Analysis for a Satellite Communications System

Abstract

The paper describes an investment analysis for a satellite communications system for the United States. The satellite communications business is a complex one and possesses several key variables which have profound implications on the future profitability of a participant. Uncertainty in these key variables adds yet another dimension of complexity to the characteristics of this business. The model used in the investment analysis is a probabilistic simulation model which attempts to capture the interactions and relationships existing among all the variables. The size and mix of the potential market, competition from terrestrial as well as satellite carriers, communication satellite-launch vehicle combinations, and specific financial arrangements were some of the key variables that were explicitly recognized and accounted for in the model. The paper describes the course of an actual study from preliminary evaluation to final management decision. It develops the model and management understanding of the business over time. It shows the impact of the management decisions on the model and the impact of model results on management perceptions and decisions. It demonstrates how management and the management scientist, working together, can speed up the decision process as well as lead to a clarification of the underlying issues of the business.