Maybe market reaction to NASA Hosted payload going to GEO
Much of the justification for the ~3 Billion dollar spend on NEXT was based on the cost recovery of Hosted Payloads paying to share the ride, but also the years of billable reoccurring revenue from data delivery from a captive customer bolted on to the satellite. They estimated Hosted Payloads influx to be between 200MM and 300MM in net cash. So far they got 10MM from Orbital for options for up to 20% of the space. Of course, the big advantage of LEO is latency, but for many sensor applications, near real time telemetry is not really a factor and Geostationary can supply much faster data rates and a much larger field of scope from a single sensor. The big Hosted Payload customer ended up being Iridium themselves. With lack of any commercial interest in funding ADSB on NEXT. Iridium basically chose to "self-fund" the ADSB hosted payload business. Still waiting to see which other investors belly up to the bar. So far NAVCANADA is named to participate, but, to this date, we have not seen any money placed on the table, and everyone is closely watching for exactly how much money they actually fronted. 3 Billion is a lot of debt.
Guess you've seen the money on the table now - $150M big ones. Nice commitment. Since it covers the costs of the payload, Iridium isn't "self-funding" ADSB - they are just waiting for enough user contracts to come in for Aireon to pay them their $200 million in hosting fees, and then they get data fees and half the profits from Aireon.
I think the data fees and profits are going to be much larger than the $200 MM in hosting fees - maybe worth half a billion or more if this is as successful as I think it will be (and some of the aviation analysts agree that I've talked to).
Sounds like there is still a little more payload space left so with that, they'd definitely be in the $200 - $300 MM range they promised in net cash for the hosting part alone.
3 Billion is a lot of debt, though that isn't what they will have - only about half that. And that will only be 4 - 5x leverage, which isn't that much for a satellite company that doesn't have to spend any capex for 15 years.
Perhaps the market is just learning this but customers that had looked into Iridium as a hosted payload ride quickly found that the constraints (Size, Weight, Power) were too great and the price was no bargain but the biggest concern among payload designers that I've spoken with has been the limited bandwidth. With a maximum of about a megabit per second available on a platform and restrictions on how many payloads could share crosslinks at a time, a large number of high-end optical and RF sensors (the kind that would value an orbital position close to earth) were impossible to host. Data rates for these are often in the high 10's to hundreds of mbps - the ability to supply that bandwidth and to stare at the same geography all the time with plenty of room for sensors makes GEO a good solution. Government has found that hosting only works when you have a sensor already built and ready to go (anything less in government-terms wouldn't meet a commercial schedule for insertion). The CHIRP brassboard was sitting in a lab when the deal with SES and OSC was signed (and it still took nearly $100M to fly). Most existing LEO sensors (and in fact, most LEO requirements) expect a lot more than what Iridium could provide - and thus interest fell off nearly 2 years ago.
It is likely that the ADSB fallback was as much face-saving as practical. It is an interesting market, but not so interesting that others would take the chance on it. Perhaps at Iridium's internal transfer price for payload accommodation, the business plan makes more sense. It will be interesting to see if that market is viable a decade from now - someone's got to be on the bleeding edge and it looks like it is Iridium again.
Sounds pretty practical after today's announcement of NavCanada's $150M investment into Aireon (and they are the first big customer).
What do you mean if the market is viable a decade from now? When Aireon goes live, it's pretty much the way global aircraft surveillance will be done going forward. Not a lot of competition when it can't be done any other way.
Who cares if other stuff isn't optimal for hosting on Iridium? - They only needed one, and it looks like they found a perfect match with Aireon.
All very astute observations. Of course, If I were to point out these "inefficiencies" of the Iridium Hosted Payload scheme a year ago. I would be accused of spreading FUD. From a Hosted Payload standpoint, you had COFACE waiting for the money to appear. Obviously, you are fairly close to the satellite industry/defense from an analyst standpoint. May I take a guess that you have some affiliation with RJ in Tampa? Personally, I don't think you will see the first SpaceX launch until second half of 2016, or early 2017. COFACE will require the same six month checkout after the first launch. So, if they can get a couple of pre-flight models off the line by the beginning of 2015, and lofted on a Dnepr by mid 2015. That may put them at the beginning of 2016 before an OK to launch the remiander from COFACE. With might put the final launch, if it ever happens in 2020 or 2021. So the question becomes, how do they support the nearly 3B dollar debt associated with a fully built and launched space and ground network? The maritime and aeronautical VSAT advances are kicking #$%$ and taking names, leaving Iridium LEO for the smaller extreme polar regions and fail-safe backup. A business model built on "access fees" is not going to make it, IMO. Call Intercept is also a huge issue for MSS providers, especially those with gateway earth stations continents away.