Sabbagh Sets Out SES Vision

The first time I saw SES CEO Karim Michel Sabbagh speak was at a CASBAA event in Hong Kong, which was one of the first times he addressed the satellite industry. He is a gifted public speaker — with an air about him very different from his predecessor, Romain Bausch — and spoke constantly of the satellite industry’s “right to play” in the global communications ecosystem. I was delighted this year that, after a highly successful opening general session at the SATELLITE 2016 Conference & Exhibition, I was able to catch up with Sabbagh and talk about his vision for SES. Having now been in the job well over a year, he talks candidly on many topics.

VIA SATELLITE: Could you tell us the significance of becoming the majority owner of O3b Networks?

Sabbagh: The acquisition of a controlling stake in O3b further strengthens our global network and capabilities. We expand our reach and portfolio, augment our capabilities and enhance the foundations for sustainable growth. SES and O3b are highly complementary, and expanding SES' global GEO network with O3b's unique MEO fleet is a game changer for us, since it leverages tremendous potential and adds significant value to our assets and our start-up investments. We also significantly augment our capabilities to offer data-centric applications and serve customers with scalable, flexible and very differentiated solutions in the enterprise, mobility and government verticals.

VIA SATELLITE: What made you decide to pull the trigger on this deal now?

Sabbagh: The time was right because we reached the point where all the conditions we had determined earlier for such a transaction were met:

1- To have a fully functional fleet in operation in a technical and a regulatory sense;

2- To have successful customers and thereby prove commercial viability;

3- To meet a set of financial criteria that show the economic performance and sustainability of the business; and

4- To secure the financing of a further eight satellites that are now under construction.

VIA SATELLITE: Do you think the new LEO constellations could impact the “GEO-MEO” play that SES currently has? Can you see SES having a LEO play as well?

Sabbagh: Last year on the opening general panel session at SATELLITE 2015, I said that we should keep our options open in terms of what is the best way to deploy capabilities in space. The usage of a GEO, MEO or LEO satellite is not a value in itself but instead dependent on the applications it is providing for in the end. As I have said before, we must focus on the customer and the global scalability of the application we are serving. We must analyze, differentiate, invest with patience and shape future market habits and models. It is impossible for us today to fully predict the applications of the future. A case in point is Internet of Things (IoT). We know it should be enabled by both terrestrial and satellite networks, but we still haven’t fathomed the full extent of what the IoT ecosystem would look like.

So, what we are seeking is the flexibility to deploy solutions when the opportunities arise in our different verticals, and to do that in a capital efficient and scalable manner. If this implies LEOs at some point, and if this pushes the frontier of thinking beyond what we know today and we discover new opportunities, we are ready to invest.

There may be some “secret sauce” we have not yet thought of in terms of how we can get GEO, MEO and LEO satellites to interoperate with one another and provide seamless connectivity to the markets.

Look at O3b Networks; it took five years for their talented management team to achieve the roaring success they enjoy today, and even then they still have a long way to go. Another good example is the aeronautical market. Connectivity in this segment is very much about providing broadband connectivity that is comparable to the home or office experience. Yet at the same time, we know that airlines create large volumes of data when flying; routing information, environmental sensing, airport operation, to name a few. If some of this data is managed in an instant manner, the airline can perhaps improve the efficiency of the travel route, fuel consumption, safety, and open an entirely new paradigm. And if there is a need for latency-sensitive connectivity, why not explore using LEO satellites? This would open up a new box of solutions that we have not yet fathomed today. We need to keep our minds open, and have both the ability and interest to commit to the R&D of how LEO, MEO and GEO satellites can offer seamless connectivity simultaneously. However, what’s vital to SES is that the endgame of such a solution has to be scalable and made global.

VIA SATELLITE: At SATELLITE 2016, Dan Goldberg talked about going from skeptic to believer in terms of LEO. Are you now a believer too?

Sabbagh: I am a firm believer of constant evolution. The next step of our evolution may well be beyond LEO. Or it could be different from LEO. What is the next generation of HTS really about? How do we integrate and deploy the most advanced technologies, such as photonics, software-defined payloads or digital processors? We have an exciting way to go ahead of us.

VIA SATELLITE: Where are we with that HTS evolution?

Sabbagh: The beauty of HTS is that they place satellite operators in the driving seat. Satellite operators have to create tools on the ground to be able to think about throughput, contention, service level agreements, Quality of Service, and pricing. As a result, the investment on the ground for HTS satellites is actually higher than the investment in any one HTS satellite. This evolution is going to require a significant change in the way satellite operators do their business. In the non-HTS world, most of the work is done once you have deployed a satellite and have a teleport. That way of working is no longer possible in the HTS world.

