The Space Reviewin association with SpaceNews

NSRC 2023

Orders for conventional GEO communications satellites, like BSAT-4b (above) have sharply dropped in the next few years. (credit: SSL)

May the satellite industry live in interesting times

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For years, one of the most important events for the established commercial space industry has been World Satellite Business Week in Paris, run by the satellite consultancy Euroconsult. Held in an ornate hotel just down the street from the Louvre, the event regularly attracts the chief executives of major satellite operators, manufacturers, launch providers, and others in the ecosystem of geostationary orbit (GEO) communications satellites, long the mainstay of the overall commercial industry. It was for many a lucrative business, and the venue fit the part.

But the business has been changing recently. Satellite operators had long sought less expensive launch as one way of reducing the overall cost of deploying new satellites. They’ve achieved that with the rise of SpaceX and the competitive pressures it has placed on other companies who have been forced to adapt or else.

“If this was a temporary change, it would be one thing,” SSL’s Zamarian said, “but we believe there are some more structural challenges that the industry overall needs to figure out.”

Those launch cost reductions, though, also help close the business case for constellations of satellites in low Earth orbit, offering broadband services with lower latency, and potentially higher speed and capacity, than GEO systems. Those constellations, ranging from startups like OneWeb to established satellite companies like Telesat to even SpaceX, have effectively created a chilling effect on the GEO market: operators are less willing to buy new satellites as they wait to see how the constellations develop, lest they spend several hundred million on a satellite that could be rendered obsolete by constellations within a few years.

As a result, orders of new GEO satellites have plummeted: less than ten were ordered last year and no more than about ten are expected this year. (Exact numbers sometime vary from source to source, depending on whether a particular order is considered really open to competition or not.) By comparison, as recently as early this decade it was common to see 20 or more GEO satellites ordered a year.

That’s put pressure on satellite operators, perhaps none more so than Space Systems Loral (SSL), a division of Maxar Technologies, which also owns Canada’s MDA, remote sensing operator DigitalGlobe, and geospatial analytics company Radiant Solutions. SSL long relied almost exclusively on the commercial market for its business, although it’s more recently sought more government business, including building the Psyche spacecraft for NASA that will travel to the metallic asteroid of the same name.

That diversification, though, hasn’t shielded it from the GEO market downturn and an order book that’s drying up. For months, there have been rumors that Maxar was considering strategic options for SSL, ranging from partnering with another satellite manufacturer to shutting down its GEO business entirely, claims backed up by a presentation it gave recently to investors. That last option, according to that presentation, could net the company $150–200 million as it sells its current GEO facilities in Palo Alto, California, leveraging the hot real estate market in Silicon Valley.

In a panel discussion with other satellite operators at the conference, Dario Zamarian, president of SSL, acknowledged those strategic alternatives are all under consideration, with a decision planned around the end of the year.

“SSL is still in business. SSL is still here. We are still pursuing business,” he said. “I appreciate the challenge that presents.”

The GEO market has long been cyclical, with some rise and fall in orders, but Zamarian said that this time is different. “If this was a temporary change, it would be one thing,” he said, “but we believe there are some more structural challenges that the industry overall needs to figure out.”

“There’s been a flying out of backlog that’s led some folks to think there’s been an explosion in this marketplace,” said ULA’s Bruno.

Other manufacturers were a little more optimistic about the market, even while admitting that the days of 20 to 25 orders a year wouldn’t return for the indefinite future. Nicolas Chamussy of Airbus Defence and Space said his company’s internal projections, based on the replacement needs of existing satellites, led him to conclude that orders for such satellites will rise to 15 to 18 a year, the highest estimate of any of the major satellite manufacturers. “It’s not the 20 to 25 number driven after that we have witnessed in the past years, but it’s still a sizeable number,” he said.

Some other commercial satellite manufacturers are more insulated by the lack of commercial GEO orders because of other business, like government work. This is especially true for Boeing and Lockheed Martin, which can rely on US government business to help smooth over diminished commercial business. “That is going to help in the commercial market as it returns, and I’m sure it will in the future,” said Lisa Callahan of Lockheed Martin.

