Flawed Metrics: Satellite Cost per Transponder and Cost per Day

In engineering design, metrics play a critical role in guiding design choices. It is therefore of prime importance that the metrics used to guide decision-making be the "right" metrics. This paper makes the case that two metrics used to guide communications satellites design, namely cost per operational day, and cost per transponder, are flawed under certain conditions in the sense that they result in design choices-increasingly longer lived satellites and larger payloads-that do not necessarily maximize the system's value. This paper advocates a value-centric mindset in system design, and proposes shifting the emphasis from cost to value analyses to guide design choices that maximize a system's value. Counter-examples are provided that challenge the traditional wisdom that longer lived or bigger satellites, being more cost effective on a per-day or per-transponder basis, are also more profitable or valuable. It is shown that while these metrics are useful guides for design choices in a supply-constrained market (in which a cost-centric mindset can prevail), they are flawed metrics on which to base decisions if the market is competitive, and in which the revenues from the system are not guaranteed to remain stable over time, through the impact of technology obsolescence, or overcapacity resulting in downward pressure on transponder lease prices. Finally, the case is made that the current market conditions require a value-centric mindset (as opposed to a cost-centric mindset) that views a spacecraft as a value-delivery artifact, and integrates considerations about the system's cost, its technical environment, and the market it is serving.