Routes to Market Report

30 - Satellite Technologies for

Space Launch Services

1. Contents

1. Contents ...... 2 2. Introduction and Scope ...... 3 3. Market Overview and Opportunities ...... 4 4. Customer and Value Proposition to Customer and End-User ...... 7 4.1. Earth Observation Customers ...... 7 4.2. Communication Customers...... 7 5. Value Chain and Competing Solutions ...... 8 5.1. Competition from the UK Perspective ...... 9 Japan ...... 10 Spain ...... 10 India ...... 10 Sweden ...... 10 6. Role of UK Companies ...... 10 7. Revenue Projections ...... 12 8. Market Enablers ...... 12 9. Challenges and Steps to be taken ...... 13 10. Market Dynamics and Value Chain ...... 14 11. Market Trends ...... 16 11.1. The UK Perspective ...... 16

2. Introduction and Scope

The number of new, small-satellite operators has increased over the last 5 years, enabled by the availability of standardised small-satellite hardware at relatively lower prices, which allows operators to develop assets at lower cost. This dynamic will continue to disrupt the competitive landscape and new suppliers are expected.

However, the key challenge faced by small-satellite operators is the lack of dedicated launch services for small-satellites, forcing them to adopt the existing ride-share opportunities which can be prohibitively expensive. This lack of affordable access to space continues to keep space capabilities away from businesses that are willing to invest in next-generation satellite services for earth-observation and connectivity.

Table 1 provides the terminology relevant to this analysis and the space launch market this study covers. Alongside small-satellites, nano and micro-satellites are gaining prominence.

Table 1: Definitions

Small-satellite Small form satellites weighing 500 kg and less Nano-satellite Small-satellites up to 10 kg Micro-satellite Small-satellites up to 150 kg Spaceport Dedicated launch infrastructure focused on LEO/sub-orbital launches

Table 2 presents a summary of the main space launch market trends and expected outcomes. The key aspect of space launch market in the United Kingdom will be the accessibility of infrastructure and regulatory framework that can support a diverse group of affordable launch service providers. This will require the government agencies (UK Space Agency and UK Department of Transport) to evolve and implement necessary regulatory framework to accommodate space launch services and launch operators (domestic and international). The presence of affordable launch services in the United Kingdom will be an enabler to small-satellite operators in the United Kingdom and EU region.

A spaceport based launch service market will not only enable small-satellite launches but also support the still evolving space tourism and high-speed air travel segments. Spaceports in the United Kingdom (to be developed) will be covering conventional rocket launches and air-launched rocket systems which will be a key differentiating factor for the business model the spaceport business will establish. For this purpose, the spaceport will not only require dedicated land space but also a specially dedicated and regulated air space consistent with the launch operations requirements.

Table 2 Market Trends across Timeline and Expected Outcomes (Source: Frost & Sullivan) TRENDS ACROSS TIMELINE KEY MARKET KEY EVOLVING (1- FUTURE FAR FUTURE CURRENT FEATURES STAKEHOLDERS 2 years) (3-6 years) (7-10 years) No Development Persistent Affordable dedicated of dedicated Long-term Launch capability demand for access to LEO small- LEO small-sat launch developers and LEO small-sat LEO/sub- sat launch launch contracts operators launches orbital space capability capability Scheduled Demand for single/multi- Small- More small- polar/equato Sustainable Small-satellite manifested satellite satellite rial/mid- small-satellite operators and launches spread operators operators latitude LEO industry manufacturers across the launches calendar Dedicated Dedicated Sustainable Government airspace Spaceport Spaceport infrastructure LEO/sub- agencies, air & allocation and developmen business for LEO/sub- orbital space space regulators evolution of ts models orbital launch and spaceport regulatory launches industry operators framework

3. Market Overview and Opportunities

Chart 1 below indicates the launch forecast for small-satellites during 2014-2023. Multiple research groups [GeoOptics Inc.’s CICERO constellation] are fielding their experimental small-satellites with the objective of commercial business models, should their technology demonstration succeed. While the number of small-satellite operators seems relatively small, the number of small-satellites expected to be launched are much higher (currently, over 2,270 satellites are expected to be in orbit while during 2016- 2023, over 2,500 small-satellites are expected to be launched). OneWeb, a small-satellite start-up, is planning to install a 720 satellite constellation for wireless broadband services to remote location not connected with fiber-optic network. Planet, which already has over 100 small-satellites in operation, is planning to expand its fleet. As given in Chart 1 below, the total quantum of small-satellites to be launched during 2016-2023 is estimated to be 2,591.

