Global Satellite Industry Climbs Back To Health
HONOLULU–As telecom, broadcast, consumer and enterprise markets begin to recover from their recent business lows, the world’s global satellite and expendable launch vehicle (ELV) industries are looking forward to improved demand for their products and services.
“We saw slightly increased and improved business conditions in 2003 over 2002,” said Rob Peckham, international sales director at Boeing Launch Services. “We see improving regional prospects for video [services], government applications and [consumer-driven] applications [including HDTV] as new drivers for growth in 2004.”
Peckham made his comments here Jan. 12 during a panel on ELV services during the Pacific Telecommunications Council (PTC) conference. He said that in addition to the commercial environment improving, ELV companies have worked hard to secure affordable insurance capacity and pricing; on-time satellite deliveries from satellite manufacturers; and improved relationships with U.S. State Department officials, resulting in smoother export licensing control procedures.
Echoing Peckham’s cautious optimism was Clayton Mowry, president of Arianespace. Mowry told the 120 session attendees that Arianespace had climbed back into the black with revenues topping 550 million euros (US$683 million). His company currently has 33 launches in its backlog, and three additional launches slated with Starsem.
Arianespace has placed an order for 30 more Ariane 5s with prime manufacturer EADS. He announced that the troubled heavy-lifting Ariane 5 ECA rocket would return to flight in late spring or early summer of this year.
Mowry agreed with Boeing’s Peckham that high-definition TV, digital TV, consumer applications and regional satellite systems continue to drive the growth in the commercial satellite business. He predicted that satellite operators would continue to consolidate, but at a slower pace than during the past two years.
Tom Carroll, director of marketing sales for International Launch Services (ILS), told attendees that the key buying factors in securing ELV services are: launch vehicle reliability; launch vehicle performance; manifest schedule assurance; and customer service.
Carroll said that in 2004, ILS projects that the number of launch service contracts awarded will be similar to 2003. By the end of 2004 there should be between 15 to 20 new contracts for launch services worldwide. He also said that ILS will fly out the Atlas 2AS and Atlas 3 launch vehicles for commercial launches this year and will move to the Atlas 5 and the Proton/Breeze M as its core commercial launch vehicles. He added that ILS has decided that no Proton rockets with Block DM upper stages would be used for commercial launches.
Finally, Isao Yamazaki, executive chief engineer for Mitsubishi Heavy Industries, said that the Japanese government has decided to privatize the troubled H2A launch vehicle program by 2005. He said the rocket would return to flight later this year, following last November’s fiery launch failure on Nov. 23.
The time has come for Asia-Pacific to fully open its doors to the international satellite business, according to many PTC participants. Even though global satellite and network operators have made significant contributions within the Asian marketplace for regional connectivity, they continue to face regulatory obstacles that hinder business growth for multinationals.
Global satellite operators who provide versatile connections to, from and within the Asia-Pacific region remain frustrated that their supply of regional bandwidth continues to be underutilized. The reason? Multiple levels of political bureaucracy favoring domestic service providers instead of their international counterparts.
“The 1990s were a fantastic time for deregulation [within the Asian market] stemming from increased competition and WTO [World Trade Organization] directives,” said Bruce Olcott, attorney with Washington, DC-based Squire, Sanders and Dempsey. “Since then, we have witnessed something of a business rollback,” he told a PTC regulatory panel.
Because of this rollback, satellite executives are recommending transparent guidelines be adopted, followed and enforced throughout the region. The best way to ensure compliance with laws, regulations and satellite licensing conditions, according to Olcott, is to adopt objective guidelines for companies to follow. “When you have non-uniform regulatory provisions within some countries and not others, this increases prices, therefore not all customers can afford to take advantage of satellite services,” Olcott added. “Laws should be objective, transparent and highly predictable.”
