# Presentation: 763191

## Next-Generation Space Transportation:

- Washington, DC

**Next-Generation Space Transportation:**
- Six (Hopefully) Interesting Thoughts in 60 Seconds

- May 17, 2001
- Lori Garver
- Director, Space Programs

- Prepared for

**Notes:**
Title Page:
This page follows the cardstock cover and should contain identical information. However, it should also list the analysts on the project.

## Thought #1: It is neither the best of times nor the		 worst of times

**Thought #1: **It is neither the best of times nor the		 worst of times

**However, future dynamism in the industry is still almost entirely dependent on deployment of commercial constellations **

- 0

- 2000

- 4000

- 6000

- 8000

- 10000

- 12000

- 1997

- 1998

- 1999

- 2000

- 2001(E)

- 2002(E)

**$ millions**

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- 180

- 1997

- 1998

- 1999

- 2000

- 2001(E)

- 2002(E)

**# Satellites Launched**

- Government/Civil

- Commercial non-GEO

- Commercial GEO

- Global Satellite Launches (1997-2002)

- Global Launches Revenues (1997-2002)

- Satellites are going up ...

- Source: DFI International

- Source: Merrill Lynch

**Notes:**
Satellites launched
Even the most conservative forecasts forsee continued (albeit incremental) growth in government/civil and commercial GEO launch demand
The wild card is non-geostationary commercial launches 

Launch Industry Revenue
More than 20 current launch providers being supported today
In revenue terms, launch market is larger than US markets for coal, metal mining, and leather goods, and 1⁄2 th size of the tobacco market (all DOC data); larger than the market for such “hot” technologies such as DWDM (RHK forecast) and will remain larger than the market for optical switches through the decade (Electronicast/DFI forecasts)

## Thought #2: It is all relative 

**Company**

**Capex To**** **

**Light (Millions)**** **

**  ****Years to**** **

**    ****Complete**** **

**360 Networks**

**31,360**

**$    **

** **

**39**

**AT&T**

**23,296**

**9**

**Sprint**

**13,440**

**8**

**Worldcom**

**16,128**

**7**

**Qwest**

**39,424**

**25**

**Global Crossing**

**16,128**

**24**

**Genuity**

**19,712**

**41**

**Williams**

**105,728**

**123**

**Broadwing**

**82,432**

**785**

**Level 3 (Internal)**

**7,168**

**3**

**Level 3 (Dark Fiber)**

**152,320**

**76**

**507,136**

**$  **

** **

**38**

- TERRESTRIAL FIBER DEPLOYMENT COSTS

**Satellite is no longer****	****  ****the black sheep   ****	****                of the family**

**$900,000,000**

**$630,000,000**

**Iridium**

**Globalstar**

- LAUNCH REVENUES FROM IRIDIUM,
- ORBCOMM, GLOBALSTAR

- Source: Level 3, DFI International Estimates

**Over $1.5 billion****  for the launch ****	****               industry alone**

**Notes:**
It is becoming clearer and clearer that the pains of the satellite industry are all relative.

For example. Iridium, Orbcomm and Globalstar, which are usually cited as the poster-childs of satellite industry excess, nevertheless did generate $1.5 billion revenues for launchers from 1997-1999.

And while analysts love to pick on the satellite industry for its lengthy time to market and up-front costs, the market is quickly learning that terrestrial build-out is also a capital expenditures vortex:

Here we show the results of a recent study that show that at current rates of expenditures and costs/per mile it would take a sampling of telecom carriers 38 years and 1⁄2 a trillion dollars to lay and light all the fiber they project in their business plans and public disclosures. Worldcom, at current rates, would need 7 years and $16 billion ... which sounds remarkably close to broadband constellations.

And it’s not just terrestrial fiber. Licenses, JUST LICENSES, for 3rd generation wireless spectrum in Europe are going for $6 billion in each country, plus the 3 years and $6 billion it will take to deploy an actual network.

All of this isn’t to pick favorites but to suggest ... (next slide)

## Thought #3: Pioneers show us the way

**Notes:**
... that the pattern in the satellite industry isn’t so different from what is playing out in the terrestrial communications sector... and in some terrestrial telecom sectors the fallout has been arguably worse.

In both areas, the pioneers led the way, invested a lot of money in infrastructure ... and taught the rest of the market about what kind of business models were necessary and where the inherent weaknesses are in the business cycle.

Here we show high profile CLEC failures, and one ISP – PSINET – which like the high profile satellite failures arguably invested a bit too much in advance of demand. And in both areas we are likely to see a leaner and meaner second-generation, learning from the mistakes of the first.

The picture is Lewis and Clark.

