Analysts Tackle Consolidation, Space Economy, and Sustainability Issues

SATELLITE 2023 will have many talking points as the industry debates a path forward for the 2020s. In our annual roundtable, we talk with leading analysts about the key issues facing the industry.

Taking part in the round table are: Andrew Cavalier, satcom industry analyst for ABI Research; Maxime Puteaux, principal advisor for Euroconsult; Arun Kumar Sampathkumar, principal analyst for Aerospace and Defense, BIS Research; and Ehrar Ahamed Shariff, analyst for Frost & Sullivan.

VIA SATELLITE: We are seeing huge investments in new satellites and constellations. Will all of these projects be successful, or will some fall by the wayside?

Cavalier: The satellite business has historically been a costly endeavor and comes with a number of risks. While SpaceX has a strong launch engine for modern satellite networks, the cost to deploy and manage the network can be high and incur substantive costs before the constellation even starts generating revenue. Alongside this, companies can get stuck in development hell and burn through their funds before even launching a single satellite. If the network is rushed out and comes online before full deployment to generate revenue as quickly as possible, there is still the fact that the network only has so much capacity and can only handle so many users, meaning the network will need to expand or upgrade to accommodate this and increase revenue potential. In the event that the network starts generating revenue, the average revenue per user (ARPU) needs to be high enough to sustain the business, but low enough to attract customers and increase revenue potential.

Puteaux: After record years, investment in the space industry dropped from $14 billion in 2021 to $8 billion in 2022. This slowdown combined with a tougher market environment stresses market players. Those with limited runway will likely stop while a handful of ones concentrating on investment and are more likely to survive. Generally, a shake out is expected and part of the journey to a sustainable space economy.

Sampathkumar: All space startups operate in difficult circumstances even without the pandemic and recession related disruptions. Developing a space capability, evolving a reliable version of the same and scaling up a validated version to deliver the desired impact is not an easy task. Many successful space technologies take time before they get deployed in orbit and this is a systemic challenge that all space startups recognize and respect. At one point in time, the total number of active satellites in orbit was between 1,500 and 2,000. As of 2021, a little over 1,740 satellites were launched. As of 2022, SpaceX alone launched over 1,700 satellites. What used to be an industry-wide number is now being contributed by one space startup which is also a constellation operator. There are 155 constellation operators and over 45,000 satellites are expected to be launched over the decade. The optimistic scenarios for the same tend to take this estimate to a much higher number.

Shariff: I don’t believe the number of these projects will fall, especially for the large market participants, but it could be difficult for the new startups to keep up. The numbers could potentially decline, as the launch options are fairly limited and obtaining regulatory clearance for launching such large constellations could be very challenging. As the space industry starts to focus more on space sustainability, this could also have a potential impact on the number of satellites that will be approved by the FCC.

VIA SATELLITE: Out of the two major pieces of consolidation announced over the last year, Viasat/Inmarsat and OneWeb/Eutelsat, which combination do you feel is in a better position for long-term success?

Cavalier: While both companies have significant opportunities to be leveraged from their partnerships, OneWeb/Eutelsat does seem to be in a better position as regulators have yet to rule on the Viasat/Inmarsat merger. Viasat/Inmarsat does seem to be eager to continue its consolidation efforts and this would help with acquiring key companies and technologies to build on its competitive advantage. On the other hand, while OneWeb has faced recent financial and launch troubles, the company appears to be back on schedule with launches.

Sampathkumar: Both are interesting but very different consolidations. Viasat/Inmarsat consolidation has resulted in the reinforcement of the key portfolios those organizations already had. They utilize Geosynchronous (GEO) satellites for their downstream services and their heritage is across verticals delivering communication services to enterprise customers/large organizations.

Shariff: I think both consolidations are great and are positioned for success in their own ways. But, if I had to choose, I would choose the Viasat/Inmarsat consolidation because the space industry is evolving, and it is no longer limited to a small number of high-paying customers but rather to a large number of modestly paying customers. This, combined with both companies' previous heritage and future plans, compels me to believe that their consolidation puts them in a better position for long-term success.

VIA SATELLITE: Is it possible to keep space a sustainable environment when we are putting thousands, tens of thousands of satellites into orbit?

Puteaux: The surge in the number of satellites challenges the state of satellite operations and spurs stakeholders to coordinate, mitigate, and enact new frameworks. Sustainability by design is adopted by the largest constellations by launching satellites at lower altitudes, constellations are naturally deorbiting after a few years due to atmospheric drag. Mandatory use of propulsion at higher altitude is becoming a new requirement from licensing authorities as it enables satellites to maneuver and deorbit. Space situational awareness will play a role and is gradually used to improve safety of satellite operations will likely evolve into space traffic management to support denser orbits. Adoption of satellite beacon acting as ID transponder will also improve identification and mitigation. Stakeholders are slowly realizing that without proactive actions space activities could suffer from the tragedy of commons.

