Memorandum 100
Supplementary submission from UKspace
THE ROLE OF GOVERNMENT IN SATELLITE TECHNOLOGY
AND DEVELOPMENT
This supplementary submission is offered by
UKspace to support previous submissions by UKspace and member
companies, and seeks to clarify the technology and market environments,
both global and national, surrounding the continued role of Government
in supporting satellite technology development. The case for continued
public investment in UK satellite technologies lies in the basic
characteristics of the global and UK space business: the nature
of the technology itself, the nature of the market, the maturity
of the global industry and related applications, and the investment
community itself.
1. SPACE TECHNOLOGY
IS CUTTING
EDGE
Space and satellite technologies operate at
the frontier of human science and understanding. Many satellite
capabilities today were not thought possible 10 or 20 years ago.
Using lasers in space to measure wind direction and radar to measure
ice depletion might have been considered science fiction only
a decade ago. Similarly, Astrium's latest media satellite, Hot
Bird 8, launched last year, carries as many TV channels as 24
satellites built 10 years ago.
2. SPACE TECHNOLOGY
IS INHERENTLY
HIGH-RISK
Because satellites are not as easy to reach
and therefore to repair as terrestrial infrastructure, satellite
technology needs to be at a very high level of maturity before
the satellite is launched, imposing an exceptionally high degree
of financial risk due to the uncertainty over the amount of time
and money needed to get the technology to a sufficient state of
perfection.
— These disruptive and high-risk characteristics
of much satellite technology therefore pose significant risks
for the private investment community, who do not have access to
a track record of success for the technology. The role of Government
as a launch partner in new high-technology products and services
is well documented, such as in the global aerospace community.
3. THE GLOBAL
SPACE INDUSTRY
IS STILL
IN ITS
INFANCY
Space is a dramatically high-growth sector.
The UK sector has grown 10% a year since 1999-2000, four times
UK economic growth, and the global industry is forecast to grow
from $180 billion today to $1 trillion by 2020. Its rapid growth
reflects the relative infancy of the sector. Satellite navigation
services are a good example, where the potential of location information
is still largely untapped. The relative immaturity of the marketplace
plays a key role in attitudes by the investment community towards
the sector. For example, Avanti has remarked to the Committee
on the narrow availability of space experts in the investment
community. As the sector grows and related applications grow,
and as the sector grows a track record of public and private investment
successes, such as HYLAS, Skynet 5 and Inmarsat 4, so too will
the investment community's confidence in and understanding of
the sector grow.
4. STRATEGIC
INVESTMENT IN
SPACE WORLDWIDE
IS CREATING
A NON-LEVEL
PLAYING FIELD
AND DISTORTING
THE INVESTMENT
ENVIRONMENT
Governments around the world see space and satellites
as strategic areas of manufacturing capability and policy making.
The 2006 US Space Strategy publicly calls for US dominance in
space, and China has recently even more publicly entered a space
technology race. India is proceeding with its 25 year national
space plan. Public investment in space within the ESA member states
averages at double the UK spend, as a proportion of GDP. The US
enables its industry to win business indirectly through a discretionary
DoD IR&D scheme of $3 billion pa. In Europe many countries
now use ARTES and national programmes (eg France) to prepare their
industry for commercial opportunities.
— The UK has no portfolio of national
space projects to help maintain its indigenous technology leads,
unlike many competitor nations, and the BNSC has little or no
discretionary funding to allow it the flexibility to support technology
projects. Despite the UK's leading position in the European satellite
communications sector, alongside France, UK investment in the
ESA satcom technology programme, ARTES, is now in eighth place,
behind, for instance, Luxembourg.
5. SPEED TO
MARKET IS
KEY TO
WEALTH CREATION
The prospects for the UK to make money out of
its world leadership in satellite technology rely on the speed
with which its industry can bring its technologies into the marketplace.
The quicker the technology is earning money for UK plc, the longer
will the UK sustain its competitive advantage before competing
high-tech countries catch up with the technology and low-cost
countries commoditise the technology more cheaply. Speed to market
is therefore an essential component of the wealth creation prospects
behind Britain's satellite technology bank.
— As the Hylas case study has shown,
public investment can play a critical role in raising private
investment and bringing the final product into the market more
quickly—in the case of Hylas "collapse the timescale
from lab to market" [David Williams, Avanti, oral evidence]
from six or seven years to three years. UK Government investment,
through the ARTES programme, in Astrium's advanced flexible payload
technology raised the confidence of the private sector, allowing
Avanti to focus the City on their market forecasts and to raise
funding more quickly. Government partnership has therefore been
critical to the business plan of Avanti, which is now a company
with forecast revenues of £600 million over the next 15 years.
6. MANY KEY
CUSTOMERS REMAIN
IGNORANT OF
THE POTENTIAL
OF SPACE
SOLUTIONS
Satellites are increasingly offering innovative
solutions for customer needs, both in the public and private sectors.
However the space sector is often up against both ignorance and
vested interests of traditional terrestrial solutions and a regulatory
environment that has not caught up with the satellite solutions.
Public broadcasters often choose terrestrial transmitters without
considering cheaper, environmentally sound satellite alternatives.
And the telecommunications regulator, OfCom, has, by not considering
satellite opportunities, effectively created a regulatory environment
that discourages satellite solutions.
7. SPACE AS
"PUBLIC GOOD"
DEPRESSES THE
MARKET VALUE
OF MANY
SPACE MARKETS
The public utility of many satellite based services
is vast and rapidly growing. Public uses especially include earth
observation and early warning systems for environmental policy
makers and for the academic community. Such services are often
freely available in the public domain, and as such depress the
market value of many satellite service markets. However without
UK involvement in their provision, the UK remains reliant on the
continued goodwill of other countries and will have limited say
in shaping the end services to suit UK users. The social value
behind many satellite applications also make it difficult to place
a monetary value on the application.
8. PUBLIC PARTNERSHIP
IS CRITICAL
TO SMES
Satellite and space projects are inherently
high-risk and involve large financial sums. Government partnerships
have significantly helped the involvement of leading UK SMEs including
SSTL and Avanti and the development of advanced technology. Examples
include investment by the DTI and BNSC in the development of small
satellite technology by Surrey Satellites. Initial seedcorn funding
through the public MOSAIC programme was critical for enabling
Surrey Satellites to grow its constellation of earth observation
satellites, DMC, across the world.
9. SPACE'S
ELONGATED VALUE
CHAIN WORKS
AGAINST PRIVATE
INVESTMENT IN
TECHNOLOGY
The length of the value chain of the global
space business stretches from the science community through to
the technology incubators in industry, into "wholesale operators"
such as Avanti and Inmarsat, and beyond into the market operators
such as BT, BSkyB etc. The majority of the wealth generated in
the UK space business is in the high-growth service end of the
sector, where the UK enjoys a 12.8% share of the global market.
Although the added value generated for the UK by the service sector
derives in large part from its early access to the technology
developed by the "upstream" UK industry, this relationship
does not make it much easier for the upstream industry to raise
private capital against the wealth derived by other companies
from its technology.
The UK's bank of world-leading technologies
underpins its leading role in the global space industry. If the
UK is to retain its 7.3% of the global space market, a market
estimated to grow to $1 trillion by 2020, then it should revisit
recent cuts in its investment in ARTES, which remains the primary
public-private investment mechanism driving present and future
wealth creation in UK Space.
March 2007
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