The current space launch industry does not have any dedicated launch services for small-satellites and therefore does not have the launch capacity to meet this approaching surge in demand. Moreover, small- satellite operators are aiming to place their payloads in mid-latitude orbits which is not frequented by existing launch capabilities and this means there is an emerging demand for unique orbital placements which cannot necessarily be supported with conventional rideshare capabilities.

Multiple space launch developers [listed below] are currently working on diverse launch technologies for small-satellites and some of these developers are also preparing to be launch operators looking to conduct scheduled LEO launch operations. The entry of small-satellite based commercial businesses has

4 substantiated the approaching ‘persistent-demand’ for scheduled LEO launches for small-satellite payloads.

The key aspect of the LEO space launch market development is that the launch operators are aiming to offer low-cost launch services to small-operators who might not have the big budgets to afford existing launch capabilities. The objective is to develop reliable cost-effective technologies that can allow affordable launch opportunities for small-budget business models. The small-satellite operators are developing business models to cover a diverse range of customer groups. In the earth-observation domain, ‘pay-per-picture’ purchase option is gaining prominence as imagery sales are looking to cover ad- hoc purchases suitable for individual stakeholders. In the connectivity domain, the focus is shifting from providing exclusively upstream augmenting capacity to delivering full solutions where the end-user can get the air-time and hardware from the satellite operators and/or their regional channel partners. The connecting link among these trends is the fact that the satellite operators are using small-satellite systems for their services which they have developed with extremely small budgets. Such democratised satellite capabilities distribution covering diverse customer groups at low costs require suitable low cost access to space which is the current capability gap in the space industry. The LEO space launch service providers are looking to fill this gap with low-cost space launch services for small-satellites. This will enable the opportunities for long-term launch contracts between small-satellite operators and LEO launch service providers.

Chart 1: Leo Small-Satellite Launch Forecast, Global, 2014-2023 (Source: Frost & Sullivan)

400

350

300

250

200

150

100

0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Number of Small-satellites 158 100 271 284 309 346 358 341 354 328

Chart 2: LEO Small-Satellite Launch Forecast, Nano-satellites, Global, 2014-2023 (Source: Frost & Sullivan)

90 80 70 60 50 40 30 20 10 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 No. of Nano-satellites 67 35 62 73 50 50 80 80 80 85

The nano-satellite estimates given above in Chart 2 largely cover operators in the earth-observation domain. While most of them have been aiming the 470-500 km polar sun-synchronous orbits, the demand for orbital placements along the mid-latitudes is growing. ‘Persistent surveillance’ continues to remain the stronger theme and the resultant focus is on shorter revisits. Simultaneously, the operators are looking to expand coverage and viewing angles from mid-latitude placements (inclined orbits).

Chart 3: LEO Small-Satellite Launch Forecast, Micro-satellites, Global, 2014-2023 (Source: Frost & Sullivan)

300

250

200

150

100

0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 No. of Micro-satellites 1 23 209 211 256 271 248 218 233 213

Chart 3 above presents the estimates for micro-satellites to be launched during 2014-2023. This estimate largely covers small-satellite operators in the connectivity domain. The spike during 2018-2019 is due to the expected beginning of the replacement phase. The micro-satellite segment is expected to contribute the larger segment of launch demand owing to its numbers. However, the earth-observation segment will contribute quicker recurrence of launch demand, as the earth-observation small-satellites operate at relatively lower altitudes resulting in relatively shorter mission lives.

