The genesis of the Leasat program, about forty years ago, is not well known. The culmination of our efforts was the award to the Hughes Aircraft Company of the Leasat contract in September 1978 by the U. S. Navy. The significance of this program, I believe, was to move the company’s course further in new directions—in management, in pricing of products, in risk-taking, and in new business structures. This was all made possible by the earlier innovative technology developments and complexity and the more sophisticated satellite production, test, launch, and operations in the Space and Communications Group (S&CG) in the 1960’s and early 1970’s. A successive number of synchronous communication satellites (including the Leasat precursor, Tacsat) were built for various customers in that period.
The Defense Division of S&CG was responsible for all military and classified satellite programs. Robert Sears was the Division Manager during this time. Reporting to him was a small group called Advanced Programs concerned with developing new business, staffing and managing proposals, and interacting with potential customers and marketing. By the early 1970’s, it seemed apparent that, subsequent to the successful TACSAT program, Hughes had not been very successful in winning any of a series of military satellite procurements such as IDCSP (DSCS-I), DSCS-II, NATO-1 SATCOM, and later DSCS-III. One reason put forth was that the cost estimates from the many S&CG performing areas might have inflated the total cost in our bids causing the customer to choose another supplier. This may have been caused by the very detailed and complex military specifications. The customers usually add requirements to successive procurement specifications to avoid known problems incurred by previous satellite contractors.
At least by the early 1970’s, the process of building a series of commercial communications satellites at S&CG was well in hand and the risks considered moderate. We asked ourselves, how might we take advantage of this commercial experience in the winning of future military contracts? There were not many significant technology differences in the satellites themselves except for the frequencies of operation. The subject arose of our not selling a satellite to the military, but instead providing long-term communication services by long term leasing not unlike a telephone company. In this way our experience in the commercial satellite business would be applied to the military. Our internal specifications and procedures for satellite construction, test, launch, and operation would be used. Obviously, this novel idea needed more detailed study and both our and Navy management would need to be convinced. What kind of contract would you enter? What Government approvals would be required? How would authorization of the operating frequencies be arranged? Who would control the satellites and from where? What forms of leasing are possible? If we were to be a common carrier where the FCC must know your costs and rates, how does privately owned Hughes handle that? What part of Hughes would be the lessor?
Earlier, the role the DOD gave to the U. S. Air Force was for the procurement and technical direction of satellite, boost vehicles, and space systems and contractors. However the U. S. Navy had its own special naval space missions, communications and system requirements. They used the Applied Physics Laboratory of Johns Hopkins University as their think tank and technology organization. The Navy had a desire to be independent of other DOD branches for space. This undoubtedly influenced the Navy’s acceptance and internal promotion of communications leasing. Their technical personnel were very supportive of our lease concept and provided assistance to us while developing their communications system specifications.
As new leasing idea grew, Ken Renshaw, in the Advanced Programs group and a strategic thinker, had this as his primary assignment. Some answers to the myriad marketing, contracts, and legal investigations questions were addressed. The legal, financial, and organizational issues involved seemed more complex than the technical ones. At a management offsite presentation in 1974 or 1975, Jim Dunlap, head of S&CG Contracts and Legal, and I presented the concepts to all attendees. A separate wholly owned subsidiary would be formed that ultimately became Hughes Communications Incorporated (HCI). It would contract services with the Navy and operate the system. In this way, our books could be open to the FCC and be separate from Hughes. HCI could contract for products, analyses, services, and support with our parent, the Hughes Aircraft Company.
Many marketing and technical meetings were subsequently held with the government. By late 1977, it seemed that the concept of Navy satellite service leasing was understood and underway. It was time for Hughes to do a detailed design of our product. I formed a separate design team. Al Wittman’s ideas of a “Frisbee” deployment of a maximum diameter drum satellite from the bay of the Space Shuttle were incorporated. Two separate transmit and receive helical UHF antennas were incorporated and the difficult passive inter-modulation product suppression technology was addressed. By the time the Navy request for proposal (RFP) arrived in early 1978, we had completed the design. Another bidder, Comsat Corporation, a satellite communications carrier, also wished to bid and came to Hughes with a bid request. Dave Braverman ran that effort entirely separate from our own Hughes bid. Both competing proprietary proposals were totally independent from each other, even though the overall designs may have been very similar. Since the HCI satellite design had been completed before the RFP, the Comsat proposal work was less effort. We carefully avoided any possible conflict of interest as we were competing with one of our good customers.
HCI was awarded the Leasat contract in September 1978. S&CG began the design and construction of the space and ground facilities. A separate building was leased in El Segundo at the southwest corner of Continental and Grand Avenue as HCI headquarters. I was asked to be the first employee of HCI as Technical Director. Ralph Rhoads was second in Contracts and Jacque Johnson was next for Marketing. In January 1979, Tom Whitehead joined and became President of HCI.
It was a very stimulating time period for all. In reflecting on the Leasat program significance, I believe that it opened the door for Hughes to utilize its technology skills in commercial business in a novel and rewarding way. At HCI, the later Galaxy program sold individual satellite transponders at market prices to TV cable and network providers. HCI would just operate the satellite, insure, and warranty the services. It was followed by DirecTV, a satellite system that was financed, developed, and deployed before there were any customers for the service. These stepping stones of technology, risk taking, financing, and marketing led to the space communications accomplishments of Hughes that are unique in the world.