Business India, April 21- May 4, 1997
SPACE: THE NEW BUSINESS FRONTIER
Driven by the telecom, TV and Internet revolutions, the global space market for satellites, launch vehicles and other hardware is expected to rocket to nearly $60 billion in the next three years. The software for, and services coming out of, this growing space infrastructure will involve even larger sums. With the Indian Space Research Organisation's technology and Indian entrepreneurship, the country is well placed to grab a significant share of this emerging business. But will the government amend its currently stifling policies to let this happen?
Anand Krishna is a real estate developer who is making his fame and fortune not on land anymore but actually beyond the skies. A Malaysian of Indian origin, Krishna owns Measat, a satellite company with four satellites in orbit. Shinawatra, a former general in the Thai army, is another to reach for the stars with company Thaicomm. They are part of an increasing number of Asian entrepreneurs who are getting into the hottest business of this, and probably the next, century - satellite services.
The business is rocketing in front of our very eyes and we seem to be missing it. Over the next 10 years a galaxy of satellites will cover our planet's skies. There are all together 150 satellites in orbit today running telecommunications, remote sensing, TV, scientific experiments and military applications. In the next three years alone 500 satellites, called 'birds' in industry parlance, are expected to be launched.
The hardware alone spells $30 billion worth of business for builders. If the plan of the Bill Gates-Craig McCaw company Teledesic to put up 840 satellites to provide multimedia services and global mobile connectivity to the Internet comes through, then the value of business will truly be astronomical.
Four major factors have fuelled an unprecedented demand for satellites: the growth of the Internet, corporate business communication, value-added services and electronic commerce globally, but especially in the US; the mushrooming of satellite TV channels in almost all countries and their further development to digital Direct- To Home (DTH) service with high-definition picture and CD-quality sound; the development of commercial remote-sensing applications; and the urgent need to set up basic telephony in developing countries.
Global mobile communications drives the market. In the next three years over 300 satellites are expected to be launched in the low-earth (600-1,000 km) and mediumearth orbits (10,000 km). These are parts of constellations of satellites meant for global cellular communication such as Iridium of Motorola, Globalstar, Odyssey of TRW, Orbcomm of Orbital Sciences, Starsys of GE Americorn, ICO Global, etc. There are a few more schemes involving 100-200 small satellites awaiting global regulatory processes.
With commercial remote sensing opening up, 100 remote sensing satellites are planned to be launched as well. Additionally 150 traditional large satellites will be launched in geostationary.orbits. More than a hundred of them will be commercial communication satellites. Over 50 of these are high.- powered satellites meant for DTH TV broadcasts. About 30 satcoms (communications satellites) will be for standard telecommunications and others will be for assorted use, including multimedia services and the Internet.
Such an unprecedented boom will mean another $30 billion for launch providers. Besides the government-funded space programmes, a large number of private companies are developing rockets for these launches. Some companies like Loral (Ford Aerospace) have shed their defence business in favour of the more lucrative space market. The merger of corporate giants such as Lockheed-Martin Marietta (GE satellites with General Dynamics rockets) and Boeing-McDonnell Douglas have also meant an intensified focus on their space businesses.
Unlike in the past, the major new players are not governmental or inter-governmental programmes such as NASA, Intelsat, Inmarsat or Arianespace, much less the cash-starved Russian and Ukrainian agencies. The new players are not manufacturers of satellites and rockets at all- rather, they are operators, marketers and service providers. They rely on other firms to build the hardware and launch it, while they focus on selling and finding innovative applications for their services.
Where does India fit in this scenario?
The Indian Space Research Organisation (ISRO) has today completed developmental flights of the Polar Satellite Launch Vehicle (PSLV), which can put a one-tonne satellite in a 1,000 km orbit. Work is in progress to stretch the existing launch vehicle by increasing the amount of propellants in the first stage solid-fuel booster and the second stage liquid-fuel engine, so that a 1200 kg satellite can be placed in a low earth orbit. The PSLV in its developmental phase cost an incredibly low $15 million. The entire programme was budgeted at about $100 million. Even if commercial launches of PSLV are marketed at $25-30 million, it will be the most attractive launcher for low earth orbit satellites, which could be for remote sensing, scientific experiments or the market driver - mobile communications, such as Motorola's Iridium (66 satellites) amongst others.
