Memorandum 41
Submission from Intellect
EXECUTIVE SUMMARY
1. Space is a critical element of the knowledge
infrastructure that underpins the knowledge economy. The UK has
an enviable record of achievement in developing and using space,
and this is facilitated by involvement in all aspects of space
applications from satellite to end user. When the value chain
in a market is radically changing, a country that is involved
in all parts of the value chain has a better chance of adapting
to those changes. Involvement in all parts of the value chain
also underpins an informed regulatory environment, which is crucial
for continued success of UK space services such as broadcasting
and telecommunications.
INTRODUCTION
2. The UK's hi-tech sectors make an amazing
contribution to our lives. Intellect's membership is made up of
the leading players in these sectors as well as many smaller hi-tech
companies that help to maximise this contribution. Intellect represents
these sectors with government, regulators, customers and consumers,
creating an environment where technology transforms. Intellect
works in three significant areas: helping member companies to
be top performers; providing insights into members' markets and
supply chains—and shaping them for the better where we can;
and working with government and regulators to create the most
favourable business environment. Intellect therefore very much
welcomes this opportunity to provide inputs to the Select Committee's
inquiry into one of the most knowledge-intensive sectors in today's
economy—space.
3. Intellect is aware of some of the inputs
that the Select Committee will receive from our sister trade associations,
in particular from UKspace. We shall try to avoid duplicating
that evidence, and instead present evidence based on the perspective
of our members, who largely address the "down-stream",
or user end, of the space market. The evidence below makes a few
general points then turns to the specific issues identified in
the Select Committee's invitation for written evidence.
IMPORTANCE OF
END-TO-END
COMPETENCE
4. The UK is fortunate in that we are active
in all "key aspects" of the most important space applications
that have export potential. By "key aspects" we mean
all domains involved in research, development, deployment, system
operation, service provision and exploitation. Involvement in
all parts of this end-to-end chain between space infrastructure
and end-user is crucial when the value chain of the sector is
undergoing rapid change, which is the case in several important
space applications.
5. Changes in at least some of the value
chains are easy to spot. Satellite TV competes against terrestrial
TV on cable, telephone lines, VHF/UHF radio, even via mobile telephones.
For the UK to remain globally competitive, UK regulators must
have access to in-depth expertise in all of these technologies.
And UK companies active in the sector must understand all these
technologies if they are to compete at home and abroad. For example
if new satellite technology is about to be deployed that drastically
cuts the cost of TV reception, it would be imprudent for a TV
operator to make large investments in a traditional technology.
So, to understand the business case for building TV relay masts
(a traditional technology) requires an understanding of the trends
in the latest satellite technology.
6. Over the past 40 years, the UK has been
quite good at keeping up with, in some cases even leading, world
trends in telecommunications and broadcasting, including their
space variants. We attribute this hard won success in no small
part to the UK's continued end-to-end involvement in satellite
applications.
PUBLIC SECTOR
SUPPORT
7. The public sector must provide the right
regulatory environment—and we will return to this important
topic below. But the public sector must also seek to ensure a
level playing field. If our foreign competitors are underpinned
by large national funding, it will be difficult for UK companies
to remain competitive. The space technology end of several space
markets is indeed in this situation. While government works to
remove these distortions to the market, the challenge is to provide
focused support at modest levels that permits UK industry to build
sustainable and thriving business.
8. For the past 30 years, mostly through
the European Space Agency, successive UK governments have adopted
this strategy—putting relatively small amounts of seed-corn
funding into those technologies that offer the promise of changing
the market. The evidence you will receive from UKspace will undoubtedly
mention examples for the telecommunications sector such as Inmarsat
4 and Skynet 5. As noted in §5, that sector is still undergoing
radical evolution, and so it is crucial that the government provides
continuity of this long-standing and successful policy. We hope
that the 75% reduction in the funding for space telecommunications
support imposed in 2006 was a one-off blip, and that funding levels
will be restored to previous levels in 2007.
REGULATORY ISSUES
9. From the downstream industry perspective
further activity is needed in the areas of market structure, regulation
and licensing. For example, new upstream capabilities in satellite
communications are not always made available to service providers
by incumbent satellite operators. There is limited competition
at the satellite operator level and this can sometimes prevent
the exploitation of new satellite technologies and the delivery
of advanced low-cost services to end users. The recent wave of
consolidation among communications satellite operators makes innovation
at the wholesale level less, rather than more, likely in the future.
