Tech Features

Cost Control

At the recent World Space Risk Forum, which took place in Dubai 2-4 November, a lot of pertinent issues were discussed. Perhaps the most important were the challenges the industry is facing, and the need to reduce costs

What are the challenges facing the industry for the future?

John Celli,

President, SSL

I’ve been in this industry for 40 years and you don’t last this long unless you’re an optimist. The risk the industry is facing is not to try and be proactive with all the changes they are facing. We are going through a period where changes are needed. They are required by our customers and operators. As a satellite manufacturer, we cannot be reactive, we need to be proactive and do what is right for the industry. The technology we have is good for addressing challenges. More will be needed, but the risk is to just be reactive. That would be a huge mistake.

Mark Spiwak,

President, Boeing Commercial Satellite Systems

When I think of the industry and challenges, we are going through an interesting exercise at Boeing Satellites. We are involving a significant amount of the workforce to see what is life going to be like in 2025. How are we going to live our lives and be connected – getting on airplanes, connected cars and how governments are going to do what they need to. One of the key aspects is the insatiable demand for bandwidth. Some of the key challenges have to do with adaptive technology. We need to be much better as an industry in developing new technologies and be able to adapt to challenges. Quality, reliability and affordability are key to surviving in this industry. We need to understand how space systems and terrestrial systems will work together to provide that connectivity.

Stephane Israel,

Chairman and CEO, Arianespace

We are seeing that there is much more competition nowadays. Each time we see our customers, they say they are facing a huge decrease in prices for bandwidth, and as a result they want us to decrease our prices. There is more competition between terrestrial and satellite solutions. There is also a lot of competition between launchers. For us, we must address this increased competition by being more price competitive. We all need to have volume compensating for pricing.

We need to have more volume over the next decade, and this increased demand could be linked to the demand for global connectivity, increased mobility through diverse solutions and use of satellite as a solution. For us, this is the challenge, and over the next decade we will need more satellite solutions to address this huge demand for connectivity and mobility. If this happens, the cake will be so big that there will be room for every player. Arianespace wants to be more cost competitive but also be reliable. It is natural for people to be risk-averse, and you can be sure that with Arianespace, we are not going to increase risk.

Khalid Balkheyour,

President and CEO, Arabsat

In our industry there is modest growth, and we are not denying that there are definitely challenges too. At this time in the industry, prices are going down and satellite operators are competing with terrestrial networks. However, on the positive side we are seeing increasing demand. People love to be connected and want high data rates and throughput. This is the positive side.

However, the lifetime of the satellite cycle from design to get in service and end of life is very long. This is between 15 to 20 years, and nobody can project what will happen in 20 years. There are huge investments in the satellite industry, but we need to be more flexible in the design of satellites to offset and rationalise the investments made versus the service we deliver to our customers and end users.

Overall there is modest growth in the industry, depending on region to region, but I think it is a healthy industry. Broadcast constitutes about 55% of our business and we are trying to provide triple play services and solutions to our customers, whether it is broadcasting as well as internet, and this is our focus. There is a growing need for internet connectivity and broadcasting. In terms of telecom and broadband, we are seeing a stronger need for capacity, and in the region that we are in, with the political situation as it is, there is a military requirement too for bandwidth.

The industry demands lower costs. How is this going to be achieved?

Stephane Israel

Arianespace is working towards producing Ariane 6, which is based on proven technologies of Ariane 5. It will be the same propulsion mechanism, solid and liquid. We believe in Ariane 6 being an evolution of Ariane 5, not a revolution. We did this on purpose because we wanted to get to market quickly with a reliable product, and we didn’t think we would be able to get to market quickly if we changed everything about the launcher.

We also want to reduce cost dramatically, by 50%. Firstly we want to increase cabins, which will reduce unit cost. Today we use about seven Arianes per year, we would like to increase this to 12. Furthermore, things are really going to change in Europe, as we are going to have a new government soon. Industry will really be at the centre of the game, with no direct intervention from the agencies. The agencies will fund the programmes but not be involved in the day-to-day working of the programme.

Arianespace will work closely with Airbus for the launcher for Ariane, and this will further reduce cost. As it is a new launcher, it will have new technology like 3D printing and design manufacturing, and we will also have a simpler way to operate it by going for horizontal integration instead of vertical integration. The target is to reduce by a third the duration of the launch campaign. Hence we have many ways to reduce cost, which are clearly identified and give us some comfort in the fact we will reach our target.

Mark Spiwak

Being able to be flexible with employees, the market and our products is key. Boeing Space was a small part under the larger Boeing company. Three of our core strategies are integrated with some of the visions of the larger company. Suppler management is key. A lot of the airplane programmes use a global supplier process. There are a lot of lessons learned from that, and we look at how we can use a global marketplace to bring the best of the world in, to be able to provide the best solutions to our customers. Commonality and reuse – from a product line standpoint, one of the things about this is that it drives up the quality and drives down the cost.

Third is our digital payloads. We just signed a contract in August for our seventh-generation digital payload. We’ve delivered 110 of these digital processors over the last 20 years. So we look at how we can take what has been done in the consumer electronics market, and how we bring it in for space applications. In the GEO orbit.

What is counterintuitive is, as we are working with the consumer electronics industry in some very strategic partnerships, we’re delivering these next generation capabilities which are actually simpler to build and simpler to test, because there are less parts. So as we drive in the digital payloads, the satellites are actually becoming cheaper and simpler to build. These are some of the strategies we are using to give value to our customers.

John Celli

We spend a lot of time talking to our customers. We try to really understand what they think they need five to ten years from now. All this information is important so that we can deploy our resources for development. In addition to that, we try to go a step forward. Cost reduction is a big thing these days, when the industry is doing okay, but in certain areas revenues are dropping. We need to think how we can help our customers grow to profit.

A lot of people are saying that satellite manufacturers need to reduce cost, which we have done over the years. This has been an ongoing process. We’ve reached a point where all that we have done so far is necessary, but no longer enough to get to the point where the satellite operator would like the CAPEX to be. The bottom line is really what counts. We can’t keep doing the same thing forever, so we have to change that paradigm. The technologies are there, it’s just how we use them and combine them together in a much smarter way, which will allow us to reduce the cost in the range of 30% to 40% from where we are at now. I’ve been telling a couple of my customers that I can’t do this all by myself. We have to work together, because their procurement process has to change as well. The underwriters have to be involved as well, because this is a big change. We need to be proactive and not just reactive to these requirements. This is the time to change, otherwise I think we are going

to stall.