Smallsat industry faces challenges to growth

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MOUNTAIN VIEW, Calif. — While the smallsat industry continues to grow, experts warn that several blind spots could slow its growth in the near future.

A Feb. 4 report by Bryce Space and Technology found that 389 smallsats — defined as those weighing no more than 600 kilograms — launched in 2019, an increase of nearly 19% over 2018. By comparison, only 52 smallsats launched in 2012.

That growth will likely accelerate this year thanks to satellite megaconstellations like OneWeb and SpaceX’s Starlink. “This is on track to be a much bigger year,” said Janice Starzyk, vice president of commercial space at Bryce, during a panel discussion at the Smallsat Symposium here Feb. 4. She noted that SpaceX has already launched 120 Starlink satellites this year, while OneWeb’s first launch of 34 satellites is scheduled for Feb. 6.

Much of the discussion about the health of the smallsat industry has focused on issues such as financing and access to launch services. However, panelists noted that the industry has to grapple with a number of other, less appreciated challenges to its future growth.

John Serafini, chief executive of HawkEye 360, said one such issue is cybersecurity. He warned the “greatest existential risk” to the industry is that a satellite system is hacked and its data accessed or even manipulated.

“That would be a tremendous blow for the opportunity for smallsat to become a viable part of our government’s architecture,” he said. Companies need to invest “significant dollars” into cybersecurity systems “to ensure that they can validate the data that they’re producing.”

Space sustainability is another growing concern, both for the industry and those affected by smallsats. “We’re at the stage right now where everybody is launching as soon as they’re ready, and as soon as they come up with something new they throw it on the next round” of satellites, Starzyk said. “That isn’t really a responsible, sustainable approach to space.”

She added she saw signs of two “very polar” approaches to space debris. “There are some groups that are being somewhat alarmist about it and some that are really blowing it off,” she said, advocating instead for a middle path. “Clearly this is something that we have to pay a lot of attention to and behave responsibly.”

As smallsat companies grow, they also face difficulties in hiring, particularly as they compete with each other, various other space companies and those in related fields. “We have a hard time finding people with the right mix of experience and mentality and knowledge,” said Marco Villa, president of Tyvak Nano-Satellite Systems.

The growth of smallsats poses regulatory issues as well. “The speed at which the industry is growing and maturing is going to stretch the regulators’ mindsets,” said Tim Deaver, director of U.S. space programs at Airbus U.S. Space and Defense. Those issues, he said, range from how to regulate novel Earth observation systems to competition with terrestrial 5G networks for access to spectrum.

Panelists, though, played down one long-running concern about access to capital and worries that the industry is in a “bubble” that could soon burst. “I don’t think it’s a bubble popping as much as, perhaps, things are leveling out a bit,” said Melissa Farrell, vice president of commercial initiatives at Stellar Solutions. “Investors are waiting to see the revenues and the return on investment.”

Starzyk said that Bryce is completing a report on space investment in 2019. “It was another really big year,” she said. “We’ve been talking about a bubble and when it’s going to slow down. It hasn’t yet and it might still be a couple years.”

However, Villa said he was unimpressed with many of the companies in the sector. “It’s been pretty repetitive, the same things done in different ways,” he said. “I think in the last two or three years there has been stagnation in new ideas.”

Serafini is doubtful that any of the current major smallsat operators, even those with large constellations already in orbit, are profitable. “The capital expenditures are significant to build smallsat companies, and the revenues aren’t there yet,” he said. “Just a handful — maybe one or two — could be approaching profitability.”