4. Customer and Value Proposition to Customer and End-User

The key selling points to be conveyed to small-satellite operators from LEO launch capability developers are:

• On-demand launch scheduling [year-long pre-determined launch schedule open for booking] • Diverse launch options [single versus multi-manifest launches with variable pricing options] • Launches to diverse orbital locations [focus on mid-latitudes] • Lower launch pricing [air-launched systems, miniature launch vehicles]

The UK government had shortlisted 5 potential locations for spaceport development and 3 of them are in Scotland. The UK administration [Department of Transport] also announced that any suitable location can be used as a spaceport and regulatory evolutions will be made to accommodate a licensing business model to encourage new commercial businesses to invest. From a launch operations perspective, most small- satellite operators are interested in polar sun-synchronous orbits and the launch locations need to meet the safety requirements as enforced by the regulators. As polar orbital launches are pole-facing, a northern location close to the coast will be preferable. In addition a successful spaceport development will require a closely connected ecosystem of software, hardware and professional services organisations (for example engineering consultancies, legal, insurance)

Potential Customers for Space Launch Services (Small-satellites) are listed below.

4.1. Earth Observation Customers • Planet Inc. • SpireGlobal Inc. • BlackSky Global • Terra Bella • UrtheCast • 21AT • GeoOptics Inc. • OmniEarth Inc. • NorStar Space Data • Acquila Space

4.2. Communication Customers • OneWeb Ltd. • LeoSat • Sky and Space Global • Kepler Communications

5. Value Chain and Competing Solutions

Table 3 provides an overview of the key launch players either active or planning to enter the small-satellite launch services domain. This list covers those businesses that specialise in air-launched systems. The key focus areas for these players is the ability to skip the expensive ‘solid booster stage’ of the launch technology, which usually translates into the highest cost-contributing element of the capability. This also indicates the inherent aim of industry participants who are focused on low-cost launch services for small- satellite customers. Moreover, air-launched systems are being perceived as capabilities with extended ‘range independence’ and their potential of being able to operate out of any available air base is helping them gain prominence in the evolving LEO space launch market.

Table 3: Small-satellite Launch Capability Developers (Air) (Source: Frost & Sullivan)

Table 4 and Table 5 below provide a list of space launch players specialising in conventional rocket systems. The exceptions include participants such as Reaction Engines Ltd., whose objective is to help realise a high-speed spaceplane with an air-breathing rocket engine. Single-stage-to-orbit is a key aspect of the capability they are aiming to help the industry realise. These industry participants in Tables 4 and 5 are developing their capabilities in conventional formats to realise cost-effective launches that can be repeated frequently in an ongoing basis. Reusability is an area these players are focusing on as the extent of repurposing hardware will enable them to realise more return on investment and support the delivery of lower cost launch services.

Table 4: Small-satellite Launch Capability Developers (Land) (Source: Frost & Sullivan)

Table 5 below gives a list of launch market players covering government agencies and established defense industry. This indicates that government agencies and defense industry are also observing a surge in demand for dedicated launch services for small-satellites.

Table 5: Small-satellite Launch Capability Developers (Land) Contd. (Source: Frost & Sullivan)

5.1. Competition from the UK Perspective Tables given above provide a list of launch capability developers/operators who are looking to enter the small-satellite launch market. Three of these developers are based out of the United Kingdom. From a manufacturing perspective, Surrey Satellite Technology Limited and Clyde Space are key industry participants focused on small-satellite hardware. Moreover, the UK based small-satellite businesses are getting started and this trend is looking to grow further [for example, Sky and Space Global]. While there

9 are participants in the manufacturing segment for small-satellites within the United Kingdom and small- satellite operators from the United Kingdom entering the market, the launch market in the United Kingdom is yet to get started.

This vacuum in the launch domain within the space industry will need to be filled in order to allow the UK based space ecosystem to evolve and reach a sustainable state. The UK based space ecosystem should be a mix of international industry participants and UK based companies, creating a prominent space hub in the UK/EU region. This way, a UK based Space Hub will be evolved that can accommodate and support every member of the space value chain.

