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Produced by the NASA Center for Aerospace Information (CASI)
COMMERCIALIZATION OF THf: LAND 

REMOTE SENSING SYSTEM: AN 

EXAMINATION OF MECHANISM~IIW~ 

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COMMERCIALIZATION OF THE LAND 

REMOTE SENSING SYSTEM: AN 

EXAMINATION OF MECHANISMS & ISSUES 

Prepared for 

U.S. Department of Commerce 

Under Contract No. 

NA-83-SAC-006S8 

Prepared by 

ECON. Inc. 

900 State Road 

Princeton. NJ 08540 

April 1. 1983 

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ABSTRACT 

In September 1982 the Secretary of Commerce was authorized (by Title ([ of 

H.R. 5890 of the 97th Congress) to plan and provide for the management and 

operation ot the civil iand remote sensing satellite system, to ~rovide for user fees, 

and to plan for the transfer of the ownership and operation of future civil 

operational land remote sensing satellite systems to the private sector. As part of. 

the planning for transfer, a number of approaches were to be compared incJuding 

wholly private ownership and operation of the system by an entity competitively 

selected, mixed government/private ownership and operation, and a legislativelychartered privately-owned corporation • 

This rep" .. t presents the results of an analysis and comparison of a limited 

number of fin1ncial and organizational approaches for either transfer of the 

ownership and operation of the civil operational land remote sensing program to 

the private sector or government retention. The following basic approaches were 

considered. 

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Continued ownership and operation by the federal government (planned 

phase-out) 

Continued ownership and operation by the federal government (es~:lt;­

lishment of necessary budget line itl'"ms to continue prOvision of the 

da ta services) 

• Wholly private ownership and operation of an entity competitivt;:!y 

selected 

• Phased private ownership (government ownership and operation w~th 

private $ector marketing) 

• Legislatively-chartered, privately-owned corporation. 

Each of these scenarios was developed based upon the same demand forecasts and 

the same schedule of events. Government net cash flows were deVf~loped in r.t11 

cases. For the private se.:tor scenarios, financially viable business ventures WE!re 

developed based u~on achieving return on capital and other financial measure!;; 

deemed necessary to achieve financing. The required rates of return were obtained 

thrOugh the use of government subsidies. For each scenario a complete set of 

financial plans was developed. Nonfinancial issues were identified in general and 

specifically relatp.d to each scenario. 
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ACKNOWLEDGEMENTS 

The principal contributors to this study ana authors of this report were \tr. J. 

Kevin Cauley, Ms. Carole GaeJick, Mr. Joel S. Gr~enberg, Dr. John Logsdon and 

Ms. Tracie Monk. They were assisted by Mr. B.P. Miller and a group of capital 

market consultants inc!uding ~'r. Madison Hay the, WilHam Sword de Co., Dr. Adrian 

Stear, Consultant, and Mr. Jerome Simonoff, Citicorp. The study was managed by 

Mr. Joel S. Greenberg. 

During the course of this study many individuals and organizations were 

contacted, and provided valuable assistance without which this study could not have 

been accomplished. Among these were the National Oceanographic de Atmospheric 

Administration (NOAA); National Environmental 5ateJJite, Data and Information 

Service (NESDIS); National Aeronautics de Space Administration (NASA), both 

Headquarters arad Goddard Space Flight Center; U.S. Department of Agriculture 

(USDA), both the Foreign Agriculture Service and the Statistical Reporting 

Service; the Central [nteUigence Agency; the Department of Interior (001), 

including the Bureau of Land Management, the U.S. Geologi.:al Survey and the 

Earth Resources Observation System Data Center; U.S. For eign Service; C",ngressional Research S.!rvice; Communications SateUite Corp.; Spot [mage; RCA; 

General Electric; American Science and Technology Corp.; GeoSat; Metrics; 

Lockheed; Hughes and Terra-Mar. 

This study was performed under the direction of Mr. W. Eskite, NOAA. 

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TABLE OF CONTENTS 

Section 

1-

2. 

3. 

4. 

5. 

6. 

Abstract 

Acknow ledgements 

List of Figures 

List of Tables 

Introduction 

The Current Land Observation System 

2.1 LA;"DSA T D and D' Satellites 

2.2 Communications System 

2.3 Ground Segment 

2.4 Data Distribution Center 

rhe Business Scenario 

The Marketplace 

4.1 Products 

4.2 Customers 

4.3 Competition 

4.4 Marl<et Forecast 

Finane ia1/ Or gan iza tional Scenar ios 

5.1 Continued Ownership and Operation by the Federal Government 

(Planned Phase-Out) . 

5.2 Continued Ownership and Operation by the Federal Government 

(Establishment of the Necessary Budget Line Items) 

5.3 Wholly PriVate Ownership and Operation by an Entity 

Corr·petitively Selected 

5.4 Phased Private Ownership (Governmclnt Ownership and 

Operation With Private Sector Marketing) 

5.5 LegisJatlveJy-Charter~:1, Privately-Owneo C"rporation 

FinanciaJ Issues 

6.1 Financial Projections for a Civil Land Remote Sensing System 

6.1.1 Government Ownership and Operation (Planned 

Phase-Out) 

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TABLE. OF CONTE.NTS 

(Continued) 

Sec non 

7. 

8. 

9. 

6.1.2 Government Ownership and Operation (Continued 

Ownership and Operation) 

6.1.3 Private Ownershlp and Operation 

6.1.4 Phased Private Ownership (Private Sector Marketing) 

6.1 • .5 Legislatively-Chartered, Privately-Owned Corporation 

6.1.6 Comparison of Financial Projections 

Nonfinancial Issues 

7.1 Commerclalization of Land Remote Sensing: A Persistent 

Political Question 

7.2 International and Foreign Policy Issues 

7.3 r~ational Secur ity Issues 

7.~ RegUlatory and Legal Issues 

7 • .5 Institutional Issues 

7.6 General Policy Issues 

7.7 Policy Requirements - A Summary 

Observations/Conclusions 

3.1 Observations/Conclusions: Operations 

8.2 (';)servations/Conclusions: Financial 

3.3 Observations/Conclusions: Nonfinancial 

Recommendations 

Bibliography 

Appendix A: Analysis of Satellite and Launch Requirements 

Appendix B: Supporting Documentation for Input Data to 

Financial Analyses 

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LIST OF FIGURES 

Figure 

1.1 Overview of Study Approach 

2.1 LANDSAT D Flight Segment 

2.2 LANDSA T D Ground Segment 

2.3 LANDSAT D Sy~terr. Overview 

3.1 Land Observation System-Anticipated Schedule of Events 

3.1 Basic Concept of Land Remote Sensing Business System 

3.3 The Business System: Staged Operations 

l~.l Global Distribution of MSS Data Estimated and Projected Fiscal 

Years 1978 Through 1984 

4.2 Marklet Segmentation Model 

4.3 Revenue Forecast by Market Segment and Product Class 

(Constant 1983 Dollars) 

4.4 Revenue Forecast by Market Segment and Product Class 

(Current DoUars - 696 Annual Inflation Rate) 

1t.5 ,'v\arket Forecast for 80 ~\eter Data Products 

4.6 ,\1arket Forecast for 30 Meter Data Products 

~.7 Anticipated Prk.e Elasticity 

4.8 Anticipated Price Elasticity by Market Segment 

5.1 Scenario 1: Government Ownership de Operation 

5.2 Analysis of Private Ownership de Operation Scenario 

5.3 Scenario 4: Phased Private Ownership 

6.1 The Analysis Process 

6.2 

6.J 

Simplified Profit and Cash Flow Computational Procedure 

Compar Ison of Net Government Expenditures 

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10 

10 

12 

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16 

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23 

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26 

31 

32 

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34 

40 

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Figure 

LIST OF FIGURE.S 

(Continued) 

6.4 Comparison of Asset R<:·.:oupment by the U.S. Government vs. 

Nonrecoupment by the U.S. Government 

Financial Exhibits 

6.0 Data Set 

6.1 Government Ownership and Operation (Planned Phase-Out) 

6.2 Government Ownershlp and Operation (Continued Ownership 

and Operation) 

6 • .3.1 Private> Ownership and Operation (Projected Statement of Income) 

6 • .3.2 Private Ownership and Operatk 1 (Projected Balance Sheets) 

6.3.3 Private Ownership and Operation (Projected Statement of Changes 

in Financial Position) 

6 • .3.4 Private Ownership and Operation (Pr':;jected Cash Flow) 

6 • .3.5 Private Own~rship and Operatio" (Projected U.S. Government Cash 

58 

61 

62 

63 

64 

65 

66 

Flows) 67 

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6.4.1 Phasea Private Ownership (Private Sector Marketing) (Projected 

Statement of Income) 

6.1~.2 Phased Private Ownership (Private Secter ,V\arketing) (Projected 

Balance Sheets) 

6.4.3 Phased Private Ownership (Private Sector Marl<eting) (Proj~cted 

Statement of Changes in Financial Position 

6.4.4 Phased Private Ownership (Private Sector Marketing) (Projc:cted 

Cash Flow) 

0.4.5 Phased Private Ownership (Private Sector \-larketing) (Projected 

U.S. Government Cash Flows) 

6.5.1 Legisla'tively-Chartered, Privately-Owned Corporation (Projected 

Stateme"t of Income 

6 • .5.2 1.egis!atively-Ch3rt~red, Privately-Owned Corporation (Projected 

Balance Sheets} 

vii 

t!"Ji ..... 3-==~-~· .----.. " ~-. 'W:f - ~: - •• _________________ ....&-.h "-_ ._.~,_._ . 

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Figure 

LIST OF FIGURES 

(Continued) 

6 • .5.3 Legislatively-Chartered, Privately-Owned Corporation (Fro;ected 

Statement of Changes in FinanciaJ Posiuon) 

6 • .5.4 Legislatively-Chartered, Privately-Owned Corporation (Projected Cash Flow) 

6.5.5 L""gisla ti ve ty -Chartered, Private lv-Owned Corporation (Pro jec ted 

'j.S. Government Cash Flows) 

8.1 Present VaJu'! of Government Cash Flow and Government Average 

AnnuaJ Cost as a Function of Cornmf..'rcialization or Retention 

Scenario 

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~~ _________________ --"""'h_" __ ,_,,,,_,_,,,, . .: ..f~~:-;' __ ,.,.. ~ 

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• 4.1 Optimum Pr ice ~ Resulting Revenue 35 , 

5. L Determination or Government Costs 39 

7.1 U.S. Interests in CivU R\~mote Sensing 81 

• 8.1 Non f inane iaL Issues: Comparative '\nalysis l08 

A.I Assumed Sensor Demand 

119 

A.2 Assumed Sensor and Subsystem ReHability 120 

A • .3 Launch Reiated ReHabiHties 120 • 

/\.4 launch Attemot Statistics 120 

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1. INTRODUCTION 

F\)t" more than a decade, and a~ a cost estimated to be in excess 01 

$1., bUlion, the U.S. government has conducted research, development and demonstration of land remote sensing technology. These program~ have now progressed 

to the point where data is being obtained or. a continuous basis from a land 

observation satellite (LANDSAT D) and .nformation products are provided to and 

utiUzed by government, industry and foreign organizations. During the past few 

years attention has increasingly focused on the operational nature of the LANDSAT 

system which includes Ii space data coUection segment and a ~r~und processing and 

information disseminatioll segment. The federal government, rcal1zing the operational nature of the system designated, in November 1979 the Nationai Oceano· 

graphic and Atmospheric Administration (NOAA) to manage the LANDSAT system, 

NOAA was ~lected as the operating agency because of its experience in manau.ng 

and opl!rating '" ~ National Environmental Sa teUite System which has irlvolvf!d 24 

en\' ironmental sateHites since 1966 [ 1 ]. 

As the land observation satellite system continued to evolve, attentlon has 

focused on the appropriate public secto. and private sector roles [2-2u]. In 

keeping with this, in September 1982 the Secretary of Cominerce was authorized to 

plan and provide for the management and operation of tne civil land remote sensing 

sateUite system, including the LANDSAT 0 and 0' satellites and .usociated ground 

system equipment transferred from [\jASA; to prov ide for user fees; and to plan for 

the transfer of the ownership and operation of future civil operational hlf~d r'!mote 

sensing satelJite systems by the private sector, when in the natiol'al interest (10 J, 

As part of this planning for the transfer of the ownership and operation ot dvl1 

operational land remote sensing satellite system~ to the private sector, the 

Secretary was requested to: 

A. 

B • 

C. 

Conduct a study to define the needs of the government {or land remote 

sensing data 

Determlne and describe the equipment, ~oft·"'··lre and data inventory 

susceptible to transfer to the private sector 

Compare various feasible financial and organizational aP:>rl'laches for 

such a transition. 

Criteria for the comparison was to include considel'aticns such as: maintenance of 

data continuity; maintenance of U.S. leadership; national security; international 

". c.'"""+trta,,,(I> - .... _______________ ill--'t..-. __ .u~ ___ --. ...... o~*:, ----, --~--
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obligations; potential for market growth; cost to the governmentl independence of 

subs.: I I)r financial guarant~ from the government; potential of financial retl4r1l 

to tne governmr.!nt and price of data to users. The following approaches were to be 

compared: 1) Whot'l private ownership and oper"tion of the system by on entity 

competitively selected; 2) mixed government/private ownership and operation; .snd 

3) a ie.Ji!13tjvely-chartered, privately-owned corporation. 

In addition to the above lStudies and cornpal'lsons, the ~~<.:retar)' wall asked to 

fund at least two parallel studies outside the government 50 as to Independ"ntly 

conduct the comparisons called for above. ECON, Inr:. w"s selected e:1(I)' 1n 

Jilnuary 1983 as one of the contractors to p~rform these :itudies. The results of 

this work are reported herein. 

The specUic objective of the study was to provide an analysis and comparison 

of a limited number of financial and organizational apf)roaches for either tranlSfer 

of the ownership and operation of the ci"U operational land remote sensing 

program to the private sector or government retention. The following basic 

apprndchc!\ for commercialization or retention were co."lderedz 

• C·.lntinued ownership and operation by the federal governmr,nt (plolnned 

phase-out) 

• 

• 

Continued ownership and operation by the federal government (estdblishment of necessary budget line items to continue provision of the 

data services) 

Wholly private ownership and operation of an entity competitively 

selected 

• Phased private ownership (government ownership olnd operation wi1

.h 

private :sector marketing) 

• Legisladvely-chartered, privately-<>wned '.;orporatioa. 

We have taken the position that in order to eval.uate the alternatlvp.s iT is 

necl!ssnry to plan potential business ventures and evaluate their financial merit, 

the llkeHhood "f their financing and their impact on government cash flows. We 

have tr-iud to play the role of an entrepreneur, puttin~ together business plans for 

the pur Jose of obtaining financing. The business plans are based upon a perceived 

technology base and a market forecast. The market forecasts are felt to be 

reasonably conservative because of the selected role (as entrepreneur). It is 

obviolJs that many business scenarios may be d~veioped, ranging t.rom flymg an 

instrument in the Space Shuttle and selling resulting images, to the Communications Satellite Corporation's proposal to acquire and operate a COMbined land 

observation and meteorological satellite system. Due to the very fimte nature ot 

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this study, a specific buslne~ system was defined (Section " and used "I the 

common basis for analyzing the various appro~ches for cornmerdaUzatlon or 

retention of the land remote sensing system. It must be empha~&zed ttia t this 

,ystem r.as not been optimized either from the poirt of view of private sector 

proUt maximization or pubUc sector benefit maximization. It appears to be a 

reasonable posslbll1ty with its main virtue being the introduction of commonality 

which fadUtates comparison between aU ot the approaches analyzed. 

It should be noted that the selected business system does not Include "vall!e 

added" functions. It was not possibLe within the scope of the current effort to 

obtain sufficient information to -tHow the planning of value ,lddea business 

ventures. 

Figure 1.1 presents an overview of the study approach. Th" Urst step was the 

development of the financial and organizational options of interest. In order to 

compare these options or scenarios, a common business sc~nario was deflned. This 

included a schedule of events, data flows and other important features. This is 

described in Section 3, The Business 5ctmarl0. Section 2 pre5eFlu, as geraeral 

background, a description of the current land obse:rvation system upon which the 

business sy!ttem buiJds. A demand forecast was made based upon a review of the 

published literature and discussions with current and potential user groups and 

competitive suppliers of information products. The demand forecasu and projected revenues are described in Section 4, The Marketplace. Thes~ forecasts and 

projections were held constant across aU scenarios. CCJst estimates were based 

upon detailed data obtained from the current operating entities and are described, 

as appropriate, in Section 6.1 through 6.4. Detailed schedules in support of the 

speciflc cost ltcm:s are presented in appendices. 

The demand forecasts and the cost estimates together with other information 

such as recoupment, leasing and subsidy pollcies and desired return on capital 

served as input to the financial analyses. The financial analyse~ developed the pro 

forma income statements, cash flow statements and balance slll~f'!'S for a ten-year 

planning period. The financial analyses were performed for each of the scenarios 

of interest. The specific scenarios are described in Secti,>n , and the financial 

analyses are described in Section 6. The financial analyses were used as input to a 

governme'nt cash flow analysis-this is also discussed in Section 6. 

The results of the financial analyses were reviewed by a group of individuai:} 

with expel'tise in the capital markets. The review established financial criteria 

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A~StS5i ~~/ji I)rI,O~F" 

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'.l.N';1 r,L 

;ES 

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-

OEVELOPME~T OF 

FlNANC IPl/ 

ORGAN;ZATlONAl 

OPTIONS OF INTEREST 

~PEClr:CAT!ON OF r--- aVSINESS SCENARIO 

~ DEMA~D 

FORECASTS 

, 

~ FINANCIAL 

ANALYSES 

ASSESSMENT OF 

"- FINANCIAL 

VIABILITY 

---

r-::PAlmON OF .... FiNANCiAL/ 

LGA1H ZAn ONAl 

J!'TTONS 

FIGURE l.l OVERVIEW OF STUDY APPROACH 

....... 

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t".. ~ _______ • _____________ ......... _ .. __ ._ .... __ ~ _ 

COST 

ES T Ir-IA TES 

. GOVERtlMENT 

CASH FLOWS 
(; . , 

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that must be met in order to have a viable busine~~ venture-i.e., attract 

investment funds from capital markets. These criteria are desc:ribed in Section 6 

as we!! as the general procedure used in the financial analyses. 

