TIM FURNISS / LONDON
Cancelled projects, industry rationalisations and programme delays suggest that the space bubble may finally have burst TIM FURNISS / LONDON
When President Bush cut NASA's International Space Station (ISS) budget and killed the X-33 and X-34 programmes in March, it seemed the final act in bursting the great space bubble. Lockheed Martin had recently declared that "space doesn't pay", while Boeing's space business was being rationalised and over 400 ISS jobs at the company were being lost. The Roton and Beal Aerospace launcher ventures had collapsed, while Kistler Aerospace was struggling. NASA Mars missions had been cut back after the failure of two Mars spacecraft in 1999, and a Mars sample return was delayed from 2005 to later than 2010.
What seemed to have kick-started this worrying trend was the bankcruptcy of the original Iridium mobile communications satellite venture. A rationalisation of related businesses followed in its wake, leading to cancellation or reduction of the number of planned low earth orbiting (LEO) and medium earth Oobit (MEO) satellite constellations such as mobile communications and internet-in-the-sky broadband satellites - Iridium, Globalstar and ICO, and Teledesic and Skybridge, respectively. Contributing to the satellite market's collapse was the development of terrestrial systems that offered many of the same benefits of space access.
On the government side, for example, the X-33 fell victim to a five-year-old decision to lead a quantum leap in technology with a totally insufficient budget. The failures of the Mars Climate Orbiter and Mars Polar Lander spacecraft, both built under a new "faster, better, cheaper" policy introduced by NASA administrator Dan Goldin, dashed NASA's Mars hopes.
Analysts disagree that the long-term picture is dark, however, and describe the situation more as a blip.
In retrospect it would seem that space companies, observers and some analysts may be embarrassed that predicted growth and massive profits have failed to materlise. "It was their timescale that was wrong rather than their predictions," says David Todd of Airclaims SpaceTrak. "The space bubble hasn't burst but it has been deflated."
After the Globalstar and Iridium debacles, it is back to business as usual, with Geostationary Earth Orbit (GEO) telecommunications satellites leading the profitable way.
However, a dramatic increase in the numbers of launches is unlikely - bad news for the launcher industry, which is already suffering from too much competition for too few launches. On the other hand, the size and value of communications satellites is increasing rapidly.
Dramatic change may not occur for two decades. Quantum leaps in technology cannot be made in a few years with lack of political will and austere funding, most of which comes from government.
Optimistic outlook
Launcher company Arianespace is looking at the situation optimistically, despite the loss of existing and potential future business faced by launcher companies generally. Meanwhile, in addition to the Iridium, ICO, Globalstar and Orbcomm business failures, the NASDAQ effect - the collapse in the value of high-technology shares - has also been significant. Telecom and cellular business is suffering and pulling down the market.
Faced with such economic realities, the commercial sector is becoming more selective and concentrating on programmes that provide real value, says Arianespace. "The commercial space sector is recovering and convalescing from a difficult period in the last three years," Arianespace says. "Yet the basis of the business remains sound. If you look at the main stream actors in the commercial market, they remain strong, profitable and ambitious."
In the meantime, there is still plenty of business for "traditional" space activities, such as communications and Earth observation. "This is good news for space insurance," says Todd. The space insurance market has suffered recently from low rates due to underwriting overcapacity and high losses through poor in-orbit reliability.
Space manufacturers have used new technology too quickly and, in some cases, did not test it enough. This has left underwriters having to pay out $1 billion in three years. "The cycle is about to change," says Todd. Rates are increasing and a result is less underwriting capacity - in fact there may not be enough capacity to underwrite some future multiple launches, "such as dual satellites ones on Ariane 5s".
If the premium rates continue to rise, and assuming that satellite reliability improves - or at least gets no worse - things should look a lot better for space insurance.
Mike Blackwell of SBi space consultants, believes that the blip is just a "shadow on the futurescape". The problem, he says, largely relates to overconfidence in telecommunications innovations and the refusal to acknowledge that the market will decide when it needs new developments, and when it is ready to pay for them. Until the market makes those decisions, there will be no returns.
"There has also been an overcapacity in space infrastructure, including launchers, satellites data and communications capacity," says Blackwell.
There has also been a reaction to cyclic economic trends in space nations. In these days of "mature" space, it is often forgotten that the space sector still has two significant components: supply-led political and demand-pull markets.
The political component, including international commercial projects, has its roots in technology policies in a limited number of countries and "far outweighs market demand", says Blackwell. "This will change over time in reaction to economic upticks, with all that entails for market perception - but not before 2004-05." Until then, the market will be comparatively flat.
There will be change when the revival appears. Growth is expected in Earth observation as a demand for climate change information kicks in, and in a convergence between hand-held technologies, communications and Earth observation, he says.
Source: Flight International