ISRO lost an opportunity to be part of the first round of Iridium contracts. Motorola had to finalise its financial closure and, due to the failure of the first developmental flight of PSLV in 1993 on account of a software error, dropped PSLV for consideration as one of the primary launchers. However, the later success of two flights in 1994 and 1996 means that Motorola will consider it as a potential vehicle for replenishing the constellation starting in 2002. Recently there have been a series of launch failures by several launch providers, and it might well become a seller's market for those who have successful launch records, so the window is still open for ISRO.
How does ISRO succeed with a 'shoe-string budget' (as the wellknown US aerospace magazine Aviation Week & Space Technology said in a recent cover, story)? Space technology needs highquality industrial and other infrastructure. For example, running the deep space simulation chamber for testing a satellite soaks up large amounts of power and about 2 million litres of liquid nitrogen, both of which are expensive in India.
MILESTONES IN THE INDIAN SPACE PROGRAMME
First sounding rocket launched from TERLS
Indian Space Research. Organisation (ISRO) formed under Department of Atomic Energy
SLV-3, Rohini satellite launched
SLV-3, RS-D1 launched. APPLE launched. Bhaskara-2 launched
SLV-3, RS-D2 Iaunched.INSAT-1B launched
Launch of ASLV. SROSS satellite could not be placed in orbit
IRS - 1 A launched
INSAT- 1 C launched
ASLV launched. Unsuccessful in placing SROSS satellite in orbit
1990 INSAT-ID launched
1991 IRS-1B launched
1992 ASLV launchedSROSS-C placed successfullyINSAT-2A launched
1993 INSAT - 2B launched PSLV-D1placing IRS-IE unsuccessfully
1994 ASLV launchedSROSS-C2 placed successfully PSLV-D2 launchedIRS-P2 placed successfully
1995 INSAT-2C launched IRS -1C launched
1996 PSLV-D3 launched
IRS-P3 placed successfully
1997 INSAT-2D sent to French Guyana on 8th April for launch
Any object placed into orbit at 36,000 km above the equator will take the same amount of time as Earth to complete one revolution. Thus from Earth it appears to be stationary. Hence an antenna dish receiving signals from the satellite does not need to move to continuously track it, saving considerable expense and complexity.
A communication satellite used for telecom or TV receives the electromagnetic signal from the ground transmitter. It then retransmits it at a different frequency towards Earth. The communication equipment on board a satellite that does both is called a transponder.
Why multi-stage rockets?
The more weight that is carried into space, the larger the size of the rocket that is required for more fuel and power. It costs approximately $30,000 (roughly Rs. 10 lakh) to put one kilogram into geostationary orbit. In a multi-stage rocket the burnt out stages are detached one by one so that less and less weight is actually carried up.
Observing Earth from a distance and getting information based on the reflecting properties of different objects is known as remote sensing. Remote sensing can also be done using aircraft but satellite remote sensing is far cheaper and more comprehensive.
What is digital Direct- To- Home broadcasting?
In DTH, the signal frequency allows the broadcast to be received by a small dish antenna about a foot in diameter. Using digital technology the signals are compressed so that many channels can be broadcast from a single transponder. It enables the broadcaster to monitor and control usage, because the signal can be keyed to individual users, who can then be charged subscriptions. Since it uses digital technology, DTH provides extremely high quality picture and sound, as on a laser disc or CD.
Why should we use liquid-fuelled rockets when solid-fuelled rockets are much simpler to make?
Solid-fuelled rockets cannot be turned on or· off at will. Once lit they bum till the propellant. is exhausted. A liquid-fuelled rocket, on the other hand, can be easily controlled with a fuel valve, just like the accelerator of a car.
