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RE: future of satellite business (was Re: More about the Ariane failure) -REPLY -

Franklin & Jeff,
Thank you for your insights. I am an AO40 lover and am in the Commercial TV
business, as well as High Speed Internet delivery... You nailed the topic!!
Again, thank you for your thoughts. In so many fields, we are seeing the
take-back of a substantial portion of the 90s, (the BS and smoke screen
portion) from unneeded technology to a bananas stock market..
Gunther Meisse

-----Original Message-----
From: owner-AMSAT-BB@AMSAT.Org [mailto:owner-AMSAT-BB@AMSAT.Org]On
Behalf Of Franklin Antonio
Sent: Saturday, December 14, 2002 6:09 PM
To: Jeff Davis
Cc: amsat-bb
Subject: future of satellite business (was Re: [amsat-bb] More about the
Ariane failure)

At 11:46 AM 12/14/2002, Jeff Davis wrote:
>Five years ago there was a surge in satellite demand, driven by an
>over-enthusiastic expectation for both satellite phones and the dot.com

Well, I think the connection to the dot.com bubble is tenuous, except
perhaps in the case of Teledesic.  The peak in the satellite construction
business due to mobile satellite telephone system construction or
anticipated construction a few years ago (Globalstar, Iridium, ICO, ...)
was real.  But there are larger trends that one must consider to get the
big picture.

Many of the uses for communication satellites have simply been replaced
with or substantially reduced by technological change.

Long distance telephony:  Fiber has replaced satellite completely.

Computer networks:  In the 70's some folks were convinced that geo
satellite communication links would be the backbone of high speed computer
networks used by large corporations.  May sound strange now, but large
corporations did use satellite links for computer data routinely at that
time, and for awhile in the 70s it was a growing application.  If you
guessed that computer networks would see incredible growth (correct), but
failed to see the transition to fiber, you might have invested.  Satellite
Business Systems (a JV of IBM, Aetna, and Comsat, if I remember correctly)
was formed to supply to that market, and spent about a billion dollars
building a giant high speed TDMA satellite network, to connect computers at
major corporations.  It was a complete business failure.  Fiber now
supplies all the long distance connectivity anyone could want for computer

Satellite television:  C and Ku band geo satellites in large number were
used for backhauls and network distribution to TV stations.  Some home
users tapped in to the signals as well.  For many years the transmission
was analog, where one TV signal occupied an entire transponder.  With the
transition to digital, and the advent of high quality compression, many TV
signals can occupy the same transponder.  In addition, as these satellites
have been gradually replaced at end-of-life during the past 10 years, the
satellites that have replaced them have more powerful transponders, meaning
they can carry even more per transponder.  A lot of TV signals still go
thru satellite transponders, possibly as many as ever, but the number of
transponders required has been greatly reduced.  More and more TV signals
travel over fiber too, in point-to-point (backhaul etc) applications.

The home satellite TV users of course mostly migrated to special DBS
satellites designed specifically for broadcast to small dishes at the
home.  That's a new use for satellites, but there isn't a need for very
many of this special kind of satellite, so they don't add much to the count
of new launches required.

Satellite internet delivery: There are a few companies offering a
satellite-based internet connection to your home.  Unfortunately, these
businesses use conus-beam Ku band satellites, and these satellites just
don't have enough capacity to make these businesses profitable.  Future
multi-beam Ka band satellites may accomplish that trick a few years from
now.  Meanwhile it has been a mystery why these companies continue.  News
broke a few days ago that Hughes will cease marketing its service.  Perhaps
they reached the same conclusion that I did.

Then there's Ka band.  FCC issued a bunch of licenses a few years ago for
Ka band satellite systems (20/30 GHz).  Many of the proposed systems were
proposed only to get one of the licenses, and then see what would
happen.  There were people who were serious, such as Teledesic, but it is
difficult to discuss Teledesic while keeping a straight face.  The original
system involved a constellation of over 800 LEO satellites.  This would
have offered high speed internet access to everyone in the world via
satellite.  The large number of satellites meant that there would always be
one nearly overhead, providing a short range (good link budget) and low
latency.  From a communication point of view, this made great sense.  Only
problem is it would have required an impossible amount of money.  The
system was redesigned to user fewer satellites several times and then
finally abandoned.  They got great PR and generated tremendous hype from
the fact that two high profile rich guys put in some of the initial money,
but it wasn't enough buzz to attract other investors.  While the other  Ka
band proposals were not so bold, most of them will never get built
either.  Some companies have started construction of Ka band satellites so
that they can show progress and keep their licenses, but there are very few
who have plans for those satellites that are capable of making sustainable
businesses.  Any satellite manufacturer who was planning on much of this
business for future growth is making new plans.  I'm not saying Ka band
satellites will not be built.  I'm just saying this will proceed much much
more slowly than was anticipated.  At Ka band it is possible to build
satellites with a large number of independent antenna beams.  This
increases the capacity of the satellite tremendously, presuming that you
have a large number of users who want different bits
delivered.  Eventually, this sort of satellite will find a place in
satellite internet delivery.  That's several years away.  Even when it
arrives, it will likely not create a demand for a large number of

Finally, even if all the new systems go away, there's a background business
replacing geo satellites as they run out of fuel.  As the satellite
manufacturers stare at their blank order books they keep mumbling to
themselves that the replacement business will surely come.  I claim even
that business is now uncertain.  As the C and Ku Geo satellites in orbit
now run out of fuel over the next 10 years, will all of them be replaced as
once planned?  Probably not.

Don't get me wrong, there are some great commercial uses for
satellites.  Sometimes nothing else will do.  However, many of the past
uses are just going away, and many of the hyped new uses have not
materialized.  That means a many years of reduced activity in construction
and launch.

>In 1997 there were some 60 commercial rocket launches, which fell to 28
>last year. This year there will be only 21 commercial satellite launches."

This trend will continue for awhile.

>"But the reality is that no one at present is making money by launching

!!! True for building satellites as well as launching.  I believe that the
satellite manufacturers order books look even worse than these launch
counts would lead you to believe.  It means we will see more consolidation
in the satellite industry during the next 2-3 years.

I know less about the launch industry, but it seems clear that something
similar must happen there too.  Whether they will downsize, consolidate, or
some just disappear, I don't know.  Most of the launch operations are run
by governments who are unlikely to consolidate.  They'll probably just

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