The UK must seek to create competition at the wholesale satellite
capacity level in order to exploit and grow our upstream capabilities
and bring their full benefits to the downstream industry and end-users.
10. The recently announced HYLAS programme
is a good example of how to create competition at the wholesale
capacity level by a start-up satellite operator utilizing next
generation technology (and a UK orbital slot and spectrum filing)
to address specific market opportunities in a way that existing
operators appear to be unable or unwilling to contemplate. However,
opportunities to create new satellite operators are limited, not
only by the capital required to create them, but also by the way
that satellite orbital slots and spectrum are managed. Orbital
slots and spectrum rights are allocated to national administrations
well in advance of their potential exploitation and, due to the
time it takes to develop a new satellite platform, much can change
in the market place between the genesis of a new concept and the
launch of a commercial service. To overcome this disconnect between
upstream capabilities and downstream needs, it may be necessary
to explore other ways of bringing upstream capabilities to the
downstream market, including reviewing the international process
for allocating orbital slots and possible regulation of the satellite
capacity market at the UK, European and global levels.
11. In addition, a licence to operate services
in some countries is difficult to acquire, even in some EU states
despite EC Directives mandating trans-EU licence equality and
transparency. This means that UK service providers can suffer
inconsistent costs and delays when trying to offer service across
international boundaries. This can result in contracts being lost
due to operating licences being delayed or denied in some countries.
The current EU Directives need proper enforcement, and the UK
should seek appropriate market liberalisation elsewhere through
the WTO.
12. To help government users and UK enterprises
exploit space and fulfil its wider policy objectives the UK should
seek to align its regulatory approach to support its strategic
development, rather than hinder it as sometimes appears to be
the case now. For example, Ofcom's management of UK spectrum use
is becoming very UK-centric in that the wider policy implications
and international dimensions of existing and new satellite services
do not appear to be taken into adequate account when planning
future spectrum usage. Specific examples include:
— Ofcom is seeking to allow new terrestrial
services to encroach on the existing receive C-band transmission
band which will restrict the introduction of new earth stations
and potentially cause interference into existing links. This is
the prime band for global connectivity and could jeopardise the
UK links to other countries, in particular in Africa where satellites
in this band provide the only available telecommunications link
between the UK and many of the poorer countries.
— Ofcom is planning to use an unwieldy
clearance mechanism for temporary transportable terminals in the
internationally designated exclusive satellite bands (eg 14-14.25GHz)
for VSAT services. This would represent an additional burden for
new players seeking to support the security and emergency services
with new capabilities.
— Ofcom requiring clearance (SATCLEAR)
and registration of VSAT terminals for satellite broadband and
similar services in the UK—no such registration is required
in some other parts of Europe.
— Ofcom is proposing a massive increase
in satellite earth station licence fees (at least three-fold for
most permanent Earth stations) and this will have a detrimental
effect on business cases for satellite services.
IMPACT OF
INVESTMENT ON
COMPETITIVENESS
13. The UK is a world class player in satellite
communications and broadcasting. It is home to a host of world
leading satellite communication service providers meeting the
needs of consumers, enterprises, international corporations and
governments. As explained in §5 and §8, this healthy
situation requires continued modest government funding to counteract
the global market failures.
14. A similar situation prevails in the
other two main application sectors: positioning and remote sensing.
15. In positioning, the USA government provides
global infrastructure enabling users with relatively low cost
equipment (from <£100) to determine their location free
of user charges—the Global Positioning Satellite (GPS) system.
Usage of GPS has exploded across the globe, with tens of millions
of cars and mobile phones now GPS-enabled. While our economy and
society become increasingly dependent on GPS, the European Union
and member states have rightly decided to invest in complementary
infrastructure—the Galileo programme—to avoid total
dependence on a single piece of infrastructure controlled by a
foreign government. So long as GPS is financed by the USA government
and does not require payment at the point of use, Galileo will
require similar financial underpinning from European governments.
Thankfully, the cost of Galileo is proving to be much less than
GPS was.
16. Remote sensing has been growing slowly
for 30 years as an application, but has not shown signs of taking
off in the way that satellite telecommunications, broadcasting
and positioning have. Outside the military domain, the main operational
application of remote sensing has been for weather forecasting.
