The satellite telecommunications industry today stands out as a bright spot in a global economy where there are very few. The three biggest commercial satellite fleet operators – SES, Intelsat and Eutelsat – all enjoyed strong growth in the last year and are investing in new satellites amid what they say are no signs that the downturn is affecting their business.
�This obviously is good news for satellite manufacturers, their suppliers and others in the food chain, such as user-equipment and service providers. Here, though, sensitivity to the wider economy is mixed: While companies like component maker Com Dev and network provider Hughes Network Systems remain bullish, satellite manufacturer Orbital Sciences Corp. is cautious, saying the market for commercial satellites likely will shrink in 2009 as startups and other relatively new telecom ventures have trouble securing financing and as developing nations lose their appetite for supporting national operators for prestige.
Certainly all is not rosy for the industry, although whether the troubles being experienced by some satellite companies are due solely to the current state of the economy is debatable. EchoStar Communications Corp., for example, is having a tough time developing a fixed satellite services business in
, and the company’s mobile television venture in
appears to have run aground. Other companies, such as those planning to deliver mobile TV and broadband services using hybrid systems featuring satellites backed by networks of ground-based repeaters, also are treading rough waters.
�But the top three fixed satellite services operators, which together account for more than half of the geostationary commercial satellites built and launched, are as strong as ever, aided by long-term service contracts and a customer base largely composed of television service providers. As it turns out, television is one of those things people are unwilling to do without, even in tough times.
�But any business, no matter how healthy it may appear, is only as strong as its weakest link, and for satellite operators, the weak link is the launch industry. The vast majority of geostationary-orbiting commercial telecommunications satellites are launched by three companies – Arianespace, International Launch Services (ILS) and Sea Launch – all of which use rockets that wouldn’t exist if governments hadn’t invested in their development.
�In a perfect world, three providers would be enough to handle the current commercial launch market of 20 or so geostationary satellites per year. But nothing is perfect, of course, and few enterprises are less forgiving of imperfection than building and launching rockets.
�Sea Launch, for example, which markets launches aboard a Russian-Ukrainian rocket, has suffered manufacturing supply chain problems in recent years that have made it difficult for the company to meet its contract schedules. The result has been lost business – time is money for satellite operators.
�For whatever reason, these supply chain problems do not seem to be affecting ILS, which sells commercial launches aboard the Russian Proton rocket. In fact, ILS has taken business away from its competitors in recent weeks due in part to a drop in prices, courtesy of a sharp decline in the value of the Russian ruble.
�Arianespace launches more commercial satellites per year than its competitors by virtue of the fact that its Ariane 5 rocket is designed to loft two payloads at once. But this model has drawbacks: Arianespace sometimes has trouble finding compatible payloads that are ready to launch at the same time.
�Of broader concern is the ever-present potential for a technical problem or failure to ground a commercial vehicle for a substantial period of time. When launch manifests are tight, as they are now, the grounding of any vehicle can result in costly delays for schedule-sensitive satellite owners. If the Ariane 5 is grounded, the problems are magnified given the size of Arianespace’s launch backlog.
�One would think the current market is ripe for the entry of a new player, but this wouldn’t necessarily solve anything. For example, the re-entry of
– which for the last decade has been marginalized in this market by
policy – as a full-fledged launch provider could well lead to the exit of one of the established companies, meaning there would be no net gain in options available to satellite operators.
This is not to blame the launch industry, whose business is as tough as it gets. The point is that success can be fragile and fleeting, something the entire commercial space industry must be careful not to forget, no matter how well things seem to be going at any given time.