The United States and Canada have pioneered satellite communications services and today the U.S. is the world’s largest market for satellite-based services, all applications combined (SATCOM, SATNAV, and Earth observation).

This statement is consistent with two facts...

• the U.S. government is the world’s lar est satellite operator
• commercial satellite applications emerge earlier in the U.S. than in the rest of the world as a result of early deregulation of satellite service provision and easier access to capital financing

A Large Industry With A Large Customer Base
The U.S. space satellite manufacturing and launch industry had record sales of almost $40 billion in 2008, thanks to its access to the world’s largest government market including the DoD, NASA, and the DoC. In addition to the captive U.S. government market, U.S. satellite and launch vehicle manufacturers also serve a large domestic commercial market (communications and Earth observation satellite operators). In that market, US manufacturers enjoy high market share — of the 20 geostationary comsats launched for U.S. commercial companies over the past three years, 17 were manufactured in the U.S.

• Fixed Satellite Services (FSS) with three companies (SES Americom, Intelsat and Telesat) serving U.S. and foreign telcos, ISPs, celcos and broadcasters in the U.S.
• Mobile Satellite Services (MSS) with five companies providing enterprises and government agencies in the U.S. with mobile voice and/or data services: Inmarsat, Iridium, Globalstar, Orbcomm, and SkyTerra (formerly MSV)
• Direct-to-home digital TV Broadcasting Services (DBS) with two vertically integrated satellite broadcasters (DirecTV and Dish Network), together serving about 33 million U.S. subscribers Digital Audio Radio Services (DARS) with one vertically integrated satellite broadcaster (Sirius XM Radio) serving about 20 million U.S. subscribers
• Consumer two-way broadband satellite services with two vertically integrated satellite service providers (WildBlue and HughesNet), together serving almost one million U.S. subscribers
• Earth observation data sales with two vertically integrated satellite companies (GeoEye and Digital Globe) primarily serving the NGIA and other government agencies, as well as virtual globes and geospatial companies.

These 15 companies feed an ecosystem of terminal manufacturers, resellers and application developers that is unequalled elsewhere in the world. They demand a lot from satellite technology providers so as to introduce innovative services to their own customers — whether consumers, businesses, or government agencies.

In addition to satcom and Earth observation, satellite navigation is the third area where commercial services have developed thanks to the availability of satellite infrastructure (GPS) financed by the DoD. Today, Magellan, Navteq, Trimble, and Raytheon serve their domestic market and compete internationally on a growing market of GPS-enabled terminals.

Using launch mass of geostationary satellites as a metrics for satellite capabilities — reasoning that more power, more bandwidth, more lifetime result in bigger satellites — U.S. satellite operators and manufacturers have always been at the cutting edge of performance of the industry.

In 2008, ICO launched its first geostationary satellite, the world’s largest to date at 6,600 kg, and ViaSat ordered a multispot beam band Ka-band satellite capable of 100 Gbps. In the area of Earth observation, GeoEye anticipates launching GeoEye-2 with 0.25-m ground resolution. GPS-3, now in development, will feature a cross-linked command and control architecture and a new spot beam capability for enhanced military (M-Code) coverage and increased resistance to hostile jamming.

Adapt To Changing Market Environs
Innovation in the U.S. satellite industry is not just about technology — as the various business models tested over the past few decades illustrate.

The first experiment in public-private partnerships in space occurred in the U.S. for the TDRSS and Leasat satellite systems for NASA and the DoD, but U.S. government procurement schemes for space systems have since returned to cost-plus contracting.

Vertical integration produced mixed results for OSC and Loral Space & Communications, which both divested entirely or partly from the service business to concentrate on the space system business. For satellite operators, the acquisition of service companies downstream seems to have been more beneficial. Examples include Intelsat (which acquired Comsat General), SES Americom (which acquired Verestar), and Telesat (which acquired Spaceconnection). U.S. commercial satellite operators have also introduced the cost-effective and rapidly deployed solution of hosted payloads where government dedicated payloads are piggybacked on commercial satellites.

Consolidation is now the rule at every level of the value chain in the U.S., as the space market matures and competitors seek improved profitability, and shareholders look to maximize their returns on investment. At the manufacturing level, the two largest events were Boeing’s acquisition of Hughes Space & Communications in 2000 and Northrop Grumman’s acquisition of TRW in 2002. Since then, consolidation has reached smaller companies manufacturing small satellites for low Earth orbit, with ComTech Aero, Sierra Nevada, and ATK emerging as new players.

Lower in the value chain, consolidation among satellite operators started in the late 1990s with the acquisition of HCI by PanAmSat and culminating with Intelsat acquiring PanAmaSat in 2005. In the satellite service business, companies have changed shareholders (if not name) through merger and acquisition (e.g. Arrowhead, Spacelink) in the aftermath of the telecom crisis of the early 2000s.

But technological superiority comes at a price. Financing for advanced developments for future government and commercial satellites in the U.S. is now uncertain, with a new Administration and the collapse of the financial markets. This is why U.S. companies will continue to restructure and consolidate all along the satellite services value chain, resulting in more opportunities for partnerships and acquisitions by foreign companies.

About the author
Rachel Villain, Director Space & Communications at Euroconsult, Paris, with inputs from Euroconsult’s Satellite Communications & Broadcasting Market Survey: World Prospects to 2017 and Government Space Markets: World Prospects to 2017.