Case Study of PanAmSat: Recovering from a Satellite Failure

A Galaxy 4 satellite operated by PanAmSat, a subsidiary of Hughes Electronics, tilted away from the earth at 6:13 P.M. on May 19, 1998 and began to spin because of a computer failure and the subsequent failure of a backup computer. This unexpected problem disabled 80% to 90% of the pager services in the U.S. along with a number of credit card authorization networks, television transmissions, and other networked services. PanAmSat’s effects to realign the satellite failed, but it was able to restore service within a day by rerouting the traffic the satellite normally handled. Of the 17 satellites PanAmSat had in orbit at the time, one was a spare. The recovery plan included rerouting signals for paging, retail-store services, and other services though its Galaxy 3R satellite and rerouting television signals through its Galaxy 4 had occupied since its launch in 1993. Computer failure had transformed the Galaxy 4 from a $200 million link in the U.S. business infrastructure into a 3700-pound place of space junk with a 100-foot span of solar panels. The satellite was insured for $ 116 million, and the company did not expect to suffer a major financial loss as a result.

The immediate consequences of the satellite failure demonstrated the widespread dependence on communications infrastructure. Emergency communication to police departments and physicians was disrupted for hours. Customers at 5,400 Chevron stations could no longer pay by credit card at the pump because automated credit-card authorization requests were transmitted from antennas atop gas stations through the Galaxy 4 satellite. Customers in Wal-Mart stores had similar problems. At home, the non-response of family members and friends when paged repeatedly led to confusion and annoyance. The cost of satellite time suddenly jumped. It had ranged from $100 to $500 for a 15-minute block depending on the satellite’s location; after the failure the prices jumped to $250 to $600. Annual prices of $900,000 to $ 2.500,000 seemed to be increasing by up to 50%. Ten months later, a failure on GE Americom’s satellite GE-3 disrupted a number of key networks including PBS broadcasting, CNN, and Turner Classic Movies.

Although satellites typically have been extremely reliable, with a failure rate of less than 1%, the widespread impact of this event was a reminder of vulnerability to infrastructure-related weak links that affect business and society. It is possible to imagine ways to reduce risks through investment in redundant capacity, but the costs are prohibitive in many situations. For example, CBS television shifted to a backup satellite when the Galaxy 4 could not carry its planned broadcasts. CBS could afford the backup, but many paging businesses do not have the resources to keep a satellite idling in reserve.

Questions For Discussion:

  1. Implement a principle based analysis method that can be used as a starting point for identifying and organizing issues?

Credit: Strategic Management-CU

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