In paraUei with, and at times providing guidance to the financial analyses, an 

assessment of nonfinancial issues was performed. These inc:ludec.J political, 

institutlonal, legal/regulatory, international, national security and policy issues. 

Thes~ .v:..; discussed in Section 7 with emphasis placed on differences in the ir 

I!ffects upon the different scenarios. The objective of considering these issues was 

to establish policy, legislative and organizational requir~rnents that are deemed 

necessary for each of the scenarios to be viable. 

General and specific observations and conclusions are presented in Section 8 

and recommendations are presented in SectifJn 9. 

The data utilized in this study was obtained from the indicated referenced 

documents and from discussions with individuals in government agencies and 

commercial organizations. These included the National Oceanographic & Atmospheric Administration; National Aeronautics & Space Administration; U.S. Department of Agriculture, both the Foreign Agriculture Service and the Statistical 

Reporting Service; the Central Intelligence Agency; the Department of Interior, 

including the Bureau of Land Management. the U.S. Geological Survey and the 

Earrh Resources Observation System Data Center; U.S. Foreign Service; Communicatkn!» Satellite Corp.; Spot Image; RCA; General Electric; American Science: and 

Technology Corp.; GeoSat; Metrics; Lockheed; Hughes Clnd Terra-Mar. Due to time 

constraints this data could r.ot be independently validated or estimated. The fact 

that this data is used in the study reported herein should not be interpreted to 

mean that these estimates are considered '':0 be valid. 

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2. l'HE CURRENT LAND OBSERVATION SYSTEM 

Remote sensing implies the detection of the nattJre or condition of an object 

without touching it. The advent of first the photographic camera and later th~ 

airplane represented major advances in remote sensing. Space remote sensing was 

first tried experimentaJJy when cameras were used on manned orbital flights to 

take multispectral photographs of the Earth. Later, in 1973, Skylab was outfitted 

with sensors designed to the specifications of the Departments of the Interior and 

Agriculture, which used the data in programs that tested possible applications in 

planning, management and resource conservation [21]. 

The LANDSAT program began in July 1972 when the first LANDSAT sateHite 

(the Earth Resources Technology SateJJite-l) was launched by NASA. The program 

began as a research and development effort to determine the usefulness of sateJlite 

mul tispectral information, provided as synoptic views of the Earth's surface [22]. 

In the ten years that foHowed three more LANDSAT sateHites were launched so 

that a continuous flow of information about the earth's surface was transmitted 

over an extended period. of time. LANDSAT data has been used regularly in a wide 

range of applications from crop forecasting to mapping, to land use planning and 

resource management. ''i'he program has developed into a vdluable source of 

~nformation for agricultura.i and urban planning, geologic exploration, land mana~ement studies, snow melt and flood runoff analysis, crop stress location and other 

tasks requiring large-scale views of the Earth's surface areas. 

LANDSA T D (LANDSAT 4) was launched July 16, 1982 into i\ polar orbit at an 

altitude of 705 kilometers. It r":lfcles the Earth every 98.9 minutes and images the 

same 185 kilometer swath of the Earth's surface every 16 days. A foHow-on 

sateUite, LANDSAT D', is available to replace or supplement LANDSAT D. 

The LANDSAT data collection system consists of the LANDSAT D sateJiite in 

orbit, the LANDSAT D' satellite currently in storage, a commOnications sateJiite 

system, ground receiving stations, a ground data processing and satellite control 

facility, and a data distributi' n center. 

2.1 LANDSA T D and 0' S:: ~eUites 

LANDSAT D (and D') illustrated in Figure 2.1, consists of the Standard MultiMission Modular Spacecraft and a mission unique instrument module. The spacecraft, which is compatible with Space Shuttle launch and retrieval, contains the 

~~".=.=~.-.'". . ---, .. -.,,---- r'-=~j'W(~;;:N '" .... 

.. ~-------------------."''- ,,_ .... _._ ... ,_ .. -----_-:-_. ... . ., --~'----- t . t • 

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PROPULSION 

MODUle 

POWER MOOUlE 

7 

HIGH GAIN ANTENNA 

GLOBAL POSITIONING 

SYSTEM ANTENNA 

ANTENNA MAST 

·;-;~~~~~fiR~~~~ ~...ot-..,-,:- MUl nSPECiRAL SCANNEH 

SUN SENSORS 

SoOAND ANTENNA SClAR ARRAY PANEL 

THEMATIC MAPPER 

~ULTIMISSIO~~ INSTnUMEN~ OOULAR MODUL~ 

SPAC::CR.~FT 

FIGURE 2.1 LANDSAT 0 FLIGHT SEGMENT 

attitude control, communications, data handling and power subsystems. Included in 

the instrument module are the Multi-Spectral Scanner ('vlSS), Thematlc ~1apper 

(T~O, a wideband communications subsystem, high-gain and other antennas, and ii 

solar array that can generate two 1<i1owatts of power. The MSS is a radiometer, an 

instrument that coUects and measures energy reflecte-:i or ~rr,itted in di~.::r~t(': 

intervals of the electromagnetic spectrum. !t has four spectral bands in the visible 

and near infra!"ed portions of th~ spectrum and has an SO meter 5patlal re50l'.lti0:1. 

The TM works like the MSS bl't is a seven band multispectral, high !"e~ohl'Cbn 

scanner with 30 meter spatial resolution [20]. 

2.2 Commun)cations System 

Until the launch of NASA's Tracking Data Relay Satellite System (TDRSS), 

da'ta coming directly from LANDSAT D will be received by ground receiving 

stations located in the U.S. and 11 foreign countries. Coverage is limited by 

receiving station line-of-sigilt, since LANDSAT D has no on-board recording 

capability. The U.S. has arranged to receive foreign scenes by mail from these 
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stations albeit sometime's with long delays. Once TDRSS is b operation it will 

receive data from LANDSAT and transmit it to a ground receiving station at White 

Sands, New Mexico. This location was selected to minimize propagation effects on 

the TDRSS down-link. The positioning of the sateUites in the TDRS system (one at 

4l oW and one at 1710 W longitude) will aHow for data acquisition from nearly aU of 

the earth's surface. Foreign ground stations will continue to coHect data for their 

own use directly from the satellite and can obtain other scenes from the U.S. 

facility at Sioux FaHs. 

Data received at White Sands is de modl.'.1al.ed , separated and recorded on 

separate wideband data recorders. Compacted raw data tapes are prepared and 

transmitted via a domestic ccmmunications sateHite (hereinafter referred to as 

DOMSA T) from White Sands to the processing facilities located at Goddard Space 

Fllght Center in Greenbelt, Maryland with, under normal conditions, a data delay 

of no more than eight hours from sensor observatic"Jn to availability for processing 

at GSFC. In the case of a DOMSAT failure: of gr~:1ter tllan two days, the raw data 

tapes will be mailed from White Sands to GSFC (23]. Once MSS data is processed 

at GSFC it is sent through DOMSAT to the EROS Data Center (EDe) at Sioux 

Falls, South Dakota. 

The TDRSS and DOMSAT communications satellite systems will substantially 

reduce time deic:\ys that have been encountered in shipping data from foreign 

ground stations to the U.S. and from LANDSAT ground receiving stations to 

Goddard Space Flight Center, a.nd subsequently to EDC. 

2.3 Ground Segment 

Raw data is receivd at GSFC, is stored on high density tapes (HDT R) and 

sent to the Image Generation Facility for preprocessirlg, framing, radiometric 

correction and computation of geometric correction matrices, to produc.e a high 

density archival tape (HDT A)' in the case of MSS data. TM data is processed 

further, into computer compatible tapes a. d film [24]. Separa te (computer) 

processing strings exist for MSS and TM proce&sing. 

User requests for data acquisition over specific land areas are input into the 

system through a mission management facility which senc!s such request.s to the 

Control and Simulation' Facility for spacecraft orbital operation planning and 

scheduling (24]. A basic data set is routinely acquired, but a user may make a 

request for "special acquisition data" (for which there is a fee). The mi~sion 

----~=--. fP ..... '.,.....,I~~~-~---. , .... ~ . ..vt. ,'\ :;- ___________________ .. ~-•. ~~"'--' i!T' .. ....a ...'-.-... .. __ ,_.~~,____ _ _ _ _______ _ 
9 

management facility also provides image dat"_ production management, management reporting, database management, control point library generrstion, inventllry 

control and ground segment management. 

Control and monitoring of the spacecraft, coordination 01 the ground 

schedules with the spacecraft, pertormance analysis and mission plan"ing are 

handled by the Control and SImulation FacUity r. 23]. 

F.valuatio'1 I)f the image data, with emphasis on assessir.g syst~rns handling 

TM oata, 1.; Cl)ndu..::ted by the LANDSAT As:;essme-nt System [23 J. Fi~ure 2.2 

illustrates the flow of information in the ~round sp.gment. 

2.4 Data Distribution Center (EOe) 

MSS data on high density archival tapes are relayed from I~S:=(: through 

DO\l\SA T ~o the EROS data Center (EDC) located in Sioux Falls, South Dakota. At 

E.De the incoming data is recorded on high density tape, which is sent through che 

EROS Digital Image Processing System to ascertain readability, correct gc"m~try 

and generate blacl< and white 241 mm latent fUm. The film is prJcessed into a film 

mastel;' and the HO rand Wm master are archived. When scenes .:lre ordered, 

digital prodl4cts will be generated from the HOT and film products from the film 

rna:;ter [25]. 

Goddard-produced TM film will be inspected for quality and cloud cover and a 

working master generated and stored in the archives. j\l\ digital data (on CCl',,) 

will be inspected for physical defects [25]. Products will be produced from th"! 

film master or CCT to fiU customer's orders. 

The Center's computer complex controls a database of over six mUHon 

images and photo~raphs of the Earth's surfa,ce features [20]. 

Figure 2.3 illustrates the flow of information in the totai LA:"JOSA T system. 

:
(, 

f. 

I 

~' 

ORIGINAL PAGU 13 

Of pOOR QUALITY 

lJ 

.110. OATA CINTIII 

FIGURE 2.2 LANDSAT D GROUND SEGMENT 

(SOURCE: LANDSAT D MISSION SYSTEM !NDI)STRY BRIEFING. FEBRUARY 26, 1982) 

'0.' t·,. "'~ ,) r;- ","-A'II:I'.17 d/!"u jw • 

CI:.~ ® t ~' I 1 /1 U 

I ~::::: J , .... ::Ol OO"":"IA' I 01..". tll •• -. I I",tihll" '1M ..... '" 

, L"-' .... -X --.., l.!::'"1' , 

(SOURCE: 

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I.EOSNO 

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I I I O""'" I j 

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I: SEOME'T I 1 ____ -1 '-__ 

'l"A __ 

DOMIAT 'om.lllo l.:om",ulI'olllo" SI'I.IIIe 

IiAOS ell'" A •• oy,e •• Ob ..... llol1 SYI'I'" 

aSFC GOlld ... Sale. F"Oh. CI"'.' 

TI.U 

CCT 

TO'" 

TN 

Till""', 

Comu ... Cor."IIIb'l Tflchlne I"d Oil. A ••• , _'It.", 

lASS MYIIII •• cU.1 SCI""., T".mlllc "" •• 1' 

FIGURE 2.3 LANDSAT 0 SYSTEM OVERVIEW 

U,NDSAT 0 MISSION SYSTEM INDUSTRY BRIEFING, FEBRUARY ~ 26, 1982) cc:;S@CiU 

t:" - *' .,.'"'" . ------ ...-- . ., . -.. _______________ .... ,h_"'--_._ ... , •• __ ._ 

. 
c 

11 

3. THE BUSINESS SCENARIO 

Underlying the analysis and comparison of the Hnar,cial and organizational 

approaches for either transfer of the ownership and operation of the civil land 

remote sensing program to the private sector or government retention is a basic 

commonality. This commonality is with respect to the level of service provided in 

the marl<etplace and hence product sales. Thus a point of departure is a set of 

products having the same attributes (including price, resolution, timeliness, etc.) 

over time for each of the scenarios. The result is a demand forecast that is 

independent of scenario, a timeHne or schedule of events that IS independent of 

scenario, and a basic business concept that is independent of scenario. With these 

factors constant from scenario to sce'1arlO, attentlOn can be focused on the 

relative attractiveness of 3cenarios, their affect on government cash flowl, the 

impact of recoupment poliCies and other factors. 

The anticipated schedule of events that is a major factor driving the costs of 

all the business scenarios is illustrated in Figure 3.1. For reasons to be discurse(~ 

subsequently, it is assumed that commercial operntion wiii commence at the star~ 

of fiscal year 198.5. If this date is delayed, continuity of service will be 

jeopardized unless !t.) federal government initiates procurement of another backup 

s,'ltellite (in addition to DI). A number of specific events and their timing (fiscal 

yead is shown. LANDSAT D was launched in FY82. It has already run into 

problems which have necessitated operations on backup subsystems. It is assumed 

that the multi-spectral scanner (MSS), having 80 meter resolution, will fail at the 

end of FY85 and the thematic mapper (T~t), having )0 meter resolution, will fail at 

the end of FY 84. It should be noted that specific failure dates have been assumed 

for events that are basically random in nature. It is assumed that the MSS is the 

primary sensor and that LANDSAT DI wiJi be launched during FYS5 in anticipation 

of an MSS failure. It is felt that this Claunch on antici.pation) is important to 

demonstrate t!-Ie intention of continuity of ~ervice to potential user:) uf the 

information products. LANDSAT DI also has an ~,tSS and a TM. It is assumed that 

this TM will fail after approximately two years of service and that the MSS is 

placed into an in-orbit spare status at about the same time. 

Immediately upon commercialization it is assumed that two LANDSAT Es 

will be procured. LANDSAT E will consist of the same "bus" llsed in LANDSAT D 

~ ~""'~IIP'"'r .. r"rn--= .... ~ -,. ~~ 2119fi$.P~lI' IIT-. ...., 

.. ___ • ____ .. ________ < _____ ........ ,, ___ t--_._ ... ' .... ___ ~_- ---~~ 
~tS S 

H4 

• LMH)~AT~' 

I·'S~ ;H 

\~ tA'J DATA "ROCES:I:H, 

200 SCENES/OAY 

• Tl4 DATA PllO~ESSIIiG 

~.) SCEneS/DAY 

• TDRSS OPERATlOrjAL 

• LAlWSAT E UILA(MSS)) 

PROCUREMENT (2) 

FLIGHT (2) 

• LANDSAT F (MLA(TM/MSS)) 

I-1ARKEi ANALYSIS 

R&D 

SYS, DEF. STUDIES 

t)QOCUREMENT (2) 

iLlGHT (2) 

• LAI~IJSAT u (fU, SAR. ?) 

'lARKET ANALYS 1 S P~jO 

SYS. DEF. 3TIJOIE5 PROCUR[r~ENT : 2) 

FLl (,HT ") 

• DATA SALES 

80 14 (~'ISS) 

3G :~ (nil 

~? 

L 

• L. 

12 

YEAR (rv) 

'11 ~6 REI 90 'JZ ~J Cj~ , J , I t t 

f 

.. J! 

I HI OR!!I T ~1'''PE F I L • .--------. 

I

l 

.. ~ 

~ 

I 

t1 I 2 

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I 

t l· F 

• • 

'.--. 

~ .. I ~ 

• .. F L. • 

• .. 

• • 

......... • L~ 

• 

t=: ::::::::::::: ...... - SO ~I STEREO U'LA(fISS)i 

30 '.\ STE~E') \I~Ll\(,T::~~3)) 

RADA~ OQ OTHER IHAGEPY 

I •• ------------______________ ___ 

• 

I 

r- ~f)I"·'fRCIAL C,I(PliTI1~1~ 

FIGURE 3.1 LAND OBSERVATION SYSTEM--ANTICIPATED 

SCHEDULE OF EVENTS 
• 

( 

• 

13 

and LANDSAT 0' (the Muhi-Miuion Spacecraft), plus a solid state version of the 

MSS-a multi-linear array heving a stereo capability. The stereo capability allows 

the observation of scenes at diH~rent angles from the nominal ground ~rack. This 

procurement must proceed with haste since in the absence of LANDSAT e. there is 

no spare for the MSS on l.ANDSAT 0' and continuiry of service is in jeopardy. 

Continuity of service is deemed extremely important since, as will be discussed, 

the large part of the demand for information products is associated with renewable 

resources which require up-to-date information. Two spacecraft are procured in 

order to have a reasonaole chance for the desjr~d continuity of service. The 80 

meter resolution MLA is indicated because time is of the essence, and the 

development of a )0 meter resolution ~LA would require an extendeo development 

schedule. It is anticipated that the two LANDSAT E spacecraft together with the ... LANDSAT 0' MSS on-orblt spare will provide service through FY92. 

During FY91 LANDSAT F, having a solid state version (multi-linear array) of 

the TM with 30 meter resolution, will be launched. It Is assumed that the decision 

to develop LANDSAT F will be based upon a market analysis and that two 

spacecraft will be procured. These wH1last through the remainder ot the planning 

horizon. Since it is likely that additional spacecraft will he required in the 'atter 

part of the 19905, expendltures for their development and procuremenT 

(LANDSAT G) will be required during the pl;:snning horizon. 

As will be discussed in Sectlon 4, there is d need for t)oth 8(J meter and 30 

meter resolution information products. LANDSA T F will have a )0 meter 

resolution capability. To satisfy both the 30 and 80 meter product needs, the 30 

meter data will be degraded to produce 80 meter products as necessary. This will 

aHow attribute pricing poHcies to contInue and to prov ide the lower priced 

products required by the renewable resource commuI,ity. 

The basic concept of the land remote sensing business system is shown in 

Figure 3.2. It is assumed that the government will cor-dnue to perform R&D 

related to the development 01 sensors and associated tt!chnologies and new 

information extraction techniques. The results of this R&D wiil be aval1able to the 

land observation venture. The land observation venture will utilize the tracking 

data relay sateLlite (TDRSS) and domestic communication satellite (DOMSAT) 

* . The question of number of spacecraft to be procured is addressed in 

Appendix A dna is based upon the use of a stochastic mission and life cycle 

cost simulation model. SATIL • 

'1 
, . 

. 

