labels: futron corporation, interviews, profiles, space
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18 October 2002

Chennai: India's proposal to launch its Insat 3D satellite using its own Geo-synchronous Satellite Launch Vehicle (GSLV) and to place satellites for a fee using its Polar Satellite Launch Vehicle (PSLV) has made global majors and industry watchers sit up and take notice.

A US-based company, Futron Corporation, recently did a survey of the global satellite industry - satellite manufacturers, launchers, ground service providers and ground equipment manufacturers - for Satellite Industry Association, USA, representing the US commercial satellite industry.

According to Futron director Philip McAlister, India has the potential to capture a moderate market-share in the satellite launch segment with its GSLV and PSLV. Apart from placing India's own satellites in the orbit, PSLV till now has successfully launched four satellites for a fee. PSLV can place satellites on polar as well as geo-synchronous orbits. India still uses France's space vehicle Ariane for its Insat satellites.

Says McAlister: ''Both the satellite manufacturing market and the launch market are dominated by US and European-based companies. But India has earned a lot of respect globally for its commitment and success in the launch market. Both the GSLV and the PSLV have very impressive track-records.''

The $11-million Futron specialises in market and industry analysis, safety and risk management, remote sensing and communications, and information management.

According to the survey, the year 2001 saw world satellite industry revenues going up to $85.1 billion from the $82 billion logged the previous year. Last year, the total share of satellite services was $46.4 billion, followed by ground equipment manufacturing ($19.6 billion), satellite manufacturing ($14.1 billion) and launch industry ($5 billion).

''The only two sectors that saw any growth in 2001 were the direct-to-home television sector (satellite services) and the ground equipment sector. All other sectors, including the transponder leasing sector which had shown historical growth in the past, actually declined in comparison with 2000,'' says McAlister.

For 2002, the survey expects the global satellite industry to log revenues of $101 billion. Last year America's satellite launch and manufacturing sector witnessed dipping revenues owing to increasing competition. The US satellite launch industry generated revenues of $1.7 billion during 2001 - down from $4.1 billion in 2000. Similarly, the satellite manufacturing sector saw revenues going down from $8.9 billion in 2000 to $5.5 billion in 2001.

The majors in the satellite launch industry are the US, Europe, Russia, Ukraine and China. India and Japan have now joined the fray. The following are the major launch vehicles in the world now: Delta, Pegasus, Shuttle, Atlas, Ariane, Soyuz, Proton, Titan and the new Long March that belongs to China.

Some of the satellite manufacturers are Boeing Satellite Systems, Orbital Sciences Corporation, Lockheed Martin Corporation, TRW, Space Systems / Loral and Israel Aircraft Industries. McAlister says commercial satellite and launch vehicle manufacturers will be under financial stress as the number of satellite launches has come down.

McAlister also talks about other industry trends. Excerpts from an interview:

The number of commercial launches has come down to 16 in 2001 compared to 35 a year in the 1990s. Further, there is a remote possibility of the launch numbers reaching the levels of the 1990s. What does this portend for the various constituents of the satellite industry - satellite manufacturers, launch industry, ground equipment manufacturers and service providers?
Sixteen commercial launches are an unusually low number. However, it is very unlikely that we will see a rebound to 35 for several years. This means that satellite and launch manufacturers will be under financial stress for some time.
On the other hand, service providers and ground equipment manufacturers can still do well because their financial health is not directly dependent on the number of launches. Their health is more dependent on the demand for telecommunications services, which is currently facing a slump; but this is expected to rebound sooner than the manufacturing sectors.

What is the current cost of launching a satellite? Is there a further possibility in the launch / carrying cost of satellites coming down from the current levels?
The cost of launching commercial payloads into the geo-synchronous orbit (GSO) as measured using the price per pound metric dropped significantly in 1990s. The average price per pound fell to $11,279 in 2000 from $18,158 in 1990. The decline was not gradual, but sharp during the first half of the decade and steady in the later half.
The sharp fall is due to the entry of Chinese and Russian launch vehicles. But the decrease has failed to stimulate increased commercial activity. According to forecasts, commercial launch activity is unlikely to return to the peak levels of 1990s for the next 10 years despite a fall in the launch costs, demonstrating the price inelasticity in the satellite launch market. A far more deep cut in the price per pound to orbit is needed to trigger major increases in commercial space activity.

Is a launch cost of $1000 per pound to orbit possible?
It is certainly conceivable that we could get to $1,000 per pound, but it will require a significant increase in demand for launches or some technological breakthroughs for current levels of demand. If demand does increase substantially, a reusable launch vehicle with a very high flight rate could easily achieve $1,000 per pound with today's technology. Till then the average price to get to the geo-stationary earth orbit (GEO) is more like $10,000 per pound of payload.

Is there any distinct trend you see in satellite manufacturing, launch, ground equipment and ground service industries?
There are many trends in each of these industries. For many years, the trend in satellite manufacturing has been the increasing size of the average satellite. Satellites have been getting more massive, with more transponders, more power, and a longer lifetime. Launch vehicles have also followed this trend. However, both of these trends seem to be tapering off somewhat.

What impact will the current slowdown in the telecom industry have on the satellite industry?
It has already had a negative effect on the satellite industry. Revenues are down, profit margins are slim, and forecasts are rather grim. It has also made it much harder for satellite firms to raise money to finance new or expanded services. There are other factors that have contributed to this situation in addition to the slowdown in the telecom industry. All these factors have made the industry much more financially conservative, which has led to the delay or cancellation of many of the broadband satellite initiatives.

In which region do you expect demand for satellite services to take off?
Demand takes off and then cools down in different regions at different times. There are definite opportunities in the developing nations. As terrestrial alternatives (fibre-optic landlines) build out, the demand for satellite services declines.

What is your forecast for the industry?
Futron's 10-year forecast (2001-2011) of the demand for satellite services shows that the business, while somewhat volatile, has a solid base and strong growth potential. Satellites will continue to be required for telecommunications service needs. These needs are not spread uniformly either in time or geography, but there are opportunities and issues to be faced.
We expect the number of on-orbit geo-stationary commercial satellites to grow by 30 per cent. The demand for satellite services will grow much faster than the number of satellites due to data compression, increase in number of transponders per satellite and longer satellite life. The largest demand growth will come from consumer services like broadband, direct-to-home television than infrastructure services like trunk telephony or Internet service providers (ISP) to backbone services. The success of satellite services will depend on the speed and the price at which the opportunities are lapped up when they come up in different regions.

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