State Of The Satellite Industry Report

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State Of The Satellite Industry Report
June 2005
Sponsored by the
Prepared by Futron Corporation
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SIA Overview/Mission

• Overview
• The Satellite Industry Association is a
  U.S.-based trade association providing worldwide
  representation of the leading satellite
  operators, service providers, manufacturers,
  launch services providers, remote sensing
  operators, and ground equipment suppliers.  
• The SIA is the unified voice of the U.S.
  satellite industry on policy, regulatory, and
  legislative  issues affecting the satellite
  business.
• Mission
• To educate the public, the press, policy and
  lawmakers throughout the world of the critical
  role satellites play in our everyday lives

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SIA Members
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Methodology

• The study is performed by Futron Corporation for
  SIA.
• The study is based on a survey that targets large
  companies operating in four satellite industry
  segments
• Satellite Services
• Launch Industry
• Satellite Manufacturing
• Ground Equipment Manufacturing
• Survey questions are designed to gather
  employment and revenue information specific to
  each industry segment.
• Futron augments survey data with publicly
  available data to provide the complete industry
  picture.

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Methodology

• Launch Industry data include launch services
  provided by private companies for both
  commercially-owned and government-owned payloads.
• Launch Industry data does not include Shuttle
  launches or ISS missions.
• Satellite Manufacturing data include
  manufacturing activity by private companies for
  both commercial and government customers.
• All Launch Industry and Satellite Manufacturing
  revenues are recognized in the year of launch,
  not the year the contract is awarded.
• All revenues are in then-year dollars (not
  adjusted for inflation).

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Satellite Industry Overview

• Satellite Services
• DBS/DARS
• Fixed Satellite Services
• Voice, Video, Data
• VSATs
• Remote Sensing
• Transponder Leasing
• Mobile Satellite Services
• Mobile Telephony
• Data/Messaging

• Satellite Manufacturing
• Satellite Manufacturing
• Component and Subsystem Manufacturing

• Ground Equipment
• Mobile Terminals
• Gateways
• Control Stations
• VSATs USATs
• DBS Dishes
• Handheld Phones
• DARS Equipment

• Launch Industry
• Launch Services
• Vehicle Manufacturing
• Component and Subsystem Manufacturing

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World Satellite Industry Revenues
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World Revenues By Sector
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Satellite Industry Findings

• The world satellite industry revenues have grown
  every year since SIA/Futron began tracking the
  industry. Average annual growth during this time
  period is almost 13.
• In 2004, the world satellite industry growth was
  about 7, slightly higher than the 6 growth
  achieved in 2003.
• Revenues from Satellite Manufacturing, Satellite
  Services, and Ground Equipment segments increased
  in 2004, while the Launch segment continued to
  shrink.
• The Satellite Services segment share of total
  revenues has grown over the study period,
  increasing from 42 of the total in 1996 to over
  60 in 2004.

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World Satellite Services Revenue
FSSVSAT services, remote sensing, and
transponder leasing MSSMobile telephone and
mobile data DBS/DARSDTH TV, DARS, and Broadband
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Satellite Services Findings

• Subscription and Retail Services had the greatest
  growth of all industry segments in 2004, with an
  11 growth rate.
• Direct-to-Home TV services grew 10 and continued
  to drive overall growth.
• Satellite Radio Services experienced over 200
  revenue growth in 2004, although revenues
  continue to account for less than 1 of overall
  satellite service revenues.
• By end-2004, XM and Sirius together had 4.4
  million subscribers compared to 1.6 million the
  previous year. XM and Sirius revenues reached
  over 300 million collectively in 2004 compared
  to roughly 100 million in 2003.
• DigitalGlobe and Orbimage each won contracts for
  up to 500 million over the next 4 years from NGA
  as part of the NextView program.
• Transponder Leasing revenues dropped 4 in 2004,
  primarily due to continued declines in capacity
  pricing.

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Satellite Manufacturing Revenues
N.B. Satellite Manufacturing revenues are
recorded in the year the satellite is
delivered/launched, not when contract is awarded
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Satellite Manufacturing Findings

• Global Satellite Manufacturing Revenues grew by
  4 in 2004, while U.S. Satellite Manufacturing
  revenues dropped more than 15. The decline was
  due to
• Reduced government spending
• Lower number of overall orders in 2002
• In 2004, government payloads accounted for 72 of
  total payloads launched and 82 of total
  manufacturing revenues.
• This is about the same as 2003, when government
  payloads accounted for 75 of total payloads and
  nearly 84 of total revenues.
• This trend is expected to continue for 2005, with
  government payloads contributing to the majority
  of launches and manufacturing revenues.

