HOW MANY
SATELLITES ARE ENOUGH? A FORECAST OF DEMAND FOR SATELLITES, 2004-2012
16
February 2004
(courtesy of Futron Corporation)
INTRODUCTION
The satellite industry has
experienced many profound changes over the last decade: the expansion of the
Direct-To-Home television market, the rise and fall of the low Earth orbit
telecommunications systems, and the development of the Internet as a source of
demand, to name just a few.
Throughout all these changes, the heart of
the industry has been the satellite itself. All the industry sectors (satellite
services, launch services, ground equipment, and satellite manufacturing) are
critical for the industry to maintain its viability and competitiveness.
However, the satellite is the lifeblood of the industry, and the number of
satellite orders has become a key metric in determining the health and future
prospects of the industry.
For these reasons, Futron spends a
significant amount of resources tracking and forecasting the demand for
satellites. Every year since 1996, Futron has performed a forecast of demand
for satellite services, i.e., bandwidth. Occasionally, depending on the
requirements of our customers, we translate the demand for services into demand
for actual satellites and launches. This White Paper presents our
recentlycompleted forecast of the demand for GEO commercial communications
satellites (C, Ku, and Ka Bands only) from 2004 to 2012.
Many people ask
us about the accuracy of our forecasts. We believe the value of forecasting is
in the insight it provides into market dynamics. A forecast will never
eliminate all of the uncertainty associated with future events. It is a
quantification of how future events are expected to unfold, which enables
better-informed decisions.
However, accuracy is a legitimate concern for
any forecaster. Thus, we went back to our year 2000 satellite forecast and
compared it to actual numbers of satellites launched. The results are displayed
below, showing that the average number of satellites forecast by Futron was
within 7% of the actual number launched.
FORECAST METHODOLOGY
Futron spends a lot of time
developing, refining, and updating its methodology. While accuracy is a prime
consideration for the quality of a forecast, accuracy can only be determined
after the fact. At the time the forecast is performed, the analytic rigor with
which the forecast is executed is a key factor in its credibility.
For
this forecast, as in the past, we analyzed over a dozen separate satellite
markets, evaluating the tenyear trends in user demand for each market in over
200 countries. The figure below graphically summarizes Futron’s forecast
methodology.
DEMAND FOR SATELLITE BANDWIDTH
The results of Futron’s
forecast, in terms of bandwidth, are shown below. This graph shows the expected
demand for GEO commercial communications satellite bandwidth for voice, video,
and data service (C, Ku, and Ka Bands). For more detailed information on the
forecast of satellite bandwidth demand, please refer to Futron’s white
paper, Satellite Service Demand: Reloading the
Matrix.
The 2003 bandwidth number is based on actual transponder
equivalents in use (not just on-orbit) and is provided as a baseline. This
graph shows demand growing at a fairly healthy rate for the 2004-2012 time
period, 4.3% compound annual growth rate (CAGR) or 40% total growth.
This growth rate compares relatively favorably to that experienced during the 1995-2003 timeframe, the first part of which represented a boom period for the satellite industry. The growth rate for demand for satellite bandwidth was 3.4% CAGR or 31% total during this time period. Interestingly, the supply of satellite bandwidth grew by 5.6% CAGR or 54% total during this same timeframe. This is why the industry is now awash in excess capacity.
DEMAND FOR SATELLITES
While the demand for bandwidth is forecast to grow at a relatively robust rate, the demand for individual spacecraft is not so strong. The relationship between demand for bandwidth and demand for satellites is displayed in the figure to the right. The primary factors responsible for depressing the demand for satellites are shown on the right hand part of the figure. These factors have had, and will continue to have a profound effect on the demand for new satellites, as discussed below.
The total spacecraft power is a crucial performance characteristic of a communications satellite, and one that has been driven largely by consumer-oriented applications such as DTH TV. Futron calculated the average power capability per year of all GEO commercial communications satellites launched from 1990 to 2002. The results, displayed in the top graph, show that during this time, average power levels increased by over 350% from approximately 1.6 kW to 7.6 kW per satellite.
Futron also calculated the trends in spacecraft size in terms of the average number of 36 MHz transponder equivalents (TEs) for those satellites launched during the same time period, 1990-2002. While the plotted line in the middle graph goes up in some years and down in others, there is a clear trend towards increased number of TEs per satellite launched. There is an increase in size of about 86%, from 26 TEs to 48 TEs per satellite launched.
Finally, Futron calculated the
average design life of satellites launched during the 1990- 2002 timeframe. The
bottom graph shows an increase of 38%, from almost 10 years to almost 14 years.
This does not even take into account the fact that the actual service life of
GEO communications satellites usually exceeds their design life by an average
of 25%.
Other factors, such as increases in compression rates and
frequency reuse, have also contributed to the enhanced performance of each
satellite. While each one of these individual trends has shown substantial
improvement over the years, the individual trends have enhanced and amplified
the effect of the other. The combined growth in power, size, and design life
make the average satellite of today approximately 900% more capable than the
average satellite launched in 1990. In other words, the average satellite
launched today is doing the equivalent work of 9 average satellites launched in
1990.
