It’s been two years since Boeing landed its first contract for what was billed as a revolutionary new satellite platform utilizing all-electric propulsion, a design feature that cuts satellite weight in half, allowing two to be launched aboard a single Falcon 9 rocket.
To date, however, demand for all-electric satellites hasn’t lived up to the hype.
Since that initial four-satellite order from two different operators, Boeing has yet to announce any new contracts. Nor have any of the Boeing competitors that announced plans for their own all-electric satellites.
That’s about to change in a big way, says Jim Simpson, who predicts that Boeing will sign as many as three new contracts for its 702SP all-electric satellite before the end of March. Customers have been waiting for Space Exploration Technologies Corp. to demonstrate the ability of its low-cost Falcon 9 rocket to launch geostationary-orbiting satellites, which it did in successive missions in December and January.
Commercial satellites now constitute 30 percent of Boeing’s overall satellite business, up from 8 percent in 2009, Simpson says.
Simpson, who was formally announced as the head of Boeing’s commercial satellite business in December — confirming one of the industry’s worst-kept secrets — spoke recently with SpaceNews Editor Warren Ferster.
Why is it taking so long for the 702SP and other all-electric satellites to catch on with operators?
We will have an announcement of at least one satellite and as many as three by the end of this quarter. So it took a little bit of adoption. One of the critical points was to prove out the Falcon 9 rocket. This was a huge point in showing the economics of our satellite system.
You mentioned that the Boeing-built Wideband Global Satcom (WGS) military communications satellites have utilized electric propulsion. Am I correct in assuming, though, that electric propulsion has not been used for WGS orbit-raising maneuvers?
That’s correct. But we have over 170,000 hours of on-orbit firings for station keeping and as such we’ve demonstrated far more time on orbit than would ever be required in a transfer orbit.
So you expect 2014 to be a real breakout year in terms of the electric propulsion satellites?
I do.
What is your outlook for the commercial satellite manufacturing market in the near and long term?
We see that the marketplace from a manufacturing perspective is on the order of between 15 and 25 satellites per year for the foreseeable future. That’s obviously dependent on what sizes the customers select, whether they want to go for a large high-throughput satellite system, which may reduce the quantity of satellites required, or they go on the smaller end.
What about midsized satellites?
We’re seeing a lot of interest in both the high end and the low end. Not so much our midrange satellites. So we’re looking at satellites that are roughly in the 7-8 kilowatt range and then we’re also seeing the leap up into the 14-15 kilowatt range.
Why is that?
What we’re seeing is a focusing in on new regions where a smaller satellite might be the right introductory satellite system or operators are trying to exploit a proven marketplace by providing as much capacity as possible in that region. The midsized satellites we are selling are on the high end — over 11 kilowatts.
What are your expectations for Boeing in 2014?
Currently we have proposals or we’re in negotiations for roughly $1.2 billion of satellite systems and over the year we see at least 12-15 opportunities that fit within our addressable market.
So come Dec. 31, 2014, how many contracts will you have signed?
We think we’d have something around six 702SP satellites sold, one to two of the 702MP class and one to two of the 702HP class. So it’s about eight to 10 satellites total.
How does that quantity compare with the past five or so years?
It’s probably been on the order of six to eight satellites per year.
Are the expected orders coming primarily from new or established providers?
It’s a combination. Some of the work is potentially follow-on activities to our current contracts; others would be new providers that are interested in utilizing our products and technology.
Which customers are looking to buy multiple satellites?
There are some regional satellite providers that are looking at potentially multiple satellites; some of the larger satellite service providers are looking at that as well.
There has long been talk about the need for consolidation among satellite manufacturers, but the number seems only to grow. Can the market sustain the existing manufacturers?
This question has been asked every year since I’ve been in the satellite and launch business and apparently it is because we’ve never seen real consolidation. Whether it’s because of national requirements or other business cases that enable this to happen, we really don’t see substantial reductions in satellite providers.
Can China become more of a mainstream competitor either in the near or long term?
Their technologies and capabilities are improving dramatically. They already have a launch vehicle that is very reliable, and at least some of the lower-end satellites are adequate for some. Whether they’re going to be a mainstream player I think really depends more on politics than technology.
Is Boeing feeling any competitive pressure from China?
It depends on the markets and the capabilities needed in a satellite system. Some of the key technologies that we’re utilizing in our government sector and applying now to the commercial sector are things that at this point China couldn’t provide.
What events or developments could shake up this market in the near term?
One of the plausible near-term activities that could shake up the marketplace is the utilization of commercial satellite systems for government applications. Because of certain policies and other factors, there really hasn’t been the ability to fully exploit commercial space for government applications. We’ve been hearing for a long time about disaggregation, hosted payloads, utilization of free fliers, and utilization of leases in a more expansive way than currently is being done, but it hasn’t happened.
Some senior defense officials envision the day when all but the most specialized government communications move to commercial satellites. What’s your view?
I would say that’s an objective, but I’m not sure it will happen. There are substantial wideband capabilities in both the strategic and the tactical arena that may need to be owned by the Department of Defense. But there’s no reason the majority of broadband communications couldn’t be done through commercial satellites. What we’re seeing with the high-throughput satellites is much larger channel size. Instead of the traditional 36-megahertz channels, you’re seeing channels growing to as high as 1,000 megahertz. What that enables you to do is use new waveforms and other technologies to protect against jamming and other things, which provides the government and even commercial providers more security, at least in a tactical environment. So you’re starting to see the blurring of the commercial and the government lines.
Most government satellite bandwidth is already commercially provided. What’s new here?
You’re right, roughly 60 percent of all communications are right now over commercial satellite systems, but I think you could see expansion beyond that. As operators move to higher-throughput satellites, the cost per megahertz could go down, which would enable the government to buy more capacity. If you’re able to leverage that and include anti-jam capabilities, it becomes that much more appealing.
How much of a game changer can hosted payloads be for manufacturers?
What we’re finding more and more is that a hosted payload can make or break the business case for many of the regional providers and even larger providers that are looking at entering into new marketplaces. So that could create additional growth. How much growth really depends on how much the government is able to embrace hosted payloads. So what we’re trying to do now is help ensure that guidelines and policies that are subservient to national space policy are in line such that the government can truly leverage the potential of hosted payloads that the commercial sector would be willing to invest in if the only risks were associated with the market and not with government impediments.
Are you saying the U.S. National Space Policy, which calls for exploiting commercial capabilities including hosted payloads to the extent possible, is not being followed by the Pentagon bureaucracy?
I think the implementation is lagging. There’s a struggle between what the program of record requires versus the augmentation you require and how that augmentation occurs. Again, I think the private sector is willing to take that market risk. The key, though, is that we can’t have other impediments that pose a risk to the program beyond that. So that’s what needs to be worked. And if that’s worked, I think you could see expansion of satellites anywhere from 10 to 25 percent over where we are now.
Is the Air Force’s hosted payload contract going to change anything?
It’s a start. I’d say it’s probably the incipient phase of enabling hosted payloads to be utilized by the U.S. government.
We’ve heard lots of talk about the major operators winding down their fleet recapitalization programs. What dynamics do you see driving this market?
I don’t see the larger operators pulling back. The large operators are starting to be very selective as far as what types of satellites they really want — you’re starting to see them utilize a lot of the technology we’ve developed on the government side to provide greater capacity to different regions. If you want an analogy, if you had beachfront property and you wanted to now exploit it to get even more revenue, you would build skyscrapers instead of one-story buildings. In addition to that is the advent of new marketplaces, such as the aerial layer, and there are specific types of satellite systems that enable that better than others.