, 

~ 

14 

ORIGINAL p,,\ :,~~ ! J 

or. POOR QUALITY 

~u I[ frl~~l 'il 

~&lJ 

cortlll!; I (., II 0" 

~(~VIClS lA",,! II 

S[R'IILES 

( IDRSS/CO/o!S~T) 

,$ • "'JI,fl0/i SIILES 

L~ • (,JI!ESTIC $IILE~ 

IJF • "·I~I:Jf.l IJH R r([ 

,j • I •• el')r, OF FOR(IGa 

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• L 1.1 :,(,11 COS T~ ---',P"ICL • • lGI"tl,:1I eM I {Jrl I,OS I 

P' • I'RI)(ES51fIG .. 'OST ---- S 

FIGURE 3.2 BASIC CONCEPT OF LAND REMOTE SENSING BUSINESS SYSTE~1 

servlces. The venture will aLso utilize launch services provided oy either 

government or nongovernment operations, * It is assumed that initiaUy the venture 

will utilize services (archiving and sales-not marketing) provided by the EROS 

Data Center which will be reimoursed for all costs incurred. The venture will, in 

essence, take over the Goddard Space Flight Center Data Processing Facllity and 

the White Sands Ground Station. At an appropriate point in time, aU datu 

prucessing and sales facilities will be consolidated at White Sands (White Sands 

must remain since it was se!ected in order to minimize communication problems 

with the TDRSS) • . _--* Launch services are a potential problem. The LANDS/\ T seri~s is desJgnF.:c1 to 

be launched on a D~!1ta vehicle. At present, N.ASA does not plan:" have 

Delta vehicles avaJable after the launch of LANDSAT D'. There are no 

definitive plans for commercialization of the Delta, ,although this is a 

possibility. In the absence of the Delta, there appear to be ether possibilities-a West Coast Shuttle launch or the use of Ariane. Because 

LANDSAT series spacecraft are not optimized for Shuttle launch and the 

limited number of payloads to be launched from the West Coast, it is likely 

that the LANDSAT launch would be charged for a dedicated Shuttle flight. 

This would impose a significant penalty on the LANDSAT observuticn 

business venture. A new spacecraft could also be developed to reduce laltnch 

cost~ but development cost would be incurred. In the financial analysis 

considerations i;'l Section 6 the cost of a Delta launch ($35 million--FY83$) 

has been a.ssumed. 

~ #;;.... :,l",:~ .,l'fP"...... =.~ -,.. .b iii.. __________________ .ol' ....-.t-.·:···,--·--- ... .....' -- -.. "", - ------ ",.. 
r 

, 

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i 

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( 

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c 

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( 

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It is assumed that the foreign ground stotions will be franchised, each having 

a region within which it is the sole supplier ot informotion products. The foreign 

ground stotions Will continue to be able to obtain direct readout from the sateHites 

when they are observable. Annual fees will bt! paid for this. Scenes so obtaineo 

can be distributed within the franchise area without restrictions. The foreign 

ground station will be (esponsible for sales in its region of information products 

that cannot be obtained by direct readout. Revenue from sales so obtained will be 

spHt with a portion maintained by the ground station and the remainder paid to the 

U.S. venture which will provide the necessary information products. The gOill is to 

establish a foreign marketing organization using the existing ground stations as tht! 

starting pomt. FranchisC!s may also be t!stabHshed without having a ground station. 

Figure 3.3 il1ustra(es the staged operations of the business system and the 

flow of in10rmation. Stage I utilizes the system configuration which wiU be in 

place in FY8.5. Stage II consolidates all functions at White Sands. During Stage I 

LANDSAT observation satellite data is transmitted via TDRSS to the tracking and 

readout facility at White Sands which (;l rnmunicates this data via DOMSA T to the 

system management and processing center at Goddard Space Flight Center (GSFC). 

Data is processed into information products at GSFC which then communictes the 

bulk of these products to EDC via DOMSAT. The foreign ground station!:; receive 

direct readout from the land observation satellite and also receive requested 

scenes from EDC. 

During the second stage the data proce~sing, archiving, sales a,,~ tracking, 

and control facilities are consolidated at Whi.te Sands. This aJlows the elimination 

of duplicatIon of facilitles and eliminates the need for DOMSAT cor,'municatlons. 

The previously defined events schedule and business concepts serve as the 

common basis for evaluating the alternative financial and organizatlonaJ scenarios. 

-..,' -.- ~ _. ~? ~. .~ 

~._". ________________ """th_L-_'_'h .• ~~_._-:-~~ .. ~"tt-!"- ___ .~ 

f 
'.H\ 

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,/ ,.,... '~\'" jI,f., 

'lhl:, III 

ORIGINAL tJ/\~C 1$ 

or POOR QUALITY 

" ... ·.t 'Io~r 'Iv ." .H 

16 

(A) STAGE 

',)'111 'I. 

I{, • \J.I 

• ~ l' l ~ ~J I :/!J. 

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f 

I 

+ 

-----

Ifwrl'.n 

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rf/" II 'I 

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r' (I,,,', '.",', 

- -- ( -. \ . ., 1'-' 'J" ,---1 '--,_ 

'-., --,-.. 

- -('"I I -1 ' __ ' t--.~ 

~IGURE 3.3 THE BUSINESS SYSTEM: STAGED OPERATIONS 
{ 

( 

t,: ~ 

• 

17 

4. THf. ~t\RKETPLACE 

frpducts 

LANDSA T 0 provides data from two sensors, the Mu1tl-Spectr~1 Scanner 

(MSS) und the Thematic Mapper (TM), which is processed Into photographic images 

and computer digital tapes. Each LANDSAT scene covers an area whose 

dimenslons are 18' kUometers on e~ch side. Data is provided from the ,\1SS In four 

spectral bands with a spatial resolution ot approximately 80 meters. The TM 

obtains data in seven spectral bands with a spatial resolut.ion of approximately 30 

meters. Customers for resu!tmg information products may order photographlc 

images in film and paper, po~itive and negative format, in blacl< and white and 

color, and * in sizes from 70 mm to 41.1 inches. Digital products may be ordered in 

p;v:iaUy or fuUy corrected forma ts. 

The basic collected data and resulting processed information products have 

value only to the extent that they can be interpreted and applled in decision 

making and planning. In the years since the 'vluiti-Spectral Scanner has been 

available, techniques have been 11·,weloped to utilize the information p.roducts in a 

wide range of app1&cations. Information acquirl~d through analyses of LANDSA l' 

datil has demonstrated mlue in crop assessments and yield forecasts, forest and 

range inventory and monitoring, soil analysis. sur face water delineation, land cover 

ciassil.\cations, mapping, urban planning, location of 011 and mineral resources and 

the understanding of the compos!tl!)n d the Earth's surface. 

The Foreign Agric'tural Service, for example, uses LANDSAT data In 

providing information to aid U.S. fumers and trader!; to adjust to changes in world 

demand for U.S. agricultural pn.1ducts [2 ~. Maps produced with the aid o! 

LANDSA T data are being used by the Bureau of Land ,\1anagement in their 

management 01 federal land, by the Corps of ~ngineers in conducting dam 

inspections, and by several states in urban land-use delineation and hydrologic land 

use planning [ 1 ]. \-tany oil and gas companies have developed in-house computer 

processing ca,QlbiHties for L\NDSAT data interpretation to assist in their worldwide exploration activities. This !atter ap!Jllcation has probably been the largest 

non federal user of LANDSAT tapes and imagery products. 

* ' A distinction is made between dat;:& pr:>duct!., the raw data prior to processing 

and informatIon products, the processed data made available for s,lle in the 

forrn of imagery or d ~ita! tapes. 

t • ~""'~;~~=;;:;:::;='::::-::':1.' - "",- - --r: """ ... ,rqr .. "W'''~i'I'P'''' :. ~ r::. _______________ ·____ ·h_t....a,_.", _______ - - - - .--------
" '. 

~ 

'.' 

18 

The increased resolution, new spectral bands, in addition to narrower bands 1n 

green, red and near infrared of the Thematic Mapper oHer advantages beyond 

those of th~ Multi-Spectral Scanner and, consequently, increased value in appJications. However, TM data is costlier than MSS data ($2,800 for a TM scene in tape 

tormat versus $650 for an MSS scene in tape format), and for some uses the 

ir.r.l'ea'S\~d ,=ontent af t1 T:Vi scene may not ju~tiiy the higher costs. 

New spec.:tral bands will enable differentiation among a wider va:lecy 01 

crops, vegetation, rock and soil types than was possib.1e with the MSS. Measurernent ot suriace temperature will "How identitication of plant np.alth and irnpl'ove 

identification of Individual plant type, ai.d may be used in identifying and mapping 

surface composition for geoiogical studies. 

Increased spatial resolution will permit more effective use of data in land use 

mappmg and planning, storm water management and geologic mapping because 

features are more distinct in TM observations. 

4.2 Customers 

U~ers oi information prlJducts from a lan.d remote sensing system have 

olJfer'.!llt r.eed.s (based upon applications) for specific product attributes such as 

spatial resolution, number and !vt:~tion of spectral bands, frequency of observation, 

timeliness of delivery of information, and area of coverage. The users of the 

information products, depending upon applications, require information products 

that are packaged in different forms ranging from film tf) high den~ ity digital 

tapes. Some users requ:re a large number ot scenoes on a repetitive basis (the 

renewable resource applications) while others require a small number of scenes on 

a nl")nrei'eti~ive ba:;i5 (the nonrenewable resource applications). T~e former 

appHcatlons generally have relatively low · .. aIue pp.r scene whereas the latter 

,-\ppUca tions have :'e!atively high value per sc.:ene. 

The majlJi' user 01 LANDSAT data has ceen the fed~ral governm-ant, although 

its share of total U.S. distributions of information products has declined to about 

33 percent [20]. It is estimated that in rY83, $7 to $8 million wiH be allocated 

among federal agencies for LANDSAT data. Within the federal government, the 

iargest user is the Department of Argicuiturp. with a budget estimated to be 

slightly in p.xcess of S3.5 million in FY 33 for data acquired over foreign areas and 

$150,000 on domestic data. for the Fore Ign A~~ricultural Service, LANDS A T is the 

only way to obtain glohal crop information. In domestlc crop monitoring, 

J .. ;_"",=_" _"""-_"""_::_0, __ ": ... '"'"-':'_":"_' __ ""_""_' ._".-_~,_._. ______ 1_" ,, __ ._ .... _~._. 
( 

. (' 

19 

alternative means do exist for collecting data. Aerial photography, district !"angers, 

county agents and extension workers are used regularly, especiaUy during the 

grow ing seasons. Because of anticipted b'Jdget constraints coupled with the 

agencies use of large quantities of LANDSAT data, H is not likely to shift to the 

use of the more expensive TM dat"l on a significant scale. Timeliness of deJivery 

and frequent observations are critical to the value of the data. Based upon 

previous benefit estimates [26-29] i~. appears that USDA budgets * for information 

products bear little or no relationship to the pott:ntial benefits. 

Among the other federal government users are the CIA, Department of 

Interior, DOD and NASA. It is estimated that their combln~d FY83 expenditures 

for information products will be of the same order as the USDA's. The information 

products will be used for both renewable and nonrenewable resource management 

applica tlons. 

Stat~ and local government users constitute a smaJJ segment of the market; 

about 5 percent of the nonfederal market [20]. They are low volume users. Many 

states have d~v~loped internal data analysi!» capabilities [7]. The largest number 

of state applications have been in environmental management, torest/rangeland 

management, and water resources planning and manageJTIent [12]. Higher resolution images over urban and suburban areas are valuable to urban planners 

concerned with r:han~ing land use patterns I: 30]. 

AcademiC institutions use LANDSAT data in research or teaching. Some 

pu"chase data to perform value added services for state and local government 

organizations or other clients [12). 

The industrial sec·tor is the second largest market cate~ory and is dominated 

by the resource exploration industries-particularly oil, natural gas and mineral 

exploration companies [31]. Frequent coverage and timely delivery are not as 

vital as in the renewable resources area. UsuaJJy seasonal coverage and delivery 

within the month is adequate. During the past few years firms that have been 

actively using LANDSAT data have developed in-house processing facilities and 

have established databases with scenes acquired during each of the four seasons. It 

is possible that this part of the marl<~t may approach saturation in the near-term. 

However, new firms are beginning to employ LANDSAT data, and so the marl<et 

may be driven more by expanded number of users than by lncreased demand among 

--.. Not including USDA information processing costs • 

., ·-·~7,-,-·--· '::. .............. ~ ~~ -£"':l~:a.;~.~ .; .

---------------------" .... ,-"-........... -- '-----
tr ..... 

20 

existing users [20]. Counterb .lancing this trend is the worldwide petroleum glut, 

which has reduced speculative searches for new sources of petroleum. 

The industrial market is characterized by relatively low data volumes but an 

ability to pay, which bears more of a relationship to value than the other market 

segments. Data, once acql.,:ired, has value for years afterwards. The new and 

:1ilrrOWer spe(~tr3l bands of the Them~.tit; Ma!>per data will be valuable in mineral 

and f.'etr"leum p.y.ploration, a"d a ~tr.Jng :nitiill demand for T:~' data on the part of 

these users is anticlpateo. The industrial sector has expressed a desire to acquire 

stereo data which is (lot available frorn LANDSAT D and D' but wilJ be available 

from the French SPOT System. 

There has been limited operational use of multi-spectral data in the forestry 

industries. St. Regis Paper Company is now using MSS data in a forest resource 

information system [ 1]. Agribusinesses, although aware of the LANDSAT program, have been reluctant to actively use the data [ 31 ]. A recent market study 

identifiec.' potential private users with require menU which LANDSAT now has the 

potential to fill, including utilities, construction companies, agl"ibusinesses, or 

whic.n ;~lgher resolution [v'LA systems '""ill fiU, inciuding mining engi:leering, bridge, 

tunnel and elevated highway construction contractors [311. 

Foreign users have made up about one-third of total EDe data sales. The 

composition of the foreign sector is believed to be similar to the U.S. groups 

(federal, industrial, academic, and state and local governments) and will have 

similar requirements [20). The developing countries and some developed countries 

(such as Canada, Australia to a certain degree, Brazil and South Africa, whic!1 have 

substantial areas. small but well tnined !;cie!1tific populations and economies which 

can support investments in remote sensing) place high value on the LANDSAT 

sy:a~m L 12 j. For man;' developing countries the:-e are no alternatives to 

LANDSAT's rPoliable, inexpensi"/e provision of data on natural resources. Small 

countries, cloudy countries and countries with finely segmented landscapes do not 

have much interest in the present system, but look to future spa~ecraft imaging 

radars to overcome the cloud cover problem, and to SPOT and TM for high 

resolutIon and multi-spectral da':a [12]. 

-

t

. : 
• 

c 

c 

21 

4.3 Competition 

Starting in 1984 LANDSAT will face competition if, as is currently scheduled, 

France launches its developmtmtal satellite earth observation program, SrOT. The 

SPOT satellite will contain two identical high resolution visible (HRV) t'ange 

instruments. These instruments will have a resolution of 20 meters in three 

spectral bands (in the vi~ible and near infrared portions of the spectrum) and 10 

meters in black and white. During ground processing, 20 and 10 meter resolution 

images can be combined into a product appearing to have an enhanced resoluticn 

beyond the multispectral image. A unique feature of the SPOT imaging system is 

the off -nadir viewing capability made possible through the use of multi· linear 

arrays (MLA) of solid state c.letectors. This allows revisit coverage at interval~ 

from one to several days, and the ability to record stereoscopic pairs of images of 

a particular area. SPOT has a 26-day repeat cycle [32, 33]. 

A market for SPOT data is expected to be found among those involved in oil 

and mineral exploration, topographic and land use mapping, crop and environmental 

monitoring, coast..!l zone studies and general research activities. SPOT Image, the 

privately-owned company that will market SPOT, plans to establish agreements 

with ground stations, giving the stations exclusive rights to market SPOT within 

their own countries [33]. The payment fees to these stations are structured so a$ 

to be essentially proportional to the amount of data received by them. SPOT Image 

has tentatively priced their product (high density tape) at about $1,000 per scene • 

A SPOT scene is approximately one··fourth the area of a T~ scene (currently priced 

at $2,800) and has three spectral bands. as compared to the TM's seven. The 

implications on the market can only he gt.'essed, but it is likely that thos~ 

applications that do not have need for full TM scenes will find SPOT somewhat less 

expensive. 

4.4 Market Forecast 

The past decade has seen many major developments in the state of the art of 

land remote sensing. A space hardware and a ground data processing technology 

base have been developed. An enormous amount of data have been coilected from 

the LANDSAT sr.l.teUites and have been processed into film and tape information 

products. These information products, having applicaticn in both renewable and 

nonrenewable resource management areas, have been available to and used by both 

taderal and nonfederal customers. Considerable progress has been made toward 

the development of a good technology foundation upon which estimates and 
t! 

, 

22 

projections can be made with respect to the cost and c2.~pability of data collection 

and processing. During this same time, however, little progress has been made 

with respect to understanding the market dynamics for resulting information 

products, although a number of market studies have been undertaken r 31, 34, 35, 

36]. Little information is available that relates potential sales of information 

products to the lTIultiple attribu tes $IJch a!i reso!u~:ion, nurnbfl!r of spectral bands, 

I'ric:e and competition. Because of the brief period 'f perfJrmance of thi~ reported 

study, it was not possible to develop new data-that is, it was not possible to 

perform an in-depth market study, nor was it possible to make independe.1t ~ost 

and performance estim"ltes. Since a$sessmel'lts and projections were neces:,Sary, 

thfl!Y were made based upon review of previous worl<, the establishment of 

historical costs, performance and sales databases, and interviews with both users 

and suppliers of data p.oducts. 

l\ summary of historical data is presented in Figure 4.1 and indicate~ 

thousands of MSS scenes (imagery plus tape) delivered as a function of time, Also 

indica,Elc ~re the Dr::partment of Commerce estimates of MSS scenes that will be 

deliverer.! i,n FY 1933 and 1984 [2C J. It shol,ld be nott!d that there have been 

significant ':~~nges in pricing policy over the period of time shown, culminating 

with a large price increase (approximately two to three times) in October 

1982 [301. Also, TM scenes have recently become available and will cause a 

gradual s',\itch by some usars from MSS (80 meter) to TM 00 meter) information 

products. 

