Select Committee on Science and Technology Written Evidence

Memorandum 81

Submission from Inmarsat

  On behalf of Inmarsat, I would like to thank you for extending the opportunity to us to provide a written submission to your inquiry into Space Policy. The Inquiry comes at an important time for the satellite industry, currently one of the country's "hidden treasures".

  Our submission comes from the perspective of a telecommunications operator, who designs, commissions and operates a fleet of satellites that provide global services from our London base. We are the leading global operator of mobile satellite services, with a particular commitment to providing lifeline services to the maritime community and to emergency services and relief agencies worldwide.

  For Inmarsat, Government is both a customer and a partner. As a customer, Government departments such as DfT, DfID and MoD use our airtime for various projects; as a partner, Government's investment in ESA and the resulting flow of R&D contracts to the UK space industry has been instrumental in our ability to maintain a competitive edge on the competition from the US, Europe and Asia. The importance of the mitigation of technological risk to a company operating in a highly competitive environment cannot be stressed too strongly.

  We have in the UK a valuable mix of expertise at the leading edge of technology, in all aspects of the satellite industry, from design to operation, from R&D to provision of innovative, value-added services. Inmarsat will do its part to keep it that way and looks to Government to continue to play its part in maintaining a vibrantly healthy high-tech industry.


  1.  Satellite services are a major enabler for Government to meet many of its strategic objectives in terms of global competitiveness, wealth creation and social benefit, whilst contributing to our understanding of the Earth's environmental challenges.

  2.  The UK has a vibrant space industry, with considerable expertise—and in some cases global leadership—in design and building of satellites. In Inmarsat it also has the leading global operator of mobile services via satellite, with a fleet of 10 satellites managed from its London headquarters. Further downstream, a number of innovative companies provide specialised applications and services, many of which support to the Government's agenda for climate change monitoring and for security.

  3.  The industry's competitiveness depends in large measure on maintaining this mix of academic and industrial research and innovation, operations and service provision. With no national space agency or programme, the industry is largely dependent on participation in ESA and EU programmes to maintain its leading edge. It is essential that Government continue to play its part fully in co-funding with industry those programmes that will enhance our current position.

  4.  Government should also recognise the importance of Space Studies in motivating children to take up science subjects—essential for the country's future competitiveness and for maintaining for the future the knowledge base that underpins the excellence of our space industry.


  5.  Inmarsat is the world's leading provider of global mobile satellite communications services and has been so for over 27 years. The company is committed to innovation and has a long track record of introducing new technologies that redefine the standard to the industry. Its fleet of 10 satellites are controlled from the company's head office in London. Inmarsat's turnover in 2005 was $491.1 million, most of which was generated outside the UK; the company accounts in US$ too reflect this. Most of the 390 employees are however based in the UK.

  6.  The company is a major purchaser of advanced satellites, which it also helps to design and develop; that it does so with mostly UK-based companies is a tribute to the excellence of UK industry in this field. The company invested $1.6 billion on the recent Inmarsat 4 satellite programme, the majority of which was spent with UK-based companies. The type of satellites that form the backbone of Inmarsat's network function from 36,000 kilometres in space and cannot be physically serviced should they malfunction. So it is absolutely critical that the technology they use should be both leading edge and, as importantly, robust enough to withstand the rigours of being launched and reliable in operation, as they are expected to last for at least 10 years. This barely compatible combination requires suppliers to join technical skills of the highest order to excellence in innovation and execution. We are fortunate to have in the UK several companies who meet these very high standards and with whom we have forged a close technical collaboration over the years. The importance of this cannot be underestimated in the pursuit of the technological excellence we need to keep ahead of the competition.

  7.  However, the innovative edge of the UK space industry comes not only from such collaboration, but also from work contracted to UK companies by ESA as a result of UK participation in the ESA programmes and it is essential that Government continue to fund them. Fortunately, they do lead to significant economic benefits to the country. As an example of this, the company is currently investigating an opportunity (project name Alphasat) to use an ESA -developed satellite platform, known as Alphabus, to provide the next generation of services from 2010 onwards. It is also an opportunity for Astrium to develop its next generation satellite payload technology, gain early in-orbit heritage and increase the prospect of selling similar technology worldwide.

