[Via Satellite 04-15-2016] Arie Halsband, CEO and founder of in-orbit satellite servicing company Effective Space Solutions, believes that in the last year alone the satellite market has grown more responsive to contracting for the potentially groundbreaking service. Proof is in the company’s first Letter of Intent (LOI) to deliver in-orbit services via microsatellites, which will operate out of a docking station of the company’s own design, to provide life-extension services that have the potential to expand mission life of a commercial satellite by up to five years.

Effective Space signed the LOI with an undisclosed satellite operator to provide multi-year life extension for a geostationary (GEO) communications satellite, and plans to inauguration operations in two years. The company is currently working with an unnamed satellite manufacturer to move the spacecraft docking system into full-scale-development to meet its contracted rideshare launch date in 2018.

Halsband believes that this LOI not only secures the first spacecraft program, but also confirms the business assumptions behind life-extension use cases, making in-orbit servicing more attractive than satellite replacement in some cases. The LOI is symbolic as well, acting as a totem of the increased appetite for in-orbit servicing in the satellite market.

“Regardless of the LOI itself, I think that in the last few months we can identify progress with several operators that have been willing to openly discuss in-orbit services. To be frank, I feel that we and other service providers in the market are enjoying a more responsive customer base and appetite now than in previous years,” Halsband told Via Satellite.

Earlier this week, Intelsat and Orbital ATK announced a satellite life extension service agreement as well, in which Orbital ATK will extend the life of an Intelsat satellite by five years using the company’s Mission Extension Vehicle (MEV). Launch of the MEV 1 is currently slated for 2018, with mission extension service for Intelsat beginning in 2019.

Halsband contributed the increased interest in satellite life extension to several factors, including the general health of current satellites in orbit, a lack of resources for new geostationary satellite programs, and increased competition in the market.

“The first factor is that most of the typical satellites are behaving very well from a payload perspective, which means that our ability to provide life extension by providing in-orbit services — and therefore allowing the customer to extend the payload usage even beyond the end of fuel — actually translates to a technical capability,” he said. This ability by the satellite operator to manage the payload from a “health point of view” is one of the main factors contributing to the increased evaluation of in-orbit services.

“The second factor is the satellite market’s current economic situation and the ability to raise money necessary for a new satellite in the current market, which has become more difficult even for the ‘big four’ operators,” said Halsband, echoing many of the concerns surrounding the over-supply of satellite capacity in the market. Operators with satellites over Africa and Asia have experienced pricing pressure due to an abundance of capacity, and Latin America is expecting a similar situation in the coming years. With satellite life extension services, companies like Effective Space are allowing operators to translate Capital Expenditures (CAPEX) into Operational Expenditures (OPEX), which Halsband said operators are more willingly evaluating at this point in time.

“The third factor is definitely the competition that an operator faces from other operators,” he added. “We see that some operators are pushing prices lower. So, while I believe that several years ago all of the operators enjoyed margins in their operations so they could tweak prices, now, with the state of the ecosystem, prices are almost set and they have to start dealing with their cost structure in other ways. In orbit services are an offering that directly translates into cost reduction.”

 Effective Space secured down payment funding for its first two in-orbit spacecraft last year, and the LOI obtains further significant funding toward Series B financing for full-scale development. The LOI is also a key milestone in securing export credit, according to Halsband.

The company is actively seeking more funding to expand its fleet of microsatellites prior to its rideshare launch in 2018. And while the rideshare includes up to five spacecraft with Effective Space’s design, the Halsband made it clear that the company is not actively seeking to expand its fleet to a number that would occupy all positions.

“At the end of the day, we want to ramp up in a safe manner without risking our program and organic growth,” he added. “But we are certainly willing to increase the number of satellites that we will send to space based on the contracts we receive.”