Captive Markets: Can NewSpace Outmaneuver Traditional Space?

“A million-dollar night view in Hong Kong.” Photo by Yuya Sekiguchi

Historically, traditional space has not been able to such as India and China due to various restrictions that fall within the ambit of several political, economic, social, and technological barriers. Today, some of these markets have large unserved and underserved market potential with a growing middle class which can afford several satellite-based services. In places like India, the government is also now exploiting space as a foreign policy instrument in both providing services (e.g. SAARC satellite) or collaborating with international partners in the development of new technologies (e.g cooperation with Israel to develop atomic clocks and electric propulsion). In 2014, China also announced its welcoming of the private sector participation in developing space technology and space-based services.

One of the fundamental questions to ask is whether the traditional space players kept up with these new developments. Most traditional space players even today view India as a niche market for themselves and a difficult one to break into. They believe the only way for making a confident investment decision into simply even crafting a strategy for the market is needing to work the top-down ladder. This is perhaps the same thought process they employ to break into their traditional markets in which they use government as their anchor. However, they fail to realize that this one-size-fits-all approach would not work in all geographies. For instance, markets such as India do not have large corporations in the space industry considering its Western counterparts. However, it does have a string of almost 500 Small and Medium-Sized Enterprise (SME) suppliers involved in its space value chain. Therefore, these markets present an opportunity that seemingly appears today as a pyramid whose foundation is more or less present but lacks an inherent means of building an industry-led top.

Unfortunately, these markets are at an arm’s length to most traditional players, which prefer to invest and wait on top-down engagement models. They usually have no patience for a bottom-up approach of working with the players at the foundation of the pyramid to formulate novel strategies to capture value in these niche markets. Is this an opportunity that NewSpace can use to outmaneuver traditional space players? The answer seems to be yes, given the early signs of new models of engagement that are forming today.

A litmus test to these claims is some of the interesting developments that have occurred recently. Berlin Space Technologies, a small satellite manufacturer based in Germany, revealed it is working with an Indian partner which is investing in developing production facilities in India for smallsats, with the intent to use India’s substantially low cost and abundant manpower base alongside the reliable launches by the Indian Space Research Organization (ISRO) to target production and eventual launch of satellites for constellation missions from India. Here is a new industry engagement model. An established European company, which doesn’t want to make a large independent investment and lacks a cultural understanding in doing business in India, but has still found a local partner which can make up for these shortcomings.

Similarly, the commercial aviation regulator in India recently announced an approval to allow In-Flight Connectivity (IFC) services onboard passenger aircrafts. Aligning with this development, Bharti — an Indian business house which was one of the early lead investors in OneWeb — announced it would enter the Seamless Alliance, a global partnership that includes the likes of OneWeb, Airbus, Delta and Sprint. This may be the first time that a large Indian business house (Bharti Airtel has 370 million subscribers) is intending to play ball in an arena that involves working with international partners to leverage their assets and align their combined value proposition for the Business-to-Consumer (B2C) space services market. Incidentally, Viasat has been operating an Offshore Development Center (ODC) in Chennai and recently Gogo too has made a similar move of using India for its ODC. There may be room for a lot more of such new interesting developments over the next few years with the possible formalization of a space command in the country, which can open up several new defense-focused, space-based services.

These developments indicate that there are innovative ways to be a part of what is often considered a captive market, but which may not be under the lens of traditional space executive decision-making. Therefore, NewSpace has the potential to not only innovate in the way it wants to deliver a product or a service but also innovating the way it tries to lay a foundation to entering new geographies and ecosystems. It will indeed be an interesting cat-and-mouse game over the next few years based on the approaches NewSpace and traditional players choose in either leveraging or developing captive markets.

Photo by Yuya Sekiguchi

Narayan Prasad is co-founder at satsearch.co which is building the “data layer” for the space industry using proprietary Electronic Datasheet (EDS) technology, ensuring that we can collectively achieve our daring goals in outer space. Curator and Community builder of Space 2.0 folks in India with NewSpace India as a platform.