SES has several hybrid HTS satellites under construction — SES 12, SES 14 and SES 15 — and our focus is really shifting. In the SES executive committee, we spend an equal amount of time discussing developments in satellites as we do in ground infrastructure, such as the developments in all ancillary systems that need to be created by either SES or our industrial partners. This is an important point: where is management spending its time? A military senior in the United States once noted that when seeking to understand the strategy of an entity, you don’t have to read what they are claiming, you have to observe what they are doing. If you had an independent observer present at our executive committee meetings, that is exactly what they would see.

My conclusion is: the answer is not going to be a silver bullet; it is going to be marginal gains and additions of each one of these initiatives.

VIA SATELLITE: Has the satellite industry been good at making these “marginal” gains you talk about?

Sabbagh: As an industry, we have always been tempted by hanging on to one big idea and presenting it as a panacea. The 1 Terabyte (TB) discussion is one of those examples. In principle, building a 1TB satellite is doable. You would need to access 2.5 GHz of raw spectrum x2 polarization, and design a program with 300 beams that can achieve 75 times re-use of the spectrum — take 2.5 x 2 x 75 and you will end up with 375 GHz. And if you have a spectral efficiency of 3 bits per second, per Hertz, 3 x 375 will give you beyond 1 TB. So we visualize this idea. Yet, we have to ask: is this the defining idea for our industry? In some situations, this could provide a good answer. But it is not the definite answer for all questions being raised.

VIA SATELLITE: Since you took over as CEO of SES, what has been your number one learning during this time?

Sabbagh: I would say the first learning is that this industry has a great capacity to evolve and adapt. When I joined, the collective wisdom was to describe our industry as being rigid intellectually and economically attached to models of the past, and that it is going to take a while to see a proactive engagement. I say this positively, but we have underestimated the industry’s ability to evolve.

Secondly, we have underestimated and under-imagined the potential to bring new technologies into the market and how these could have a transformational impact in some sectors. O3b Networks’ maritime product is a case in point. Customized applications such as hybrid video are another case in point. Downstream investments in modems and antennas for mobility solutions are unlocking unprecedented market potentials. You also have access to highly secured spectrum, which enables a new generation of defense and security capabilities. We still don’t see the end tail of these opportunities. I think we under-imagined what we could do with our technology and how we can evolve it. For whatever reasons, we were too focused on the trees and forgot to see what the forest would look like.

VIA SATELLITE: We have touched upon video. How do you see this market developing?

Sabbagh: We see the satellite industry enabling seamless video delivery in a converged hybrid system. The more seamless this connectivity is, the more we would have succeeded, because the best technologies are the ones that weave themselves into daily life and are not noticeable. Seamless connectivity bringing linear and non-linear together is where we see the video market heading toward, and we are very excited about this. Truly seamless connectivity can only be delivered through a hybrid video solution that will benefit the entire market. First, the video experience will be democratized, as it will be equally relevant to someone who is six or 60 years old. Second, there will be more options of distributing content in optimized and efficient ways from both a cost and an experience standpoint.

Take a subscription-based VOD platform, the mode of delivery may consist of an IP component and a linear component, but consumers are not interested in this. All they want is a seamless video experience. For SES, the mission therefore is two-fold. First, we need to think about how our space infrastructure interfaces with terrestrial infrastructure. We also need to look at other elements we need in the value chain so that the hybrid magic sauce can take shape. Secondly, we need to put it in the hands of the end user and interface, either in the form of consumer electronics or applications that deliver video in a seamless manner.

VIA SATELLITE: What attracted you to the RR Media opportunity?

Sabbagh: We see growth opportunities not just in deploying more satellites that have additional capabilities and in advanced technologies in space, but also through further investment either organically or inorganically in the services value chain. We already had a first-hand experience of investing in the video services market via SES Platform Services, which has been very successful. So, the next natural step was to scale up our strategy. At SES, we believe everything we do must be scalable. So, when we looked at this, it was evident that we needed to take the concept SES Platform Services globally. We did consider the organic path, and we decided it wasn’t going to be the most efficient way to move forward. We now have an end-to-end ability to enable and accelerate the video ecosystem.

VIA SATELLITE: ViaSat is building ViaSat 3. ABS has hinted at doing something really radical with new satellites. Is SES working on something with this type of ambition?

Sabbagh: What we are looking at is not to build an extremely powerful satellite so that we can say we have a 1 TB satellite. That is something we can already fathom today and put on a medium-sized platform.

The question that keeps us awake at SES is: what is the best way to customize payloads to serve specific applications? Our thinking is that we have to keep pushing the envelope in terms of technology. It is not going to be one brutal step forward. Creating a platform that could be 1TB or bigger does not necessarily equate to a “right to win.” Instead the “right to win” comes from how you can differentiate these payloads and integrate them with IP layers and HTS hubs, creating an adaptive network that would allow for much higher throughputs, lower cost per bit, as well as the ability to scale rapidly up and customize services in the most efficient manner. This is the tall agenda we are pursuing. VS