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Routers in the Sky

Born in Kashmir, raised in Bombay (now Mumbai), Pradman Kaul came to the U.S. at the age of 17 in 1963 to study engineering at George Washington University and never looked back. He joined Comsat Laboratories, where he teamed up with the nucleus of engineers who would form Digital Communications Corporation-the company GM would buy …

Born in Kashmir, raised in Bombay (now Mumbai), Pradman Kaul came to the U.S. at the age of 17 in 1963 to study engineering at George Washington University and never looked back. He joined Comsat Laboratories, where he teamed up with the nucleus of engineers who would form Digital Communications Corporation-the company GM would buy in 1986 after it had been absorbed by M/A-COM. Under GM’s umbrella, this and many other pieces became part of Hughes Electronics. (GM would later sell off pieces of its Hughes businesses, with the satellite business going to News Corp. and ultimately to the private equity group that now controls it.)

With more than 500 patents in a broad range of satellite telecommunications technology, the company has been a pioneer despite its multiple and convoluted changes in ownership. When owned by GM, Hughes developed the OnStar system that today is used in most GM cars and trucks. The company also built the backbone communications network that allowed Sam Walton to create the legendary inventory management control system that Wal-Mart has used with lethal effect to dominate retail. Hughes went public in February 2006, when it went to market with 35 percent of its stock. Apollo Management, L.P., a private equity firm, owns the remaining 65 percent. Hughes’ markets are in two areas-VSAT satellite networks and telecommunications systems, with the former accounting for 88 percent of the company’s approximately $1 billion in annual revenues.

For all its wonder-the recently deceased Arthur C. Clark first predicted the use of geo-synchronous orbit satellites that Hughes made real-satellite is still a niche technology and almost 99 percent of communications dollars in the world today are spent in non-satellite related fields. That his business is not mainstream yet doesn’t bother Kaul.

What does the impact of the integration of satellites and cellular technology mean for the future, and what is Hughes’ role in it?

There are many new applications and value-added services under development around the world. For example, we started with digital signage in retail environments in Europe. Our first big customer was Tesco, the giant UK food retailer, where we transmitted commercials via satellite to 100 stores. Each grocery aisle has a flat-screen television. As a customer enters the personal products aisle, a commercial for, say, Crest or Colgate will be running. Commercials are interspersed with two-minute news clips or the local weather so you have some reason to watch the monitor.

Another example of digital signage is a program we do with BP at gas pumps in the U.S. and Europe. We transmit IP TV video through our satellite network directly to screens at the pump. While customers are pumping gas they can see a similar mix of news, entertainment and ads at the point of sale.

There are also educational applications of the technology. For example, in India we are working with major universities to set up remote classrooms either owned by us or by franchisees in 30 major cities. Students sign up for a course, and a professor teaches it live from a studio in the university to any number of remote locations. It’s interactive, so students can ask questions on a PC. We’re putting this capability in 10,000 kiosks in remote areas of India-the truly small villages and towns that are off the mainstream.

Talk about broadband on the move.

It’s similar to receiving radio signals that use both satellites and terrestrial transmission. Remember, when you are moving in a vehicle, the Doppler effect affects your ability to receive signals and must be taken into account. Today, we offer broadband capability on cruise liners, yachts and tankers, anything that moves. We use the same technology, but with a tracking antenna, so that as the ship yaws, the antenna can keep the signal fixed toward the satellite. We have announced a deal with a company called Route 44 to provide the same technology on airplanes.

After four years and $400 million, Hughes has its Spaceway satellite launched and in position. What does it represent for you and for users?

It fundamentally changes the level of technology available in a commercial satellite by orders of magnitude. For the first time, a commercial satellite has on-board processing. It has a 10-gigabyte router on board that takes a packet of data that’s transmitted to the satellite and demodulates it so it can determine where it must be transmitted to. Then the packet can be directed to a specific downlink beam where, say, it goes to your home in New York City and nowhere else. Until now, commercial satellites have not had this capability.

Typically satellites have been mirrors-just send a signal up there, and it sends it down. What this means is that we have more bits that we can give a user at higher speeds and at lower costs. We can give a user what we call mesh connectivity. Today, systems transmit from a hub to a remote. So, if I want to go from my company to yours directly, it can’t do it. It would have to go from my company to our hub in Las Vegas and then go back up the satellite to get to you, or be sent on a terrestrial trunk.

Because Spaceway is a router in the sky, it knows that this packet that I’ve transmitted has to go to you and only you. This is mesh connectivity. It has the ability to go point to point rather than point to multipoint to multipoint to point. This kind of network connectivity is very important to enterprises that handle a lot of applications and to markets that we can’t address today.

So how else does it help users?

In addition to more sophisticated digital signage, there’s distance learning. In the next generation of Internet applications, you’ll see more peer-to-peer applications. You will also see more peer-to-peer collaboration. I don’t mean just video conferencing, but meetings among 10 branches of a corporation where each group can collaborate just as though everyone was sitting in the same conference room. Without mesh connectivity this couldn’t happen.

Apollo owns a big piece of you and has three Apollo people on your board. Do you find it claustrophobic having the owners hovering over your shoulder?

They don’t hover. We have a quarterly board meeting, and this is the only time I see them. They have left us alone. They’re there when we need help. They’re very supportive, bright people. There’s one person, a partner who I primarily interface with, who is very strategic. People have this image of private equity companies coming in and squeezing the hell out of cost. He has not asked me to cut one dollar of cost or let go of one person since they took control almost three years ago, because we have performed. _

About Jennifer Pellet

As editor-at-large at Chief Executive magazine, Jennifer Pellet writes feature stories and CEO roundtable coverage and also edits various sections of the publication.