The following paragraphs $ummarize the market forecasts that have been 

usC!d in the financial analyses which are pref.ented in Section 6 of this report. 

Because we have tried within the scope of the current effort to ?lay tr,e roie of an 

entrepreneur formulating a busin~ss plan. the market forecasts are felt to be 

conscrvative-"blue sky" Qi'plicatior.s h:;l.ve no-: been inc1l1dt!d. Thus, there is H\.:ely 

to be considerable upside potential with bllt limited downside riSK. Also, no 

consideration has been given to major changes in markets that m~y result from 

technology changes (for p.xamplet the impact of low cost processir,g on demand has 

not been considered) or from market development. 

The market forecasts are based upon a market segmentatior. ~s indicated in 

Figure l,L.2. The market forecasts are segmented by user (federa!, indu!»trial, 

state/local government/academia and foreign), product type (tape and imagery) and 

L---. .fI' " ~ .~ --.. ...... -----------______ -........1 .... "- ,,_._ ._ ..... ___ _ 
.. 

" 

, 

> I 

" ( 

I 

, '! 

c: 

••• 

• 

Q 101) 

.... 

:.: )0 , .. : . ... 

.... 1)0 C5 

V' 70 .... 

z: 

.... 60 u 

VI SO VI 

'/1 =c ~O 

'-0 30 VI 

Q 

:i 2G Jl 

~ Ie .-

1978 

23 

BY FOREIGN GROUND ~ ___ __ -----

BY EROS DATA CENTER TO 

NONFEDERAL USERS -... ~-- ----- .... ---

TO FE:lERAL uSERS ~ _______ ---

1979 1980 1981 1982 1983 

F I SCf,L YEARS 

ESTIMATED - . -I PROJECTED 

DISTRIBUTIONS '~ DISTRIBUTIONS 

FIGLRE 4.1 GLOBAL DISTRIBUTION OF MSS DATA ESTIMATED AND PROJECTED 

FISCAL YEARS 1978 THROUGH 1984 

(SOURCE: TRANSFER OF THE CIVIL OPERATIONAL EARTH OBSERVATION SATELLITE 

TO THE PRIVATE SECTOR (DRAFT), U.S. DEPARTMENT OF COMMERCE, JANUARY 1983) 

r I L 

N 0 A 

F D S C C 

E U T A A 

D S A L D E E T T G E I R R E 0 ,., G A I V [ N L A I.C 

L 

FIGURE 4.2 ~ARKET SEGMENTATION MODEL 
\ 

!:., 

; . 

. I 

, 

, 

~ 

24 

resolution (30 and 80 meters). Thus forecasts have been made for 30 and 80 meter 

resolution teape and 30 and 80 meter fUm products to four market segments. It 

should again be noted tha.t the information products have many attributes including 

medium (fUm or tape), resolution, number and location of spectral bands, timeliness of delivery, frequency of observation, proprietariness and dimensions of scene 

(partial scenes). It should be noted that many of these attributes have no, been 

~xp!id~ly considered ira this arlalysis primarily because of lack of data upon which 

to base forecasts. It should however be pointed out that pricing by product 

attribute (other than resolution and medium that have been explicitly considered 

herein) may prove to have grea.t impact upon projected revenues. TIlis is discussed 

in follow ing paragraphs. 

Figures 4.3 and 11.4 illustrate the revenue forecast and are based upon a 

review of previous studies as well as discussions with users, agencies and suppliers. 

Considerable judgment has been used in arriving at these figures, the rationale for 

which foHows. Figure 4.3 presents the revenue forecast in constant 1983 dollars 

and Figurt! 4.1; presents the forecast in curr\!nt dollars based upon a continuing 

6 percent ~nflatior, rate. Since commercial ventures are being evaluated, current 

dollars are used in the financial analyses. The revenue forecast is based upon the 

specific timing of events as illustrated in Figure 3.1 (most important is the 

assumed TM failure in FY 1987 and re-estabHshment of a 30 meter capabiHty io' FY 

1991), pricing policy and price elasticity estimates, market share estimates 

(assuming competition from SPOT and perhaps other sources), user transitions from 

eo to 30 meter information products and nominal demand estimates. 

The rationale !Jehir.d the forecast is as foHows: 

lli~r!L9ovEt~L~arket 

The fede!':\! sc':tor is ::haracterized by relatively stab I\! budgets which arc 

m:el}' to grow slightly (in real t'!rms) with time. This growth will be prima,rily the 

result of price increases of the information products as price adjustments are made 

towards the maximization of revenue of the /;usiness entity. Information products 

will be acquired principaUy for renewable resource applications and there is some 

but little interest or need for stereo data (this data becomes available in FY 1987). 

The basic attitude of the federal market is to "buy American." This implies a very 

high market share for a U.S. commercial corporation independent of competition 

from foreign entities. Because ot the large quantity of data required en a 

continuing baSIS for monitoring the renewable resources, it is important to acquire 

~U1J , 

...., 

r.-=-." i 

~ .. --·->'"""·=·--s"::=·;"''-'''··~;·· .... ''''';· ... ''''~=--~ \ ~ .• " --~;

It!!. __________________ ...... _"--•. _ .... ____ -

-- • t-#J Of 
,Ci 

(j 

f' 

I, 

J 

SALES & FEES 

($ MILLIONS) , 

, 

, 

, 

, 

, 

, 

, 

, 

, 

20 ~' 

, 

" II;' ,""," 

, ",,, 

, , '" 

r~'" .. ,-

GROutlD 

3TATlON 

FEES 

~-- .... , l FEDERAL 

lO-~ ",-- - rOREIGt~...... ...... ) ) ----....... 

1-....... _. )ru:t:Li'-~'....... --' --- 'i-- T -.... ................. 

~==:::=---f~:::':::- =-'l ~OU+A~ - ......... 

-~ .. -----.- - - - - I 

FEDERAL )80M 

FIGURE 4.3 

'84 

C0MMERC r AL 

- GPERATlONS 

'86 '88 '90 

YEAR 

LCL = LCCAL 

ACAD = ACADEMIA 

'92 

REVENUE FORECAST BY MARKET SEGMENT AND PRODUCT CLASS 

(CONSTANT 1983 DOLLARS) 
~ALES ~ FEES 

(S MILI.ICtlS) 

60 

so 

40 

t 

iO ..I.. 

20 

, , 

" 

, , , 

, 

, , , 

26 

/ 

/ 

30~ 

eo:~ 

I I COl-'dERC I AL 1 ) I r- O,PEf<ATICNS 

~~t--I--~,--_,--~~--~t ~~~ __ +--+I __ 

, 84 "86 I 88 "90 "92 "94 

YEAR 

FIGURE 4.4 REVENUE FORECAST BY MARKET SEG~[NT AND PRODUCT CLASS 

(CURRENT DOLLARS - 6% ANNUAL INFLATION RATE) 

tap ~--==--""'='_"-'" . r• ~ ... 

Ii~;':'-' __ "__ --,_;;;; _______________ "","",,," _I!.. __ .••... ___ _ 
( ; 

( 

( 

f. 

c 

. '~ 

27 

low pric.e information products. This is the primary reason for assuming continued 

reliance upon 30 meter information. 

It i~ 3M'\med that the demand for 80 meter information products wlU remain 

r~latively constant with time. The demand is basicaHy related to renewable 

resources. Of particular importance are information products concerning foreign 

agricultural products. Although 30 meter resolution may be desirable, it is 

anticipated that the combination of large volume required and high price will, to a 

large extent preclude its use for renewable resource applications. It is assumed 

that the demand for these products wUJ continue well into the future and wiH be 

independent of the availability of higher reso:,ution inf<)rrnatlon products. It is also 

assumed that USDA's domestic agricultural reporting services will not rely upon 

remotely-sensed data. If this changes, then the demand (together with bud~ets) 

will increase, possibly by several thousand scenes per year. This would nece!ssitate 

a budget growth and is probably the only major growth area if, the federal sector. 

With respect to 30 meter data there is little or no historical data upon which 

to base forecasts because )0 meter data has not been available untl! recently. It is 

assumed that 30 meter information products will be used primarily for experimentation and for nonrenewable resource applications. For these applications, 

because of the relatively small volume of data required, higher prices can be 

afforded and 30 meter information is more attractive than 80 meter Information. 

When the LANDSAT D' thema..:ic mapper fails, it is assumed that data purchases 

will continue (but at a decreasing rate) from archived data. When an operational 

thematic mapper or its 30 meter equivalent is reintroduced, 30 meter information 

product sales will pick up and prices wil! be increased as adjustments are made 

towards the maximization of revenue. Again. the basic attitude of the federal 

market is to "buy American." Because of the nonrenewable resource appJi.caticns, 

there will be some increase in demand due to the availability of stereo data. 

Industrial Market 

It is assumed that during the dl.~cade of intel"est (the ten year span of the 

financial analysis) the resource exploration industry will continue to be the primary 

source of demand for information products. The mar ket to date has been 

dominated by the resource eX[1laration companies which currently are likely to 

continue to do their own data analysis. This implies that thp. '.:ost of the data is but 

a smail fraction of the total cost. The value of data products significantly exceeds 

the price paid for th~ products. Ther~fore, prices can be increased significantly 

without reducing the revenue. 

~ . . 

-----------------......... .. -,... ,-'"--
,! 

Z8 

It is anticipated that this market wUI be s:gnUicQnt!y irnpacted by the 

avaUabiUty of )0 meter data. Therefore the demand for 80 meter products wiU 

faU off when )0 met.er data becomes avaUable from the thematic mapper. When 

stereo (SO meter) data is available, demand wlU increase unti! 30 meter stereo data 

is avaUable. Since the market can stand significantly higher prices, attribute 

pricing m;£y be ust'!d (r.ondisc:rim'natory, to ful"tl",cr increase revenue by :hal'ging 

nigher jlrlcc~. If pricl! 1s l'etQted t.o qur.ntlty ptJrCh;lS~d with signif1t:ant prke 

breaks for large quantitil!s, prices may be kept low to federal ll,ert; and high to 

industrial users. High prices would ttlen abo be charged -:0 foreign and ~ta\e/local 

users). Another alternative would be to charge by spectral bands-this is 1ll<ely to 

separate by renewable and nonrenewable resources. The effect of this type of 

pricing, though riot used in the financial analysis, is discussed in foUowing 

paragraphs. 

Industrial demand wiU continue to increase at a constant annual level. 

'\iark"t share will however decrease over time because of product availability from 

othel' :i1J~rce,\, i.e.r .:ompeti~lon from SPOT and other systems. Market share for 80 

l'l1et~r j)l·OCJI.l.-: .. s wUl staoiJjz~ at about 7n percent because of a basic ttdeslre to buy 

American. 1I 

Market share for 30 meter products will be more dIrectly affected by· SPOT 

and the unavaUi.ibiJity of new 30 meter data because of the assumed demise of 

LANDSA r 0'. Thus, market share will erode to a low of 30 percent in 1990 before 

again increasing and stabilizing at about 60 percent. 

,gate/Local Government/Academia 

This industry segment is characterized by reJatively small budgets for the 

acqJisition of informati"n products. It is anticipated thilt budgets will increase 

slowly with time as the value 'Jf the information products becomes an accepted 

fact. Information prouucts will be used pr'imarily for j",,mrenewable resource 

applications ilnd for research. Because of the large area covered by a scene and 

slow changes being observed, a relatively small dernand is forecast. It is 

anticipated that 30 meter products will be desired but that due to the relatively 

high price and fixed budgets, a relatively large quantity 01 80 meter products will 

be acquired. It is anticipated that the bulk of the information products will be 

purchased from a U.S. source. 

L- .. __ ..... _______________ .-1, .... - _ .. __ .-••.. _.--
l' 

I 

1 

J 

I I ( 

c 

c 

o 

29 

Foreign Market 

The foreign market consists of franchising foreign ground stations and 

receiving annual user fees and the sale of information products through these 

ground stations. It is assumed that the number of franchised ground stations wUI 

remain relatively constant over the next decade. It is assumed that maintaining and 

demonstratIng continuity of data wiU be important in maintaining an active 

franchise operation. 

It is assumed that the foreign ground stations wUI seU information products 

that they cannot receive by dJrect readout. These information products wiH be 

obtained from the U.S. or'ganization. It is assumed that 2' rercent of the revenue 

obtained from these sales by the foreign ground stations will be kept by the ground 

stations and 7' percent of the revenue wiU be paid to the U.S. organization for ~he 

informatiCln products. 

It is assumed that the foreign demand for 80 meter information products wiU 

continue to grow for several years and wiU then stabilize. If foreign countries 

decide to acquire worldwide renewable: resource data (such as lISDA', Forelgn 

Agriculture Service does) this demand could increase significantly. It is assumed 

that competitive systems wiU make significant inroad~ with respect to market 

share. 

Similar forecasts apply for 30 meter information products. Very significant 

growth is forecast in this area. However, market 5hare wiH be significantly eroded 

by competition and the lack of new 30 meter data resulting from the gap caused by 

failure of LANDSA T D' and the launching of LANDSAT F. 

In summary, it is anticipatl!d that revenue froln SO meter information 

products will remain relatively constant ov~r' the next decade, This is the result of 

a combination of many factors including a slow growth In basic demand for 

renewable resource applications, the availability of 80 meter stereo data, competition from other systems and the availability of 30 meter information products. It 

should be noted th~t the use of sateHite data by the USDA domestic reporting 

serv ices could change th is forecast substantially. Also, the use of war Idw ide crop 

information on a continuous basis by other nations could also substantially increase 

the forecast. It is anticipated that revenue from 30 meter information products 

wUl increase substantially over the next decade. The growth will be significa.,Uy 

affected by an anticipated gap in the avallabHlty of new 30 meter information 

products (this is the primary reason for the dip (1988-1990) in 30 meter revenue) 
: . 

, 

,: 

r 

30 

and competition from other sateUhe systems. It has been assumed that there will 

be only one U.S. orgallization providing Information products. More will be ~aid 

about this in Section 8. 

The r~venue forecan 1s based upon the detaUed data presented in Figures 4.' 

and 4.6 (aU in constant 1983 doUars) for 80 meter and 30 meter information 

products, rupectivt.!Jy, and the price ela,t:city estimates presentea in Figures 4.7 

and 4.8. (:idce. elasticity was established by esumoting the quantity which Ivould oe 

sold at three different price levels. Two straight lines are passed through the "Chr~e 

points a:l illustrated In Figure 4.7 thus establishing the pric~-quantity relationship. 

The specific estimates utiHzed 41'e presented in Figure 4.7 tand illustrated ~raphiclllly in Figure 4.8. 

Referring to Figure 4.8, the dotted curves Indicate unit elastidties or 

constant annual budgets (l.e., price x quantity = annual budget). When the soUd 

curves are above the dotted curves 11: is impUed that budgets will be increased to 

accommodate price Increases. It is thus evident that the federal users have been 

4ssumc:d t·:') be budget constrained within a )'ear (it I:; assumed that budget3 ,=an 

VCJ~y II".,m year to year as inclr.ated by the nominal prices and quantities in 

Figures 4 •. ~ and 4.6. However, as prices are varied from their nominal values, 

quantities are adjusted according to the assumed elasticitie!l). As prices incre~'ie, 

quantities demanded decrease by approximately the same amount. This is ill 

contrast to the industrial sector where it is assumed thM significant price 

increases will have but little effect on demand. The state/local government/academia segment is aJso assumed to be budget constrained but to il slightJy 

les~er degree (because of dlver!ilty) than the feder3J sector. The foreign sector, 

assumed to be a composit~ of tile three oth~r sectors, is assumed to have some 

::udgct fJey,mi!iT.Y but less th~\n that of tne industrial sector. 

,\ few cornments must be made with respect to optirnum pricins, that is, 

pricing to maximize revt:nue. The optimum price: iJ established by finding the point 

of tangency of the c",v·tallt budget (by varying the budget level) curve with the 

price ela:;ticity cur" ,"esented in Figure 4·.3. Assuming that nondiscriminatory 

attribute pricing C ... ,I De achieved so that the optimum price can be charged in each 

market segment, then the price and revenue as indicated in Table 4.1 can be 

achieved. Table 4.1 indicates optimal price to the federaJ sector is 2.' times the 

nominal price used in the analysis with a resulting revenue of 1.25 times that 

assumed. The net effect of such optimum pricing (across aU market segments) 

J
• 

• 

...... ".,. ....... , ................ • ••• ".,op--••• -

";.'. pe ,e. ··\If 

N\Jtt, "I." .UAAr 1" •• 

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................. _-.............................. -.. . ~r" .•• ler 

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••••• 11 .......................................... , ........................... , ••••••••••••••• , ••••••••••••• 111. 'Of .KYI .. 

'AO, 1~.Q!:"(' """0 •• 02,." '0.,., •. .,,.211. '.UI"I ... ;:.~:, .o,~O". 1117 .. 21. '.'OH •. 7.'0'''. 'Ill! :(· •• ·111 l"A"ft 102230', 1I!l"". ItI:OI(l ItS:':1. :011"3. ""0711 "2~'m' ":0(1" It':(I(\7' r",.l. .,:'"." ... ~~,=~ ",:".'11. 8."'~". 10:."", ICJ'"'' PI 106'40:. 1""~"'~2 102 •• '." 'JUN' •• , '.1(1' ••. ............................................ , ••••• , ••••• tl ................................................. . 

FIGURE 4,5 MARKET FORECAST FOR 80 ~ETER DATA PRODUCTS 

(CONSTANT 1983 DOLLARS) 

.. 

1-....'- • ________________ ----;;:;~.~=~--.*- .. ____ .. ~--.-.&, .. _ ........ ......... -.. ' .... _.u, --.-r" __ .. ~---.~. .... __ _, .. .. ... r, ... .!""" ~ . 

I 

1.1 

Ii 
" 

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FIGURE 4.6 MARKET FORECAST FOR 30 METER DATA PRODUCTS 

(CONSTANT 1983 DOLLARS) 

1---.... 

