The Domino Effect

By | October 1, 2011 | Editor's Note

The satellite industry has recently been flooded with strong demand for capacity to support applications for a cross-section of vertical markets, creating a string of new and potentially lucrative business opportunities for those involved. The news sometimes makes it seem as though the satellite sector is in its own bubble, protected from global economic doom and gloom.

The positive domino effect means more satellites, more components, more technology, more launches and a healthier business environment. However, incidents during the last couple of weeks show that, while the industry may be protected by a diverse set of customers, it is still fraught with risk. Events in Russia and China show that years of hard work can be lost very quickly if a satellite fails to reach its intended orbit. Thus, the domino effect can work two ways.

The loss of the Express AM-4 satellite, which has now been confirmed, could set Russia’s space industry back a few years. Equally, the loss of the ShiJian 11-04 satellite for China is also bad news and could set China’s space plans back.

With China looking to branch out business internationally for its Long March vehicle, a launch failure was the last thing it needed to bolster confidence. Russia, which desperately requires capacity to bring new digital and broadband connections across the country, will undoubtedly have to revisit plans in the wake of its Proton-M setback. While an insured satellite offers some shred of comfort, Russia may have lost some of its momentum in generating new satellite communications business opportunities. Considering the aggressive capital expenditure plans of Russian Satellite Communications Company (RSCC) and its hope to bring the benefits of satellite communications across Russia, this setback will hopefully be temporary. RSCC had planned to double the amount of capacity it has today by 2015 in order to meet the requirements of its satellite customers. The loss of any satellite makes a deep impact on those plans.

Launch failures, whether they are in Russia or China, or anywhere else, also create nervousness within the industry. Investigations have to be initiated and launch manifests, which are usually full at the best of times, have to be adjusted and revised. Beyond the launch phase of these programs, satellites take years to construct, which creates huge implications for the companies involved and the people that helped build them in instances of a loss. It takes just as much time to start over and recover that momentum. This is one of the unique vagaries in the satellite industry and while the domino effect often works in its favor, there are times when the exact opposite is true.

Despite the stress and intense competition, there is, fortunately, a great solidarity in the industry, and while events in China and Russia showcase the risks involved in putting up new satellites, solidarity can help reverse the domino effect once again.

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