Other countries developing infrastructure and will compete with a UK capability includes;

Japan Japan’s Ministry of Economy, Trade & Industry is funding a space program aiming to use a 9.5 m tall, 20 inch diameter sounding rocket to place a 3 kg cubesat built by University of Tokyo. The launch, scheduled for January 10, 2017, was aborted and postponed owing to bad weather conditions. This indicates a government funded space program to realise lower cost launch capabilities for small-satellites so that such low-budget satellite missions have access to comparably affordable launch services.

Spain PLD Space is aiming to realise a liquid rocket engine based small-satellite launch capability that will also be reusable. The Spanish government, through its Technological and Industrial development center has given a contract to the company in 2012. In 2015, The European Commission has signed a $334,000 contract to support German Space Agency for testing its propulsion technologies. This indicates the launch capability developer’s growing international presence.

India Indian Space Research Organisation is planning to place 103 small-satellites into orbit in one launch. The government space program is looking to expand the use of its Polar Satellite Launch Vehicle to deliver multiple small-satellite payloads to orbit, which will eventually bring down the launch prices.

Sweden Swedish Space Corporation has its proprietary launch and testing capabilities along with its Esrange facility which together can support a commercial small-satellite launch and payload-testing service business model. Efforts are on to commercialize the available capabilities targeting the small-satellite market.

6. Role of UK Companies

The key capability gap in the United Kingdom, with respect to the small-satellites is the lack of launch infrastructure that can support scheduled launch services of multiple launch service providers. A spaceport based business model involving a commercial spaceport system, consisting of more than one spaceport will be the key enabler of the small-satellite value chain growth within the United Kingdom.

From a launch perspective, the key technologies being developed cover conventional rocket systems and air-launched rocket systems. The air-launched rocket systems use aircraft to take the rocket to a higher

10 altitude before launching it from the aircraft. This way, the capability skips the expensive solid booster stage, which is being leveraged to realise lower cost launch service for small-satellite operators.

This indicates that, operationally, conventional and air-launched rocket systems will require totally different operational procedures. This will also require equally different land and air space segmentation and regulation. While air-launched rocket systems will use the runway, the conventional rocket systems will use traditional launch pads. Owing to the operational methodologies and the diversity in risks involved, it will be difficult to accommodate both segments of launch services within the same spaceport.

Owing to the nascence of the small-satellite launch market, it is too early to pick one segment of launch technology as the basis for a spaceport based business model. Ideally, both technology segments need to be given equal priority so as to capitalize on the development of both set of services. From this perspective, it is clear that the spaceport based business model, should it materialize, must cover more than one spaceport where each spaceport specializes in one segment of the launch technologies under development. This also calls for an open market strategy where any UK based private business entity can propose, install, and establish a full-fledged commercial spaceport, possibly in partnership with the administration to deliver infrastructure-access to the launch service providers who can set up scheduled operations for their customers, namely the small-satellite operators.

From a UK perspective, with Reaction Engines Ltd. focused on realizing an air-breathing rocket engine and helping the development of a single-stage-to-orbit spaceplane that can also serve as a high-speed aircraft for long-haul flight services, it is beneficial for the UK based spaceport system to cover both air-launched and conventional rocket system based launch services. This way, irrespective of the timeliness of scheduled launch operations, the spaceport business model’s break-even period will remain definite and poised to establish a space value chain focused on small-satellites.

