Smaller satellites could be in a position to take on a larger role in the Fixed Satellite Services (FSS) market, as evidenced by Orbital Sciences Corp. sitting among the leaders for satellite manufacturing contracts won in 2005, a spot usually reserved for companies offering larger satellites and not the small satellite niche Orbital has carved for itself.

And while industry observers are not ready to commit to saying that smaller satellites are the future of the FSS industry, they have said this shift toward smaller satellites will get a closer look in the near term. If this trend gains significant momentum, this could have a long-term effect on the manufacturers of larger satellites already competing to maintain market share in a tight playing field for commercial satellite orders.

“There has been a shift toward the smaller,” John Edwards, space systems analyst for Forecast International Inc., told Satellite News. “It is interesting. You went from the little LEOs (low earth orbit satellites), and that kind of went bust. Then you got the massive communications satellites like the Anik F2 and IPStar, and now we are coming right back down again.”

Small satellites could play a significant role in the future of the FSS market, particularly when it comes to finding the right amount of capacity to fill a orbital slot.

“When you buy a big satellite for a small slot, so to speak, you end up with surplus capacity and it really does not do you any good and it depresses the market,” Max Engel, analyst with Frost & Sullivan‘s space and communications group, said. “I think this [shift] reflects an increasing view on the part of operators that ‘build it and they will come’ doesn’t work, and that you need to [expand capacity] in a measured fashion,” he added. “Per transponder — it is cheaper to build a bigger satellite, but does not help you if you can’t market it.”

Orbital Sciences did not respond to Satellite News‘ interview queries.

Panamsat Leading The Way

Among the large FSS operators, Panamsat has taken a lead position in pursuing a strategy of purchasing smaller satellites.

In an interview with Satellite News earlier this year, Panamsat CEO Joseph Wright said his company “will not put up new satellites simply to open up new markets and we will design our satellites for market demand, reliability and simplicity. Our small satellites [carry] 24 36-megahertz transponders compared to the [satellites with 48 transponders] we used to put up. We have a couple of [satellites with 72 transponders] in the fleet, but I doubt if we will put any more of those up. If we find a market has greater demand than our capacity, we [will] just co-locate another satellite at the same orbital slot. This smaller, simpler satellite strategy not only improves our return on investment but also reduces risk.” (SN, April 25).

Panamsat has remained committed to its philosophy on small satellites, accounting for two of Orbital’s four contract wins this year – one for itself and one through its joint venture with JSAT Corp.

“Panamsat certainly is one of the early adopters of that small satellite approach,” said Christopher Baugh, president of Northern Sky Research, “It is just a completely different mind set.”

“We don’t understand why other operators aren’t going with smaller satellites,” Engel said.

Regional, Application Considerations

While observers see the shift occurring toward the small satellites, analysts and manufacturers acknowledged there will be a need for larger satellites for certain applications, namely direct-to-home satellite television services.

“Typically, there has been one or two spacecraft per year that has historically been awarded for small-type spacecraft and that is something that will continue. There may be an uptick in it, but we don’t think it is something substantial,” Space Systems/Loral (SS/L) President Patrick DeWitt told Satellite News.

DeWitt noted that SS/L is seeing the capacity and power requirements in contracts it is winning continuing to inch up, but in general, “there will always be a variety of satellites on the market. Some very large ones, most in the 10- to 12-kilowatt range, and you will always have some small ones in the 4- to 5-kilowatt range.”

The increase in the number of small satellite orders does not mean the end of the larger communications satellites, Baugh concurred. “I think what’s happened is there is not a definite trend one way or the other just yet,” he said. “It’s not such that the market is going to whole-heartedly adopt small satellites [in place of] big satellites, because some are really divided on the effect of high-definition television and broadband in the future and what that is going to mean for the satellite industry. I think the operators don’t want to be caught with a problem of not having enough capacity in an orbital slot because they chose … a small satellite.”

Edwards noted that EADS Astrium and Alcatel also believe that there will be a market for the larger satellites, as they are continuing work on the development of the Alpha bus. Additionally, companies “like DirecTV and Echostar would probably still go with the larger satellite because they are trying to cover the entire continental United States with as few satellites as possible.” Edwards also said it would be “unlikely” that a satellite operator would replace an existing larger satellite with a small satellite.

But while there may be a need for larger satellites in the mix, it appears the small satellite platform is going to be more competitive when it comes to gaining contracts. “This is the last year for Orbital [to fly] under the radar,” Edwards said, noting that if some of the larger satellite manufacturers are going to remain competitive going forward, “they are going to have to come up with a more competitive offering.”

–Gregory Twachtman

(John Edwards, Forecast International, 203/426-0800; Max Engel, Frost & Sullivan, 210/247-2404; Dee Valleras, Lockheed Martin, 215/497-4185; Christopher Baugh, Northern Sky Research, 407/352-5295; John McCarthy, Space Systems/Loral, 212/338-5345)