But ISRO has a major cost advantage because so much of space technology development is highly labour-intensive. This kind of work requires the highly skilled labour of scientists and engineers. ISRO has MScs, MTechs and PhDs assembling and testing critical subsystems of its satellites and rockets for a fraction of the costs of its foreign competitors. Just like the Indian advantage in developing computer software, low-cost intellectual labour gives ISRO a marked competitive advantage.
For example, the money invested in the entire Indian space programme over the last 35 years is half of what Japan invested in developing their own H-2 rocket over the last 10 years ($2.4 billion). Yet it found that H-2, with a price tag of $150-180 million per launch, is priced out of the market. Now Japan is investing another $900 million to modify it into H-2A and using all the manufacturing infrastructure of heavy weights like Mitsubishi, Kawasaki, Nissan and NEC to bring the launch estimate to about $80 million. H-2A has the same payload capacity as ISRO'S Geostationary Satellite Launch Vehicle (GSLV) now under development at an additional cost of only $100 million. ISRO can profitably price it at $70-80 million when it flies early in the next decade.
Launch failures are a common occurrence in the developmental phase. But serious problems arise when an operational vehicle fails, because this shoots up the already high satellite insurance costs and damages the launcher's credibility in the market. Thus far, all of the operational satellites built by ISRO, be they remote-sensing satellites or communication satellites, have done well, with some performing beyond their designed lifespan.
PSLV also acts as a major step in achieving the capability to launch 2,000-2,500 kg communication satellites in the 36,000 km high geostationary orbit. Slightly modified first and second stages which have already been ground tested are used in configuring GSLV to launch India's Insat series. After developing GSLV and putting it into operation, it will be stretched to carry the heavier 3,500 kg class satellites.
Under the leadership of U.R. Rao, ISRO undertook a vigorous programme to develop a space industry in India by transferring their technology to build various subsystems for liquid- and solidfuelled rockets to private and public sector units. Antrix Corporation, which was set up by ISRO to market the government organisation's products internationally, has already taken initial steps to involve the private sector, and it even has Ratan Tata, Jamshyd Godrej and Ravindra Reddy on its board. L&T, Godrej, MTAR, Walchandnagar Industries and others, who are involved in manufacturing subsystems for ISRO, could follow the worldwide trend and form consortia to build launch vehicles and market launch services.
Global marketing requires investments, market savvy, and aggressive strategies, which private entrepreneurs can provide. In fact, Rao recalls how India's first experimental communication satellite, Apple, was not only offered a free ride into space by Arianespace (a European launch conglomerate) but, throughout the developmental stage of Ariane, its director-general would personally visit ISRO every three months to brief them on the latest progress in the project. Ariane used to fly prospective customers from all over the world to French Guyana for Ariane launches. No wonder then that when NASA stopped carrying commercial satellites following the Challenger disaster, Ariane moved in. Today it has 60 per cent of the commercial launch market with its Ariane-4 rocket.
To launch so many satellites one needs suitable space ports. More than 10 new launch facilities are being planned by the private sector worldwide in the US, Canada, Brazil, Norway, Sweden, Kenya and Australia. And India's Sriharikota Range (SHAR), covering some 170 sq km north of Chennai, if marketed properly, could be a money-spinner. The location utilizes Earth's eastward rotation to launch a geostationary satellite in the equatorial plane. Its location close to the equator is one of its main advantages (as geostationary satellites must be launched near the Earth's equator), besides the fact that the Bay of Bengal provides a safe, unpopulated environment. Along with the Arianespace port at Kouru in French Guyana in South America, SHAR currently provides the best location for equatorial launches.
SHAR also boasts a state-of-the-art, 20-storey, 300-tonne mobile service tower. This is a mechanical engineering marvel built by Triveni Structurals to ISRO designs and specifications. The mobile service tower provides facilities for launching PSLVs and is currently being augmented with cryogenic equipment for launching GSLVs as well. To increase the frequency of launches to serve the global market an additional launch tower is being planned by ISRO and is awaiting government funding. The range also offers solid propellant production and casting facilities along with ground testing facilities for solid-fuelled rockets.
