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.
EXECUTIVE SUMMARY
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.
INTRODUCTION
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.
IMPACT OF
INVESTMENT ON
COMPETITIVENESS
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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