Industry Leaders Predict Comeback
PARIS–The satellite industry is poised for a modest comeback during the next few years, according to executives who gathered here recently for the 10th Satel Conseil symposium.
The symposium, hosted by French satellite industry advisory groups Satel Conseil and Prospace, found increased optimism among top executives from a full spectrum of operators, spacecraft manufacturers, launch-vehicle providers and end users, due to an overall boost in year-end 2003 financial performance. However, no one was willing to predict with precision the resurgence of satellite services.
The three-day conference took place against the backdrop of the new Chinasat 9 direct broadcast satellite order and PanAmSat’s [SPOT] first order of a European-built satellite, Galaxy 17. In addition to PanAmSat’s order for a satellite from France-based Alcatel Space, the Proton rocket marketed by International Launch Services recently carried the Intelsat 10-02 satellite into its intended orbit.
Also showing that the industry is preparing for the future is the June 18 announcement that the space activities at Alcatel Space, Telespazio and Alenia would be consolidated into two separate entities.
“Things will get more exciting as we head into the future,” said Dave Ryan, president of Boeing Satellite Systems International, during the kickoff session on satellite manufacturing. Echoing the theme, Lockheed Martin Commercial Space Systems President Ted Gavrilis said that all of the spacecraft builders have taken “tough measures” to reduce costs in pursuit of future profitability. Gavrilis said downsizing and a realistic approach to projections of new spacecraft orders would enable the major manufacturers to survive, while the industry searches for new satellite service applications. Suggesting along with Ryan that “broadband and high-definition television will keep us going,” Gavrilis said that the “next real killer application is nowhere in sight.”
EADS Astrium CEO Antoine Bouvier sounded a balanced note, amending his earlier projections for new spacecraft orders in 2004 to “less than 12.” But, he said, the company expects total annual orders to approach 20 spacecraft “within a short period as the replacement market” evolves. Blaise Jaeger, Alcatel Space’s vice president of sales, said his firm was “working to reduce the cost of satellite solutions with new terminal and other technologies.”
Greg Harms, Space Systems/Loral vice president for Europe, said his manufacturing company has become more adept at following the lead of operator requirements in specifying new spacecraft. “The most successful tailoring is when we collaborate closely with the customer to provide a business plan-specific resource,” he said.
The maturing market for small satellites was addressed by Orbital Communications International Its president, Dr. Ali Atia, predicted demand for smaller spacecraft would continue to increase. His forecast is that it would grow to as much as 20 percent of the total commercial geosynchronous market during the next several years. With a current average of two small satellite orders a year, the small-satellite market represents about 10 percent of the total number of annual orders. Other manufacturers were quick to note that they either offer a small-satellite option or that they are looking at ways to address this demand.
Launch Services Over-capacity
The struggle for market share also was evident among the major providers of launch-vehicle services. Without naming names, ILS President Mark Albrecht sought to winnow the field by declaring that launch- vehicle providers “who have government support will survive; enterprises that are based on commercial business alone will not.” Albrecht predicted about 20 launches per year in a “mostly flat” environment, noting that other factors, such as preferred insurance rates for successful vehicles, were helping force eventual consolidation or market withdrawal.
Albrecht noted that during the past few years, ILS has outstripped its competitors in total launch orders and the number of completed launches. The organization currently can be considered the top global launch- services operator.
Philippe Berterottiere, Arianespace’s marketing and sales senior vice president, speaking on behalf of his own firm and its backup launch services partner Boeing Launch Services, was slightly more aggressive with his market forecast. He suggested the demand for commercial launch services would approach as many as 25 missions per year. Berterottiere paid homage to an “institutional market, meaning those launches reserved for Ariane,” as a key lever for his company’s continued viability. He also said new services and a robust replacement market would continue to drive launch-services demand.
Isao Yamazaki, executive chief engineer of Mitsubishi Heavy Industries and the Japanese H-IIA rocket program, was joined by G. Narayanan of India’s ISRO to provide updates on their respective national launch-vehicle activities. Yamazaki said the Japanese booster, a victim of a launch failure in November 2003, was expected to return to flight sometime in the first quarter of next year.
“The adoption of satellite radio in the United States has proceeded at approximately four times the rate of acceptance of similar consumer electronic services,” said Rob Briskman, Sirius Satellite Radio’s [SIRI] co-founder and top technical executive. The fast-paced growth offers a ray of hope that new satellite-delivered consumer services could help spark an industry renaissance. Briskman said his company, which competes nationally with XM Satellite Radio [XMSR], is in the process of applying for regulatory approval to extend its operations into Canada and Mexico.
WorldSpace COO Andy Ras-Work said the success of Sirius and XM in the United States had “put some wind” behind his company’s efforts to provide satellite-delivered digital audio radio services to underserved regions of the globe. People today, Ras-Work said, want “more flexibility, more mobility and the ability to create a virtual environment” from their space-based and terrestrial telecom services. Ras-Work described India, China, the Middle East and parts of Europe as “low-hanging fruit” for satellite radio providers. He also said WorldSpace was considering the launch of its third satellite to serve European markets.
Satlynx President and CEO Paul Heinerscheid offered an overview of evolving broadband services, suggesting the long-projected uptick in adoption of satellite-delivered mobile services and Internet access was inevitable.
Key Factors For The Future
Francois Auque, CEO of EADS Space, helped Prospace’s Pierre Bescond close the symposium by identifying “three key factors of the future.” First, Auque opined, the ongoing trend of government and military end users of satellite services means that these customers will continue to “procure services instead of systems. This allows us to build satellite systems to be shared by multiple, compatible users.” This trend, Auque said, will spread, “creating more demand for satellites and associated ground-segment infrastructure.”
Next, Auque said, it is clear that operators will only enter into investments that are “low-risk.” In the case of broadband access, for instance, Auque said the satellite industry “was losing a lot of time arguing about low-cost terminals or technical innovations on the spacecraft.” The solution, he suggested, was to “drive public money to fund programs that will propel the expansion of broadband.”
Lastly, Auque expressed “concern about what is happening with operators being taken over by financial funds with only one goal – the short-term generation of money.” A “take- the-money-and-run approach means we will have extremely weaker operators, accelerated consolidation, and only the strong will survive. I want to put this to the attention of regulators everywhere,” he said.
Closing the conference, Alcatel Space Sales and Marketing Executive Vice President Pierre de Bayser, warned attendees that “satellite solutions that come too late to the market are doomed to fail, as shown by Globalstar and Iridium. We need to be on time with new services and the solutions we propose must be friendly to existing or similar ground-based offerings.”
De Bayser said the ideas of technicians and engineers must be “challenged by business and market experts.” He cited frequency allocation as another key issue facing the satellite industry.
“The parameters for fourth-generation terrestrial telephony are being established,” De Bayser said. “We must be a part of this discussion or the space business is finished.”