The star of the space programme is of course ISRO'S satellite design and fabrication capability. Indian Remote Sensing Satellites (IRS) today are among the finest in the world and at the same time inexpensive. ISRO currently has four of these in polar orbits and will launch four more by 2000. ISRO is thus placed to be the best provider of remote-sensing data globally, a market dominated earlier by Landsat (US) and Spot (France). It was also a bit of luck that Landsat-5 went out of action and Landsat-6 was lost in space by the Chinese Long March rocket.
ISRO moved into the vacuum with its high-class IRS 1-C. Seizing the opportunity, the US company Eosat, which is marketing Landsat's remote-sensing data, made a strategic alliance with ISRO'S global marketing arm, Antrix. ''The alliance is win-win," N. Sampath, executive director of Antrix, exults. Recently Eosat's director of applications and training, Tina Cary, echoed similar sentiments, saying, "the IRS series is a jewel in the crown of Eosat." A new partner to this alliance will be Space Imaging (US), which is soon putting up a high-resolution satellite of its own. The threesome, with its combined array of data products, hopes to capture a significant portion of the $250-million market for data over the next three to five years.
In an exclusive interview with Business India, K. Kasturirangan, chairman of ISRO, spelt out the organisation's marketing strategy. "Data sales in the form of computer-compatible tapes and hard copies will yield us money, but the real money is in value-added services. Value-added services in remote sensing could soon have a market of $2-3 billion. The important thing is that in India we have a lot of experience in generating value-added products for specific queries, laying a pipeline for urban development or ground water studies or other studies in rural development, crop estimates, aquaculture, etc, which we did for our own developmental needs. Thereby we have built up the service infrastructure for the global market as well.
"We are encouraging more and more entrepreneurs into remote-sensing, value-added services. When many of the foreign space agencies come to us today for signing co-operative agreements in remote sensing, they also come as representatives of industry in their country. We also have been including industrial representatives and put entrepreneurs together. We have identified about 50 entrepreneurs and 12-13 have become very active.
Profits from a distance
Remote sensing is a technology by which a satellite acts as our eye in the sky through which we get important information about our own planet. Everything reflects energy in a different way. The reflective and emissive properties of various surfaces, which are detectable by satellite, are called their 'spectral signatures'.
Indian Remote Sensing (IRS) satellites are equipped with special cameras which scan a Part of Earth's surface for radiation. The data is digitised and sent to a ground station for analysis. This data can yield commercially valuable information. For example, in the case of ground water, the conventional method of prospecting yields a success rate of about 45-50 per cent, but remote-sensing data used in conjunction with the conventional method yields a success rate of almost 95 per cent.
In the same way, remote sensing has great cash-saving applications in urban development, aquaculture, deep water fishing, cartography, siting industrial complexes, environmental impact assessment, pipeline laying, etc.
ISRO, in addition to having developed extensive in-house remote-sensing expertise, is working at building up a service infrastructure and likewise encouraging many entrepreneurs to service the market. The National Remote Sensing Agency (NRSA), National Natural Resources Management System and Regional Remote Sensing Service Centers are continuously making efforts to popularize the technology. They provide satellite data in various forms at throwaway prices to Indian users as compared to the expensive French SPOT satellite data. They also help in interpreting it for specific applications. NRSA, together with the Indian Institute of Remote Sensing at Dehradun, is training a large number of people from the government and the private sector in data analysis and value-added services.
Recognizing India's strengths in remote sensing, the UN has established an advanced centre for training in remote sensing for the Asia Pacific region at Dehradun. Given its state-of-the-art remote-sensing satellites and software abilities, India is considered to be one of the global leaders in the field.
Some are ex-ISRO people. Some have been trained by us at our Indian Institute of Remote Sensing at Dehradun and at the National Remote Sensing Agency at Hyderabad.
