Space News - September 10, 2018
Maxar’s Space Systems/Loral, the longtime market-share leader in the construction of geostationary satellites, is considering exiting the GEO business entirely. An exit by such an established industry leader would have been inconceivable until recently.
Orders for traditional geostationary satellites have fallen precipitously over the past three years. Industry counts show orders dropped from 26 GEO orders in 2014, to 15 in 2016 and seven in 2017. Most observers don’t believe 2018 will be much better. There are many reasons for the decline, ranging from a plateau in satellite video distribution to rapidly evolving high-throughput satellite (HTS) and digital payload technology that has created overcapacity in some segments and makes operators anxious about ordering long-life satellites that may soon be obsolete. These risks might be manageable if not for the planned low Earth orbit (LEO) constellations, with their promises of lower pricing, amplifying pricing and capacity concerns.
Is the industry jumping the gun and prematurely dismissing investment in geostationary satellites? There are a lot of LEO constellations ready to compete with GEO satellites in the media; there are far fewer of them in the factories, much less in orbit. Financing for multibillion-dollar LEO constellations has mostly stalled over the past two years. If this continues, the industry may go from overcapacity to a capacity shortage never seen before.
Business plans for the large LEO constellations are primarily, albeit not entirely, predicated on being able to use their low-cost capacity to address the underserved consumer broadband market that was not previously financially feasible. These underserved consumers are the only market segment with a realistic chance of absorbing the enormous amount of new satellite capacity the planned LEO constellations plan to unleash. Viasat and EchoStar’s experience with delivering internet via satellite to households underserved by terrestrial options illustrates the demand elasticity of the consumer broadband markets. ViaSat 1 and EchoStar’s Jupiter 1 nearly tripled fixed-satellite service (FSS) capacity over the U.S. However, they quickly sold out this capacity by creating an affordable consumer broadband service serving nearly 2 million subscribers.