UK Government is planning to invest in infrastructure and development programmes that will enable growth of domestic business and the entry of international business such that the end result is a collaborative economic growth resulting in creation of sustainable employment opportunities for UK citizens. The spaceport initiative is one such effort. From a spaceport perspective, UK, geographically presents relatively closer-to-equator latitudes (in comparison with potential competing locations in Sweden). The UK locations will also have relatively warmer temperature profiles. However, that will be a challenge as UK’s weather conditions, especially in the Scotland region will be predominantly cold which will present a fairly strong operational challenge. The small-satellite launch capabilities being relatively small and nimble capabilities that can be operated from diverse geographies will remain, by design, immune to such harsh temperature conditions. The operators acknowledge the challenge and approach it on a mission by mission basis even from launch pads they are used to. With operators such as Sky and Space Global (UK based company) and OneWeb (closer to the UK) in the vicinity and totaling an estimated 900+ satellites in orbit for their services, a spaceport in the UK will benefit the launch service providers deliver cheaper services closer to their customers. Minimising the transport of space hardware reduces the risk of failure in transit and space industry participants get the support to practice their business remaining close to each other.

7. Revenue Projections

Chart 4 below shows the revenue forecast for dedicated small-satellite launch services for 2014-2023. This forecast accounts for the potential price reduction which will be a result of multiple launch operators entering the market leading to increasing competition. This estimate includes small-satellite from earth- observation and connectivity domains.

Chart 4: Commercial Small-sat Launch Services Revenue [includes rideshare and dedicated launch services] in $ million (Source: Frost & Sullivan)

700.0

600.0

500.0

400.0

300.0

200.0

100.0

0.0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Commercial Small-sat 17.6 91.2 370.0 363.2 443.6 577.2 511.1 528.1 536.4 454.4 Launch Revenue Small-satellites 158 100 271 284 309 346 358 341 354 328

The growth toward 2019 and the spike at that point in the forecast indicates the ‘replacement phase’ the small-satellite market will be observing during 2019-2020. This will level-off in the subsequent year, establishing the recurring nature of the launch demand as the operators start operating full fleets with regular replacements.

This also indicates that the demand for dedicated small-satellite launch services will reach its peak during 2019-2020, by which the early-to-market spaceport participants should be ready to meet the demand.

Establishing a sustainable LEO/sub-orbital launch market will enable the growth of the small-satellite industry which in turn will render the spaceport business models sustainable in the long run. The eventual consequence of this will be the concentration of industry participants from the small-satellite value chain, resulting in the establishment of a self-sufficient small-satellite market based in the United Kingdom, catering to the small-satellite needs globally.

8. Market Enablers

From a launch perspective, enabling the launch capability developers and operators establish presence in the United Kingdom will be crucial for the rest of the small-satellite industry to capitalise the emerging trends. From a launch market perspective, the effort will comprise collaborative contributions from multiple stakeholders, especially from the government, launch developer, and service provider segments.

The graphic below presents the idea of key stakeholders contributing their strength for the realisation of the small-satellite launch services market through a spaceport ecosystem.

Figure 2 Spaceport Ecosystem: Key Stakeholders (Source: Frost & Sullivan)

From an UK perspective, at this point in time, developing the regulatory framework for small-satellite launch services and dedicated launch infrastructure will be crucial contributors for a spaceport based space value chain focused on the small-satellite launch market. The subsequent impacts will cover the opening up of opportunities for relevant ancillary components and service providers who will build their business models on the basis of the UK based spaceport business model. This will also enable the existing small-satellite system, platform, and components developers to expand their business within the United Kingdom, as the demand for solutions will grow with the entry of international players.

9. Challenges and Steps to be taken

Limited and expensive launch options are the key restraints on the growth of small satellites. The following are the key challenges:

• Lack of dedicated LEO launch services for small–satellites with few international options. • Limited regulatory framework for spaceport businesses that can support multiple launch service providers. • Lengthy political processes and approvals. • Funding for start-up launch developers.

The following are the key steps to be taken:

• Government expediency regarding approvals, funding and regulation. Decisions related to spaceport development in the UK have been delayed due to Brexit. Continued delays will harm

the UK’s future competitive position should other countries, such as Sweden and the Esrange facility, capture early market share. • Enabling the evolution of dedicated launch services for small-satellites through public-private partnership business models. • Develop the regulatory framework. • Initiating technology development competitions and related government-supported funding programs will enable the development of new and affordable launch capabilities that can support the government agencies and the domestic market participants.

