Global Commercial Space Markets

Claude Rousseau, NSR

SUMMARY

Space is becoming more accessible than ever before.Falling satellite manufacturing and launch costs have opened the door to new players to enter the market, disrupting the status quo.HTS and constellations have entered the market and will lead to a lot more capacity at a lower price.But how this capacity will be optimally distributed remains a significant challenge.Earth Obseravtion (EO)and Big Data are also areas of interest that are gaining grounds thanks to projects of 100s if not 1,000s of satellites that will have a lasting effect on manufacturing and launch markets.

Satellite Manufacturing &Launching

1.NSR forecasts >2,000satellites over 100kg to be launched in 2017-2026period, with most of these being smallsats launched for commercial clients.The business model behind a number of these programs remains unclear or is in question, however funding is coming into the industry anyway.

2.Major advances have been made in satellite manufacturing & launch,and more advances are expected moving forward.This includes greater competition in both industries, with manufacturing also seeing larger,more flexible payloads, and launch seeing advancements to launch bigger rockets, more frequently, and at a lower price.

3.The satellite launch environment over the past few years has gotten more competitive, and this is expected to continue moving forward.More players from emerging space nations entering the launch market with more internationally competitive rockets,namely China and India.Beyond this,private companies are moving closer to the cutting edge, and sometimes are the ones de fi ning that.

4.China has made significant advancements in many areas of space over the past 10years.China is competing for developing space nations project, has a larger role in the Asian market and is expanding operations in the satellite market with the launch of its first MSS satellite and its fi rst HTS satellite with electric propulsion.China is becoming a more signi fi cant player on the global space stage with advancing capabilities and ambitions.Policy issues such as ITAR may slow progress and changing focus of market opportunities towards LEO pose industry challenge.

Satellite Communications

1.On the satellite communications side, traditional FSS market is quite concentrated, with Intelsat, SES,and Eutelsat controlling ～60% of transponder equivalents (TPEs) leased in 2016(～7,500TPEs generating$12B) .Biggest markets are North America and Western Europe, and the market is growing fairly slowly.On the HTS side, we see a more fragmented market share, and we see faster growth.The HTS market moving forward will still see a lot of new winners and losers made.NSR expects more FSS capacity sold by regional operators as the Big Four(Intelsat, SES, Eutelsat, Telesat) are more aggressive about transitioning to HTS.

2.Capacity is increasing at a truly unprecedented rate.From 2005to 2026, total satellite capacity supply will have increased from 360Gbps to 17,800Gbps.Today, we are only at around 2,340Gbps, meaning that in the next ～8years, we will see capacity increase by a factor of 7.

3.The majority of new capacity—and by 2026, about 60% of all capacity—will be from LEO and MEO HTS.OneWeb, SpaceX, and Telesat are planning on launching LEO constellations, with the potential for others such as Boeing remaining a real possibility, albeit at a somewhat later timeframe.Overall, by 2026we expect a huge amount of Non-GEO capacity, and as of today, there is not very much in terms of technology that could distribute this much capacity at a reasonable/attractive price point.

4.We have seen global capacity prices fall quickly over the past 5-6years,with average pricing dropping from just under $3,000per MHz as late as 2008to around $1,000today.Moving forward, we expect capacity pricing to continue to fall as more capacity is brought onto the market at a lower launch cost.This will have a dramatic impact on the industry.

5.Many satellite communications constellations have been announced,and NSR has noted almost 20that have or will launch to different orbits.While only a few at most will ever see the light of day, it will take only 1or 2to completely revolutionize the industry.The total number of satellites to be launched in these constellations could range from the 8,600range to over 24,000, but the question is “How many will be launched and operated?” Their business model still remains very unclear.

6.Ultimately, in the satellite communications world, the million dollar question will be: “How to bridge the supply and demand gap that is coming into the market?”We are undoubtedly going to see Terabits of capacity launched, and once it is launched, it is effectively a ‘melting ice cube’—any spare capacity today is never going to be sellable again.The company(ies) that are able to make use of this excess capacity in a way that allows rapid distribution of capacity to a customer base willing to pay, will be a very successful company indeed.

Satellite-Based Earth Observation

1.Earth Observation (EO) markets are expected to double globally to around $6.4billion by 2026.Many of the same factors that are influencing the communications satellite space—namely, lower launch and manufacturing costs—are benefitting EO, and advances in Machine Learning are allowing for the data collected by EO satellites to be used in much more lucrative ways than before.

2.EO revenue growth will be fairly broad-based, with most regions seeing an increase to 2026of around >100%.NAM, EU, and Asia will be the three largest markets throughout the forecast period.

3.Technologically, EO is seeing a number of trends that are in fl uencing the development of the market.Dedicated smallsat launchers are making it more cost-effective to launch these satellites, while other technological advancements on the ground are enhancing the capabilities of the systems that the EO satellites feed into.

4.Most satellites in EO are launched in constellations and they are targeting High Resolution imagery markets,with higher revisit capabilities.The huge amount of data that is coming is leading to a ‘commoditization’ of data which is causing industry players to focus more on selling more than just raw data—increasingly focusing on selling analytics or ‘insights’.

Emerging Space Markets

1.The phrase ‘emerging space’ or‘Space 2.0’ gets used very often today.NSR’s definition is anything that is‘targeting a new market or a radically new way of approaching an existing market’.There is no single qualifier for what makes something ‘emerging space’.

2.Funding for Emerging Space companies has increased markedly in recent years, and total funding over the 2000-2016timeframe was over $10billion.The majority of funding went into launch companies,communications companies, and EO companies, while the majority of companies was concentrated in launch, manufacturing, and EO.

3.The overwhelming majority of emerging space companies is privately owned, at over 90%.Around 3% is publically traded, or is owned by parent companies that are public(i.e.O3b being bought by SES).A remaining 2% is state-owned, and 1%is non-pro fi t.

4.The New Space movement is leading for example in the smallsat market to the development of an ecosystem involving a number of different activities across a range of sub-verticals serving this market.This could include things such as communications, dedicated smallsat launch, satellite inspection and repair,in-orbit servicing, debris removal, and so on.The development of a smallsat ecosystem is likely to lead to more opportunities and innovation in space.

5.Service revenues for emerging space verticals like EO, M2M, and Non-GEO_HTS are expected to be the key opportunity for the Emerging Space Markets, and will rise from under $6B today to over $12B by 2026, thus propelling growth across several different industry segments.

Conclusion

The Space Industry as a result of the new and emerging players and technologies are seeing drastic changes such as much lower capacity,less costly launchers, expanding market opportunities and all of this is making satellite more applicable.

As a result, the Commercial Space Market is at the cusp of a revolution today.We expect to see lower capacity pricing opening up new markets, and new technological advancements creating new applications that we cannot even imagine now.