a multi-layer, multi-band and multi-orbit perspective. That is directly contrasted with the historical way we have approached things in our industry, which has been to look at things on a bespoke basis. We have to be re-connected or connected with global telecoms. We have to be interoperable. We have to leverage all of the great things that have happened in the broader ecosystem to benefit our sector.

Looking at what we have learned over the last 18 months, I will say the following: firstly, the technology I have just described is nearly ready. The industry is ready and we, as a company, are poised to take the lead. From a technology standpoint, our focus is going to be around non-terrestrial network 5G. It is fantastic that the standard is incorporating satellite and other technologies that will come along next year. We are investing in software-defined networking on the ground and in space. We have our first couple of software-defined satellites under construction right now. And, we are building out our 5G terrestrial core, which will be an integrated part of it. Beyond this, we have antenna and terminal technology that is maturing.

Some of the talks at SATELLITE 2021 were about standards and partnerships. I found it encouraging that this was a broader part of the conversation. It validates what we have believed for several years now— that coming together from a standards-based standpoint and partnering will be essential for the future, instead of having a closed architecture.

VIA SATELLITE: What does a successful 2022 for Intelsat look like?

Spengler: We focus on our customers. I view success as if we can continue to innovate and bring more value to our customers and our partners— to me, that is what constitutes a successful year. If we do that really well, it shows we are advancing and innovating. Everything else like financial success will follow. It starts and ends with the customers. VS

Editor's note: This story and headline have been updated with the news of Spengler's resignation.