## Thought #4: Hey, look down, I see demand

**Thought #4: **Hey, look down, I see demand

- Source: RHK, DFI International Estimates

- 10

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- 10000

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- 2001

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- 2004

- Terabits/sec

**1.75**

**17.5**

**175**

**875**

**3500**

**Broadband Multicasting – **$14 billion market by 2005 by some accounts; leverages unique one-to many ability of satellites

**Digital Cinema – **specific multicast application; can provide dynamic improvement in global distribution of major films

**Universal Service – **providing service to those areas where market economics will never support terrestrial buildout

**Route Pioneer – **providing services in emerging markets until demand warrants terrestrial buildout

- Global Network Demand (2000-2004)

- Key Commercial Satellite Applications

**Demand for connectivity is expected to be explosive  ...**

**... ****and although terrestrial solutions will dominate, satellites will play a significant role **

**Notes:**
Both small and large players are currently – and aggressively – pursuing the satellite markets identified here, as well as others.  If global network demand forecasts are even close to accurate, there will be a robust market for satellite players to attack with inherent capabilities (ubiquitous coiverage, flexibility, one-to-many capability, security, etc.) that provide clear competitive advantage in certain markets.  

## Thought #5: Next-gen launchers need to be three 	things ... reliable, reliable, and more reliable

***“******Reliability is too important to trade off ... [but] capacity could be sacrificed”***
**	**-- International Space Agency Program Director

***“******Reliability is of the utmost importance ... a launcher must have a proven track record”***
**	**-- Commercial LEO constellation executive

***“******[We are] willing to trade price for other factors such as reliability”***
**	**-- Commercial LEO constellation executive

***“******The five leading factors that we consider in selecting launch vehicles are reliability, reliability, reliability, reliability, and reliability”***
**	****  **-- Commercial satellite manufacturing executive

** ... ****but increasing reliability is also the easiest way to reduce cost to orbit – by continuing to drive down insurance premiums **

- Satellite Launch Insurance Premiums
- (1989-1999)

- Source: JH Marsh & McLennan

## Thought #6: Government can be a successful 			enabler

**Thought #6:** Government can be a successful 			enabler

**Notes:**
 The Federal-Aid Highway Act of 1944 created a 40,000-mile "National System of Interstate Highways," but without national importance and no increase in federal funding. Construction of this system began in August 1947, but without increased federal support, many states balked at the idea. Road design standards were not always uniformly applied. The Federal-Aid Highway Act of 1952 authorized funds on a 50/50 state/federal matching level. These were the first funds dedicated to this cause. But even then, the amount ($25 million) was not enough. When President Eisenhower assumed office in 1953, only 6,000 miles had been completed at a cost of $955 million. 
  Roads expanded from two lane, roaming, state roads to much larger and more direct interstate highways. This occurred after World War II not only because of the return of the soldiers from the war and the subsequent baby boom, but also because of military interests. (Note: the map above is “National System of Interstate and Defense Highways”) Roadways did not go directly or effectively across states and the country. After the war though, the Eisenhower administration took action and, because of a fear of attack, proposed the Interstate System in 1956. The possible threat of an atomic attack prompted Eisenhower to argue for the implementation of an interstate system, which would allow quick evacuation and military promptness. 
  As of December 31, 1995 only 30 miles remain to be built, with 25 of those 30 miles already under construction and the other five in the design phase. When completed, there will be 42,796 miles of Interstates. The interstate system has often been called "the greatest public works project in history." It not only linked the nation, but it boosted productivity and helped sustain a more than tenfold increase in the gross national product since the start of the program in 1956. It is the backbone of the world's strongest economy. 

 Each year, nearly one trillion person miles are carried on the interstate highway system --- a figure equal to providing trips around the world for 37 million people --- more people than live in Pennsylvania, Illinois, and Ohio combined. In its 40 years, more than 17 trillion person miles have been traveled over the interstate highway system. This is equivalent to: Three light years of travel through space --- nearly three-quarters of the distance to the nearest star outside the solar system (Alpha Centauri). 
  It is estimated that the total construction cost of the interstate highway system, through 1995, is $350 billion in current terms dollars ($58.5 billion in 1957 dollars). 
  A study in the mid-90s indicated that with respect to non-local roads (arterial highways, especially the National Highway System, which includes the interstate highway system), each dollar of investment in highways produces an annual reduction in product costs of 23.4 cents, with larger cost reductions in the early years and smaller reductions in more recent years. 
 This annual economic benefit is estimated to have peaked in 1970 at approximately $38 billion. Over the 40 year period, it is estimated that gross producer cost reductions have exceeded $1 trillion (1) --- more than three times the gross original investment in the interstate highway system (2 This represents a substantial economic benefit, which is likely to have created employment and reduced consumer prices ) --- permitting the financial resources of consumers to be stretched to purchase more than would be otherwise possible. 
Highway transportation, and directly related industries is 7.5 million, more than one-sixth of total employment, while personal expenditures on highway transport represent one-ninth of total personal expenditures. 

##  Conclusions

-  **Conclusions**

**NASA should focus on its core mission...**

**Space transportation remains an exciting industry with steady growth**
**Pioneering projects are, by definition, costly and time consuming **
**Satellites are increasingly viewed as a key component of global telecommunications infrastructure**
**Shakeouts in the satellite and launch markets, like in terrestrial telecom markets, lead to a “flight to quality” **
**Government has a key role as enabler**