Prospects for the Satellite Industry in 2002
Satnews/ -- Both the commercial satellite and the commercial satellite launch industries are
headed for less turbulent rides in 2002 after weathering a chaotic year of varying fortunes.
Fortunately, September 11 did not have the immediate negative impact on both industries that it
did on others (such as aviation) since satellites and launches are locked in place by long-term
contracts. More worrisome for both industries’ long-term prospects are the continuing drought of
financing for future expansion (a residue of the Iridium, GlobalStar and ICO fiascoes) and a
market for broadband services being eaten up by a worldwide glut in fiber optic cables.
In 2001, deal making moved away from project financing to corporate financial support for IPOs
and mergers and acquisitions such as the US$5 billion acquisition of GE Americom's satellite unit
by Société Européenne des Satellites of Luxembourg. SES Global, the entity born of the merger,
has become the world's largest satellite operator with a global fleet of 29 fully owned satellites and
13 part-owned spacecraft through strategic investments in Asiasat, NSAB, Star One, Nahuelsat
and Americom Asia Pacific. It was the largest M&A in the satellite industry during the year.
Despite the global economic slowdown, worldwide space industry revenues for 2001 are
expected to hit US$149 billion compared to US$103 billion in 2000. The Aerospace Industries
Association in mid-December said U.S. space sector sales increased two percent to US$31 billion
but commercial space exports shrank to US$170 million in 2001, 75 percent below 1998 levels.
U.S. satellite manufacturers, hard hit by tough U.S. export laws, saw their share of the world
market drop from 75 percent to only 45 percent. Orders traditionally won by U.S. companies are
now going to companies in Europe, particularly to Russia and the European Space Agency, and
Asia.
While the space industry as a whole showed surprising resilience in the face of the global
downturn, the fortunes of the world’s commercial launch industry took a slight turn for the worse.
Research firm Futron Corporation estimates that there were only 16 commercial geosynchronous
orbit (GEO) spacecraft launched in 2001. Futron, however, forecasts that 20 commercial GEO
satellites will be launched in 2002, up 25% from 2001. The figure in 2001, however, is down
nearly 50% from the 30 that were launched in 2000. Commercial satellites launched to non-GEO
orbits numbered 19 in 2001 compared to 35 in 2000 and a forecast of 23 in 2002.
Futron predicted that 2001 will turn out to be one of the worst years in the history of the launch
industry with significant drops in almost all categories of launches. It said the situation was even
worse when looking at the American launch industry. Futron reported no more than four
commercial launches in 2001 by American boosters, including only a single commercial GEO
satellite, EchoStar 7.
The events of 9-11 were not to blame for the big drop in launches during the year. That was due
to a big increase in launches in 2000: the 30 commercial GEO satellites launched in 2000 were
considerably higher than the average of 24 a year between 1996 and 1999. Commercial GEO
launches are the most lucrative type of launches, so a modest drop in such launches can have a
huge effect on the bottom lines of launch vehicle companies. The rebound forecast in 2002 is a sign
of the cyclical nature of the commercial launch market, said Futron. It added that low 2001
numbers should not be seen as anything other than an unfortunate drop in an otherwise healthy
market.
Futron correctly pointed out that commercial launch services are entirely dependent on the health
of the commercial satellite industry, which reflects the demand for satellite telecommunications
services, the buildout of terrestrial fiber-optic cable, and the effects of improvements in satellite
technology.
Long-term prospects for the launch industry, however, are decidedly better than those in 2001.
The record number of contracts entered into in 2000 to build new GEO satellites should mean a
corresponding increase in launches in about three years. The future also looks brighter for the U.S.
launch industry. Futron forecasts that the number of U.S. commercial launches in 2002 should
double to eight. The introduction next year of two new families of heavy-lift launch vehicles,
Boeing's Delta 4 and Lockheed Martin's Atlas 5, should enable those companies to capture a
greater share of the worldwide launch market as commercial communications satellites continue to
get heavier.
Futron also forecasts that the non-GEO commercial market will level off in 2002 as the excess in
low earth orbit (LEO) satellites caused by the deployment of the Iridium and Globalstar systems in
the late 1990s disappears. Demand for the non-GEO commercial markets will be higher in 2002
than what it was in the mid-1990s, before the surge in such launches began.
In the area of launch vehicles, 2001 saw routine operations by International Launch Services
(ILS), the leader in the space launch services business. ILS won 11 new launch orders by late
September and expected to carry out 10 missions by year-end. Highlight of ILS’ operations in
2001 was the first use of the Proton M with the Briz M upper stage that upgraded Proton’s
reliability as a GEO launch vehicle.
France’s Arianespace, ILS’ closest competitor, had its launch schedule thrown into disarray with
the failure of its Ariane 5 launcher in July to place its Insat 3C satellite payload into correct orbit
due to a second stage propulsion problem. This problem affected that launcher's operations and
schedule for the second half of the year and forced it to schedule the launch of Insat 3C on board
an Ariane 4 in January 2002.
For Arianespace, the most important event of 2001 was the European governmental decision to
complete development of the ESC-B upper stage for Ariane 5 that will provide a dual launch
capability for large satellites weighing up to 12 tons combined.
New trends in satellite applications hit the scene in 2001. Broadcast applications took on more
importance at the expense of telecom and Internet access. Digital satellite TV became a huge
success with research firm Euroconsult reporting in September that 8,276 satellite TV channels
were operating, of which more than 7,000 were created in the last four years. Euroconsult said
two dozen new TV channels are created every week to fill the demand created by this new media.
The 53 satellites hosting satellite TV services produced US$17 billion in revenue in 2000. In
comparison, Euroconsult said that 294 transponders were used for Internet services as of
mid-2001, including 242 for backbone and transport, and 52 for direct access.
The biggest challenger to satellite as the delivery medium of choice for broadband access remained
the fiber optic cable. In 2001, fiber continued to make inroads against satellite. Pricing for long
haul fiber dropped during the year, causing a number of users to shift towards fiber. The problems
associated with fiber remain, however. Fiber’s last mile cost is still exorbitant. Its inflexibility and
vulnerability, as demonstrated by the events of 911, are serious drawbacks when set against
flexibility and fast response of satellites.
Satellite radio was a success in 2001 and provided another avenue of growth for satellite services
in the year ahead. The start of Digital Audio Radio Services via satellite occurred in late
September when XM Radio became the first company to offer these services directly to
consumers. On September 25, XM services debuted in two U.S. urban markets. Competitor
Sirius was expected to start its service in 2002. XM is expected to have 45,000 subscribers by
year-end 2001 and 420,000 subscribers by year-end 2002. Sirius was predicted to have 10,000
in 2001 and 180,000 in 2002.
In regional geostationary mobile satellite services, ACeS (Asia Cellular Satellite Service) and
Thuraya went into commercial service in Asia-Pacific and Middle East/Europe respectively.
ACeS, based in Indonesia, started its commercial operations in September 2000 and had
launched service in seven Asian countries in mid-2001, offering mobile phone calls for less than
US$1 a minute and service from fixed terminals at less than US$0.15 a minute. Only 10,000
mobile subscribers were using ACeS by June, with subscribers making an average of three minutes
worth of calls a day. Fixed users were making an average of 50 minutes of calls a day, leading the
company to switch its emphasis to fixed services and order 10,000 fixed terminals in 2001 to help
increase use of its satellite.
Thuraya, the US$1 billion regional mobile satellite project based in Abu Dhabi, United Arab
Emirates, started commercial services in July. Customers paid a monthly fee of $14-$20 and 50
cents to $1.50 a minute per call. |
