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““State Of The Satellite State Of The Satellite Industry” ReportIndustry” Report

Prepared by Futron Prepared by Futron CorporationCorporation

Sponsored by theSponsored by the

June 2005

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SIA Overview/MissionSIA 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 MembersSIA Members

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MethodologyMethodology

• 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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MethodologyMethodology

• 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 Satellite Industry OverviewOverview

Launch Industry• Launch Services • Vehicle

Manufacturing• Component and

Subsystem Manufacturing

Satellite Manufacturing

•Satellite Manufacturing

•Component and Subsystem Manufacturing

Satellite Services•DBS/DARS•Fixed Satellite Services

•Voice, Video, Data•VSATs•Remote Sensing•Transponder Leasing

•Mobile Satellite Services

•Mobile Telephony•Data/MessagingGround

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

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$0

$20

$40

$60

$80

$100

$120R

ev

en

ue

(in

bil

lio

ns

)

Rate of change 29.3% 12.1% 9.7% 21.1% 7.5% 9.6% 5.8% 6.7%

World Satellite Industry World Satellite Industry RevenuesRevenues

$38.0

$49.1$55.0

$60.4

$73.1$78.6

$86.1$91.1

$97.2

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World Revenues By SectorWorld Revenues By Sector

$38.0B $49.1B $55.0B $60.4B $73.1B $78.6B $86.1B $91.1B $97.2B

$60.9B

$15.8B $21.1B $24.4B$29.7B $38.6B

$46.5B $49.1B $56.0B

$10.2B

$8.3B $10.6B $12.4B $10.4B$11.5B

$9.5B $12.1B$9.8B

$2.8B$4.2B $4.8B $4.3B $4.3B $5.3B $3.0B $3.7B $3.2B

$23.3B$9.7B $12.5B $13.9B $16.0B $17.7B $19.6B $21.2B $22.1B

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1996 1997 1998 1999 2000 2001 2002 2003 2004

% o

f a

ll R

ev

en

ue

Satellite Services Satellite ManufacturingLaunch Industry Ground Equip. Manufacturing

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Satellite Industry FindingsSatellite 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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$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

1996 1997 1998 1999 2000 2001 2002 2003 2004

Rev

enu

e (i

n B

illio

ns) FSS MSS DBS

World Satellite Services World Satellite Services RevenueRevenue

FSS=VSAT services, remote sensing, and transponder leasing MSS=Mobile telephone and mobile dataDBS/DARS=DTH TV, DARS, and Broadband

$15.8 $21.1

$ 24.4

$29.7

$38.6

$46.5$49.1

$56.0$60.9

FSS 6.1$ 6.8$ 7.3$ 8.6$ 9.2$ 8.9$ 8.7$ 9.7$ 9.4$ MSS 0.7$ 0.8$ 1.0$ 1.3$ 1.5$ 1.4$ 1.3$ 1.7$ 2.0$ DBS 9.0$ 13.5$ 16.1$ 19.8$ 27.9$ 36.2$ 39.1$ 44.7$ 49.5$

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Satellite Services Satellite Services FindingsFindings

• 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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$10.2$9.8

$12.1

$10.6 $10.4 $9.5

$8.3

$11.5$12.4

$3.9$4.4

$3.8

$6.0$6.6

$7.9$6.9

$4.9 $4.6

$0

$5

$10

$15

1996 1997 1998 1999 2000 2001 2002 2003 2004

Rev

enu

e (i

n b

illio

ns)

World Revenue U.S. Revenue

Satellite Manufacturing Satellite Manufacturing RevenuesRevenues

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 Satellite Manufacturing FindingsFindings

• 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 Launch Industry RevenuesRevenues

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

$2.8

$4.3

$4.8

$4.2

$3.2

$3.7

$3.0

$4.3

$5.3

$1.4

$2.1$2.4 $2.4 $2.4

$2.7

$1.1 $1.0

$2.1

$0

$2

$4

$6

1996 1997 1998 1999 2000 2001 2002 2003 2004

Re

ve

nu

e (

in b

illio

ns

)

World Revenue U.S. Revenue

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Launch Industry Launch Industry FindingsFindings

• 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. DemandGlobal Supply vs. DemandGEO Communications Satellites and LaunchesGEO Communications Satellites and Launches

1720

2421 20 21

12

20

1315

18

31

2522 22

35

28

19

13

7

0

10

20

30

40

50

60

70

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Nu

mb

er

of

Sa

tell

ite

s/L

au

nc

he

s

Launches Satellites Ordered

Satellite Capacity Launch Capacity

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World Ground Equipment World Ground Equipment RevenuesRevenues

Includes: Gateways, NOCs, Satellite News Gathering equipment, flyaways, VSATs, DBS Dishes, DARS equipment, satellite phone booths, satellite phones

$0

$5

$10

$15

$20

$25

$30

1996 1997 1998 1999 2000 2001 2002 2003 2004

Rev

enu

e (i

n b

illio

ns)

$9.7

$12.5$13.9

$16.0$17.7

$19.6$21.2 $22.1

$23.3

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Ground Equipment Ground Equipment FindingsFindings

• 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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• 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

Industry AnalysisIndustry Analysis

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Broadband Connectivity to AircraftBroadband Connectivity to Aircraft

• Forward link: 10 MbpsForward link: 10 Mbps

• Return link: 128 - 512 KbpsReturn link: 128 - 512 Kbps

• E-mail/Internet accessE-mail/Internet access

Emerging Emerging Services/ApplicationsServices/Applications

Broadband Connectivity to Homes/OfficesBroadband Connectivity to Homes/Offices

• Hughes Network Systems – Direcway / Spaceway

• Americom-2-Home

• WildBlue

Mobile Broadband Services “Comms on the Move”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 ServicesConsumer Focused Satellite Services

• Ancillary Terrestrial Component (ATC)Ancillary Terrestrial Component (ATC)

• Satellite RadioSatellite Radio

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Recent Industry EventsRecent 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 TBDEarly 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 ServicesSatellite ServicesLower Transponder RatesLower Transponder Rates

Higher Insurance CostsHigher Insurance CostsIndustry ConsolidationIndustry Consolidation

Export ControlsExport Controls

DBS/DARSDBS/DARS Access To Adequate SpectrumAccess To Adequate Spectrum

Competition With Terrestrial “Giants”Competition With Terrestrial “Giants”

Satellite Manufacturing/LaunchSatellite Manufacturing/LaunchOvercapacityOvercapacity

Export ControlsExport Controls

Ground EquipmentGround EquipmentInterference with Terrestrial/Unlicensed DevicesInterference with Terrestrial/Unlicensed Devices

Foreign Licensing/Market AccessForeign Licensing/Market Access

Satellite Business FactorsSatellite Business Factors