Satellite Business Systems
| Company type | Joint venture |
|---|---|
| Industry | Satellite communications |
| Founded | December 15, 1975 |
| Founder | IBM, Aetna, COMSAT |
| Fate | Merged with MCI Communications; operations ceased by 2007 |
| Successor | MCI Communications |
| Headquarters | McLean , United States |
Area served | Worldwide |
Key people | Robert C. Hall (president, 1979), Stephen B. Schwartz (president, 1984), Marvin Mann (president and CEO, 1984) |
| Products | Satellite communication services |
| Owner | IBM (initially one-third), Aetna (15%), COMSAT (initially one-third) |
| Parent | IBM, Aetna, COMSAT; later MCI Communications (majority stake acquired 1985) |
Satellite Business Systems (SBS) was established on December 15, 1975, through a collaboration between IBM, Aetna, and COMSAT. It became the first enterprise to offer dedicated professional satellite communication services utilizing a constellation of geosynchronous Fixed Service Satellites (FSS).
Formation and Early Years (1970–1979)
In 1970, MCI Communications initiated MCI Satellite, Inc. to investigate satellite-based long-distance communications. By 1971, MCI joined forces with Lockheed to create MCI Lockheed Satellite Corp., marking the first attempt to gain FCC approval as a Specialized Common Carrier employing satellite technology. Comsat entered the partnership in 1972, forming CML Satellite Corp. Subsequently, in 1974, IBM acquired the shares previously held by MCI and Lockheed.
FCC mandates in 1975 required IBM and Comsat to include a third partner; IBM introduced Aetna Insurance, which acquired a 15% ownership interest. This collaboration resulted in the joint venture SBS, with IBM holding one-third ownership. Initially concentrating on high-speed data transmission for large enterprises, SBS later pivoted towards voice services transmitted over data networks. Robert C. Hall was appointed as SBS president in July 1979.
This overview underscores SBS's pioneering business approach and strategic alliances that established it as an innovator in satellite communications, leveraging worldwide operations to secure a foothold in the evolving digital communications market.
Deployment of Initial SBS Satellites (1980–1983)
Satellite Business Systems, a venture by IBM, Aetna, and Comsat with satellites built by Hughes Space and Communications Company, launched its inaugural satellite, SBS 1, from Cape Canaveral in November 1980. NASA supported several launches during the early 1980s, including missions involving the Columbia. In March 1981, SBS commenced providing private satellite communication services to corporate clients, with Aetna installing earth stations in key metropolitan areas to manage voice communications.
By January 1983, SBS extended services to residential customers. In May that year, Rupert Murdoch’s News Satellite Television secured a $75 million contract leasing television channels on an SBS satellite marketed as Skyband; however, the rollout faced delays later in 1983. Although by 1984 SBS operated three satellites, it served only 22 corporate accounts and approximately 100,000 residential subscribers but experienced significant financial losses—$122 million in 1981, $123 million in 1982, and over $100 million in 1983. To address these challenges, Stephen B. Schwartz from IBM succeeded Robert C. Hall as president in January 1984.
Decline and Divestiture (1984–1990)
By March 1984, after accumulating losses totaling $360 million over three years, SBS announced workforce reductions of 14% amid an industry-wide surplus of transponder capacity and underutilization of satellites. Comsat divested its stake in SBS by July 1984. Following this, SBS sold all its satellite capacity—including ten transponders on SBS 4—to Salomon Brothers and other investors while leasing back bandwidth for $19 million per year to generate $100 million in capital.
Marvin Mann assumed the roles of president and CEO later that year and subsequently managed SBS’s sale and merger with MCI Corporation. In June 1985, IBM transferred its majority stake (60%) in SBS to MCI Communications; Aetna maintained its remaining 40%. At this point, SBS served around 200,000 customers with projected revenues of $500 million for that year. MCI migrated most voice and data traffic from SBS satellites to its terrestrial network infrastructure. The active fleet comprised four satellites: SBS 1 through SBS 4.
