Without reliable and affordable commercial launch services, obviously there wouldn’t be a satellite telecommunications industry, much less the robust one that exists today. Yet this fact occasionally seems lost on satellite operators and even manufacturers, who during a recent satellite finance conference in
Paris
took the launch services industry to task over rocket prices, reliability and availability.

Their frustration stems in part from rising prices among the three primary providers of launch services to the commercial geostationary satellite market: Arianespace, International Launch Services (ILS) and Sea Launch. Meanwhile, launch slots have been difficult to come by in recent years, a situation that has been exacerbated by failures of ILS’s Proton and Sea Launch’s Zenit 3SL vehicles.

During panel discussions at the conference, some satellite industry officials wondered aloud why a spike in demand for launch services has not triggered a corresponding increase in supply, leading to lower prices. “Somewhere along the line, the laws of economics don’t apply when it comes to launch vehicles,” lamented Marshall Byrd, general manager of satellite manufacturer Lockheed Martin Commercial Space Systems.

In one sense, Mr. Byrd hit the nail on the head: as so many have found out the hard way, the business of making, selling and launching rockets is a unique one that often defies normal business sensibilities. At the same time, many of the criticisms being leveled at the launch industry are unfair or don’t stand up to scrutiny.

Take, for example, the assertion that there is not enough launch capacity available. As Arianespace Chief Executive Jean-Yves Le Gall pointed out, the current demand is for about 20 launches of geostationary satellites per year, while the capacity is somewhere between 30 and 40. Occasional failures can upset this equation, but these disruptions are temporary, whereas an oversupply situation lasts until someone exits the business, and not before all of the players are weakened.

Launch prices have indeed risen, but this was inevitable: the rock bottom prices of several years ago were a symptom of an overall satellite industry downturn where cutthroat competition prevailed among too many suppliers with too many rockets bidding for only a handful of contracts each year. Those prices clearly were not sustainable over the long haul; in fact, some have argued that excessively low prices have been a factor in recent Proton and Zenit 3SL reliability problems.

Meanwhile, manufacturing costs, like just about everything else these days, have gone up – a fact that should not be lost on satellite makers. In
Russia
and
Ukraine
, for example, where the Proton and Zenit 3SL are made, the cost of raw materials has skyrocketed.

Arianespace, for its part, has worked hard to lower the price of its workhorse Ariane 5 to keep it competitive with the Russian and Ukrainian vehicles. The company and its industrial contractors have undergone a painful top-to-bottom scrub to wring out inefficiencies throughout the production chain. At the same time, Arianespace has boosted Ariane 5 production rates in response to rising demand, authorizing work to begin on 35 new vehicles – a substantial bet on this industry.

The Ariane 5 has had a good track record of late, with 27 consecutive successful launches, but as everyone knows, there’s no such thing as a perfect rocket. The same goes for satellites – not only have they had their share of technical problems, but satellite delivery delays have had their own adverse impacts on launch schedules in recent years.

It would be one thing if the launch companies were making money hand over fist, but that doesn’t seem to be the case given that the competition among them remains intense. Contrast that with the major satellite operators, who reside at the top of the food chain and whose profit margins dwarf those of launch companies.

The situation and complaints being voiced today are somewhat reminiscent of those that occurred just over a decade ago, when projections – coming in large part from the satellite industry – of huge demand brought a flood of investment in new launch capacity, both by the private sector and by governments. If they had to do it all over again, most of those who invested would opt to place their bets someplace else.

And if those high costs of entry weren’t enough of a barrier to entering the launch market, the risks are extremely high, particularly for the very modest returns most launch services companies are able to eke out.

Though they are hesitant to say so publicly, many in the satellite industry would like to see
China
re-enter the global commercial launch market. That may well happen eventually, but there is no guarantee that
China
wouldn’t simply knock out one of the existing players, resulting in no net increase in supply. Easier access to Chinese rockets might open up markets that otherwise are unavailable to Western satellite firms, but to suggest, without being so specific, that rocket availability is the main obstacle to this industry’s growth is a questionable supposition at best. And alas, there are no technological breakthroughs at hand that would dramatically reduce the cost of access to geostationary orbit.

Satellite operators are by definition the engine of this industry and their continued prosperity and growth prospects depend as much as anything else on a healthy supplier base. Launch firms occasionally find themselves reminding their partners of this fact, which is something they really shouldn’t have to do.