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.. , ...................................................... , ...................... . F'h'ICE FEDEAAL INDUSTAIAL STiHE/LCL GVT/ACAD FOREIGN 

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TABLE 4.1 OPTIMUM PRICE & RESULTING REVENUE (RELATI VE) 

Ir~AGERY TAPE r~ARKEi SECTOR 

PRICE REVENUE PRICE REVENUE 

FEDERAL 2.5x 1.25x 2.5x 1 .25x 

INDUSTRIAL 3.7x· 2.5x'" 4.2x 2.6x 

STATE/LOCAL/ACAD. 2.2x 1. 4x 2.2x 1. 4x 

FOREIGN 2.5x 1. 9x 3.0x Lax 

* A PRICE INCREASE RELATIVE TO THE NOMINAL PRICE OF 3.7 TIMES RESULTS IN A REVENUE INCREASE OF 2.5 TIMES. 

would be to approximately double the estimated total revenue. While this looks 

very tempting there are problems: competition will generally drive these prices 

down as will lack of knowledge of the true price-elasticity curves. Therefore, the 

conservative pricing policy indicated in Figures 4.5 and 4.6, and modified by 

inflationary increases, was assumed with the gradual incr~ase in prices assumed to 

seek out the optimum whlle countering competition and minimizing budgetary 

process problems particularly among federal, state and local government users. 

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( 

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36 

,. FINANCIAL/ORGANIZATIONAL SCENARIOS (GENERAL) 

As state-i previously, the ECON efforts were concerned with the analysis and 

comparison of a limited number of financial and organizational approaches for 

either transfer of the ownership and operation of the civil operational land remote 

sensing program to the private sector or government retention. The following 

basic approaches for commercialization or retention were considered: 

1. Continued ownership and operation by the federal government (planned 

phase-out) 

2. 

3. 

4. 

Continued ownership and opel· at ion by the federal government (establishment of the necessary budgetary line items) 

Wholly privately-owned and operated by an entity competitively selected 

Phased private ownership (government ownership and operation with 

private sector rnarl<eting) 

.s. Legislatively-chartered, privately-owned corporation. 

Each of these scenarios is described in the following paragraphs. Each of the 

scenarios is based upon the schedule of events as indicated in Figure 3.1 and the 

market and revenue forecasts as described in Section 4. 

One of the most controversial issues surrounding commercialization is that of 

subsidies. Subsidies can take a variety of forms: direct cash subsidy payments; 

federal loans or loan guarantees; guaranteed federal purchases of information 

products at a unit price significantly higher than charged to other users; provision 

of free services such as sateUite launches; special tax incentives; or other. The 

Admin.istration has indicated its opposition to subsidization for commercial civil 

remote sensing on several grounds including [8]: 

• Any form ·of subsidization (whether increasing cash outflow or reducing 

revenues) is opposed on the basis of budgetary impact on the efforts to 

balance the budget 

• Subsidization in this area would set undesirable precedents in other 

areas 

!iii If a commercialization initiative cannot stand the test of the marketplace, it should not be established at all. 

Th.is analysis of the various commercialization alternatives was jointly 

concerned with government cash flows as well as with the financial viability of the 

commercial endeavors (the feasibility of obtaining funding as well as continuing 

profitable operations). Because of the anticipated limited market for land remote 
f 

37 

sensing information products, combined with the possible competition from remote 

sensing systems owned by or subsidized lJy foreign governments and the capital 

intensive nature of the business, it is shown in Section 6 that viable commerciallz11-

tion endeavors !!:! Q21 Hkely to be established without significant federal participation, either in the form of ,ubsidies or major ownership/operations roles. 

Again it is not possible to consider all !ubsidiozatian forms or all le'lels oi 

governmer.t \')wnenh~p/(')peration. The 5pecific subsidization forms considered 

include direct cash subsidy payments, equipment transfer values and recoupment 

polide~, and government equity participati'ln. The method of determining the need 

for subsidies and the specific form ot the subsidies are described in Section 6. 

'three different levels of government participation were considered, namely: a) no 

participation except for possibly R&D and other support services, b) ownership/operation of the ground and space segments, excluding the marketing and sales 

functions, and c) ownership/operation of the ground and space segments including 

the marketing and sales functions. 

~.l f£!!tin'Jed O\lfncrship etnd Operation by the Federal Government (Planned 

.aJ.ase-Out) 

Shortly after President Reagan entered office it was announced that the 

Administration would terminate the commitment to land remote sensing satellite 

data continuity through the 1980s on the basis that 

It is the Administration's judgment that the present NASA investment 

in l.ANDSA T is sufficient to permit evaluation of operational uses of 

l.ANDSA T data, and if these uses are cost-effective to attract a 

private sector owner/operator. 

NASA's program to develop, launch and test the two additional satell1tes already m"mufactured (l.ANDSA T D and D'> will continue as 

previously planned. Expansion and extension of the U.S. civil land 

remote sensing program beyond that already funded by NASA is 

inconSistent with the need for across the board fiscal restraints •••• 

The two additional satellites, frequently referred to as l.ANDSAT Oil AND Oil', 

then were deleted from the budget [8]. 

The implication of the above is that the federal government would continue 

to fund the ground and space segments and the related sales activities associated 

with remote sensing until 'the demise of l.ANDSAT 0' or shortly thereafter (l.e., 

--~-I-·~ :!~ 

l a .. ------..----_________ ~+"'_L._._ ..... __ ~_ 
( 

( 

38 

sales wUl most likely continue for the short-term). The annual cost associated with . * this planned phase-out scenario can be stated in general as 

Annual Fed. Cov't. Cost(J) = Operating Cost(J) + Storage Cost of D'm 

+ Launch Cost of D'm + R&D Cost(J) 

+ Cov't. Purchases from Other Sources{I) - Ciov't. Revenue from Nongov't. Sources(I) 

+ Interest on Debt(l) M Tax Revenue(I). 

This is restated in Table '.1 together with the government cost computations 

resulting from the other considered commercialization and retention scenarios. 

The tax revenue results from taxation of private sector profits resulting from the 

government expenditures in the private sector. The interest on debt is the interest 

that must be paid by the federal government on borrowings made to cover the 

outlays made for the system. It can be shown that to a first order approximation, 

considering the magnitude of all of the other cost elements, the interest on debt 

and the generated tax revenue, which tend to offset one another, may be 

neglected. ** 

As per the schedule of events indicated in Figure 3.1, it is anticipated that 

LANDSA T 0' will fail in the late 19805 (FY87 or FY8S). Therefore, government 

operating costs asso~iated with the operations of the land remote sensing system 

would be reduced to zero during this time period. However, government costs wUl 

.!l2! reduce to zero after the demise of LANDSAT 0'. The reason for this is that 

government agencies will most likely continue to purchase information products 

from other sources. It can be argued that these purchases need not be made, and 

that federal budgets associated with land remote sensing can be eliminated. The 

counter to this argument is that there are benefits associated with the use of the 

remotely sensed data. These may be in the form of direct cost savings or other 

indirect benefits. These benefits will be foregone if the remotely sensed data is 

not used. If it is assumed that the benefits wiU exceed the cost of the information 

* . I represents tIme, years. 

** Tax Revenue = 0 • .5 x Cov't. Cost x Return on Sales(96)/ I 00 

Interest on Debt = Cov't. Cost x Interest Rate(96)/ 1 00 

Interest on Debt - Tax Revenue = [Interest Rate(96) - 0 • .5 x Return on Sales(96)] 

x Cov't. Cost/ 1 00 

= [8% - 0 • .5 x 10%] x Cov't. Cost/ 1 00 

Therefore, neglecting interest on debt and generated tax revenues may 

introduce an error of 3 to 4 percent. 

,... 
39 

TABLE:,l DETERMINATION OF r.QVERNMENT COSTS • 

SCEN,Il.R I 0 •• COST COMPUTATION 

~-----------------------+------------------------------------.---1 1. GOVERNMf.NT CI·MRStllP A,':,) OPER~ nON (P~:,!,;flED PHII$E 

OUT) 

,. GO\/~R',IIENr eWrlt~SfltP ~.tIO 

O'JE?ATfON lCG'-;r:llllED JII". 

ERSHIP A'I~ ()FEf(.':'T10~) 

OPERATI~G COST(!) + STORAGE COST or D'(l) 

+ lAUNCH COST 0r D' (I) • R&u COST(II 

• GOVE~NMfNT PURCHA~~ FRO~ OTrlFR SOU~CES(I) 

• GO ~ERNI1EN T REVPIUE FROr~ liOt/GO\'£ RNr~E:I j SOl/ReF,S ( I ~ 

+ INTERES! ON ~EBT(I) " TAX REVENUE(I) 

S~Ae[ SE5~ENT eCST!I; + GROUND SEGIENT ~OST(I) 

~, INTeP.ES: ~rr OCe1(1) • T/IX FF.oIE'WE(l) 

• INDUSTRIAL SALES: I I • 3TA'E/~0C~l ~O~ERNM~Nr/ACtD. 

SALES(I) . FG~EIG~ SALE~(:) • USER FEE~(II 

.. R&D COS r( I) 

~-----------------------+----------.-------------.-----------.... ,---. 3, P~:VATE )\ofNERZHIP ;.rID 

OPERATION GO'/~~N;.1ENT PAY~EtIT Foe itli'ORllATI'Jt! OROl'UC.T!.ili) ~ 0PERATIO~S COSTS( I: . LfASC ~AfMENTSI I) 

· AZSET ~ECOUPMENT PAYMENTS(I) - TDRSS C~ST(I/ . PROFIT SHARI~G OR ROYALTY ON 

SAlES(I) ~ SUBSIDY PAYMENTS(I) + R~D COST(I: + INTEREST ON DEBTII \ L . GENER4TED TAX REVENUE(I) 1-:- PHASECl PRIV;;~'-I)-W-N-ER-S-H-IP--""'-G-·o-VF.;';rn PAYMENT cOR INFORMATION PRODUCTS( I) 

(?~I'IATE St::Cl'~R ~'AR~E7!NI3) + OPE~f.710NS COSTS( I) · PROFIT SHA~ING OR MQYALTY Ot! SAlES(l) · GUARANTEED PAYMENTS(I) • R&~ COST(I) 

• INTEREST ON JEST(I) • GENERATED TAX REVENUE{I) 

~--------.-'-----------~"-~L~-----------""'---_______ . ____________ ~ 

_. ,;;~H5ur:"/rLY CH,IRTlK£O. ';OVERltMEIiT PA'fMENT FOR :rjFO~Nf.TION PROaUCTSl1 j 

rr'l vt. iEI.Y ,TvlflEr) r::lR'>OR'.';'ION + C"EP,lT:OflS COSTS III . I.EASE ?AY~~~NTS(!) 

• ASSET RECOUPMENT PAYMENTSII) . TDRSS 

COST{I) . PR0FIT SHARING OR ROYALTY ON SALE~(I) • SUBSIDY PAYMENTS: I) .. R&D 

COST(I) • GEflEkATED TAX REVfNUE(I) L + INTERf:')T 0;' DEBT!!) .. l'iJlJ!T'I PtlRCHASE( 1) 

L 

. :1IVIIJUHlS( I) 

.-',ll S-CENIIRIOS UT!LIZE --1.-- _., nlE SA~E REVENUE FORECAST . •• t REPRFSENTS T1MF. PERIODS (I E . YEARS). 

- ------------------------- pr'Jduct5 (this a.p?F.:ars to :'e d. valid assumption since, if tnis were 1\01: ·the case, uny 

form of commerci~Hzation would nO'L be seriotJsly con~idered) then rhe cost to the 

g,)verr.ment a.nd/or the gt'nerat publk (not neces~arily in the {om, of budge'£ary 

iterns} aiter t.hf! dernls~ of lA~nSAT D' Nil! eGual or exceed the cost o! the 

forecasted fed~ral governmen', purchases of information products. This is illlJsM 

trated conceptually in FlgLIre 5.1 and Guantitative results are presented in 

Section 6.1. 

5.2 Continued OwrL~ship and Opera.tion.'?y te_Fe.ct.~al GovernmenUE~tablish",:" 

ment of th~_Ne_~~!L~.!:Jdget line l~. 

It is a.ssumed fOl' this scenark') that a government organization is established 

for providing land remote sensing operations on a conth"Jing basis. It is 

i

.... :.:.:.:.:.:.:.:.:.:~--:::-.~-.--'~--'--::::-. -·--____ .oIo-....L.. •. ~~b,~:~_ "-~~T_·='~~'==<--""· =' ="= ...-=~~=:""""...--. t-.-" .... -. ..,..., --, -~~ 
( 

• I , . 

'. 

u. 

LAflO 

OBSERVATlOfl 

REVEUUE, $ 

NET U.S. 

GOVT. COST, S 

40 

riME, VPS 

(A) REVENUE FORECAST 

I 

I 

OR.to.iINPll P;'\\1:Z ! 3 

OF POOR QUAliTY 

TOTAL REVENUE 

} STATE/LOCAL/ACADEMIC 

t INDUSTRY 

I FOREIGN 

~ LANDSAT D· NO 

1 

LONGER OPERATIONAL ",.",.-~ 

\~ ./ 

I', GOVT. DATA , PURCHASES 

TIME. VRS 

(B) FEDERAL GOVERNMENT COST 

FIGURE 5.1 SCENARIO 1: GOVERNMENT OWNERSHIP & OPERATION (PLANNeD 

PHASE-OUT) 

assumed that the operations are based upon the event schedule presented in 

Figure 3.1. It is assumed tl.at the government organization is similar to that which 

would be established by the private sector as per the business venture description 

presented in Section 3. This organization will have a market orientation simUar to 

that of the private sector. The organization will have complete responsibiUty for 

the space segment (including maintaining continuity of service), the ground 

processing segment and marketing and sales (including archiving). 

It is likely that differences in organizational efficiency and management 

objectives will exist between government and private sector "'perations. These 

differences, if they exist, are difficult to quantify. No attempt was made as pa.rt 

of this study to quantify thp.se differences. An important area where differences 

are likely to exist is in marketing and sa.1es. Private sector market orientations 

differ significantly from that of the government. F~r example, the private sector 

-. ~.--" ,-----,-=-- It --

__________________ ...Io..--L,., •••• ,_·_ . 

~, .... J 
41 

is used to providing incentives (commis~lons, bonuses, stock options, etc.) to 

encourage higher productivity from a marketing organization-the gove-rnment 15 

not. To achieve comparable performance, it is llkeJy that a government organization would have to consider simUar incentives to those avaUabJe in the pr ivate 

sector. 

The cost 0;. continuing &overnment I)wne-nhip and operation of a land r~mote 

sensing system may be expressed as follows: 

AnnuAl Fed. Cov't. Cost(I):r Space Segment Cost(I) + Ground Segmel,t 

Cost(J) + R&D C05tCI) - Industrial 

Sales(J) - State-/Local Gov't./ 1\cademlr: 

Sales(J) - Foreign Sc\'e~«) - User Fees(I) 

+ Interest I)n Debt{l) - Tax Revenue(I). 

For the reasons pr~vious'y discussed, the net effect of interest on debt and tax 

revenu~ is assumed smaH and not quantified. AU of the other costs and r(l!venue 

items are quantified and are estabUshed in Section 6.1. 

5.3 Wholly Private Ownership and Operation by an EntitY Competitively Selected 

The private ownershi~ and operation scenario is based upon providing 

:t:.ntinuous land remote sensmg observation and resulting information products on a 

continu~ng basis. Commercialization is assumc:d to commence at the start of FY g, 

with a11 space, ground processing and marketing and sales being accompJlshed by or 

for the private sector organization. It is assumed that initiaHy existing grr=ond 

processing facUities at Goddard Space Flight Center, and archiving and processing 

facilities at EDC will continue to be utHized. These operations will be integrated 

into a common facilities at White Sands during FY89. 

It is assumed that the private sector venture will utilize existing lANOSA T 

satellites and will, as indicated in Fil~ure 3.1, phase mto th~ acquisition and 

operation of other 5ateUit~5. It is genendly ilsl:lum~d ir. the financial analY5\'!s that 

the ground processing facilities at CSFC "nd EDC (until FY89) ar~ 1eilSed by the 

private sector and that the LANDSAT 0 and 0' satellites are acquired on a title 

transfer basis. The effect of lease payments and recoupment payments is 

investigated by considering the conditions of: a) fuB repayment (to the government) based upon estimated book value at the time of title transfer or lease rate 

establishment, and b) no recoupment by the government (i.e., a furm of subsidy) for 

government assets utilized 1n the pnvate sector operations. 

The effect of and the need for annual cash subsidies is also considered. 

Annual subsidies are established (for both the full re~oupment and no recoupment 
( 

o 

, 

, . , , 

L 

• 

42 

cases discussed above) by determining the revenue required in order to achieve 

annual returns on capital that would be necessary to attract capit~l from the 

capital market. The dl1ference between forecasted revenue and required revenue' 

is then the required annual subsidy. 

The general approach for analyzing the private ownership and operation 

scenario is illustrated in Figure '.2. The financial analysis develops pro forma 

income statements, cash !low projections and balance sheets. The inputs to the 

analysis (described in detail in Section 6) are the demand or revenue forecast; the 

. schedule of events; fixed and variable costs associated with processing, archiving 

and sales; capital items including value, timing and depreciation lives; tax 

structure data and other re\ated information. Also speCified are desired return on 

assets, desired discounted return on investment, debt equity structure, and the 

lease/transfer options. The result of the financial analysis is the deterrn: ,alion of 

financial performance measures such as annual after-tax profit, annual cash flow, 

capital requirements, return on assets, payback period and subsidy requirements. 

The parameter, are thus those of Q business entity which is viable from the point of 

view of the financial community-i.e., it is likely that the necessary funding would 

be available. 

DES'RED RETUKN • Ot! CAPITAL 

DESIRED ROI • 

DEB1 EQUI TV .. STRUCTURE 

L.EASE/TRANSfER .. OPTION 

INCOME CASH FLo\~ 

STATEMENT PROJECTION 

BALANCE 

SHc.ET 

• ANNUAL AFTER TAX PROfiT 

• MmUAL CASH FLOW 

• CAPITAL REOUIREMENTS 

• RETURN ON CAPITAL 

• RETURN ON ASSETS 

• PAYBACK PERIOD 

e SUBSIDY REQUIREMENT 

• PRESENT VALUE 

.. - DEMAND 

FORECfST 

• SCHEDULE OF EvE~TS 

• FIXED & VARIABLE 

COSTS 

TAX STRUCT~P.E 

FIGURE 5.2 ANALYSIS OF PRIVATE OWNERSHIP AND OPERATION SCENARIO 

:....:.!"'":.:-----==:':::~:<"<':.... _________ < .... < <~.=-'-:'.-=.-::-=--...... '"t',... . -<.:l'Jti....,. .. r1I' '" - ~ ... _ 1/1',. .-... 