The drought in GEO satellite orders also means a drought in launch contracts: satellites not being ordered in 2018 mean satellites not being launched in 2020 or 2021. In a separate panel at the conference, launch providers admitted they were seeing decreased business from commercial GEO manufacturers.

“There’s been a flying out of backlog that’s led some folks to think there’s been an explosion in this marketplace,” said Tory Bruno, president and CEO of United Launch Alliance, which secured a contract for a ViaSat-3 satellite from Viasat announced at the conference. Despite that win, he said the overall commercial market “is certainly flat and soft, especially in the GEO segment.”

“Soft” was a common term used by panelists to describe a market with few GEO satellite launch orders this year. Like their manufacturer counterparts, they’re looking to diversify their business, including governments.

“It is clear that in this kind of situation, if we want to make it, we absolutely need institutional missions,” said Arianespace CEO Stéphane Israël, whose company has previously tended to rely primarily on commercial business.

“I think the decrease in the GTO level, whether it resets or wherever it ends up, is not going to impact us dramatically because there are other market areas that are growing for us,” said SpaceX President and COO Gwynne Shotwell, citing the company's government business, particularly growing work with the Defense Department. “The DOD business is growing for us dramatically.”

She also talked up commercial human spaceflight as the company develops its Crew Dragon spacecraft (and, later, the Big Falcon Rocket.) “Candidly, I think one of the potential growth areas, the largest growth area if you put aside constellations, will be once we fly crew,” she said. “I do think ultimately—and I’m not going to talk about timelines—but I do think that will probably be the majority of our business in the future, flying people.”

Israël also expressed a wish for Arianespace to get into the human launch market, something that would require European governments to step up and support development of such a program. “It triggers some questions in Europe,” he said, noting the decision a quarter-century ago to cancel the Hermes spaceplane that was to launch on the Ariane 5. “We’re not going in this direction. I do not think we will be going in this direction in the future, but maybe one day. Why not.”

But if the GEO slump is affecting satellite manufacturers and launch providers, shouldn’t the surge in proposed constellations offset—or more than offset—that dip? For now, it hasn’t because many of those constellations have yet to get off the drawing board.

“Candidly, I think one of the potential growth areas, the largest growth area if you put aside constellations, will be once we fly crew,” said SpaceX’s Shotwell.

One early system is OneWeb, which plans to launch an initial set of satellites in the coming months ahead of a constellation of up to 900 satellites. The company has built a factory in Florida for mass production of its satellites and lined up launch contracts on Soyuz rockets and Virgin Galactic’s LauncherOne for deployment.

But there was some skepticism at the conference about the company's ability to carry out its plans. The company had earlier said its satellites would cost less than $500,000 each in mass production, but at the conference Eric Béranger, president and COO of OneWeb, would only commit to a per-spacecraft cost of “below $1 million.” Some have interpreted that as significant cost growth, which could affect its ability to raise the money needed to complete the system.

There’s even more uncertainty about other proposed “mega-constellations” of satellites. There was little discussion at the conference about SpaceX’s plans for constellations of thousands of broadband satellites, which will be unlikely to help satellite manufacturers and launch providers—other than SpaceX itself. Other concepts are potentially even more speculative with limited funding.

An exception is Telesat, a GEO satellite operator that is developing its own LEO constellation, albeit more modest than OneWeb, let alone SpaceX. The company's initial plans call for a 117-satellite constellation, but Erwin Hudson, the Telesat vice president in charge of its LEO constellation, said at the conference it could eventually grow to as many as 512, depending on demand.

Telesat has one demo satellite in orbit (two were launched, but one was lost in a Soyuz launch failure) and the company has study contracts in place with Airbus and a joint Maxar/Thales Alenia Space team to work on designs of the full constellation. Hudson said a selection of one of the two should come by the spring of 2019.

Hudson’s boss, Telesat president and CEO Dan Goldberg, mentioned both work on the LEO constellation and the company’s existing GEO satellite systems during a panel earlier in the conference. He predicted continued fewer GEO orders, but that some GEO markets will persist even as LEO constellations come into service. “I think in four or five years’ time, it will be a fascinating time for the industry,” he said.

Arguably, it’s an interesting time today, just not necessarily in a good way for some existing companies.

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