"Our French competitor SPOT is talking about a new satellite – SPOT-5 - with improved resolution. They have their own established market. But I am sure that we will have our own niche in the market as well. We have to always maintain leadership technologically. Instead of trying to enter as the third force in this emerging market, we are having a strategic alliance with Eosat and Space Imaging," elaborates Kasturirangan.
Today India is one of the global leaders in all aspects of remote sensing. "In fact, a very large number of papers in any international conference on applications of remote sensing is from India," says former chairman Rao proudly. He was also the architect of Antrix Corp and its alliance with Eosat.
ISRO has not found space hardware marketing as easy, when giants like Hughes control 60 per cent of the global satellite market. SO ISRO has gone in for subsystem supply as a market entry route. It has a contract for about $2 million dollars from Hughes and a further half million from Matra Marconi. But this is not easy either. Each designer has his own specifications for subsystems, unless the system is co-designed with the supplier. "The money is peanuts and hassles are many, margins are non-existent, but the interaction is helping us in many ways. Though they are tough to satisfy, once Hughes or Matra realizes your value as a· reliable supplier, they inevitably give a steady stream of orders which we can pass on to the industry while we become the testing, qualifying node," says Sampath.
Kasturirangan feels that 10 transponders to be leased out to Intelsat in 1998 from Insat-2E will not only bring in $100 million over the next 10 years but also give India visibility in the international communication satellite market.
"Our global thrust is remote sensing"
K. Kasturirangan, chairman of ISRO, spoke to Business India about ISRO'S marketing strategies and the challenges that lie ahead in the highly competitive global market
Are you looking at the global market for space hardware and software as a thrust area, or do you just have some surplus capacity to sell?
In the case of value-added services in remote sensing we feel we have some strength and we are giving it a global thrust. In communications we have leased 10 transponders to Intelsat in Insat 2E for $100 million over the next 10 years. We also provide satellite operation-related services like tracking and telemetry on orbit tests to other satellite companies.
When it comes to satellite hardware, we do have some problems. We can supply elements which have been standardised like communication elements, precision mechanical elements, control system elements, electro-optical and infra-red sensors and propulsion elements, among others. We have a contract with Hughes worth over a million dollars. We are supplying some sub-systems to Matra-Marconi in Europe, and we are also holding discussions with Loral Aerospace of the US. But manufacturing is not ISRO'S activity and we are transferring many of these things to industry.
In the launch-vehicle programme there is limited capacity available for a single shot or replenishment of satellites in low earth orbiting constellations for mobile communication. There are a number of agencies in the world which are looking for that kind of support as well. But we are not planning a major thrust in the launch vehicle market.
Here again we want the industry to play a more important role. They should not be just making subsystems for us. They should get into assembly and the vehicle itself like Lockheed, McDonnell Douglas, Orbital Sciences, etc, in the US, so that ultimately we can have a space industry coming out of this.
Suppose tomorrow the government allows uplinking for private channels. How long will it take ISRO to put a satellite in orbit?
The DoT and the ministry for information and broadcasting use about 70 transponders. With Insat 2-D, which we sent to French Guyana for launch this month, we will have 93. As we place one Insat every year, we will have 130 transponders by 2002. We can build up capacity for private users and adjustments could be done. You can't suddenly ask for 25 transponders – nowhere in the world can you do that. Other than that we can take care of private demand.
Do you see any widening of the Insat coordination committee to include private users?
I will not right now rule out that possibility. How Insat will evolve in the future is certainly receiving ISRO' S attention. It will depend on the telecom policy and broadcasting policy which are being discussed in the government.
The draft broadcast policy says channel operators should use Indian satellites. If ISRO transponders are going to be priced competitively anyway, why should you insert that clause?
Every country, when it reaches capability like ours, develops a national satellite policy. When you talk about an Indian registered satellite, it is not necessary that it should be built by ISRO. It can be built anywhere. Registration essentially provides control of the satellite. Government also takes certain protective measures which are part of UN conventions and treaties as well as ITU (International Telecommunication Union) regulations
Have any Indian operators of satellite channels approached ISRO for transponders?