~ 

'

'

~ , 

I 

,
, , 

43 

As in the previous cases, government costs are aiso incurred. The annual 

government cost associated with the land remote sensing system may be expressed 

as foHows: 

Annual Fed. Govlt. Cost(J) :I Govlt. Payment for Information Produt.:ts(l) 

+ Operadons Costs(l} • Lease ?oyments(I) 

- Asset Recouprnent Poyments(U 

• TORSS C~st(I) + R&D COStO) 

• Profit Sharing or Royp..ltv on Sales(l) 

+ SlIDsidy Paymenu(l) ... Interest 0'1 

Debt(l) - Cenerated Tax Revenue(J). 

Gen\!rated tax revenue consists, in this case, of two components-the first resulting 

from government expenditures In the private sector and the second resulting from 

the profitabUity of the commerciaJ venture established for transfer of the remote 

senSing system. For the reasons previously discussed, the net effect of interest on 

debt and tax revenue (the first component) is assumed small and not quantified. 

AU of the other cC)sts and revenue hems are presented In Section 6.2. '.4 Phased Private Ownershl (Government Ownership and Operation With Private Sector Marketing 

Tl",c "hased private ownership scenario is based upon government ownership 

and op'!ru'don of the space segment and the ground processing system, with the 

private sec:tor venture concerned specificaUy with the marketing and sales of 

information products. This is basically the same as the government C)wnership and 

operation (continued ownership and operation) scenario as described In Section '.2, 

with the exception that the marketing and saJes operations are performed by the 

private sector. The interface is thus the provision of requested information 

products from the government to the marketing and saies organization. The 

marketin~ and sales organization wiU be granted an exc1\!siv~ franchise to market 

and sell The information productS to U.~. government agenci~3 ~fld nongovernment 

use"s. It would also markeot arid :\eU to foreign users and would rnamtain the 

assoc.iation with the foreign ground stations coUecting th~ ground station fees. 

For the provision of information products, the private venture makes 

payments to the government. It is assumed that these payments take the form of a 

royalty on sales with a minimum guaranteed !n!l.4!! e!l:!!!~ ~!!2!!! the private 

sector !9. !h.! government. The magnitud~ of this guarantee ami the royalty 

percentage- (competitively established) could serve as the basis for a competitively 

s~lected marketing and sales organization. rhe royalty payments would be made 

for information products having specified and agreed-to attributes. Guarantees 

l .. 

.... --------------- ....... _"--- ,-.~,--- -
, i 

1 

:. ( 

('. 

• 

b -

44 

would have to be made by the government that these products would be avaUable 

as agreed. Penahles would be imposed if the agreed-to information products were 

not provided. 

From the private venture's point of view the guarantee level could be 

established such that the present value of net cash !low, including the guarall!ee 

payments, is equal to zero at a desired return on investment. This concept is 

illustrated in Figure '.J. 

Thls scenario has the apparent advantage of letting the private sector do 

what it knows best, i.e., marketing and !iales. It requires the government to 

continue the ownership and operation of the remainder of the remot" sensing 

system, I,:, particula.r, those items neceSSitating • .arge expenditures which the 

private sector may not be wUHng to mal<e in any event without large subsidies. 

The annual government cost associated with the land remote sensing system 

may be expressed as foUows: 

Annual Fed. Cov't. Cost(J) = c.ov't. Payments for Information ProdtJcts(J) 

+ Operations Cosu(J) + R&D Cost(J) 

- Profit Sharing or Royalty on Siiles(l) 

- Guaranteed Payments(I) 

+ Interest on Debt(() - Generated Tax 

Revenue((). 

As discussed in Section '.3, the general tax revenue consists of two components. 

The first resulting from government expenditures in the private sector, and th" 

second resulting from the profltabiUty of the commercial venture. For the reasons 

previously discussed, the net effect of interest on debt and tax revenue (the first 

component) is a:5sumed smaU and not quantified. AU of the other cost and revenue 

items are quantified and are indicated in SectIon 6.3. 

, • .5 Legislatively-Chartered, Privately-Owned Corporation 

From the financial analysis point of view the legislatively-chartered, privat'ely-owned corporation is similar to the private ownership scenario discussed in 

Section .5.3. The major difference is concerned with the equity structure of the 

corporation. It is assumed that the federal government pu(chases equity in the 

corporation. This is in effect a form of subsidy. Altering the debt equity structure 

affects interest rates and the overall cost of capital. TheSE: effects are taken into 

account in the Hnancial analysiS and the results presented in Section 6.4 • 

:=: ::; E .. _._ ... 
, . 

i 

i 

~. 

,r, 

! 

r~ARKETtr4G 

I/ENTURE 

CASH FLO~ 

",.,'~ 

.... ,," , 

NET 

CASH INFLOW .... ~~~ 

GUARANTEED PAYMENT 

GUARANTEED PAYr~ENT SUCH TPM. 

PV OF INVESTMENT • PV OF NET CASH INrLCW 

AT REQUIRED ROI 

FIGURE 5.3 SCENARIO 4: PHASED PRIVATE OWNERSHIP (GOVERNMENT OWNERSHIP & OPERATION/PRIVATE SECTOR MARKETING) 

.'\, in the previou~ cas"s/ government costs are also include1. The annual 

government cost associated with the land remote sensing system may be expressed 

as foUows: 

Annual Fed. Govlt. Cost(l) = Govlt. Payment for Information Products(t) 

+ Operations Costs(J) - lease Paymentsm 

- Asset Ri:coupment Payments(l) 

- TDRSS Cost(l) + R&D Cost(I) 

- Profit Sharing or Royalty on Sales((} 

+ Interest on Debt(I) - Cenerated Tax 

Revenue(J) + Subsiav Paym~i1ts(l) 

+ Equity Pu:-ch3se(1) - Dividends(I). 

All of the cost and revenue Items are quantHlt!d '.ind are Ir.dicated In Section 6.4. 
I ( 

I 

j 

,i 

I 

• 

• 

46 

6. FINANCIAL ISSUES 

As stated previously, we have taken the position that in order to evaluate the 

approaches for commercialuation or retention it is necessary to plan potential 

business ventures and evaluate their financial merit, th~ likelihood of their 

financing and their impact on government cas., ~lows. We have tried to play the 

role of an ent.repreneur, putting together business plans for the purpose of 

obtaining financing. The business plans are based upon a perceived technology 

base, a market forecast, cost and capital expenditure estimates, ar.d a specific 

business system. The market f-Jrecast is based upon a review of previous market 

studies and discussions with the user community. The cost and capital expenditure 

t!stim."'tes were, in most cases, based upon estimated historical costs. No attempt 

was made to verify the accuracy of these cost data nor was an att\!mpt made to 

address the issue of government overhead rates. With respect to the business 

scenario, from the large array of possibiHtie~ a particular scenario (as described in 

Section 3) was selected and used as the basis for planning and evaluating each of 

the approachf;s for commercialization or retention. This allows al1 of the 

approaches for commercialization or retention to be evaluated on a common basis 

and compared. 

The analysis process followed is summarized in Figure 6.1. The first step was 

the formulation of the overall business plan which encompassed considerations of 

products, schedules, technology availability and nonfinancial issues. Ground 

segment costs and space seg' nent costs were estimated. Ground segment costs 

were developed for processing, archiving and communications-both fixed and 

variable costs were developed. Space segment costs considered both nonrecurring 

and recurring costs and the phasing in of different sensors over time. The SA TIL 

probabilistic life cycle costing model (see Appendix A) was used to verify estimates 

of the quantity of satellites required. 

Demand and revenue forecasts were made in terms of information product 

type and market segment. A pricing policy was postulated and together with price 

elasticity estimates (by market segment and prodlJct type) were used in a Market 

Model to establish demand and revenue forecasts. The revenue forecas'ts together 

with the ground and space segment costs were used in the financial analysis (a 

financial analysis model was specifically developed for this purpose) to develop pro 

• 

. , 

;. ... 
"' , 

ANAL Y S 15 UF COS T5 

• PP(~CF.ss:rIG 

• (!J"IM'Jru CilTlON3 .. ARCl1IVINr. 

ESTIr,1ATES OF 

SPECIFICATION 

t::iT1 ~iA'f\ or. OF 

F!>.E~ Arm V,~~lAB'.E COSiS 

GROUND 

SEGI1ENT 

COST 

DEMAND AND ~EVENUE 

FORECI\ST 

If-'PACr ON 

GOVERNMENT 

C/.SH -LOW 

47 

BUSINESS 

PI.A'I 

FINANCIAL 

ANALY~IS 

WMPARISON 

AN(I 

EVALtJATIOri 

i RANKED 

;1 ALTERNA TI VE S 

ORIGINAL PACt! I~ 

OF POOR QUALITY 

rlONr: r:ANC: ,',L 

AS~(;IIPTIOUS 

E~TjMA7ES or 

• :O!:l , flEU;'Sil.lT( 

SPP,CE 

SEGf1ENT 

COST 

EVALUA71Drr 

r.q 1 T~11 tp, 

LLl;AL, I'IST:7UilOrrAl., o'JLITI':A 

I NTEfWA n OML ~, 

I

01YER CCN31JERA- T1CN~ 

FIGURE 6.1 THE ANALYSIS PROCESS 

49 

1. Government ownership and :>peration (planned phase-out) 

2. l;overnment owncrship and operation (continued ownership and operation) 

3. Private ownership and operation 

4. Phased private ownership (government ownership and operation with 

private sector marketing) 

,. l..eglslaUveJy-chartered, privately-owned corporation (goverrllnent 

equity position). 

As a separate and distinct lillld remott: sensing ent~rfJrise does not currently exist, 

some r,lstorical data was not avaHable as a basis for the projections. Thel'cfore 

portions of the data used as a basis for the financial projections were estimated 

based upon the best information available at this time. The projections reflect, in 

our judgment, the single most probable result for each scenario projected. Each 

financial projection contains up to six parts as follows: 

1. D~,ta Set (appJles with slight modifications to aU scenarios) 

2. Projected Statement of Income 

3. Projected Balance Sheet 

q.. Pn"jth-:ted Statement of Changes in Financial Position 

.5. PrOjected Cash FloVi 

6. Projected U.S. Government Cash Flows. 

Part 1 - "Data Set" (Refer to Financial Exhibit 6.0) 

In preparing a financial projection, as in preparing comparative projections, it 

is necessary to dcvelop key basic assumptions upon which the projections are 

prepared. Although each scenario reflects alternative operating and capital 

assumptions, the basic assumptions with regard to costs and revenue are consistent 

in order to provide for an effective comparisol". Supporting data to quantitl~s used 

in t.he data set are ccntained in Appendix B of this report. 

Direct costs reiiected in the data set are semi-variable and variable costs 

attributed to proceSSing, archiving and sales of remotely sensed data on a per scene 

basis. A learning factor and a processing to scenes factor is also applied. Although 

certain noncapital operating costs at EDC, Goddard and White Sands facilities are 

semi-variable, all costs have been treated as variable for purposes of this 

pro jection. 

-.-... 

"~'. ____________ -,", ____ --""" ___ L. •. _ •...•. .l._ _ >-

_~~.~~ ..... I!I!t:l~.,..~ ..... -""l!==!""',~'-<~~~-=' ==-~-

7. nmo --
(. 

( 

c 

c 

• 

• 

.50 

R~'<O and marketing costs are reflected in the data set as both a fixed 

minimum cost/year, as well as a percentage of revenue. This results in a semivariable cost treatment dependent upon the projected revenue level. Communication costs for both TDRSS and OOMSA T have been treated as variable costs 

although certain costs are fixed. Variable and non variable ground facilities and 

equipment are assumed to be leased from the U.S .. government through 1988 with 

alternative facilities and equipment leased from third partie~ after 1988. Fixed 

assets with the exception of l.ANDSA T D and 0' have been depreciated on a four 

year straight line basis with full year depreciation taken in the year p1acI'!d in 

service. LANDSAT D and 0' are depreciated on a straight line basis over thei:' 

remaining useful lives (one year and 3 years respectively). 

Construction payment schedules for satellites generally assume a three to 

five year construction period with 12 percent of the total payment due four years 

before the sateUite is delivered, 16 percent due three years before, 24 percent due 

two years before, 16 percent due one year before, and 32 percent due at launch. 

Construction payments include storage and cost of launch and are capitalized in 

the year incurred. 

Cash requirements for Balance Sheet operating purposes are predicated upon 

an assumed number of days in terms of revenue for operating cash, accounts 

receivable and accounts payable. A fixed amount of contributed capital is 

reflected over the entire ten year projection with a cost of borrowing at an 

estimated 11 percent long-term borrowing rate. 

Investment tax credits are taken on :'lpace segment assets during construction. It is assumed that 60 percent of annual R&D expenditures qualify for 

the R&D tax credit (a 60% x 2.5% R&D tax credit = 1.5% net credit). Royalties paid 

to the U.S. government are based upon a percentage of data sales with a minimum 

base royalty. 

Part 2 - "Projected Statement of Income'~ 

The Projected Statement of IncolTle provides for the results of operations for 

the profit seeking alternative scenarios during a ten year period. The Income 

Statement and the derived cash flow may be considered to be the most important 

statement for purposes of evaluating the worth of the enterprise from the 

standpoint of investment value. Although a clear cut definition of an income 

statement is seldom found, one may simplistically describe it as a presentation "f 

-
'1 

revenue and cost predicated upon consistent accounting assumptions. The difference between revenues and costs derive nct income which is used as a measure as 

to the financial success of the enterprise. A typical (simplified) profit and cash 

flow computation procedure is illustrated in Figure 6.2. 

The Projected Statements of Income contained in this report were prepared 

consistent with the key assumptions reflected and described in the data set and 

Appendlx B. 

Tb~ before tax profit on operations is detel'l1linfl:d by subtracting th~ 

projected costs and expen!;cs from the projected ,"eVellues. FeC::eral taxes are 

deducted from the before tax profit at a !"ate of .51 percent. If the before tax 

profit is negative (a loss) the federal tax loss carry forward is treated as a benefit 

in the current year, reducing the reported loss. Current year investment and R&D 

tax credits are treated in the same manner. As this is not a r;ash inflow, 

adjustments are reflected on the cash flow statement. 

Part 3 - "Projected Balance Sheet" 

The Projected Balance Sheets presented depict the value of the various 

enterprises on the basis of proj~cted revenues, costs, borrowings and contributed 

capital. Although the significance of a Projected Balance Sheet is not as important 

as a Projected Income Statement for making investment decisions, it is a valuable 

supplement to the information contained in the Statement of Income. More 

specifically, the Balance Sheet depicts the value of the enterprise in terms of 

assets, at cost, its liabilities and the equity of the shareholders at a given point in 

time. 

Part 1+ - "Projected Statement of Changes in Financial Posit,ion" 

The Projected Statement of Changes in Working Capitill reflects changes in 

the war!<ing capital of the enterprise from operating year to operating yt!ar. 

Working cc.pit31 may be defined as current assets less cu:-rent lia.bilities. The 

purpose 01 this statement is to provide an explanation 01 what provided working 

capital during each year and how working capital was applied during each year. In 

other words, the statement depicts whether or not sufficient working capital is 

provided by operations; if not, it indicates which sources are being utilized to 

provide working c.'lpital for continued operation of the enterprise. 

Part 5 - "Projected Cash Flow" 

This statement a) reflects sources of cash (net income, increases in current 

liabilities, etc.), b) applications of cash (Josses, increases in fixed assets, accounts 
FIGURE 6.2 SIMPLIFIED PRO~IT AND CASH FLOW COMPUTATIONAL PROCEDURE 

receivable, etc.) The difference between the sources and appHcations is the net 

annual cash flow of the enterprise. 

This statement is similar in nature to the Projected Statement of Changes in 

Financial Position except that operating funds are analyzed in terms of increases 

or decreases to cash from operations of the enterprise. Nonoperating sources l,f 

cash such as contributed capital and borrowed capital are not included. Nonoperating applications of cash such as dividend distributions are also excluded. 

This statement also reflects adjustments for the noncash nature of the tax 

credits and loss carry forwards obtained in the ear ly years of the venture. 

Although these credlts were reflected on the Income Sta~ement, Balance Sheet and 

Statement of Changes in Financial Position as credits in the year they were earned, 

no cash was actually received-credits would actually be carried forward and offset 

against future tax Habilities. 

The <.. 3h flow stream is discounted at various rates and the present value I,)f 

the venture is determined by summing the discounted values. Present value ",," is 

the sum of the discounted cash flows for the years 1985-1994. Present value "B" is 

the sum of the discounted cash flows from 1995 to infinity, assuming that the 

annual cash flow in each of those years is the same as it is projected to be in 1994. 

" :~'~_.-;t>"''''_-''''-''_ .. "", .. 

------.. ---------____ ....... _'t...-. ........ -_____ ~~~~--""~ __ ~_ 

,"~~'J . '.~, ' 
Three key financ::ial ratlos of the venture are also shown. The return on 

capitahzation is maintained at a value of 17 percent by adjustments to the 

"additional federal p'Jfchases" Hne. Capital market experts have indicated that a 

"utility" of this type should have the capability of maintaining at least this rate of 

return. 

Part 6 - "Proit!ctt,d !J.S. Government C.uh FICiW~" 

The cash flow de-scribed in the preceding section is that e>:r}erienced by a 

commercial venture. Each of the five scenarios will result in a government cash 

flow impact. Dependent upon which !Scenario is examined the nature of tne 

government cash flow will contain a subset of the following: 

Cash outflows: 

• Expenditures for information products, i.e., purchases of tapes and 

films 

• 

• 

Possible purcha~es of spa.cecratt and ground-based facilities 

Costs for operations such as spacecraft launches that exceed the actual 

reimbursement made to the federal government by the LANDSAT 

commercial v~ntllre 

• Continuing government-fundeu research and development related to 

LANDSAT (assumed to be $10 millio;') per year) 

• Direct equity contributions from the U.S. government to the LANDSAT 

venture 

• Any direct subsidy (also referred to as "additional federal purchases") 

Cash inflows: 

• 

• 

• 

• 

Payments for leases of government facilities 

Any nongovernment data sales and ground station fees 

"Asset recoupment" means any lnitie. payment made by the new 

venture when it taKes over the existing LAND5A T assets 

Any royalty fee'i that may be paid by the ventur.e to the governm..,nt 

• Tax revenues paid by the LANDSAT v(!nture if it eventually becomp.s 

profitable and exhausts its tax loss carry forward credits 

• Any dividends paid to the government if the government has becorne a 

s tockho lder. 