10. Market Dynamics and Value Chain

Figure 1: The Space Launch Value Chain (Source: Frost & Sullivan)

Figure 1 above presents the small-satellite value chain with respect to the launch service providers who, at this point in time, are the largest segment of new entrants looking to establish a niche market within the space industry. The small-satellite operators are the key revenue providers for the launch service providers who in turn purchase launch systems from launch capability developers. The launch systems developers purchase components from the propulsion component suppliers. As the launch capabilities for small-satellites are still under development, the commoditization of components and subsequent market opportunities for launch components and systems developers are yet to be realised in full scale. However, that trend will be an eventual consequence, when the launch service providers begin scheduled operations.

Table 6 presents the small-satellite segment of the space value chain with a few examples for the industry participants. Among these stakeholders, the launch service providers are the ones with no or limited access to dedicated infrastructure for scheduled operations.

Table 6: Space Value Chain: Small-satellite Perspective Small-satellite Value Chain Stakeholder Participants [Examples] Segment • OneWeb Small-satellite Operators • Planet • Sky and Space Global • Surrey Satellite Technology Limited [Airbus Defence & Space] Small-satellite Manufacturers • Clyde Space • Space Systems Loral • Clyde Space Small-Satellite System Manufacturers • Swedish Space Corporation • Accion Systems • Virgin Galactic • Vector Space Systems Small-Satellite Launch Service Providers • CubeCab • Orbital Access • Reaction Engines Ltd. Launch Technology Developers • Rocketstar • Boeing • Reaction Engines Ltd. Launch Technology Component Developers • Aerojet Rocketdyne • MOOG • Mojave Air and Spaceport Commercial Spaceports • Spaceport America

11. Market Trends

11.1. The UK Perspective Reaction Engines Ltd. is an important player within the space launch segment. The company is based in the United Kingdom and is working closely with commercial and military customers, aero-engine manufacturers, and prime platform suppliers. BAE Systems holds 20% stake in the business [GBP 20.6 million]. The company specialises in heat exchanger technology that is capable of enhancing gas turbine capabilities. The SABRE engine program run by the company focuses on realizing an air-breathing rocket engine that can enable a single-stage-to-orbit spaceplane which can also serve as a high-speed aircraft. From a space launch perspective, the technological innovation is looking to establish new products and services. Orbital Access, a UK based launch service operator is looking to develop a reusable small-satellite launch system to be operational by 2030. It is collaborating with Reaction Engines Ltd., Clyde Space and SSTL to develop this service.

Clyde Space and Surrey Satellite Technology Ltd. (Airbus Defence & Space) are key small-satellite platform and systems suppliers based in the United Kingdom. Surrey Satellite Technology Ltd. is a market leader in the small-satellite domain delivering customised components, systems, satellites and full-scale missions for over 3 decades. Clyde Space is a specialist in cubesat format systems, components, and full-scale small- satellite platforms.

Virgin Group Ltd., a British multinational corporation is a key partner in OneWeb, a small-satellite operator aspiring to realise a 720 satellite constellation to deliver wireless broadband services to remote locations not connected with the fiber-optic network. Virgin Atlantic, a subsidiary of Virgin Group Ltd., is a launch service provider aiming to deliver dedicated launch services to small-satellite operators. However, the launch business is based in the United States, owing to the proximity and association with Spaceport America and Mojave Air & Space Port.

Overall, looking at the UK based and UK-origin space industry participants, it is clear that the manufacturing and components supply segment of the value chain is already present in the United Kingdom. While the UK based participants are investing in small-satellite business models, most of the launch service business units are based in the United States owing to the availability of commercial spaceports. If similar access to dedicated infrastructure is made available in the United Kingdom, possibility of space launch service providers expanding into and setting up in the United Kingdom will increase significantly.

From a spaceport perspective, the ideal approach for UK will be a spaceport system covering multiple spaceports such that both air and land based launch capabilities can be accommodated. Owing to operational complexities, both capabilities can hamper each other’s operations if conducted from the same spaceport. This will result in schedule delays which can hurt revenue opportunities for the launch players.