  8.  ESA is offering European operators the opportunity to fly a payload of their choice on the platform, in which they have invested over €100 million (~£70 million); it is therefore free to the successful operator. However, for Inmarsat to be eligible for selection for Alphasat, it is mandatory under ESA rules that £35 million of UK public money be injected into the programme (over a four year period). Failure to do so will lead to the opportunity being taken up by other ESA contributors and the development and manufacture, as well as the operation of the satellite, being lost to the UK. Some £5 million of this figure has already been committed through ARTES funding for 2006.

  9.  The £35 million of public money invested in this ESA programme would generate an immediate benefit of €100 million (~£70 million) from the free Alphabus platform. This would in turn give Inmarsat the commercial incentive to make a further investment of around £230 million in building the satellite—and possibly follow-on satellites in due course. Most of this money would flow directly through to UK-based companies, generating revenue streams that will benefit several UK regions, providing continuing employment and helping to maintain the UK's competitive edge in this high-tech industry. During the development and manufacturing phase, it could create or secure over 600 very skilled jobs in Astrium alone, excluding any spin off contracts.

  10.  Once operational, the satellite(s) will stimulate new applications and generate further revenues to the benefit of the UK. Operational revenues flow into London and subsequently into the surrounding regions. New services and applications will benefit both private and public sectors in the UK, in particular in the areas of homeland security, civil protection, emergency services support, inshore and coastguard communications, whilst many applications will have export potential and also be of benefit to developing countries.

  11.  Traditionally, investments by Government in ESA programmes have generated seven-fold returns to the UK economy on the original investment (source : BNSC). In this instance, given the additional benefit of access to the free Alphasat platform, this return on investment may be expected to be even higher.

  12.  Inmarsat's operations are directed from its London headquarters. The expertise developed there was instrumental in persuading the various Galileo Concessionaire partners to locate their Operations company in London under Inmarsat leadership. Again, this decision was facilitated by Government's willingness to maintain a leading investment stake in the overall Galileo project.

  13.  Whilst Inmarsat does not sell services directly to end-customers, preferring to do this via its network of service providers, the company does develop the technological platform that supports the innovative services that form the basis of the Inmarsat offering, to land, maritime and aeronautical markets. The service providers in turn develop their own value-added customer- or sector-specific offerings, tailored to the markets they serve. Many of these applications not only meet commercial needs, but also serve public service or humanitarian goals.

  14.  Inmarsat itself provides the infrastructure for the Global Maritime Distress and Safety Service that has helped save many lives at sea and will continue to do so. The company has worked also with service providers and national governments in the provision of services to remote and rural communities, particularly in developing countries. The system is also of immense use to provide communications and logistical support in the event of natural and man-made disasters and emergencies when normal communications links do not exist.

  15.  The above has touched on some of the questions specifically identified by the Committee. More specific answers are set out below.


  16.  Inmarsat can only maintain its global lead in its chosen sector by continual innovation and investment in the network, its service platforms and in its people. In turn, the company relies on its suppliers to invest in the research and development necessary to meet the highest standards that we require. The company has recently completed an investment programme of $1.6 billion in its Inmarsat 4 satellite system and continues to develop the service platforms needed to tailor the high-speed data service that the new satellites can deliver to the aeronautical and maritime communities. This group of service offerings, collectively known as BGAN, provides services to 85% of the world's surface and 98% of its population. We intend to launch a third satellite next year that will ensure complete global coverage. We are also considering the advantages of the Alphasat programme and, if favourable, could invest as much as £230 million in this.

  17.  So far, most of this investment (except launchers) has been spent in the UK, where there is a tradition of excellence in the leading-edge technology we require for our satellites and network and where we have ready access to both financing and insurance. However, our competitiveness depends on continuing access to this level of excellence. Should this for any reason be diminished, we would be forced to go where we could find it and get the best value for money.

  18.  We also see considerable value to our suppliers from their continuing participation in ESA and EU research programmes. Much of the innovation that underpins their leading edge technology is developed at least in part from work on these programmes. It is therefore important that the Government continue to invest in the ESA, particularly ARTES, programmes, which are directed at producing practical results that can deliver a competitive product that can be put into commercial use.

