By Roger Rusch

Although there is great concern about weak demand within the launch services industry, there are brighter prospects ahead. In a few years, a new cycle of satellite replacement activity will nearly restore the old launch rate.

In the mean time, we need to examine launch requirements conscientiously. In 1999, the National Aeronautics and Space Administration (NASA) hired my firm, TelAstra, to evaluate launch demand. NASA wanted to know if the market wizards had been correct, based on historical records. The agency asked for our estimates of market demand. It also wanted to know if forecasts that projected a surge in demand for launches were realistic. Finally, NASA wanted to know if reducing launch prices would increase demand.

We drew the following conclusions.

Past launch demand forecasts were not reliable. When old predictions were compared to actual launches, most of the forecasts were too high. Some projections provided no useful information because the correlation varied wildly from year to year.

It is difficult to predict launch demand. Many proposed new satellite systems never get off the ground. Problems with satellites and launchers can delay missions.

A review of launch capacity that existed and was under development in 1999 led TelAstra to create three scenarios: 1) rosy, 2) nominal, and 3) conservative. Highly unlikely proposed projects were in the rosy category. In all of the scenarios, there was ample launch capacity to handle all of the satellites that were projected for launch in the next 20 years. A surge in demand seemed highly unlikely.

Our findings showed that lower launch prices were not a strong motivation for launch orders. In fact, launch prices already had dropped 20 percent to 30 percent in the prior decade and the number of launches was continuing to fall. There was no discernible price elasticity. If prices are cut, total revenue will drop. Increased demand will not replace the revenue lost from price cuts.

A major reason why launch forecasts were too optimistic was that proposals to build non-geostationary satellite systems have almost disappeared. In addition, the estimated need for geosta- tionary satellites has not matched expectations.

Often launch demand estimates are collected from new system proponents and the business development managers who project confidence and optimism. Identifying authentic new endeavors requires good judgment.

The launch industry is undergoing restructuring in subtle ways that may not be obvious. While the number of launches has been dropping steadily since the early 1980s, the total mass lofted into orbit has been increasing.

There are several trends that have been reshaping the launch business over the past few decades:

• Satellites are growing larger and more powerful to net economies of scale.
• More sophisticated antennas need more volume in the launch fairing.
• Satellite lifetime has been extended by the use of improved technology.
• Multiple satellite manifests reduce the number of vehicles.

In the future, the launch industry must be alert to shifts in the satellite business. Clearly, larger launch vehicles are appropriate. At the same time, we must be cautious about innovations that do not rest on sound business principles. Next time around, we must restrain our enthusiasm for concepts that are too good to be true.

Roger Rusch is the president of TelAstra Inc. Contact him at 310-373-1925 or e-mail at [email protected].