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Launch Industry Revenues
N.B. - Launch Industry revenues are recorded in
the year the launch occurs, not when contract is
awarded.
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Launch Industry Findings

• In 2004, global Launch Industry revenues fell by
  almost 13 over 2003 and declined 24 over 2002
  as a result of an overall drop in the number of
  launches.
• Of the total global launches in 2004, 53 were
  government and 47 were commercial. In 2000, 66
  of total global launches were government and 34
  were commercial.
• In 2004 the U.S. captured half of total launch
  revenues compared to 66 in 2003, due to fewer
  high-revenue (Titan IV) launches.
• In 2004 there were 17 new commercial GEO launch
  orders (7 for Ariane, 7 for ILS, 2 for Sea
  Launch, and 1 for Starsem)

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Global Supply vs. Demand GEO Communications
Satellites and Launches
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World Ground Equipment Revenues
Includes Gateways, NOCs, Satellite News
Gathering equipment, flyaways, VSATs, DBS Dishes,
DARS equipment, satellite phone booths, satellite
phones
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Ground Equipment Findings

• Growth in the Ground Equipment sector was steady,
  growing by about 5 in 2004.
• Ground Equipment prices continue to decline and
  major infrastructure investments have been
  virtually flat.
• Despite declining prices for hardware, the number
  of units sold for end-user applications has been
  growing. Greatest revenue growth is in end-user
  equipment for DTH TV, high-speed Internet,
  satellite radio services, and mobile satellite
  services.

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Industry Analysis

• In 2004, the global satellite industry continued
  to grow, due to the strength of the Satellite
  Services sector.
• Government communications spending and strong
  consumer demand for video services were the key
  drivers of this growth, with deployment of new
  user applications and equipment in both markets.
• Despite falling prices and profit margins in most
  sectors, several trends indicate growth for the
  satellite industry over the next few years
• HDTV and the opening of new and competitive
  consumer video markets around the world
• Continued strength in Government/Military
  spending
• Revival of satellite manufacturing orders

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Emerging Services/Applications

• Broadband Connectivity to Homes/Offices
• Hughes Network Systems Direcway / Spaceway
• Americom-to-Home
• WildBlue
• Mobile Broadband Services Comms on the Move
• In-motion Transmit and Receive on-the-go
• Multi-Mb inbound to vehicle, up to 500kbs out
• Valuable for Network Centric Operations
• Consumer Focused Satellite Services
• Ancillary Terrestrial Component (ATC)
• Satellite Radio

• Broadband Connectivity to Aircraft
• Forward link 10 Mbps
• Return link 128 - 512 Kbps
• E-mail/Internet access

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• Recent Industry Events

Early 2003 GAO Report re Commercial Satellite
Infrastructure Commercial Satellite Security
Should Be More Fully Addressed January 2003
Homeland Security Act Satellite Communications
Infrastructure Is Critical National
Infrastructure May 2004 NSTAC Satellite Task
Force Report to President Commercial Satellite
Industry Is Critical To Our National, Economic,
and Homeland Security December 2004 Satcom
Policy Memo and Action Plan from OSD/NII DoD
Must Build Commercial SATCOM Into The Wideband
Milsatcom Architecture Early 2005 National
Security Space Policy TBD
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Multi-Year Support From Hill

• Language in HASC Reported H.R. 1815 - National
  Defense Authorization Act of 2006
• Commercial communications bandwidth The
  committee recognizes the important contribution
  commercial satellite communications systems
  provide to military operations. The need for
  commercial bandwidth to supplement military
  systems will remain a requirement into the
  future. As a result, the committee believes a
  long-term commitment to the appropriate use of
  commercial satellite communications capacity is
  in the U.S. government's best interest. The
  committee believes a multi-year procurement
  strategy with the use of annual contract options
  would provide sufficient commitment to industry
  and provide the government ample flexibility to
  terminate work as necessary. The committee
  recommends use of this alternative to procure
  commercial bandwidth to support military
  operations for those cases where it is the most
  efficient and effective procurement method.

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Satellite Business Factors

• Satellite Services
• Lower Transponder Rates
• Higher Insurance Costs
• Industry Consolidation
• Export Controls
• DBS/DARS
• Access To Adequate Spectrum
• Competition With Terrestrial Giants
• Satellite Manufacturing/Launch
• Overcapacity
• Export Controls
• Ground Equipment
• Interference with Terrestrial/Unlicensed Devices
• Foreign Licensing/Market Access