Common Ground: A Strangled Industry
By Clayton Mowry
So much has been written in this magazine and other trade publications regarding the impact of U.S. export control laws on the satellite industry that you’d think there isn’t anything else to say. Let me take a moment to try and tell you a few things you probably didn’t know.
I’ll begin with a startling new statistic. Between 1995 and 1999 U.S. satellite manufacturers were awarded contracts to build 75 percent of the world’s commercial geostationary satellites. Yet in the first seven months of 2000, U.S. manufacturers share of the market for satellite contracts dropped to just 38 percent.
Now add to those market share figures the fact that worldwide revenue from satellite manufacturing dropped from $11.8 billion in 1998 to under $10 billion in 1999, and you begin to get a picture of the problems encountered by U.S. firms in the hardware end of our business.
Export control laws that restrict the flow of technical data and exchanges between Western satellite manufacturers, operators, and launch services providers are clearly hurting the industry.
There is no denying that stricter export controls encountered under the State Department licensing regime have had a negative impact on the business. And up until now it has been difficult to quantify the effect on U.S. companies. While it may be impossible to say exactly how much of the decline in market share is attributable to stricter controls, there is clearly a perception among satellite buyers that it is more difficult to buy a satellite from a U.S. supplier than from a European one.
European suppliers now enjoy one major advantage over U.S. manufacturers because they control satellite technology as they do other critical terrestrial telecommunications technology–as a commercial product and not as an advanced weapon system. The controls are still there, yet they realize the need for their companies to compete in a global telecommunications market where technological innovation and speed of new product development have outpaced the government’s ability to dictate supply.
It is important to note that while the shift in U.S. export control authority appears to be benefiting European satellite manufacturers, those firms, their governments, and European launch services companies have opposed the stricter controls from the outset of the debate. Why? Because European and U.S. satellite companies have come to rely on one another as suppliers of critical parts, components and subsystems. And, because European launch providers count U.S. satellite manufacturers and operators as valued customers.
Tighter controls hamper cooperation and competition across the transatlantic market. As European firms have found it more difficult to buy parts and subsystems from U.S. suppliers, they are increasingly looking for alternative vendors within the European Union. This trend will hurt smaller U.S. component manufacturers, for whom export sales represent a major part of their business.
At the time Congress debated shifting satellite export licensing back to the State Department, it was suggested that the move would ultimately help U.S. launch companies to regain their lost market share. Now Members of Congress including Rep. Dave Weldon (R-FL), who represents the district that includes Cape Canaveral Air Station, realize that just the opposite is true. Even a U.S.-built satellite launched on a U.S. rocket for a U.S. customer requires an export license from the State Department. Why? Because over 70 percent of the insurance underwriting that make such launches possible comes from European companies.
Fortunately, the State Department issued new regulations in July that will establish a system for expedited licensing of parts and components exported to countries that are members of the North Atlantic Treaty Organization (NATO) and other major non-NATO allies such as Japan and Australia. The new regulations came 14 months after Congress passed a law directing the State Department to improve the satellite export control system for NATO and major non-NATO allies. The new system will allow qualified European and other firms to receive “bulk” licenses, and their U.S. counterparts to provide technical data after, and not prior to, a sale, thereby speeding delivery and response times for RFPs.
The new regulations are a welcome sign for U.S. industry and the result of hard work by satellite industry export control officers, State Department, and Defense Department regulators that crafted the regime. The Satellite Industry Association and other industry groups have roundly praised the new system as a major step towards allowing legitimate sales to take place in a timely fashion.
The only real solution to our woes, however, is to return export licensing authority for satellites to the Commerce Department under a system that also provides national security related agencies in the U.S. government the ability to control those critical technologies that present a threat to national security.
You can be assured the Satellite Industry Association will work in the next Congress to control satellite technologies that do not present a national security threat as commercial telecommunications products. The declining market share of U.S. satellite manufacturers is sobering evidence that the current system makes it impossible for U.S. companies to compete in a global market.
Clayton Mowry is the executive director of the Satellite Industry Association. His email is firstname.lastname@example.org.