Fundamental Shifts in Satellite Architecture, Applications and Markets

There has not only been a sudden broadening in the services and applications provided by satellites, but also a shift in the market that brings consumers and business more directly in contact with satellite service providers. Traditionally, satellite services have been provided to large businesses, most particularly telecommunications carriers and the TV distribution industry. Globalization and deregulation have allowed traditional terrestrial carriers to more closely embrace satellite technology.

This trend of direct-to-the-consumer architecture is seen in direct broadcast systems (DBS), mobile communications satellite systems and now even in broadband, high data rate, multimedia satellite systems. DBS systems are rapidly succeeding on a global scale. In Europe there are numerous regional and national systems such as Astra, British Sky Broadcasting (BskyB), EUTALSAT's Hot Birds, TDF of France, TV Sat of Germany and soon a reconditioned Marco Polo system serving Sweden. In Asia there are Apstar, Asiasat, Indostar, Koreasat, Thaisat and three Japanese direct-to-the home (DTH) DBS systems.

Some other organizations have taken a global approach. In the DBS radio sphere there is Worldspace's Afristar, Asiastar and Caribstar. For global TV there is Rupert Murdoch's ambitious web of new DBS nets. These include a DTH system planned for South America via INTELSAT 8. He also has major ownership stakes in Asiasat in the Asia-Pacific, in BSB in Europe, and a pending arrangement with Primestar in the United States. Thus, Murdoch's News Corporation today is the closest to a global DBS system. The ambitious filings of Luxsat (i.e., Astra) with the ITU indicate a clear intention to also have at least a global DBS system. Finally, early conceptual plans for Koreasat 4 and Meosat envision a DTH system that would cover most of the populated areas of the Asia-Pacific region and compete with Asiasat and Apstar.

There are, of course, dozens of other national DTH systems around the world that confirm the growth and popularity of this new service. Overall it is likely that the 20 million DTH subscribers today will increase to 80 million or more by 2005. This new trend of a direct to the consumer satellite architecture is also reflected in the dozens of mobile satellite systems as well. These are a combination of navigational, messaging and voice/data mobile satellite systems. They will be a combination of GEO, MEO, and LEO systems such as Iridium, Globalstar, ICO, Orbcomm, ACeS, Agrani, Thuraya, AMSC, TMI, etc.

Most recently, nearly twenty new broadband multimedia satellite filings from around the world reflect the idea that satellites cannot only compete for last mile traffic with terrestrial systems. These new systems, which are largely in the new Ka-band frequencies, will operate to ultra-small aperture terminals (i.e., 50 to 67 cm in diameter) and seek to provide a range of digital business services at competitive data rates. These satellites will be extremely high powered and multi-purpose.

Exciting New Applications

Competitive markets, new open trade provisions and new technologies have served to create the above-noted market opportunity. Nevertheless, new applications and services are of parallel importance. Particularly Internet users and corporate Intranets, with their increasing thirst for multimedia applications at high data rates, are driving up the demand curve sharply. Figure 1.2 shows the shift in global telecommunications from voice-driven to video- and data-driven.

Fig. 1.2. The shift from voice to data and video.

Likewise, machine-to-machine communications are rising sharply as the overall percentage of human to human telecommunications declines. Digital video channels (especially MPEG 2 systems), Internet and Intranet applications are rising sharply around the world and represent the major market increase. There are also emerging applications such as collaborative computing, distributed CAD/CAM, scientific visualization, remote sensing data relay, messaging and navigational services, electronic publishing, and others that create the demand for new telecommunications networks.

New Synergy: Common Service Platforms

The broadening of the types of satellite services that can be provided from space once served to create several new families of satellites. Each of these has been allocated specific frequency bands by the International Telecommunication Union (ITU) such as fixed satellite services (geosynchronous and non-geosynchronous), broadcast satellite services (BSS), and satellite networks for land, aeronautical and maritime mobile satellite service (MSS).

For some period of time, as shown in Figure 1.3, these types or families of satellites could be mapped in terms of utilized power. Today, new multi-purpose satellites capable of providing virtually all forms of digital satellite services from a broadband and very high power common platform are starting to emerge. In a digital environment in which services are defined by throughput rates and the size of transceivers, the perspective is increasingly becoming, "a bit is a bit regardless of the service delivered." Systems such as Euroskyways of Alenia Spazio, Skybridge of Alcatel, EAST and WEST of Matra Marconi, the Gigabit Satellite of Japan, and most of the U.S.-based Ka-band multimedia satellites fit the profile of this new "multi-purpose" platform capable of providing a wide range of digital services.

