[Satellite News 01-06-09] Political shifts in the U.S. government could lead to adjustments in business plans, satellite executives told Satellite News.
    With the U.S. digital television switchover planned for Feb. 17; a new U.S. presidential administration set to take office Jan. 20; possible changes to the U.S. Federal Communications Commission (FCC) that may affect the ease of acquisitions and mergers; dramatic increases in broadband capacity demand and an even more dramatic decrease in the ability to secure funding for large-scale projects, executives said 2009 is sure to test even the strongest satellite business model.

Will Obama Bring Change to the Satellite Industry?
    During his campaign, president-elect Barack Obama’s space platform involved the reevaluation of U.S. International Traffic in Arms Regulations (ITAR) restrictions imposed on U.S. companies, with a special focus on space hardware currently restricted from commercial export. He also wants to revise licensing processes to ensure that American suppliers are competitive in the international aerospace markets.
    Arianespace President Clay Mowry welcomes these re-evaluations. “We hope the new Obama administration will be open to more international cooperation in space and look forward to launching future missions where space agencies are sharing platforms and providing instruments to further scientific discovery,” he said.
    In addition to driving research out of the United States, ITAR restrictions have also prevented commercial satellite companies from seeking cheaper launch options in China — an expense that could make an impact on a recession-centered business plan. "U.S. satellite manufacturers suffer commercially because the U.S. satellites cannot be launched by cheaper Chinese launch vehicles due to ITAR," said Eui Koh, president of ProtoStar Asia. "This may sway Asian operators to select European satellite manufactures to go along with Chinese launcher to make [it] commercially attractive compared to U.S. satellites and U.S. launch vehicles," he said.
    Satellite executives also are paying close attention to how Obama will financially restructure NASA and U.S. Department of Defense space programs. Just three days into the new year, the incoming administration announced it was considering a collaboration between the Defense Department and NASA to use Boeing’s Delta 4 and Lockheed Martin’s Atlas 5 launch vehicles instead of NASA’s planned launch vehicle, Orion. The transition team said the U.S. rockets, primarily used for U.S. military launches, may be cheaper and ready sooner than NASA’s Orion, which is scheduled to be operational in 2015. The Pentagon’s space program, which spent about $22 billion in fiscal year 2008, almost a third more than NASA’s budget, could be tapped to speed the civilian agency toward its goals as the recession pressures federal spending, Obama said.
    ComDev CEO John Keating is not worried that government penny pinching will affect his business. “Our general view is that, unless there is a wholesale cancellation of budgets in both [Department of Defense] and NASA, we will be in good shape.  For ComDev, the U.S. market is very significant and provides much opportunity for us to grow our business in the coming years.”
    The Obama administration also could have an impact on the commercial satellite broadcast and broadband sectors by making fundamental changes to FCC personnel and restructuring the Universal Service Fund in regards to the U.S. wireless spectrum. Obama made it known during his campaign that he will be tougher on mergers and enforce stricter antitrust policies. While Obama did not endorse nor protest the merger between XM Satellite Radio and Sirius Satellite Radio, he was wary of how the current commission members handled the process. With several analysts and executives citing acquisition as a means to sustain the current rate of growth among larger companies, tough merger policies would make it difficult to seek financial rescue through synergies. “It will be interesting to see how a sense of competition is maintained in this market when smaller companies cannot secure the financing they need through any other means besides acquisition,” said industry analyst Tim Farrar.

Government Spending to Remain Strong
While governments around the globe may be watching their wallets, satellite executives are expecting more business from private-public partnerships in 2009.
    Sara Poulton, senior director of marketing for DigitalGlobe, said one of the biggest government opportunities for her company lies in mapping. “It is surprising, but many nations do not have a digital national map available for their constituents,” she said. “Through a public-private partnership for national mapping initiatives, we have been working to provide these countries with an updated look at their country and land use.   We have an association with countries undergoing fast economic development as well as large, undeveloped rural economies to provide a systematic, satellite map over a period of years.”
    Poulton believes these services could help governments make better policies to avoid conflicts in developing countries. “Land rights and inheritance issues have caused tribal and civil unrest, but a digital national map from both satellite and mapping companies allows governments to implement inheritance rights and practices, provide subsidies based upon predicted weather patterns, land conditions and droughts, and perhaps more importantly, develop the infrastructure and homeland security policies to support its demographic profile at a larger cost savings.”
    In North America, Keating said ComDev is maintaining solid business with its U.S. government customers. “We expect to see significant growth in our U.S. operations,” said Keating. “The revenue in 2008 was about $10 million. The current revenue run rate is about $25 million and we have recently received a $20 million order for a significant U.S. government program.”
    Keating also sees government growth opportunities outside of the United States. “We expect to see some growth in our European operations, following on from a lean period when several key government programs were delayed by the European authorities. It looks like most of them will start up in 2009,” he said. “The Canadian government and the Canadian Space Agency is busy reviewing its long term space plan. A number of new programs have been proposed and we hope that some of them will be supported in the current review.”
    Mowry said government demand for small satellites in the 3-metric ton class continues to benefit the launch industry, especially in Europe. “The recent [European Space Agency] ESA ministerial was a success and made provisions for four more ATV cargo supply missions to the International Space Station.  ESA also provided funding for work to begin on a new cryogenic reignitable upperstage engine for the Ariane 5,” he said.

Part 3 of our feature, “Industry Executives Reveal Expectations for 2009” will list industry-wide predictions from top executives as well as what excites them about the satellite business in 2009.