Satellites have proved to be so cost effective in providing the
wide area and rapidly sampled data needed by meteorologists that
other forms of data gathering have been sharply reduced, thus
reducing costs while improving forecasts. By international agreement
(driven by the USA), weather satellite data is made available
free of charge, thus destroying at a stroke the potential for
a market to develop.
17. Other applications of remote sensing
are important and even strategic. For example oil and gas exploration
relies on detailed and accurate maps of parts of the world that
are often difficult and/or dangerous to access. Despite a few
such exciting user communities, the great majority of remote sensing
applications address public sector requirements—monitoring
agricultural policies, mapping flood waters, analysing marine,
land and air pollution, measuring ozone depletion, deforestation,
illegal fires, unlicensed building—the list goes on and
on. The boundary between scientific analysis of these phenomena
and their operational application is blurred, not least because
often the same organisations undertake both research and operation.
Furthermore, in many countries apparently commercial or research
remote sensing programmes have a covert military dimension. As
a result of all of these factors, remote sensing data is funded
by a mix of public sector infrastructure investment and user charges,
making it impossible to develop a clear market-driven value chain.
UK public sector must accept its responsibility to pay its fair
share in this complex situation. If not, UK companies cannot hope
to compete globally against foreign companies whose governments
do.
BENEFITS AND
VFM OF ESA
18. ESA has successfully kick-started the
satellite telecommunications and weather satellite sectors in
Europe. More recently it has proved invaluable in kick-starting
the satellite positioning sector in the light of the relatively
slow pace at which the European Commission moves from positive
policy decision to infrastructure deployment.
19. Industry has restructured and/or adapted
its business practices to exploit the single European market in
products. The single market in services is proving much harder
to establish, and industry urges government to strengthen its
efforts towards this end. ESA can assist the process by sponsoring
European-scale developments, but at the end of the day implementation
of regulatory change across Europe is the key to achieving a sustainable
trans-Europe marketplace for space services.
INNOVATION AND
KNOWLEDGE TRANSFER
20. UK universities are recognised as having
strong capabilities in many of the areas relevant to space. There
is a good heritage of university-industry interaction, in telecommunications,
positioning and remote sensing, which benefits both parties. A
strong university capability in space topics is an important element
in the end-to-end expertise chain mentioned in §4 above.
21. One difficulty is that space is multi-disciplinary
in nature. Activities are spread across research councils, including
PPARC and NERC, but also EPSRC and BBSRC. Industry encourages
government to find ways to work across research council boundaries
in order to strengthen the academic community's ability to engage
with new space opportunities.
COORDINATION ACROSS
MULTIPLE DEPARTMENTS
22. The UK government expects user departments
to make the case for investment in new European space programmes.
Many other countries give a space agency the authority to make
initial investments until such time as the business case for the
user department becomes clearer. The weakness in the UK approach
has been evident on several occasions in the last 15 years, and
continues to be apparent in recent decisions on Galileo and GMES.[57]
It is ironic for instance that the UK is keenest in Europe to
introduce road user charging but was seemingly reluctant to fund
the extra Galileo costs (requested by ESA) that will facilitate
its introduction.
23. For the downstream sector (of most interest
to the majority of Intellect members), UK involvement in the upstream
(usually ESA) part of a programme is crucial to giving UK companies
access to the exploitation phase of such programmes on a competitive
basis. For example, in the Galileo programme, strong UK involvement
in the ESA part of Galileo has been a necessary condition for
negotiating the presence of the operating company in the UK, and
hopefully of the political HQ (the Galileo Supervisory Authority)
in Cardiff, and of preventing all of the security facilities being
of French origin. UK companies are now better placed to develop
Galileo-related business than they would have been if the operating
company and the security facilities were French.
24. A similar scenario is emerging in the
GMES programme, whereby the location of the Applications Centres
is being decided during the ESA phase of the programme, and thus
being influenced by the relative importance of each country's
level of participation in the ESA GMES programme. Long term wealth
creation under GMES will be facilitated by having the most appropriate
Applications Centre(s) in the UK.
RESEARCH AND
THE SKILLS
BASE
25. As noted in §19 above, the UK academic
community has a strong heritage in space disciplines. Furthermore,
the evidence you will receive from UKspace will undoubtedly emphasise
the very high educational level of employees in the space business.
These two factors underpin continued UK strength in this important
part of the `knowledge infrastructure' that underpins the modern
knowledge-based economy.
October 2006
57 GMES = Global Monitoring for Environment and Security. Back
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