Are GEO satellite orders still a good measure of industry health?

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PARIS — For the world’s leading satellite manufacturers, 2017 has been a rather disappointing year so far.

Just four contracts have been signed this year for large geostationary communications satellites — the traditional bread-and-butter of the commercial satellite industry and a big drop from the 10-15 orders the likes of Airbus, Boeing, Lockheed Martin, Orbital ATK, Space Systems Loral and Thales Alenia Space expected to be fighting for this year.

On the other side of the equation, you have the satellite operators themselves, who stand to improve profit margins if they can continue to serve their customers well without constantly replenishing their fleets of  big, expensive geostationary satellites.

Another dynamic at play, satellite executives said Sept. 11-15 at Euroconsult’s World Satellite Business Week here, is that the commercial satellite communications market is diversifying away from large geostationary-orbiting satellites into a mix of LEO and MEO constellations and a new breed of very high-throughput satellites like ViaSat-3 and Jupiter-3 that will still need to operate from GEO.

Rodolphe Belmer, CEO of Eutelsat Communications, says Fixed Satellite Service operators like Eutelsat are becoming “more conscious” about capital expenditures, or capex, especially as bandwidth prices fall amid a temporary oversupply.

“We feel like the industry as a whole is under pressure,” Belmer said Sept. 12 during World Satellite Business Week’s global satellite operators panel. “We feel like sensitivity to capex will increase over time” as the industry undergoes a transition in the face of changing customer requirements.

“This transition coincides…with bigger-size satellites because it gives lots of efficiency in terms of productivity. It also means less birds. If you try to evaluate what’s the number of birds that are going to be ordered  for geostationary satellites going forward, most probably the number of units will be lower than in the past.”

Belmer and his fellow FSS chief executives said part of their capital expenditures budget is going into non-geostationary (NGSO) plays, such as the 900-satellite order OneWeb has placed for its low-Earth-orbit constellation of broadband smallsats or  the seven satellites SES ordered from Boeing this week for an 03b mPower constellation promising 10 terabits of throughput.

“The growth of this industry is all about broadband,” said Telesat CEO Daniel Goldberg, who has two high-throughput GEO satellites under construction even as it moves ahead with a large LEO constellation.

“I can see the manufacturers building a handful of very big large GEO satellites — I’d also note that ViaSat is building their own payloads for ViaSat-3, so that’s another wrinkle for the satellite manufacturers,” Goldberg said. “Then, on the other hand, I believe the future of our industry, at least for broadband delivery, lies in NGSO and LEO. And there that’s going to be about the opposite of big GEO. It’s going to be about cranking out high volumes of multiple, multiple, but still very, very capable smaller satellites. And that is a very, very different activity than what our main suppliers are doing today.”

All this begs the question: is the number of commercial GEO satellites still a good metric for evaluating the health of the industry?

Builders’ perspective

Satellite manufacturers were quick to say, ‘no.’

“I don’t think the number of satellites is relevant anymore in terms of the health of this industry,” Lisa Callahan,  Lockheed Martin Space Systems vice president and general manager of commercial civil space, said Sept. 13 during World Satellite Business Week’s satellite manufacturers panel.

Jean-Loïc Galle, president and CEO of Thales Alenia Space, agreed but also noted he was not expecting 2017 to be such a slow year so far for new GEO orders.

“If you look at what happened in previous years where the orders were between 15 and 20 and sometimes a bit over 20… I was not expecting last December…we’d reach so low a number this year,” Galle said.

Even though he expects GEO orders to eventually return to 10-15 per year, he said a shift toward NGSO systems  is making raw GEO numbers less revealing of industry health.

“The question mark, obviously, is this [key performance index] still a valued [key performance index]?” he asked. “Knowing that…LEO an MEO satellites are being ordered last year, this year and next year…and sometimes we have to take into account that sometimes we are speaking of huge satellites with… huge throughput…I think we should not put too much importance to this label of GEO satellite order.”

“I’m not sure this is the continued right metric in the future for the health of the industry,” said Mark Spiwak, who is stepping down at the end of November after three years as the head of Boeing Satellite Systems. “It is about solutions, and whether it be GEO or MEO or hybrid solutions…as we continue to lead this digital revolution and provide these awesome capabilities to our customers the metric of quantity doesn’t necessarily tell the story.”

Space Systems Loral President Dario Zamarian said the contract his team won in August to build the Jupiter-3/EchoStar-24 “ultra high density satellite” for EchoStar of Englewood, Colorado, is “part of the proof of this being not the right metric.”

Although neither SSL nor EchoStar disclosed the contract’s value, Zamarian said during the panel it was “two, three, four times the average award of a normal GEO satellite.”

“So is it four [GEO orders this year], or is really seven the number? So that’s why we’re clearly in the camp of thinking this is not the right metric anymore.”

Arnaud de Rosnay, Airbus Defence and Space senior vice president for telecommunications satellites, said right metric or not, it’s hard not to keep tally.

“We always count satellites,” he said. “In the end you always count satellites,  but it’s not as relevant as it used to be.”

For the record, de Rosnay said Airbus has lowered its beginning of the year forecast of 14 GEO orders in 2017 down to 10.

Which would mean, of course, that six more GEO satellites stand to be ordered over the next three and a half months.

Not that anyone should be counting.