6.1.1 Government Owner~'ljp and Operation (Planned Phf.sse-Out) (Refer to 

Financial Exhilii t 6.1 J 

Under this scenario revenues and associated costs are reflectpd through 1988 

at which time LANDSAT D' ceases operation. No operating revenue is recognized 

beyond that time and all future costs of operating the land remote sensing system 

t ~. t " ... 
• 

• 

are terminated. Federal purchases of remotely sensed data are assumed to be 

purchases from a third party at a cost consistent with amounts contained in the 

data set. As no private sector investment is reflected in thiS scenario, only 

government cash flows are projected. 

Costs and revenues generated through termination are consistent with 

amounts reflected in the data set with the exception of ground station fees and 

government R&D expenditures. These amounts have been reduced as the ~rogram 

approaches thl'! projected termination date. 

6.1.2 Government Ownershi and Operation (Continued Ownership and Oper~: 

!!2!!... Refer to Financial Exhibit 6.2) 

This projection reflects a continued operation of the land remote sensing 

system by the U.S. government. Revenues and costs are consistent with those 

reflected in the data set. Assets, as well as other costs, have been treated on a 

cash basis. A $10 million/year R&D expenditure has been included as an assumed 

commitment by the government over the ten year perie>d being projected. 

Revenues by the government reflect nongovernment data sales and ground 

station fees consistent with amounts dssumed in the data set. Interagency transfer 

payments for data 'Sold are not included in government receipts. 

,As this financial projection does not assume private sector operation!;, the 

Projected Statement of Income, Balance Sheets, Statement of Changes in Financial 

Position and private sector Projected Cash Flows, have not been included. 

6.1.3 Private Ownership and Operation (Refer to Financial Exhibits 6.3.1 

through 6.3.5) 

This financial projection assumes a divestiture of the land remote sensing 

system to a private sector enterprise. It is assumed that LANDSAT D and D' are 

purchased from the government by a private enterprise and that existing ground 

facilities are leased from the government for a four year period. AU costs of 

operations are borne by the private entity. It is also assumed that costs of 

archiving are borne by the private sector. As the entity cannot derive a satisfactory rate of return on equity without federal assistance, "additiolial federal 

purchases" have been projected to derive a 17 percent return on equity to the 

private investor. 

The financial statements are derived from base revenues and cost assllrnptions contained in the data set. Tax benefits and costs dre reflected on a current 

year basis. Although the space segment assets qualify as fiv~ year ACRS property 

W

1 

'I 

. 

! 

: ... ~~ 
. ~ 

, 

" 

for depreciation for tax purposes, asset Uves of four years were used 

financial projections. Such timing differences have not been reflected 

benefit calculations and are not considered tei have a material effect. 

in 

in 

the 

thu 

Variables are reflected in the long-term debt and cumulative dividends 

amounts contained in the Projected Balance Sheets" Excess cash "thrown off" by 

th~ '/entlJre, in excess of 3StUrned long-t~rn' d~bt of $100 mUllen, llire t.r.,ated as 

rjbtribution of ol' .. i':.lends. 

The Projected Cash Flow provides for a discounted rate of return of approximately 12 percent with a return on equity of 17 percent. RetlJrn on a3s~t5 an.:1 

debt to capitalization ratlos clre also provided. 

6.1.4 Phased Private Ownership (Private Sec.tor Marketing! (Refer to Financial Exhibits 6.4.1 through 6.4.3) 

The financial projections for phased private owner3hip reflect a separate 

marketing organization established with exclusive rights for sales of U.S.-produced 

land remote sensed data produced by the LANDSAT venture. Initially (first ten 

years) all costs of operation would be borne by the U.S. F,overnment. In return for 

such right!.l, the !.lrivate sector would pay c:. minimum royalty fee of 80 perc' n1; of 

ail data '301d 3I\C ground station fees with a minimum annual royalty payment 

(guaranteed) of $33.5 million. Cash generated by the venture in excess of 

operating requirements are first used to reduce long-term debt and next used to 

prov1de dividends to the private investor. A rate of return based upon present 

value of cash flows tor the first ten years is calculated.at 12 percent to 13 percent. 

Other ratios such as return on assets, return on equity and debt to capitalization 

are caicul.'lted based upon the present value of cash flow assumption of 12 percent 

to 1 J percent over the fi:-st ten years. Government cash flows reflect the costs of 

..:ontinued ol'eriltion C'p.duced by rcp.1ty fees c:olli!cted and tax I'evenu'!s rec:eived 

{l'om the private sector enterprise. 

6.1.' Le isJativel -Chartered Privatel -Owned Cor oratlon (Refer to Financial Exhibits 6 • .5.1 through 6.' • .5 --

The financial projection for this organizational scenario closely reflects 

private ownership (Section 6.1.3) with the addition of an equity participation by the 

U.S. government. The government would provide initial equity capital which was 

assumed to be a 33 percent participation. Dividend distributions from ·the 

enterprise provided in later years would be paid to the government based upon its 

equity participation. No provision has been made in the projection for the 

government liquidating its equity position in the venture at any time. 

l-.~-".,,, _. --,,' .. 

----------.--- ............-._ .. __ .- ._ .... _.-., 

.~ __ .J'(' 

-~.~~' r . 
c 

• 

• 

• 

• 

• 

• 

• 

6.1.6 Comparison of Financial Projections 

In comparing projected operating r~su1ts of the five financial and organizational scenarios, it is appropriate to evaluate such alternatives from both a pubUc 

and private sector vkwpoint. It appears that the existing civlJ remote sensing 

system is not a viabhl commercial enterprise without either a signl1icant guaranteed subsidy by the U.S. government or a material reduction in the projected casts 

of operation. Government r.:osts for the continuation of the existing land remote 

sensing system range from an average annual cost of $68 mUlion (constant FY83$) 

per year for government operation to $82 mUUon (constant FY83$) per year under a 

private ownership alternative (Figure 6.3). If the private ~ector alternative is 

chosen, a minor reduction in cost to government may be achieved through transfer 

of existing LANDSAT program assets to the private sector without recollpmt,nt by 

the government (Figure 6.4). Assuming continuation of the system is desired, 

continued government operation reflects the iowest projected cost. The primary 

reason for continued government operation be the most cost effective alternative 

is that return on capital cost~ are not considered in the evaluation of government 

costs of operation. To attract private sector investment in an enterprise, a 

reasonable rate of return must be achieved. In order for a private sector 

alternative to provide a lower cost to the government (subsidy), cost and/or 

revenue efficiencies by the private sector would have to improve significantly to 

offset required return on capital. 

The financial analysis in this report is predicated upon a consistent set of 

data with regard to revenues and costs for both private sector operation as weU as 

continued operation by the government. A specific level of service was assumed. 

It should be noted that system configurations which provided other levels of service 

were not analyzed. It is possible that such systems may provide a lower cost to the 

government but would result in reduced services and benefits. 
, • 

i , .. i 

.~ 

:fl~'! , f' 

, ' 

I, 

i 

\0, 

\i 

" I 

-i 

, 

, 

~ @ 

2) 

LAND ~fH01£ ~a~l~ ~t~Tt" 

fiSC ... f£MS I~!h 19':4 

((JMPMATI YE MIt '''I S Of 

!l(T 6O\UPllfIiT [JP(::O! fUIIfS 

_,~ [~= '" _lIE.) .. tuliPl It .. ltuteS. " IlfUn .. .:t I;U!IIlS 

SDYERWai iJIII[JIStUP 

MIl OPOtATlaJI {COIIT'D 

ClWIIElI Sit I j> , OPUA TlOIl) 

renAl[ OWIIEISHI' 

MIl Oi'(RlmOil 

~D .. n .. T£ 

SK:-~ ~SM" 

IPiflAl[ SECTai ~1' ) 

U"I~nllU c..!Eat.D, 

PIllamr (MO 

CORf'OlATH)II 

l-f:~-~----·-~-l7:E:~S'O!:: 

1~5 I -~8-,-9-~----"~~------%-,-~5-5------~-------1-~-,-e-5S----~-------~--,-~-l----~~ 

1ge6 !S,544 ~12,J46 Ill,J" 111,7~ 

1987 16,6~6 156.346 110,422 160,181 

-lOi.IOS 

112.~" 

110.422 

IlS,W 

Ill.)!;'" 

Ill.iSS 

171.UI 

laJ ," 

lZ9.675 

Il1,in 

1~ 14,lZ0 '9.456 115,802 74,~ 

1989 ie, lOG 91,104 111,165 I~,~" 

1990 :4,140 105.921 113,685 11',~I' 

1991 !7,BSO 111,510 111,438 11:,412 

1991 ~O,~ 50,.71 181,498 51,1r.l 

199) 24,310 11,7?6 li7,OO5 60,904 

1994 21,34" 51,~la 146,54] 59,16S 

NH PRF'n,T 

Y'l'"r It lot: 

,r~Q~ 1-10 

'feQ II ~~n AfTE~ 

TOUl NET 

PW£Sflli VAW£ 

144,CU1 lilO,(m 686,717 ~8,16l 

95,875 179,Rf>ti !iIl,iZl 1OI,lS9 

;:40,14l 189,903 1,200.400 e16.i~ 

FIGURf 6.3 COMPARISON Of NET GOVERNMENT EXPENDITURES 

.r 

6116.110 

4., .ell 

1.lll.~Sl 

: .. Q, 

i.rL. • • .. , 

~.. - ~~"'":::.--- .".... ----=---~~,.--. . ........ 

.... 

" 

.-
lMil ROOT[ SEaSl1G SYSTEM 

FI't1oi n .. s JCJI!S-J994 ... -n t_N-a II ~. 

rOMPARATIY£ ~'StS ~ Of. atM1. II "l-.HII 

ASSlT ItW1UMIiT In llIf !I.S. mv£1I-.T IS • MI[~. 

..... ttruM.T In Ttt£ u.s. Gn76tIl:'lEllTItE(OOPN£!'Il OF ASSETS If U.S. GCYr: !Mf':! .. EtOOPIIOT Of lSS£TS IY • .s. ~T 

PRIVATE ~ERSHIP , OPERATIO~ l£GI51ATlY£U OlMTERED, fttIYAl[ c.o5MIP , OPUATJOII LKISlATlIlH a.tUfl. 

"IVAmJ OYI£D CORPOItATlOil PI • .,.m, (YO a.AJbTK* 

f!5C1oI. KEf GOY'f. ADOITIOIIAl fj[T GOY'T. NlO 1T10IIAl I':ET GOt·T. a 1'1OUl lET "·T. I _1T!oaaL 

YEAR [lPElIIll JUlES FED. Nla~s [lP[JIOI nltES FED. PlJtOIAS£S £IPEIiIOIUES fED. PdtO&AS(S [IftJIO ITUt , ~ B. I'IIIIOIAS(S 

1985 -130,855 160,OOtl -106.105 160,000 49,961 11.5011 ".111 11.SOO 

1986 132,]96 142.500 U2.l9Ii 142.500 41.196 lS,OOO .. ", lS.ooo 1~1 I1C.42Z 180.000 110.422 180.000 M.u2 10.000 M.m 10.000 

r 1~ 115,802 125,000 115.832 125.000 t6,124 '1,500 96.124 '7,500 

1969 131,365 120,000 131,365 120.000 121.183 120.000 121,181 l?O.OOO , 1990 113.685 155.000 171.685 155,000 15].52' !55,CIOG 153.52' 155.000 

1991 171,438 IBO.CIOG 117,438 UIO.OOIl 116.821 leD ,000 116.121 110.000 

i .. 

,i;:," .... . .' M ' 

t . i· , ' 

\ ~ 

1992 181,498 215.tJOO :oi.498 215.000 186,&48 21~.OOO 1 .... 215.000 

1491 161,005 115.000 129.615 115,000 163.aIi' k10.OOO 122.195 110.000 

1994 J4£,543 155,000 121,672 155,000 144.093 1!>O,ooo 116,030 1!»1l,ooo 

IIET PIIF\£IIT 

vaUIf Ii li!'I; 

,n,lIe; '-In FNt,l11 472,484 686,110 '72,484 687 • ." 614,llS 614,112 "',liS 

nAif 11 .. IfT£1f 'ill,fin 'i4J,2hfI 447,481 543,166 505.036 525,141 "1,121 525,111 

TorAl tifT :1 

I ~.) PR£SENT VAlUf 1,200,~ 1,515.150 1,133,651 1,515,750 i,192,:il3 l,lOO,056 l,t26.43t 1.200,l&i 

\i efI(COUPHUT Of ASSnS nEFlll£O AS rAJJ'I[IIT I! (lITE!'i'lliSE JC II.S. 1iOV£RIi!'OT FOil lA."IO~T 0 , 0', A;;O LEAS( PAUOlS RlIi US( Of 105ft fllCllillES. 

~ FIGURE 6.4 OOMPARISOfI OF ASSET RECOUPMENT BY THE U.S. GOVERHMfHT VS. 

NONRECOUPHfNT BY THE U.S. GOVERNMENT 

~ 

"j' 

tk: " :" "' . _' .'~.c.·',. ".. • ••• ~ 

• • - ..... ""·'t~, .. · 

~ - Jl.L..... _-= __ ;it .', 

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.. 

! 

I 

I 

I 

00 

""';::; 

~ ;,} 0:::- C ~-

-

«. 

"'" 011 
, 

2) 

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JOEI. .... ;,:. 

UHI IS SCI 0 

P -. ~ lCR- - - f lut 

TU~ 

...... "-1< --- F IUt 

loVE 

SIW.£S fTILf'AL - -- ~ 

,~ FElI£r~ 8o~ 

F£Ilt:f'AL - - - -- ~ 

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SlAIIOtt .-rE/rDhE IGN STATU ... 

M •• Uf' rllf.E I"" !>,,.nOHS 

0,,£1< ' ,£;.1:ltUE 

HDIIIII~ fEOCkA' f~S 

Dlf;ECI COStS: 

F"1lO- !;S IIIG COS1/:;U-M. 80~ 

:> ... 

f:..IlC£SSIUG 'EAI.NIN6 h£TOO 

fK(l!T S" "':;'EAlI:.·; t ACIlJf< 

I''''CIIIVr4. '::lbf '!;i.l NE 8o~ 

-A~ 

H'OIlV,lIL U -_"" r~n .. CO!.I 1'- b1C E511.IIT Dt-fl-F IU' 

fin 

:a: ...... JLft 

c Qt. 5 LE~ING '-AC10< 

... 0 I J,EC T lJoM)R 

'ion' 

r" D -£IFqS!ZD Ira 0(1.1 MS 

-£IHo£Sti£1I AS '.t OF "'V 

"'~ (JlNG.""V. ft~or.)J IDle 

E l' F'fi1: S'i£D IN Df1I L MS 

EJf ftSSt.D AS 2: ~ KV 

·::I .... nCAT IONS COSTS: 

TDr.SS COST 15C£HE &~ 

~ 

IJRtSA 1 CU> I I !.<:ENE 80 ~ 

::-.I1ft ""~S • £~ CasTS"·....na... 

DOrtSA r I £ A!;E tr!'> '5 ......... I 

L£I.~4. Ct!SlS: 

I At4v.w.I D 

lo~l o· CHIUNO t Al ILlllES ·6~C 

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f I ';cr • .. ~ ; ... ~. , '.-:4 

fl--=IAL f ....... £CfU;.d 

DAI .. ~l 

... r I SUIt VI IIIflS 

1"10 I 'l'W> I W7 1999 

4:'.'" CO* II. 4:" (11 Ib.:"~ (J) 

:!.:~ (I' ~ .. CIi ~· (I) 

364 .. (I) 

4:· ... (I) 

67:: (I) 

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Co 

u ... tOO ... (2) 

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71 :: 

14 

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• .,.1 .. (1) :'':.70 

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A.. ::-'. (10' ::::. au 18::. ~.I (10) I":. &) 

::'3. I" (Ie) :.I.. -A' 19. ,(IO) :~~.80 

1.<" · (1) 0.90 

:0 .. <", (12) IO 

..... ) (U) "'-...0 

0.04 (11) 0 . .)4 

•• :..-... (4) 1::10 

i • ..-~ .. (4) O. ("5 

6::.!..o' (IS) 66.::;') 

~ • . :.. (IS, :75.50 

1ft. 4.:» (16' ".r,.) •• 70 0') ; . H I 

(,. ( to. (1) OJ ... 

O. w Oll C) 

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" (19) 

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Artf&JNl5 lo-N'~D IN uo~ fJJ D.NoEN' 

VCNt "tIll'S, .'t IMOLAl I ... _1£ ~D 

UH'rs £ ,.t1-£~.. 1M lt0c--..s 

...... us FO sa. £ q.O<LS!>£. I .. _u.£ ... -

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1990 

: 1. I~ 

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17~. 74..' 

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FINAHC!Al EXHIBIl 6.0 DATA SCT 

A:Tt'[ H'JtmfN IN PANErfmfSIS P.U!'R TO c)[CTfOMS Jr~ AP:'ttmlX 8 "1t£ R£ 1M ~upp\'1n I!IG 00(.1 'HATH" WILL 8[ r.DW. 

~ 
• 

• 

• 

• 

• 

~~ 

0000 

~ 0 

_ ..... -- ...... -- ---

NNNN 

~ ... .;.~ 

r. ~ '" 

Q 

.... C' ,. 

g ~ r. 

oo i. 

" ,~ r. 0 .. --- COQr!" 

.. 