Sampathkumar: Sustainability has many dimensions. Safe operations in orbit is one of them. It is true that thousands of satellites add up to the risks for all the operators. However, the evolving needs around sustainability are driving the emerging segments of the space industry such as the in-orbit services segment where in-orbit refueling/repair, de-orbiting services are being developed with the objective of delivering the much needed sustainability to constellation operations. On a different note, sustainability in the space industry will only be relevant and of value when it is incorporated in the DNA of the organizations. There are many individual and consortium efforts in this regard to enable sustainability amongst space market participants.

Shariff: From a sustainability standpoint, satellite megaconstellations in due time will pose a risk. All the competitive intensity of putting the largest satellite megaconstellations in Low-Earth Orbit (LEO) will, over time, fill up the LEO real estate. Satellite mega-constellations are good, but filling LEO space with hundreds of thousands of small, low-lifespan satellites without a clear and proven method of disposal over time is not great for the future of space. Space sustainability is the underrated question of the hour. We are at the point where we have started establishing satellite megaconstellations, and this early on, we need to encourage sustainability. Failing to do so could lead us to a future of LEO space that is no longer usable.

VIA SATELLITE: Outside of major players such as SpaceX, what are three space companies that really excite you for the future?

Cavalier: Astroscale – I met with Astroscale at SatelliteAsia 2022 and its mission excited me from the start. The company shows that the orbital debris problem can be addressed from multiple angles and what is possible with the new space economy. SES – I am excited to see how they are shaping the satellite backhaul and 5G backhaul space with O3b mPOWER. And Globalstar – The company’s partnership with Apple has me excited for what's to come for Apple devices. Apple’s recent antenna module patents suggest that there are plans for Globalstar to expand its capabilities for Apple devices.

Sampathkumar: OrbitFab: A startup aiming to deliver in-orbit refueling services through space infrastructure that can cater to a wide range of space missions. This startup has secured investment from established space industry participants and also acquired government and commercial customers. Privateer: A startup specializing in space situational awareness services for commercial and government space agencies. Berlin Space Technologies: A German small satellite manufacturer, specializing in serial production of small satellites has established a manufacturing facility in India and is aspiring to assemble hundreds of small satellites every year for multiple operators.

Shariff: Axiom Space – They are going to develop the future of the LEO space economy through their space station services and be the commercial space station that succeeds the ISS, and the services they will provide are what excites me for the future. Clear Space – I’m personally more interested in the sustainability side of the space industry, and Clear Space is one of the market participants that is working towards a more sustainable space. The technology that they are developing to tackle the space debris issues is what excites me about them and their role in the future space economy. Altius Space Machines – Altius Space Machines is another space market participant that really excites me for the future of the space industry, as they are developing the key technologies that will be required by the ISAM [in-space servicing, assembly, and manufacturing] sector of the space industry.

VIA SATELLITE: Is the space economy the next big thing in our industry?

Cavalier: Yes. Space for Earth and space for space applications will play a pivotal role in the developing space economy. Medical labs in space, space mining, orbital debris cleaning, space tourism, agriculture, energy, manufacturing, etc. are some of the many applications now possible with the lower costs to launch. Coupled with the fact that newer satellite systems are smaller and can pack a lot of technical prowess, the long-term financial viability of space-based ventures is at an all-time high. We believe the space economy will help grow the space infrastructure, broadcast, communication, and services sector to become a $1 trillion industry.

Sampathkumar: It is indeed the next best thing in our industry. The new space market has brought to life a recurring format of space operations resulting in persisting demand across segments and the evolving deep space missions segment is disrupting the space industry. These deep space missions are non-recurring and long-term while also attracting large investments (over $70 billion during 2022-2032 timeline) despite no visibility of customers willing to pay for a product/service emerging out of deep space missions. Government space agencies are ramping up their spending to engage more on exploratory missions in collaboration with commercial participants. All these are demanding diverse space infrastructure and space logistics which cumulatively will drive the growth of the space economy.

Shariff: The space economy is undoubtedly the upcoming big thing. As our reliance on space services grows, so too does the value proposition for using space and its resources to create value. This suggests that space will become an indispensable and a key component of major industries.

VIA SATELLITE: What is the number one thing that excites you for our industry over the next one to two years?

Cavalier: Satellite-to-cell service developments are a very exciting arena to be watching.

Puteaux: Many things to look forward to as large-scale technology investments are expected to start commercial service in 2023. We have been talking for years about the potential impact of Viasat-3, OneWeb, or Starship. Personally, I look specifically forward to the first orbital launch of Starship which could be an inflection in launch supply.

Shariff: The development of software technologies like AI and ML for onboard computing in satellites and their potential implications on the optimization of space-based data and services are the things that fascinate me. VS Photo credit: NASA image of Earth taken from the International Space Station