An iPhone dilemma for satellite operators

Any industry in which you purchase your principal asset three years before it’s operational, then get stuck with it for another 15-18 years is about as far from the iPhone economy as you can get.

Or so it was thought until recently. Some operators now question whether a 15-year service life for a geostationary-orbit telecommunications satellite is too long, given the rapid evolution of the technology.

A successful business model for a five- or seven-year satellite is nowhere in sight, given what such a change would mean for satellite manufacturers and launch-service providers.

How do you build a half-satellite? What backup systems can you toss out? On the launch side, lower mass does get you a lower price, but that’s already being done with all-electric satellites. A design offering another 50-percent mass reduction, while still meeting the mission requirements of a conventional satellite, is not on the horizon.

But if replacing geostationary satellites with new models every few years is not yet feasible, what about the other end of the iPhone phenomenon: customer hesitation to make a purchase because a cooler, new model is about to be released?

No one keeps these things for 15 years. Credit: Apple

No one keeps these things for 15 years. Credit: Apple

That is what is apparently happening among numerous satellite-fleet operators who have issued bid requests in 2016, who but have stopped short of signing anything.

Operators don’t send out bid requests on a whim. It takes time and money to assemble the specifications, and it costs satellite builders even more time and money to assemble and promote their bids.

And yet, for months, we’ve been hearing of numerous bids for geostationary satellites large and small, wide-beam and spot-beam high-throughput (HTS), and some interesting internet constellations as well.

But few contracts have been signed, and satellite operators and builders say it’s because the market does not know which way to turn from a technology point of view.

Every piece of news about how an HTS satellite is undercutting the bandwidth-pricing power of wide-beam spacecraft — and every market forecast saying there will be too much HTS in orbit by 2020 given expected demand — freezes prospective buyers.

Until late 2015, Canada’s Com Dev, which builds satellite electronics components, was a good proxy for how the commercial-satellite business was doing. Com Dev gear is onboard most commercial telecommunications spacecraft, and its quarterly reports were invaluable in separating the signal from the noise.

Then Com Dev was gobbled up by Honeywell and became a small part of a large organization whose investor notices don’t have much room for such a niche business.

That leaves us with Canada’s MDA Corp. as about the purest publicly traded play in the commercial-satellite sector, with its SSL manufacturing division in California.

On its most recent investor call, MDA repeated what it’s been saying all year: RFPs and other bid activity are at record levels. But even MDA and SSL, who have more reason than most to want to believe in the commercial market, now concede that 2016 is likely going to be a mediocre year for orders: 12 so far, maybe 16 by the end of the year.

That will be two lackluster years in a row. Two years down the road, the launch-service sector will feel the pain.

In the midst of all this, the number of nations and regions with a demonstrated ability to win commercial geostationary-satellite orders on the merits of their bids has just increased by one.

China, whose sale of a satellite to Thailand’s Thaicom, is a showcase event for China’s satellite manufacturers, joins the United States, Japan and Europe as bonafide commercial-satellite exporters. Static demand, but increased supply. Oh, boy.