Select Committee on Science and Technology Written Evidence

Memorandum 41

Submission from Intellect


  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.


  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.


  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.


  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.


  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.


  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.


  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.


  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.


  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.


  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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