Benefits and Value for Money of ESA

  19.  We have mentioned several times the importance of leading edge technology from suppliers. As the UK has no Space Agency or national space programme, development of an innovative industrial infrastructure is largely dependent on co-funded ESA programmes, and on ARTES in particular. ESA's programmes have led to the development of a pool of expertise in Europe, and especially in the UK, that has kept our space industry largely competitive with that of the USA and emerging space industries such as those of China or India. Without ESA's presence, it is possible that much of operators' investment would go to countries where such expertise did exist.

  20.  ESA's geographical returns policy has been criticised as leading to poor value for money. However, the UK's approach of selective investment can produce an excellent return on investment for the UK and has undoubtedly helped retain expertise in this country. From a satellite operator's perspective this is important, as value for money must take into account the ability to innovate locally, to keep overall programme costs down. Were this not available, the operator would have to consider moving its innovative technical people to where that expertise could be found.

  21.  There are many examples of successful return to the UK on investment in ESA programmes and this was certainly the case with the Inmarsat 4 programme, where our main supplier (and therefore we) derived considerable benefit from ESA co-sponsored work. As previously mentioned, a satellite operator needs to be sure its satellites employ leading edge technology; however, employing such technology inevitably carries a risk. Fortunately, ESA programmes can be used to mitigate such risk without the supplier or their customer bearing all the cost. An additional advantage is that the IPR and expertise also remains with the supplier.

Innovation and Knowledge Transfer

  22.  Inmarsat has a long tradition of working with UK universities and also the World Maritime University (based in Sweden) and International Space University (based in France). However, our main forum for interchange of ideas and for knowledge transfer has traditionally been through working with our suppliers and service providers on specific projects. We regularly have technical people out-posted with suppliers and spend several million dollars a year on our Connect programme, which helps our service providers to develop and market new applications. This teamwork provides an excellent return on investment in terms of understanding the business, technical innovation, and quality assurance.

Benefits of Government Investment in Space Activities

  23.  The benefits of Government's investment in ESA has already been well rehearsed and we would wish to congratulate the BNSC team that coordinate the UK's investment in ESA, and particularly the ARTES programmes, for their excellent work and interaction with UK industry that has brought significant ongoing benefits to the UK. We cannot stress too strongly the importance of continuing along this path, if possible by increasing such investment in the Comprehensive Spending Review.

  24.  We would encourage Government to adopt the holistic approach of the UK space industry when considering its investment in space. It is important, for instance, that user departments take into consideration the wider picture when determining their "make or buy" policy. Government is potentially a big user of space-based products and is naturally concerned to get best value for money. However, value for money for the country as a whole needs to take into account the importance of maintaining a competitive UK-based industry. Otherwise user departments could find themselves not only paying higher prices, but indeed paying them to companies not based in the UK, to the detriment of the economy.

  25.  There may also be short-term consequences from lack of investment in the "build" phase of a project. A recent example is with DfT's unwillingness (or inability) to provide the necessary funding to maintain the UK's 17% share of the Galileo project. Fortunately, DTI were able on this occasion to fund the €31 million commitment—but we fear that this could be at the expense of other projects. In the context of siting the Galileo Operations company in London under Inmarsat direction, it was made clear to us that if the Government failed to make this investment, this would almost certainly lead to the company being located in a country that was prepared to make the investment—in practice France, Germany or Spain. Furthermore, there would likely have been no future in Cardiff's bid to host the Galileo Supervisory Authority.

  26.  We would therefore recommend that user departments, along with DTI, be allocated funds to provide this kind of "build-phase" investment to ensure continuing UK participation and influence in projects in which they will have an eventual interest as users, and to help keep jobs in the UK by maintaining the competitiveness of industry.

Space Research and the Skills Base

  27.  As previously noted, the current level of Research and Development by UK industry and Universities, complemented by public funding from the Research Councils, has led to a highly skilled and competitive workforce. However, a large proportion of this skill base is due to retire over the next five to 10 years. It is therefore vital that Government Education policy should be directed towards encouraging more study of science subjects. In this context, Space Studies are a proven motivator for schoolchildren and have been recognised as such by PPARC, who have done good work in this area.

  28.  For this reason, we would further recommend that Space Studies to be given greater prominence, both to improve the take-up of science subjects in general and to produce the next generation of UK space experts to maintain our excellence in this field.

November 2006

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