Using similar logic, new synergies and integrated platforms may evolve for space systems supporting space navigation, data relay services and earth observation.

Fig. 1.3. Satellite power/mass and terminal antenna size trends.

New Architectures that Provide Services Direct to the Consumer

Traditionally, satellites have been used to advantage primarily for the transport of thin route traffic and the distribution of TV to cable head ends and network affiliates. This is due to the ability of one satellite, located at GEO in particular to provide communications continuity over one-third of the globe. Fiber, on the other hand, is a point-to-point, wide bandwidth medium that typically requires significant traffic to justify its installation. In the past, the customers of satellite service providers have tended to be large businesses, the telecommunications carriers, and TV program distributors. A major change is occurring to include the end consumer in this customer mix, with direct to the home (DTH), direct broadcast satellite (DBS), mobile telephony, and Internet access as the primary services. This change is accelerating as a result of the insertion of new technology onto satellites; namely increased power, phased array antennas, large diameter antennas, multi-spot beam antennas, and on-board processing and switching. These changes allow satellites to be a cost effective competitor to cable TV, cellular telephony, and the high bandwidth Internet service providers in many parts of the world.

There is, however, a danger of a global over optimism in these heady days of rapidly expanding satellite communications. There are clearly limits to market growth of satellites, and many key challenges are yet to be overcome. If all of the proposed and planned communications satellite networks that have been filed at the FCC or the ITU were to be built, there could easily be tens of billions of dollars of facility oversupply by 2005.

The recently proposed satellite based, high data rate Internet services are aiming at a moving target, as the terrestrial network is embracing new technology at an impressive rate. The effective bandwidth of fiber is increasing many-fold with the introduction of dense wavelength division multiplexing (DWDM), and with optical switching and multiplexing approaching commercial viability. In addition, LMDS, MMDS, cable modem, and xDSL technologies are all vying for this business, to provide high bandwidth services to homes and small businesses, at low cost to the subscriber. Satellite systems with five years or longer lead times must not miscalculate where their competition will be a half decade from now. There is thus the risk that some of the proposed new multimedia broadband satellites will not be deployed quickly and effectively enough to out-compete new terrestrial networks. Some shakeout among the proposed forty or so new Ka and QV-Band satellite systems will thus likely occur, including combinations of U.S. and international systems (i.e., Cyberstar and Skybridge).

The greatest danger, however, may be that over-optimism exists with regard to the global market for satellite land mobile services. The clash between GEO land mobile satellite systems and global LEO/MEO networks could result in oversupply of capacity in this area while a small new market is trying to emerge. While the satellite industry is strong enough to sustain some losses, a broad pattern of oversupply and system failures would have negative impact on the industry. U.S. service providers and equipment suppliers are likely to be among the most exposed. Organizations that have spread investment broadly are positioned against future risks more effectively than those that have retained majority ownership in the bold, new ventures in satellite communications. Unfortunately, for the satellite industry (both in the United States and worldwide) this narrow window of opportunity is perhaps no more than 10 years long. New fiber optic systems to the home, hybrid fiber-coax networks of cable TV systems, cable modems, ASDL multiplexing systems over copper wire, PCS networks, and broader band MMDS and LDMS wireless networks are all after this same market. Those seeking to succeed in this same highly competitive multi-billion dollar market will have little more than a decade to establish their market share.

The key to future commercial success for the new high data rate satellites will be the ability to provide broadband downstream and narrower band upstream services to the home and office with terminal equipment that sells for well under $1,000 and is user-friendly. The constraint for the satellite industry will be to offer to the consumer the entire ground system (antenna, electronics and interface as well as installation) at a remarkably low cost. The under $1,000 threshold must be achieved even if much more has to be spent on complex and high powered satellites. U.S. space communications firms that have more experience with fully competitive and bypass markets seem to understand quite well the urgency of this challenge to move into this new market niche before it is filled by others.

New Players in the Commercial Space Communications Market

The dimensions of the "players" in satellite communications have also broadly expanded. While not entirely new, the cast has certainly been extensively revised. As already noted, several countries not included in the 1992/1993 study are now significant, including Brazil, China, India, Israel, Korea, and Spain, and a resurgent Russia, all of which have specific new plans for 21st century space telecommunications.