By 1987, ownership of the satellites changed hands: SBS 1 and SBS 2 were sold to Comsat; SBS 3 remained under MCI control; while SBS 4 was acquired by IBM’s Satellite Transponder Leasing Corporation (STLC), which also took possession of ground stations for SBS 5 and SBS 6. In April 1990, Hughes Communications Inc., a subsidiary of Hughes Aircraft responsible for manufacturing the satellites, purchased STLC from IBM. Around 1992 or thereafter, Comsat acquired SBS 3; subsequently Comsat itself was absorbed by Lockheed Martin. After these transactions and the deactivation of the final satellite SBS 6 in July 2007 under Intelsat’s management, Satellite Business Systems ceased operations entirely.
Marketing
SBS initiated an extensive "4-year marketing campaign" aimed at the top 300 American corporations but managed to secure only nine clients willing to pay the $108,000 monthly subscription. Due to difficulties corporations faced in leveraging the raw data provided by SBS, the company developed tailored products to assist customers in effectively utilizing the technology. Subsequently, SBS broadened its target market to include smaller enterprises and retail consumers.
The original business approach required large corporations to install SBS earth stations at key locations, which restricted the potential customer base to organizations with enough voice and data traffic to justify multiple earth station deployments. These earth stations were generally dedicated to individual customers rather than shared.
Although SBS technology supported a variety of connection types—switched digital, leased digital, switched analog, and leased analog—between earth stations, most users primarily employed it for internal corporate voice communication, as the data protocols available at the time performed poorly over satellite links.
A significant client, ISACOMM, expanded on SBS’s business strategy by focusing on smaller corporate clients and providing offnet connectivity options.
The high capital expenditure for earth station installations combined with the swift growth of terrestrial competitors such as MCI and Sprint limited SBS’s ability to achieve its commercial objectives. To mitigate excess capacity, surplus satellite transponders were leased to other companies. Additionally, SBS adopted ISACOMM’s marketing strategies and briefly ventured into the consumer long-distance telephone market.
Technology
SBS was a pioneer in utilizing satellites equipped with transponders operating in the Ku band, which allowed for smaller and more cost-effective dish antennas for business clients compared to the larger C band dishes. However, signals in the Ku band were more vulnerable to degradation due to rain fade.
The design of the SBS earth station was created by IBM and incorporated a modified IBM 1800 computer alongside a TDMA modem. All earth stations were centrally controlled from SBS’s network operations center located at their headquarters in McLean, Virginia.
NASA shuttle
SBS achieved a milestone as NASA Shuttle’s first commercial user by launching the SBS 3 satellite in November 1982 aboard STS-5. Engineers at SBS developed a deployment cradle that rotated up to 50 RPM within the shuttle’s cargo bay before releasing the satellite through explosive bolts.
SBS satellites in orbit
During its operational period, SBS launched six satellites, all of which have since been retired and relocated to graveyard orbits. The first five satellites (SBS 1-5) were constructed on the Hughes HS-376 platform, while SBS 6 utilized the HS-393 platform. These satellites were deployed between 1980 and 1990 using Delta rockets, Space Shuttle missions, and Ariane launch vehicles from launch sites including Cape Canaveral and the Guiana Space Centre.
|- | Satellite || Launch Date (UTC) || Launch Vehicle || Launch Site || Status || Retirement || Notes |- | SBS 1 || 1980-11-15 || Delta 3914 || Canaveral LC-17A || Retired || Nov 1990 || |- | SBS 2 || 1981-09-24 || Delta 3910 || Canaveral LC-17A || Retired || Sep 1996 || |- | SBS 3 || 1982-11-11 || Space Shuttle Columbia || Kennedy LC-39A || Retired || Jun 1995 || First commercial satellite launched by Space Shuttle |- | SBS 4 || 1984-08-31 || Space Shuttle Discovery || Kennedy LC-39A || Retired || Sep 2005 || |- | SBS 5 || 1988-09-08 || Ariane 3 || Kourou ELA-2 || Retired || Mar 2000 || |- | SBS 6 || 1990-10-12 || Ariane 4 || Kourou ELA-2 || Retired || Apr 2009 ||
SBS 6 was the final satellite in active service, stationed at 74°W longitude until its deactivation in July 2007 when it was replaced by Intelsat Galaxy 17. This constellation formed the backbone of SBS's communications satellite service offerings throughout its operational tenure.