Financial Models and Economic Analysis for Small Satellites Systems

Abstract

The well-established terrestrial satellite applications markets have been generating revenues and producing very substantial earnings in the billions of dollars for many decades. These major markets include the telecommunications and broadcasting services: fixed satellite services, mobile satellite services, and broadcasting satellite services and the Earth observation/remote sensing/meteorological satellite services. Also very important to commercial customers is the global navigation satellite services (GNSS) also known as precision navigation and timing services. In the case of GNSS, at least in the United States where the actual satellite system is government-owned, most of the revenues come from the manufacture and sales of user equipment and services rather from operation of the satellite systems themselves.

There have been profitable businesses associated with the development and manufacturing of satellites. These include the manufacturing of satellites, ground antennas that support these various space-based applications, the launch services industry that launches these systems into orbit, and the space insurance industry that can safeguard companies against risks associated with the launch of the satellites, possible liability claims, and even the loss of revenue from satellites or from in-orbit failures.

The status and nature of these well-established space systems are currently in a state of upheaval and change. One of these changes in satellite telecommunications is that new quite efficient high-throughput satellites (HTS) are challenging less efficient satellites that operate at lower speeds and are much less cost-efficient. There is also rapid technological innovation of new more cost-efficient launcher systems, applications satellites, and ground systems that will increase the competitiveness of all commercial uses of space.

Major technological innovations and cost-reducing trends provide a stimulus to all sorts of space-based services. However, they also create a sense of confusion in understanding the economic and financial impacts that come from the so-called “NewSpace,” “Space 2.0,” and “small satellite” revolution. In actuality, not only are “small satellites” cheaper to manufacture and launch, but also the large geosynchronous high-throughput, high-efficiency satellites can, and are, being designed, built, and launched more efficiently as well in terms of net cost per rate of digital throughput for data, voice service, or video channels.

Current economic analyses have generally concluded that it is too early to measure the economic performance of small satellite constellations in relation to new high-efficiency geosynchronous satellite networks. Further the economics and design innovations are different for remote sensing satellites than satellites that are providing communications services, making any comparisons more difficult. And there are many risks in space systems that are different from terrestrial operations and need to be understood better. Despite these market analysis limitations, this chapter seeks to assess the relative economics of small satellite systems deployed in LEO and MEO orbits, versus the most efficient of GEO applications satellites.