THE FORECAST
Taking all of these trends and
other factors into account, Futron used an internally developed software model
to convert demand for transponder equivalents to demand for new satellites. As
noted earlier, this forecast only includes demand for new GEO commercial
satellites in the C, Ku and Ka bands. Satellites in the L and S bands that
provide primarily mobile satellite services, such as the Inmarsat 4 series and
XM’s second generation of satellites are not included. Additionally, this
forecast includes strictly commercial satellite demand, though actual
satellites may include a hybrid of commercial and government
payloads.
We attempted to solidify the model’s assumptions as much
as possible. However, there were a couple variables that could reasonably be
assigned a range of values, i.e., average number of transponders per satellite
and the average load rate per satellite (also known as utilization rate).
Changes in these variables made big differences in the final number of
satellites forecasted. Thus, Futron’s satellite forecast is provided with
a range of possible outcomes, Low, Medium, and High.
The Low forecast
incorporates an increase in the load rate of satellites and an increase in the
average TEs per satellite. The global load rate, or overall utilization, of
commercial GEO communications satellites has dropped over the last several
years, and now hovers around 60 percent. This figure is among the lowest load
rates in history, and is likely below the levels desired by the satellite
operators. For the Low forecast, we gradually increased the load rate to 80
percent. Also, as was shown earlier, the number of TEs per satellite has grown
dramatically over time. While there are several indications that this growth
will level off for business reasons, it is possible the overall number of TEs
per satellite will continue to increase. Using this assumption and an increase
in the average load rate, an average launch rate of just 8 satellites per year
is forecasted.
The Medium forecast assumes the current load rate will
hold steady and includes a leveling off of satellite size, keeping the average
number of TEs per satellite steady. This generates an average launch rate of
just over 12 satellites per year.
The High forecast assumes the current
load rate will hold steady and the number of TEs per satellite will experience
a slight decline. This set of assumptions generates an average of almost 15
satellites per year.
The tendency for many people
when viewing a graph like the one above is to try to determine specific reasons
for individual year-to-year changes. While this is a natural tendency, it is
more important to focus on is the average number of satellites per year, the
most meaningful number in a ten-year forecast. Late satellite deliveries, major
satellite anomalies, launch failures, and other factors can dramatically affect
year-to-year variations. However, the overall average is the most
relevant.
While even the High scenario may seem modest to some, Futron
believes these scenarios to be the most realistic projections of the future
demand for new satellites. We incorporated several positive developments in the
satellite industry, notably the introduction of HDTV requirements, the expected
expansion in last mile broadband services, and increased demand from government
users.
Even so, this forecast is a confirmation of many well known
aspects of the current satellite market: there is no “killer app,”
the current overcapacity of bandwidth will take several years to be absorbed,
the satellite market is a replacement market, and the replacement market is
fairly modest because of increased satellite capability. It appears that 8-15
C, Ku, and Ka Band commercial GEO satellites will be the norm for the next
several years, which represents less than half the former size of this
market.
Normally, this type of sudden and severe downturn would be a
wrenching development for any industry. Fortunately, the government market has
emerged to offset the downturn in the commercial market. In particular, the
U.S. military is entering a long-term modernization, replenishment, and
expansion program for its satellite systems. The U.S. military market alone
will dwarf the entire global commercial market for several years to
come.
There may, in fact, be more commercial satellites bought and
launched than this forecast shows. The launch of additional satellites would
represent business decisions by operators driven by specific choices such as
aggressive targeting of certain markets. In addition, there will be awards for
satellites in the other bands, such as L Band and even commercial X Band, which
are not included in this forecast.
If there is a hopeful message in all
this, it is that we are now in the midst of a shift to a new industry
equilibrium sized to fit this new market reality. All the major satellite
manufacturers have taken action to rationalize their capacity, cut their costs,
and become more efficient. Also, if the expected consolidation among satellite
manufacturers occurs, this will further repair the industry, and those
companies that emerge will be stronger and better focused to serve this new
market reality.
Futron Overview
| Futron Corporation is a technology management consulting firm. Futron applies analytically rigorous decision-support methods to transform data into information. We collaborate closely with clients to relate decisions to future outcomes and measures of value. Our consulting services include space and telecommunications analyses, smart program engineering, and communications planning and content development. Futron was founded in 1986 and is headquartered in Bethesda, Maryland with a branch office in Houston, Texas. |  Futron's headquarters in Bethesda, Maryland |
Summary of
Capabilities
Futron’s Space and Telecommunications Division is
the industry leader in researching, analyzing, and forecasting space and
telecommunications markets and programs. Futron offers our commercial and
government clients a suite of proprietary, leading-edge analytic methodologies.
Our world-class team of market and policy analysts, economists, and engineers
bring unparalleled skills and expertise to each account.
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Corporation
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