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Boeing 702X
Boeing introduced last month the 702X, a new commercial satellite bus intended to serve the growing demand for smaller, more flexible communications satellites. (credit: Boeing)

The satellite industry catches a cold

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Some commercial space activities get a lot of attention: space tourism, commercial lunar landers, satellite megaconstellations, and so on. But today, as has been the case for the last few decades, the real money in commercial space remains in satellite communications, primarily using satellites in geostationary orbit (GEO). Look at any chart of the size of the “space economy,” and you’ll see communications services, like direct-to-home television or video distribution, dominating. It may not capture headlines, but it has been lucrative.

Or, at least, it had been lucrative. That foundation of the commercial space industry has been cracking in recent years as both it, and its traditional customers, face new competition. Demand for direct-to-home television is dropping as more people cut the cord in favor of streaming services, usually provided by terrestrial broadband providers.

“I think we all sit right at the precipice of a number of significant opportunities,” said Boeing’s Johnson.

That shift from traditional television has also affected video distribution. Satellite broadband prices have dropped, depressing demand for new satellites as operators look to right-size their fleets while also waiting to see what megaconstellations from OneWeb, SpaceX, and others will do the market. That has, in turn, hurt both satellite manufacturers and launch providers as a major source of their business dries up. The conventional commercial space industry has caught a cold, at the very least, if not a more severe ailment.

When industry executives gathered at the World Satellite Business Week conference in Paris last month, they tried to focus on the upside of the industry, despite its recent doldrums. One point emphasized by companies there was that the number of GEO satellite orders had finally started to rebound: ten such satellites had been ordered through the end of August, compared to just five for all of 2018.

The difference, though, is the types of satellites being ordered. GEO orders, prior to the recent drop in demand, had been dominated by large, high-throughput satellites weighing six tonnes or more. The recent set of orders, though, has included a growing number of very small satellites, some weighing less than one tonne, as satellite operators take a more cautious approach to meeting demand in a changing market.

Satellite manufacturers, in one conference panel, dubbed this an “inflection point” for the industry. “I think we all sit right at the precipice of a number of significant opportunities,” said Chris Johnson, president of Boeing Satellite Systems International. “We’re at a point from a technology basis that we’re going to be able to really come to market with the kinds of capabilities that are going to enable our customers to ultimately be successful in this changing landscape.”

Boeing used the conference to announce one of those new capabilities: a new satellite bus called the Boeing 702X that focuses on the small end of the market. With a dry mass of 1,900 kilograms, the satellites will use software-defined payloads that can be reconfigured once in orbit, making it easier for operators to repurpose those satellites based on changing demand. A 702X satellite can be built and ready for launch within three years, according to the company.

Thales Alenia Space, another major satellite manufacturer, also used the conference to announce a small GEO bus, called Instant Space In-orbit Reconfiguration or “Inspire.” The company expects to be able to build up to six such satellites a year, with a production time per satellite of as little as 18 months. A third manufacturer, Maxar, is already offering small GEO satellites based on a bus developed for the WorldView Legion remote sensing satellite constellation, and won an order from a Swedish operator Ovzon.

Startups are also moving into the small GEO market, from Astranis to the new Saturn Satellite Networks, which announced last month its acquisition of smallsat technology company NovaWurks. But just how much demand there will be for such small GEO satellites, either from existing or new operators, is unclear.

“Clearly, the satellite business at Airbus is changing as the market is evolving,” said Jean-Marc Nasr, executive vice president and head of space systems at Airbus Defence and Space. He joined the other manufacturers calling for more flexible satellites, and also less expensive ones. “It has to be cheap, or else the business case won’t close.”

The customers for those satellites also tried to look at the bright side. “The industry continues to be exciting, continues to be full of disruption and change,” said Steve Collar, CEO of SES, one of the largest global satellite operators.

“It has to be cheap,” Nasr said of new satellite projects, “or else the business case won’t close.”

Those companies are dealing with that disruption and change in various ways. SES is investing in non-geostationary satellites, like its O3b mPOWER constellation of seven satellites, being built by Boeing (using technologies it is now incorporating into its 702X.) SES announced at the conference that SpaceX will launch those satellites on a pair of Falcon 9 rockets in 2021.

Telesat is making a bigger push into constellations with its own broadband system, with several hundred satellites in low Earth orbit to provide connectivity. The Canadian government is offering some financial support for the system because it promises to serve remote communities in the country. Telesat expects to select a manufacturer—Airbus or a joint Maxar/Thales team—in the coming months, with enough satellites in orbit to provide initial service by 2022.

Telesat and SES face competition from companies with more ambitious constellation plans. OneWeb, which opened a Florida factory in July capable of producing two satellites a day, plans to launch satellites in batches of more than 30 at a time on monthly Soyuz missions starting in December. SpaceX, which launched its first 60 Starlink satellites in May, will launch up to four more dedicated Falcon 9 Starlink missions this year, SpaceX president Gwynne Shotwell said at the conference. That will be followed by up to 24 Starlink launches in 2020—more than the number of launches the company has performed for all its customers in any single year to date.

Satellite operators are hoping to get a shot in the arm financially thanks, oddly enough, to its terrestrial competition. Several of the satellite operators serving North America are proposing to transfer some their C-band spectrum to mobile phone companies, who are interested in that spectrum for 5G services. How much spectrum will be transferred, and how, is still being studied by the FCC, but some experts expect that the satellite companies could get several billion dollars when the handover is done, funding which would go to help move customers to other spectrum bands and to build new satellites.

Three satellite operators—Intelsat, SES, and Telesat—have formed a consortium called the C-Band Alliance to support their proposal, although a fourth operator, Eutelsat, dropped out of the group just before the conference last month. Rodolphe Belmer, CEO of Eutelsat, said at the conference that he felt that his company, which accounts for only a small share of C-band services in the US, would be better offer working on its own rather than being dwarfed by the other members of the alliance.

The alliance, though, plans to press ahead despite Eutelsat’s departure. “It would be beneficial if we were all working together, but I equally don’t think it’s in any way upsetting of the progress we’ve had for Rodolphe and Eutelsat to have their own representation,” Collar said.

“Now, what we’re seeing is what I call hand-to-hand combat in individual countries” about satellite spectrum, said Dankberg.

The potential transfer of C-band spectrum, though, could embolden regulators in other parts of the world to transfer C-band or other satellite spectrum for terrestrial uses given the growing demand for 5G and other services. That will be one major topic of debate at the upcoming World Radiocommunication Conference in Egypt, a multi-week affair that starts later this month.

“Now, what we’re seeing is what I call hand-to-hand combat in individual countries” about satellite spectrum, said Mark Dankberg, Chairman and CEO of Viasat. That’s made it all the more important, he argued, for satellite operators to work together on common positions to preserve spectrum from terrestrial interference.

Even the most pessimistic observers of the satellite industry don’t expect GEO to go away: there is still plenty of demand, particularly in regions of the world where direct-to-home TV and other video services are still in higher demand. But the market is definitely shifting from one where GEO communications satellites dominated the industry to one where they may be just one service of many. How disruptive that transition is for both established and new companies, and their terrestrial competitors, could have much bigger implications for the size and health of the overall space economy.

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