By Julie Blondeau

An atmosphere of stiff competition remains overhead as global launch service providers continue to race against time and win as many contracts as possible in today’s lackluster market. More importantly, however, each of the players is now more focused on customer satisfaction than ever before. There is no room for error in today’s race given the fact that fewer payloads are going to orbit; Clients must have assured access to space and 100 percent reliability for their spacecraft so they are able to move forward with their business plans.

Although the number of launches remained in par with that of 2003, the industry observed a significant redistribution of the launch counts among its providers in 2004. While Russian and multinational launches remained steady at six and three respectively, Europe dropped its launch frequency dramatically in 2004. The United States doubled its market share, attaining a strong lead ahead of its competition.

Clayton Mowry, president of Washington, D.C.-based Arianespace Inc., says his company faced some significant challenges during 2004. "We have been working to get our ECA launch vehicle back into flight, and of course you always want to make sure you’ve done everything that is necessary for a return-to-flight mission. There also have been satellites that we hoped we would launch but there have been some issues on the manufacturing and operator sides of the business that prevented us from flying those payloads during this year," he says.

Although a lower-than-usual launch frequency rate faced Arianespace in 2004, it managed to maintain a balanced financial keel as it navigated these choppy waters. "We were back in the black and signed a healthy number of contracts," Mowry adds.

Despite last year’s low figures, forecasters are predicting a slightly higher volume of launch activity for the coming years. In fact, the FAA Commercial Space Transportation Advisory Committee predicted, in its "2004 Commercial Space Transportation Forecasts" report and in the October 27, 2004 "AST News Bulletin," that the total launch demand for commercial launches worldwide in 2005 should be about 25, which represents an uptick compared to 2004. The reports also predicts a growth in U.S. commercial orbital and suborbital launch revenue, from $585 million achieved last year to $650 million targeted for 2005.

Last year, Virginia-based International Launch Services (ILS) signed 12 launch orders, evenly split between its Atlas and Proton launchers, and its manifest is near full with a backlog of roughly 30 launches on the books.

Arianespace signed seven contracts and is expecting slated for six launches for Ariane 5 and three for Soyuz. But the big event for the company will be the return to flight for its Ariane ECA. As we went to press, final preparations were underway in Kourou, French Guiana for the February 11 launch.

Sea Launch also reported it should conduct six launches in 2005 and its executives say that, for the first time in a long time, all the expected satellites seem to be making good progress so there is confidence that they will be delivered on time. Manufacturing delays have always hindered, reshuffled and strained launch manifests. Sea Launch executives also say the company signed 11 contracts giving it a robust near term manifest.

In terms of general predictions for the coming years, Jim Maser, president and general manager of Sea Launch says, "We don’t really see a lot of growth in the business and this is for the entire industry." He adds that, "Last year was pretty low in terms of total contracts awarded. Sea Launch holds about 20 percent of them. We are expecting the market to average between 15 and 20 launches between 2005-2010."

Although the market is not expected to see significant growth, launch service executives such as Mark Albrecht, president of ILS believes that "satellites will continue to play a key role in the development of technology, as new applications are invented to take advantage of satellites’ capability for wireless communications."

As for what will be driving the market in the near term, the general consent is that satellite-based subscription radio, broadcasting, voice and mobile data services are growing markets. Replenishment and growth should still be a strong part of the satellite market, driven near-term in North America by the demand for video services, with the next five years expecting growth in the Asia-Pacific region. Finally, many believe in the worldwide implementation of DTH services. "Near term, the North America DTH and HDTV market will be driving satellite and launch services growth," says Albrecht.

From a broadband standpoint, however, opinions diverge. The long-awaited outburst still has not happened. Although there is some business validity within the broadband marketplace, the industry has not seen anything near the major growth that was predicted four years ago. Maser says that, "The terrestrial substitutes seem to be developing faster, which is what really stalled satellite broadband initiatives. People are not willing to invest for fear that the terrestrial capabilities will outstrip the satellite capabilities, and this is what is holding it back." He adds that broadband is not yet a significant driver and is not expected to be until after 2010. On the contrary for Albrecht, "Broadband applications are primarily the continuation of Internet infrastructure build out in Asia-Pacific and Africa. Use of DTH HDTV-type of broadband applications (Spaceway/DirecTV and Rainbow DBS) will continue to be the largest growth applications."

Emerging Regional Markets

Direct-to-home broadcasting satellite providers are expected to continue to be an important segment of the emerging markets and they show a significant business potential for the launch service providers. Albrecht envisions that "throughout the next five years, the growth of DTH into Asia-Pacific, South Asia, the Middle East and Africa will hold major growth opportunities. Likewise, the continuation of applications using Ka-band for both broadband and DTH applications will add to the overall industry growth as well."