One of the main reasons for this push toward further regulatory reform rests in the fact that Asia-Pacific is one of the leading regions for satellite services. Phil Spector, a partner at the New York City-based law firm Paul, Weiss, Rifkind, Wharton and Garrison highlighted Hong Kong, Japan and Korea as locations for increased satellite business growth. “Hong Kong is a leader in high-speed Internet usage, Korea has a high per-capita broadband usage rate and Japan is a large DTH [direct-to-home] television market.”
In addition, several new satellites are slated for launch within the next two years, which will further increase connectivity, regional capacity and services. Both the Apstar 5 and iPSTAR 1 satellites are slated for launch this year and MeaSat 3 is slated to reach orbit in 2005. Given this increase, some in the satellite industry are confident that demand will rebound for new and existing satellite services.
With an increase on the horizon, Spector said that governments should continue to promote accessibility and affordability of satellite services. “Likewise, the satellite industry must exploit markets for DTH and broadband to stimulate demand for new satellites and equipment,” Spector said. “Niche programming that caters to Asia’s diverse populace will be key.”
A bright spot for such niche programming within Asia revolves around sporting events. This is nothing new for satellite service providers, but an area that, according to some industry executives, needs to be further exploited. Success with the broadcast of the World Cup event, for example, has some satellite service providers aggressively pursuing business generated by the 2008 Summer Olympics in China. “Companies are already trying to close deals for the Olympics,” said Ted Ringrose, solicitor with Squire, Sanders and Dempsey based out of its Hong Kong office. “There are opportunities but it must be a well-positioned service agreement.”
As these business issues become resolved, one thing remains certain: satellite products and services within Asia-Pacific will continue to exist, but it will be up to the various countries within the region to promote, grow and include international players while removing regulatory obstacles and reforming laws that currently are producing an adverse global business climate. Regardless, the near term is offering substantial business opportunities for satellite providers who want to conduct business in Asia and even though this region is not problem-free, the satellite industry should continue to include it in its various business plans.
Cautious optimism and frustration top the list of emotions expressed by various satellite industry executives attending PTC as they strategize business initiatives for 2004 and beyond. These executives where quick to point out what global policies need to change, where further consolidation needs to materialize and who will be left standing once the dust settles.
One major change executives want to see implemented revolves around the current U.S. export control issue. Commercial space executives continue to wait for the administration to take significant action on the business-stifling U.S. export policy.
“It has gone from necessary to completely ridiculous,” said Peter Jackson, CEO of Asia Satellite Telecommunications. “We need our people present during the manufacturing process and if [U.S. export policy] stops this then we do not feel comfortable signing a contract with a U.S. manufacturer.”
Dumrong Kasemset, executive chairman of Shin Satellite, agreed and added that if everything within the manufacturing process is equal, contracts then would go to non-U.S. companies because of the export control issue. “We have, however, been able to successfully work with U.S. manufacturers, such as Space Systems/Loral, but this issue does pose some challenges.”
Patrick DeWitt, president and chief operating officer for Space Systems/ Loral, said the process is improving. “We are hopeful that guidelines of what needs to be protected will continue and that the administration will be more mindful of the hindrance export control causes. Just because something is in orbit does not automatically make it a threat.”
Dean Olmstead, president and CEO of SES Americom, a unit of Luxembourg-based SES Global [Luxembourg: SESG], said that export control is a pain for his business. “Ultimately though, we will buy the best satellite out there. Reliability and in-orbit assurance remains the most important factors to us.”
But export control issues were not the only hot buttons pushed by panelists. Most recognize that further consolidation will materialize within the next year and some even welcome it. “Consolidation makes good business sense, particularly in Asia, but it will take time because of the non-homogenous business environment of the region,” said Victor Kwok, vice president of APT Satellite Holdings.
Jackson added that there should be some more consolidation. “We might have seen more already, but this industry deals with some irrational regional issues [government policies, non-transparent regulations] that stifle business initiatives and add to the already inherent business irrationalities.”
–Dave Bross and Nick Mitsis