In addition, new commercial entities not involved in providing satellite communications services at the time of the previous report are now playing key roles. Five years ago the key players in aerospace and in telecommunications were very much the same key players of the 1980s; today, though, there have been a number of partnerships, strategic alliances and mergers among them. The satellite industry is now populated by new players of various types. Established corporations, long involved in supplying equipment but not previously involved in providing complete satellite communications systems, have quickly transformed into service providers. Examples include Motorola, Raytheon, Loral, Orbcomm, General Electric, Boeing, Lockheed Martin, Matra Marconi, Alcatel, Alenia, etc. Others are entirely new ventures such as Teledesic, Morningstar, Network 28, Visionstar, Echostar, Apstar, Worldspace, Afro-Asia Communication, Ltd. of India, Thuraya Satellite Telecommunications of Abu Dhabi, etc. (These projects have different degrees of commercial viability but they clearly define a new order in the satellite field.)

In addition to changes driven by new technology and projected market growth for multimedia satellite services, an aggressive new pattern of acquisitions, mergers, and partnerships has evolved, largely within national markets but also in new multi-billion dollar satellite projects that involve new global partnerships, as in the case of Lockheed Martin forming strong alliances in Russia, and the Motorola alliance with Matra Marconi. These changes have been driven by rapidly emerging demand for new types of services, especially those related to direct to the home video, Internet and Intranet services, including multimedia requirements of business.

Regional Differences as to Competitive Markets

There are remarkably different strategies and approaches to satellite telecommunications around the world. The most complex region is probably Europe. There are 11 members of the European Union, 14 members of the European Space Agency and 43 member of the Council on European Post and Telecommunications (CEPT). Today there are the joint programs of ESA, the additional space telecommunications projects of the EU and a growing number of national satellite communications development projects in France, Germany, Italy and Spain. The coherence of space communications development in Europe of five years ago is now much more fractionated but somehow stronger-in part due to projects such as France's Stentor, and in part due to mergers such as those completed and planned by Matra Marconi (with a projected 8,000 consolidated employees by the end of 1998).

Japan's space telecommunications industry is becoming more technology-focused with clearly differentiated roles. NEC largely emphasizes ground systems, Toshiba has concentrated on large aperture antennas, and Mitsubishi is now the key systems integrator. Further, Japanese industry, freed from past trade restraints, is expected to bid vigorously for regional and global satellite systems, with Mitsubishi moving particularly strongly in this respect.

Korea's Hyundai plans to follow suit as a total system supplier, while Korea Telecom and SK Telecom have strong plans as regional service providers. If one looks for entirely different models for new satellite planning for the 21st century, there are the examples of Brazil and India. In Brazil there are plans to use an innovative new equatorial circular orbit for the ECO-8 system that would provide services to countries along the equatorial belt. The Brazilian space agency INPE will in future years contribute to new innovations in the space applications field, both on the ground and in the space segment.

India's satellite program, now thirty years old, has achieved steady and impressive growth. Determined pursuit of multi-purpose satellite technologies and development of launch technology has now reached a very sophisticated level in India's designs for INSAT 3 and its corresponding launch system. These systems are for internal use and not for export. There are valuable lessons to be learned from the Indian model in terms of integrated applications and incremental design. Clearly self sufficiency in launch technology is related to national defense considerations.

The North American picture is also complex. Canadian suppliers are seeking to define niche markets with COM DEV achieving good success. Major U.S. suppliers, such as Hughes, Lockheed Martin, Loral and Motorola are looking abroad for compatible suppliers and partners. Europe and the United States are similar in that massive investment in complex launch systems (i.e., the Shuttle and Ariane 5) and the International Space Station have tended to drain research resources away from commercial application programs. Meanwhile Korea and Japan are investing up to 20% of their space programs' resources in applications. Mapping the complex patterns of national and regional relationships in space communications was hard five years ago. It is even more difficult today.

The Strategic Force of New Ground Systems

Despite the high level of publicity given to the design and characteristics of many exotic new satellite systems, the key to market success and competitive advantage over terrestrial alternatives will hinge on the cost and performance of the associated satellite ground terminals. Motorola and Teledesic have probably pushed satellite technology the furthest, but for these systems to succeed they will need to supply millions of low cost ground units. In particular they will need to ensure the supply of millions of such terminals through automated assembly at a unit cost of much less than $1,000 to be competitive. Whether this can be achieved with traditional reflector technology, with mass-produced phased array antennas or some other technology means remains to be seen. Ironically, the market success of multimedia satellite communications in the 21st century will likely live or die on the basis of the cost and user convenience of the ground systems.

Published: December 1998; WTEC Hyper-Librarian