In particular, all major satellite launch service providers seem to see a big potential for business growth in Asia. Executives at Sea Launch, for example, are working to develop long-term relationships with Asian satellite operators. "We are hoping that as the Asian market grows, our company will be even more considered as a valued launcher provider and therefore, gain more market share from the Asian region," says Maser. "We want to make sure everybody over there is familiar with Sea Launch, understands what we do and realizes the integrity we have in this company."

Arianespace also has long-term interests in Asia, where it is currently competing for procurements in several countries across the southeast region, and trying to expand its customer base. "We have a heritage in launching satellites for many Asian operators. Obviously Australia also is important for us. We won a contract with Optus last year and we continue to sign contracts with other Asian countries today. But there are a number of other potential contracts that we are trying to win from this market as well. We are confident they will come to fruition," Mowry says,

More specifically, China continues to grow in its market appeal for the global satellite launch service providers but it is uncertain how much of the market is going to be developed completely by domestic incentives and how much will be opened to western satellite service providers and western launchers.

An Industry Under Intense Competition

The entire satellite industry, from satellite manufacturers to operators, has been under very intense competition for a number of years regarding their respective business growth. With the ripple effect, a downturn in application expansions by the operators eventually results in a downturn of new payloads being manufactured and ultimately being launched. Even so, those following the industry point toward a flatlined future at best for launching and the launch service providers are focused on upgrading their offering and maintaining the market shares they currently have with as much realistic growth as possible.

Arianespace has finished securing the guarantees for launching the Soyuz vehicle out of French Guiana starting in late 2007, is working on introducing the new Vega vehicle to its launcher family and is also returning its Ariane 5 ECA to flight. For ILS, Atlas 2 AS had its last launch and is now retired, and, at press time, Atlas 3 was facing its final launch. Atlas 5 and its Proton are, therefore, the only two left for hire.

New Customer Service

Given the fact that launch contracts are not as plentiful as they once were, launch service executives are looking for ways to show a differentiated value to the customer within this intense environment. Are they achieving this? Maser says that "First and foremost, you want to be reliable." He adds, "You want to have a constant rate of operations. Those two things are just required to be in the business." In addition to high capabilities and quality of service, executives now want to offer creativity and flexibility to the customer.

Boeing Launch Services, Arianespace and Mitsubishi Heavy Industries, Ltd. made a bold move two years ago by getting together and creating the Launch Service Alliance. The joint venture is intended to offer customers both schedule flexibility and mission assurance. Because of the dynamic nature of the launch market, customers can benefit from having more than one independent launch vehicle to choose from should the primary launch vehicle encounter any technical problems. The alliance option guarantees them a launch spot on another alliance member’s manifest assuring access to orbit. On the other hand, should there be any delay on the manufacturer or operator side, the satellite will be guaranteed a spot according to its new schedule.

The benefit of the mission assurance option is to have already done all the parallel mission integration work as well as the export licensing work, to be able to seamlessly move from one system to another at minimal cost to the customer. For the price that customers would pay upfront, they get two things: a secured slot on the primary manifest with a guaranteed window on the other provider’s manifest and all the mission analysis work, including mission dynamics analysis and technical information analysis for the spacecraft.

The creation of this alliance, however, required quite a bit of work on the part of the participating launch service providers. "It is not easy to form something like this with a competitor in the marketplace. You have to work through contractual issues and transfer issues that will allow you to reassign a payload from one service provider to another," says Mowry. "But although it does complicate the business model, such a partnership brings advantages to the customer and ultimately more launches to the alliance."

In terms of manifest scheduling, having these back-up contracts signed through the alliance also make the planning more complex. It requires launchers to carve out manifest for launches that are not certain. Reasonably, the alliance launchers are only willing to sign up for a certain number of back-ups because there is only a certain probability that those will turn to actual launches.

Given that the mission assurance through the alliance is a contractual option, customers’ interest depends on their business plan, their procurement strategy, their maturity and their financial resources. Ultimately, it also depends on how risk averse they are. For instance, a company that needs to have its satellite up by a certain time will value this schedule assurance more than a company that can afford to be delayed or has excess capacity available.

The alliance paid off with the migration of DirecTV 7S between Arianespace and Sea Launch in order to deliver the payload to orbit on time.

And other operators are following in DirecTV’s footsteps. Today, the Australian company Optus plans to launch on an Ariane as its prime and keep a Zenit rocket as its back up. Maser says "In 2005-2006 I think we will be seeing more utilization of this service alliance in particular between Sea Launch and Arianespace. Once Mitsubishi proves itself with its launch this year, it will become more active in the commercial market also."

Customer Service Spells Success

Even with a lackluster forecast for launch activity facing the global providers, none of them are bowing out of the game. Rather, all are focusing more on customer needs. That way, they not only maintain but become more attractive for new customers to sign on with them instead of the competition.

Julie Blondeau is the Managing Editor of Via Satellite magazine.