There have been in the past a number of enquiries.
So ISRO has lost that business?
Yes. If transponders were available they would have come to us.
There has been talk of an 'exodus' from ISRO. Is there any possibility of salary and perk structures being changed to offer more attractive packages?
The Fifth Pay Commission has come out with recommendations. They will be reasonably good. There is also an effort to bridge the gap with the private sector by offering housing and other perks.
Does the government recognize that high technology areas have to be treated differently; otherwise we will keep loosing talent?
Yes. The flexibility we have is quite notable. We can hire people at middle and senior levels directly if we need to. Our crop of new recruits is reasonably good; they are not all from IITS or IIMS as they used to be, but from regional engineering colleges and good private engineering colleges. The slight difference in background they might have with IITS is easily made up for with in-house training. People with enough drive and motivation are given responsibilities in wider fields. We are not unduly worried of some people leaving. It happens in all organizations, government or private.
What are the technology challenges for new comers at ISRO, or is it getting routine?
A new generation of satellites, the reduction of weights of space components, increasing power, developing new, stronger and lighter materials, new high-resolution cameras, new digital circuits and electro-optical elements, etc. To bring down the weight of say a filter from 200 to 100 gm is a tremendous thing, but if that is the new international benchmark then we have to do it. It is not easy. We may go for a newer band, the Ka band, which is used for multimedia services. It is being planned for GSAT·3. We have to develop ion propulsion systems rather than gas-based ones. They will increase the life of a satellite. I don't see any problem of technology challenges for the next 10 years at least.
Meanwhile, ISRO is coming out with increasingly sophisticated communication satellites with Ku band transponders for smaller VSATs and mobile communications, global positioning systems and Ka band for multimedia services. It will also produce a DTH satellite in 1998-99 as well as high-power S band transponders for digital-audio communication, which could have possible applications for a countrywide mobile communication system.
But these potentialities will not be realized until the government liberalizes telecommunications and broadcasting policies. To date the government refuses to release its stranglehold on communications and broadcasting, which remain amongst the most rigidly controlled activities under the Indian Telegraph Act. Despite many modifications to the legislation since its enactment in the 19th century, the commercial opportunities offered by space technology (and even India's own satellites!) cannot be used to commercial advantage.
Despite the major advances made by the Indian space programme and its enormous potential for providers of satellite-based services such as telecom and TV, government policy prohibits private satellite service providers from using ISRO's satellites. Starry-eyed entrepreneurs are not permitted either to set up satellite services or buy or lease satellites from ISRO.
What's more, uplinking from India between private sector satellite service providers and any satellites whatsoever is not permitted. This means that Indian service providers must not only lease transponders on foreign satellites, but must also send their programmes abroad for uplinking. This not only adds great expense to the service, but also means the loss of revenue that would otherwise go to ISRO and VSNL. The situation could get even more piquant if the government does not get its act together, because one might see ISRO'S transponders leased to Intelsat, which in turn could sublease them back to Indian and other Asian operators, leaving ISRO out in the cold.
Nothing seems to highlight the wasted potential of the Indian space programme due to current government policy more than the fact that while Indian experts train satellite technologists from Thailand, Malaysia, Korea, China, the Philippines and other countries at the foothills of the Himalayas at Dehradun, businessmen from these very same countries make a beeline to India to sell satellite services.
The countdown for capturing the opportunities of the space market has begun. Since it is still a nascent business with enormous growth potential and India has developed the necessary technological and managerial skills, the country is in a position to make a significant impact on the new business and reap a great deal of the rewards. But ISRO'S hands can only be unshackled through the creation and implementation of forward-Iooking, business-oriented policies. ISRO should be allowed to network with private enterprise to market its scientific and engineering expertise and products.
India and its entrepreneurs can rocket into the next millennium on the new business of satellite services, but only if the government lets them.