Launch Vehicle Manifesto
The launch services marketplace always has been a tough place to earn a living. These days, there is a combination of strong demand and heavy backload, high barriers to entry, consolidated supply but with new market entrants and former players threatening increased competition, as well as thin margins under renewed pressure from customers. Launch services is also where most anomalies occur.
According to Futron Corp. and the Satellite Industry Association, there were a total of 78 orbital launches in 2009, of which 24 were commercial launches (meaning at least one payload’s launch on the launch vehicle was commercially procured). The International Launch Services (ILS)-operated Proton vehicle led with seven of those commercial launches, followed by the Arianespace Ariane 5 with five (though launching nine satellites) and the Sea Launch/Land Launch-operated Zenit 3SL/SLB family with four. Overall, Russian and European launch vehicles accounted for nearly 80 percent of the total; the United States (four) and China (one) were smaller players in the commercial market.
The small U.S. presence in the commercial launch market does not reflect heavy use of the United Launch Alliance (ULA) Delta and Atlas EELV vehicles in the military/government market. When these missions are included, U.S. vehicles accounted for 30 percent of the overall global orbital launch market. Of interest in the U.S. market was the first commercial flight of Space X’s Falcon 1 vehicle, the first privately developed, liquid-fuelled commercial launch vehicle.
In addition, satellite operators continue to push for launch alternatives. The September announcement of the “Coalition for Competitive Launches” by EchoStar, Intelsat, SES and Telesat is an attempt to increase the availability of ULA vehicles in the commercial market, open the market to new entrants, notably Long March, and, not incidentally, bring down prices. The incumbents — ILS, Arianespace and Sea Launch — maintain that they have ample capacity for existing and projected commercial manifests, with commercial launches regularly in the 20-to-30-per-year range in the decade now ending and projected to go no higher.
The availability of Long March and other non-U.S. launch vehicles to U.S. operators and all customers flying satellites manufactured in the United States or with U.S. subsystems will depend on the pending overhaul by the Obama administration of the U.S. export regulatory regime, which was tightened in 1999 by the placement of communications satellites and related technology on the State Department’s International Traffic in Arms Regulations (ITAR) munitions list in response to U.S. companies’ assistance to China.
In a Dec. 21 presidential directive, President Obama directed his administration to recommend by Jan. 29 legislative and regulatory steps needed to revise the export control regime, based on the August findings of an inter-agency review on export restrictions of unclassified military and military/civilian dual-use technologies. Another decision by the administration in October shifted delegated authority for certification to Congress that any export of missile equipment or technology to China does not “measurably improve” China’s space technology from the State Department to the Commerce Department, clearly another move aimed at liberalization of the export regime and “rehabilitation” of China. The moves reflect not only the Obama administration’s philosophical differences with the Bush administration but China’s emergence as the holder of nearly $1 trillion in U.S. debt in the intervening decade. In any event, the smart money is that in another 10 years, if not sooner, China will be a full-fledged competitor in the global commercial launch services market.
Launch services loom large in the satellite sector, but some perspective is in order. The commercial space sector is an approximately $144 billion business, of which DTH providers account for nearly half of revenues and over three quarters of satellite services. The biggest non-DTH fixed satellite service operators, Intelsat and SES, are each approximately $2.5 billion revenue companies, behemoths in the satellite world but mid-cap companies in many other technology and industrial sectors. The overall launch services sector itself accounts for about 3 percent of that $144 billion in global revenues. Increased supply may benefit operators in the short term, but it risks creating a relatively small pie carved into many small pieces. One answer may be sub-segmentation into heavy-lift, high-cost launch services, for which supply is probably adequate, and small-payload, low-cost alternatives, for which increased supply might create new demand.
Owen D. Kurtin is a founder and principal of private investment firm The Vinland Group LLC and a practising attorney in New York City. He may be reached by e-mail at email@example.com.