~ 

o 0 0 .:, 0 ~ , Il\I 0 .; r. n <:> ~ ,2 ~ .... Q <: " .1 , I .. _ .0 ,.. , :9. ' - \61 ( ... flo ' .. ,' , ~ " t o'" • •• " ,.. j1 i-'e.;<Jt~~o r. ",,, .... /; ", 

OOO~Q~:<:O: ~~:~~ .... ~ 

~ 1-~ ''' '';:r II1 '' " , ,.,. . , , . , "--~'-' .. ,1 ... _ ,- __ .... , 

.. " ~ ,. 

o ': .;) 0 ., ,;:) ~ ~ 0 ': ;, 1'1 ~ ~ ~ ' ... -': : . ', ,~ 

~ .'-4".' .-""·"· 11 Ii' .. ., , , 'C; " 

=~ = ~OO .. ';~Q ".. .. ..... t". 

.. 

.., 

...... . , 

:' 

-" ~ 

-. .. .. & ~ -, .;' ~ 

0 

Q 

< 

.... 

< 

VI 

~ 

.... -

~ -.... 

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:r. 

~ -

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~ 

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, 

2> 

sn ' .... .1<10 • 1 

6C.J\Itcl'"N'ENT OIooI'IFt<SUIf' AfCI or"CR.''H lOW 

.. 1 ANNED PHASE ,.,T» 

llltlb 1'1:",111: SUISI .... ';'.<; ,£" 

FI$l:lll 't£~ 1'IIr>- I<iY4 

f IHHN: lAL ftilJ.lEC nOI5 

J't(nJECTEO U.!>. 6OV£t<t1EN' CHtioi FLONS 

... ........ '5 E'f'M:S5CD IN JHDUSNeS OF DIJ<f'oI:N1 

Y£M ~AR5 •• ~ INfLATION MTIE I\oSSIl.Ir£II 

FI~A. vtM6 

1'lO:i 1'101> 1987 l~ 1'i89 l~ 1.".1 I'#''-: 1-· 1_4 

II. S. r.ov\.kI'I£NT EJF"ENDITURESa 

1 Nt' ()f,"rtA T ION F1illDtJC 1 S v (t (. , .. ~. I 4 JOt) 143 40 17tt:/' ~ Z4! IO ~7~ 

ASSET f1lf",CHASa::S 4f".u(oo) 0 0 C 0 0 0) 0) fJ 0 

OF"Ef;AJl0H5 COSrS(flET Of . 

I nM "',SD1CUTS ~.61 21424 =",6(,1 n 0 0 u 0 0) .. f<~ D COSTS 1 ::>OAO :;ono ~ ...... OO .) 0 0 v " (; 0 

Ero! TY COf4Tf<IMJl 'I'N 0 0 0) 0 0 0 0 n (; 0 

SUio5WY .. 0 0 0 f) 0 0 ;;) 0 0 

----_. --- -----.---- --------- --.--- ---- --- - ----.- -------- --------- -------.- --------- ---- --- TO fAl. lC OOV' 1 EIPENU n.w.E3 n:46! 3=42 4 2'i60. 1 .. 1:0 14~ 14340 I~ 4'O'ioOO 2 4 3 10 =r-40 --------- ---- ----- -------- - ----- - -- -------- ----.---- - --- - - ----.. - - ------ --- -------

u.s. r.uv£RN'IENT r.l:CEIPTSa 

""ELE IFTS Fr.or. I EASE (GAD FAC) (; (; (; (; 0 0 U ., c.. (; 

.... - 6O\IEFcI't£NT OAT~ SALES ~ 

Gr.'OUt., STAT lor4 FEES I.j~~ 16880 13525 " V (; (; .) (; 

AS~T ~COlJF1'£NT <» (0 (. 0 0 0 " " 0 0 (\ 

TDf'SS IISF.AO.E Ft:FS 0 0 0 0 " n 0 () 0 0 

ROYAl. TV FFES 0 (I " 0 0 0 0 0 0 0 

T :U 1<£\1£,. £ ,) 0) (0 0 (0 0 0 (0 0 0 

DIVIDFN!'S ..-£C£IVED 0 (> 0 (0 (} i. V 0 0 (1 

--------- -.------- --------- -------.- ----------. ------- - ---- - -------- -------- -------- T01Al. US GOV"' fiEC£IPTS .~:!. 1688() 1 3::'::5 0 0 0 .. (} 0 0 

--. - ---- ------- ---.----- --.------- -------- -.------- ----. -.-- ------- _._---,-_.- -------

NET US j;Qy'T EIf'END1 n.cs 5a93:5 J~4 1607. 141Zi' 143<10 1434<> 17&:50 ~J'980 ~4310 27340 .. - _ _ ~ aaa.a..aa_ ~~•• __ •• :a& & ____ . .... _---..-. __ .............. ___ .~ __ ... ..... _.: .. _. a ...... ~ ___ ... ________ 

TO fIlL. 

DI5COUNT f1;£SENT PfCEsatT K.EXNT 

RATE VAtUE -A- \ML.UE -.- \ML~ 

--------- --------- --------- --- --. --- 0.10 

0.15 

0.20 

O.~ 

O.JQ 

144917 95025 

12~191 39177 

lor"::'!57 Ut391t 

9~17 9~ •• 

8"JW8 ~ 

=40:'47 

1 •• :l.B 

1=~9:i!5 

10:411 

8iU93 

Pf<ESENT \MUJE OF A- 'S TIlE Nl£5£Nl \MLUE OF THE ~ FLn.r.i. 't~M 1 IHf<OUGH I,) 

PfCESEHT VM.UE OF -.- IS THE ~5ENT VM.UE OF THE U.:iH Ft aIM. YEAR II lIND '-TO< 

FINANCIAl. EXHiSn 6.1 GOVERNMENT OWNERSHIP AND OPERATION (PlMIIED PttAC;E-OUTj 

r- *t; N~-!-: . m-:: ':x=:c- =e:+r ---= • 

~ 

-
~) 

\i 

II 

~ 2) 

SCFr.rof< 10 • :: Lllta» kOCllE !A:NSING 5'(51£" 

IiO\IChNI'EHT OWNERSHIP ~ Of'£RATJON 

(CONT INUED OWNERSHIP ANI) OF'£RATIONt 

f ISCI\l YEAo-.'S 19tf:)- IVl4 

F I NANC I AL F1<O.JE eTJ OMS 

PfCfU(CrED U.S. liO\IfktlE .. , CASU FLOWS 

..... TS Ellf'tiESSED IN Tt ... us-UDS .. a .. ,~:-eT 

YEM DOLUIfCS, ,.~ IWLATlDN !'!Aft III5!illrtE8 

... F I !>LAI_ 'If IlkS 

1905 I'ffl.!> 1987 19ttO 1'189 1990 1991 1'992 I"".s 1.,.,4 

--------- _._--.----- --------- --------- --------- ---.----- -------.- ----- --------- ----~-

U. 5. 1~'EkttENT E XF"£/'4D1 rur.Es. 

,Nt' 0RnA TJ ON r1<(Jollc TS 0 r) 0 0 0 0 0 0 0 (I 

AS~T ~CHr.S£S n'l~ 'I4~' 1418 50 57'110 87b40 lOO3:iO I~;!o 44000 660(0() 4~. 

Oi'ER~TJONS COSTS(NET OF AE1"~Sa::rtEtHS ~61 27424 ::7bUl :Zb~~ 2:)144 23026 2:)91:; 29191 3 1541 :!~ l 

"to COSTS 10000 ICOOOO 10000t(o l(t(l()O 10000 lfoOt ... 100(10 lOOUO I ()(o(j() Iftll)(o() 

£OlJITY CONTfClIlUTiON CI G 0 0 0 0 0 0 0 0 

SlIoS:OV 0 0 0 0 0 0 (, 0 0 0) 

--------- --------- -------,-- --------- --------- --------- --------- --------- --------- --------- TOTAL US GOV' T EXFENDITlM:S lI:nSI 13::074 179431 'I4~ 122784 133376 I~ Bll91 1,,7:>41 8~ll 

--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------

U.S. GOVEr,NI1EH' f\ECEIPrs. 

""£CE IPT:; .. "ott LEA!.E 16m) FAC) 0 0 0 0 0 0 0 0 (. 0 

HON- GOVERr1£HT DA T A 5AL£S AND 

GROUt., STAll ... FEES I 65:!6 197::8 22595 :!48:!0 25680 ::!44~ ~48:) ~no 33815 361~ 

AS!:E T f;"F~OUf"tEHT 0 0 0 0 0 0 0 0 0 0 

1DkS5 ur~AGE FEES 0 0 " 0 0 0 0 0 0 0 

"'OYAL TV FEE!> oj 0 V 0 0 0 (I 0 0 (} 

TAX M.V£NIE 0 0 0 0 0 0 0 0 0 0 

DIYIDENDS ~CEIVEO (} 0 0 (} 0 0 (, 0 \) 0 

--------- -----.--- --------- --------- --------- ------- ----.--- ----.---- -------- TUTAL US GOY'T AECEIPTS 16:'026 l'i12B 2~ =4830 ~"!':() 24455 2'MB5 3272<. "S3815 ~I~ 

--------- --------- -------~- --------- --------- --------- --------- --------- --------- ---------

NET US GOV' T £XF"ENOJT~S ~ 112-;46 156846 6'i4~ 97104 108921 131510 50471 1:'1'2.6 51118 ..... ~sa_ ~_a~&._ aa&aaa_== C~ •• ~&&= .~~.z __ a zaaaa_aa. _________ --__ p· ·w. _~ ___ a~&~ __ 

TOTAL 

DIsc::n..T PkESEHT NCESENT f'fcESENT 

RATE VALUE -A- VALUE -.- V ..... UE 

--------- --------- --------- --------- 0.10 610037 

('. :~ :;(:6'160 

('. :!o 4~"511 

U.ZS 369'i64 (}.1(. ~2:l.!29 

179966 

73536 

34534 

17633 

'f545 

789'Ko4 

~96 

464C14:i 

381597 

332774 

HlESENT VALUE OF -,,- IS TtE ~SENT VALUE OF 1tE CASH F\.OIII5, 'fEAR I TK.OlOi 10 

FtCESENT ;,/IILUE OF -.,. IS TtE ~SENT VALUE OF TtE ~ FL0W5, 'fEIIR II ,.., MTOc 

FHIANCIAl EXHIBIT 6.2 GOVERNMENT OWNERSHIP AHD OPERATION (COfITlIIJED OWRERSHIP AND OPERATION) 

?i Jl4·~?-.. sx;;= ",'7S n ' ,..;;c':x::..:.c =::+r zx:- • 

0-

N 

~i 

~Q 

O~ ::Or-

.o~ 

c: ~ ... ;t. ~~ -, e . e , _. 

<~ 
~ 

, 

ffd .... AIE l*NERStUt- ANI) Of'EfcAfiON 

f:FVEralE 

o,n A - FEIlEr.Hl 

- , ..... FE Ilt. RAl. 

For.·E ffiN Slr.lfON FEES 

OHIH. k£\lEKJE 

MUI I IOUAl. n : DEf'Al. f'tjr',DtAh£ 

lOlAL ..eVErtue 

Off-ECT COSTS. 

F1<OC£!.:iIN5 

lIf1:til VAl. 

SIll. £ 5 

kO{AI. T I~S 

TUTt1&.. OIl'<ECl COSIS 

6f;1JCiJ ~~1ifN 

O'II£R OF~r;A' I tc. rTISTS. 

1""lkfT I cn~ I S 

kECOEAf,nl . DE .'£Lflf"rtUH 

ADVf: "1 I 5 I lit(; ~. .. h1lf1(j' ION 

C!1t1NUNICAIIONS 015" 

-T1""'SS 

-OOt1SAT 

1.£.\5£ CQSTS · Gf,flt.40 SEC">I1ENT 

SfllCE 5£6l1ENT 

Di::fF£r:JATION- Gr;c.um SE6l1ENr 

- Sf" ACE SE 6I'tEN r w~r<£ST 

DUEl< E Xf'£NS£S 

TOTAL n40Ir.-CCT EXf'EI4SES 

KfOfi-E TAX f1'1»- IT-oPEFcATIONS 

I Nl ERt: 5 T J NCt.lttE 

BEl'ffiE TIIlI f1<OFIl-(JF'ERATIONS 

fr.ovl S IOH FOt- fEOFkAL T~XES 

IN\'( S fI'!£NT lAI Q;EOIl 

k~ O I"~ Oi:t!lll 

NET U&'!:lf1E 

Lilt., Jc£ttOIE SH6J1«i S'·"'TC" 

FlliCAL YEI\RS I~-I"~' 

t'lNfM: I AI.. F1'-oJE(' flU'S 

HiOJ£C1ED SIAI£ .... n OF 1..:conE 

... F I ~ i\l. YEAf<Ci 

1"iO:S I ~ 1 'ftlJ 1911C 

Iltl&1 

77~.) 

fj1 ~ 

(. 

aN·"'''' 

1&4/'06 

1 ~1 ) 

911./) 

9<168 

u 

1":~J 

1753 58 

1 ::40; (11)*1::>511 

~"59~ (31) :'''1 1~ 

5014 (n) 5 :?:o8 

Co 0 

:'(..:.-;-" ::1171 

14::"50 

11:!b() 

I :::i 

(I 

IttOI- oQ 

:!lb!J::'3 

1;;450 

::914 

~::I(I 

(I 

~1~7) 

Hl o 

I:OY . I :: , . .. ) 

I) 

1 :50",,-, 

1t. "r.;O 

17!:!l 

-;:!.4Y 

S<'~I 

o 

l~ 

UClUNIIO f.~5:io;-o .N T".~ OF ~T 

¥EM DOLUIMS. 61: ._l."T ION MTE IIS!iiUItLD 

199'9 I9'fO 1991 .9'92 1993 1994 

I 4 3 u(l 

Inb() 

• :!1:..'U 

o I~ 

,:;998u 

J I~=O 

=4~9 

473 3 

U 

IBn:! 

14).4u 

1097(, 

13485 

(I 

I~ 

193795 

997:! 

2UtI8 

4189 

v 

U.:?49 

171b' 

151'1(' 

14::-'5 

o 10 .. (;,( ... 

7..'733'5 

II:S::V 

=484 

4157 

o 

IH7L1 

~, 

17"f\7C! 

l::a50 ( , 

:!I~O(' 

:oa.~Of. 

I~"" ="11, ~oO 

o 

'21~17 

:l4-;IO 

1775f\ 

I"'~ 

.) 

Ir./ .... tO 

2~ :; 1~ 

14545 

3 ::16 

:son 

<> 

=J 93 

'! 4() 

1.,170 

17(1~ 

o 1550000 

:!Ia:. ~ 

I~ 

~=4 

~95' 

n 

::4Uf.b 

1t.bb13 1::;~~4 I'~:'''= 14 :;~ 141::58 177:>4" ~74 :'4718:; ;:Co'l7 ; = 19: 1>69 

'51_ .. ·.9 

• out 

J4~ 

0 

1"4 

16"~ 

::;::--::; ~ 111) 7134 

';'-,7 ,18) "3.91 

~Hf\) 

<> 

6 

j5(. :~ 

I lib!; :; 

(. 

:!OttU8..! 

- .. 14~9 

C 

- 4.4t-? 

:1149 

~16:" 

I~ 

I~un 

=1>1(00 

(I 

(0 

. 78:n::; 

15378 

u 

13:;80>4 

17831 

ro 

I~I 

-9(1?4 

9465 

197 

!8!99 

~ .. :s 

1473 

10":! 

77:'1t 

:;Y9 

:!bl()(1 

I) 

I) 

119:>8-:' 

1497:: 

n 

I 77'5:!7 

1l73!5 

o 

17735 

91 >4~. 

UIOJ. 

721 

r-(,«J4 

!101M. 

1:#58 

1948 

7~18 

39:1 

:!6~()(" 

.. 

(I 

4o-c.. ... 

1546:> 

(I 

994'" 

4"4~ 

o 

"44~ 

-=..: .. 73 

5 793 

:'J.4 

27B,0 

b ;'24 

1599 

I~ 

1.'1:.:> 

'III 

~3120 

(I 

.-. 40850' 

13:Wt7 

(I 

944'13 

467b!5 

o 

46765 

=~ 

8764 

240 

31'1,9 

67.) , 

1-'-' 

~-"'"' 

19") 

~ 

7:: 

::!!I::.) 

o 

o 648-08 

1514'1 

o 

11903.:' 

~16 

o 

:5II51t. 

-=98·41 

100;5 

33 

]894' 

lice 

1~ '3 

=,&] 

7~7" 

loe 

:0:: 1:'--) 

U 

U 

8!225 

I:'Z3 . 

o 

I~:!o 

7i~ 

o 

1vc.:s5 

-:;:; -;~11 

l~':! 

:'1t4 

• :W.Jl 

~ 

::14!1 

:-~ 

" :':-84 

14= 

= , 1::0 ,: 

IU~ 

1:1-.5:: 1 

o 

1"14~ 

. o:!7:! , 

o 

105"7:7 

-5 ~~1 

4401) 

-....... .> •• 

~ 

7984 

:-:~ 

~ 

IO--~:! 

164 

::J.I:x. 

o 

(I 

BI:=!:5 

5:-.6. 

I) 

1 3:!845 

7"..007 

o 

7:>881 

~7__ to ~ 

;;4'1 

44l :!3 

34.-:; 

:541 

3171 

11686 

184 

:!:'I=O 

o 

o 5 7:'::ti 

II·...,. · 

i\ 

1174<-. 

7t.:::61{1 

o 

6=U· 

- -:'OO?:: 

44fi\.~ 

: 81 

4:"149 a.&~_~_._ ~_.~.~~ ... Z~~: 2 ••• EW ~ • • ~ _ _ & • • 2~ • • SC.~ a. ~. '~ _~ 

FINANCIAL EXHIBIT 6.3.1 PRIVATE OWN[~SHIP ANu OP[RATION 

* SEE APPEND IX B. 

F ,,~, ....• " .•. ~ ~ n ~.~ ... "'"'"'

='. n'F: ;=r===~" --== r _ __ ~ 

e 

;;::. -- 
~ 

~) 

\i 

 

~ ~ 2) 

11i1 WII I ..... kSftlf' ANIJ .. OfAllON 

I\~ ,!'"of" , S 

F ,XeD ASSETSz 

6I".:OIlNO SEGftC N 1 

St-'ACE 5EGtt£N 1 

TOTAL FIXED ASSETS 

L£S5:ACCLI'Il"AlED DE~CIATION 

NCr FIXED P~~E. 1S 

Cl ~HT HS.'iE 1S 

OTHE.R calf'-m::NT ASSETS 

TOTAL ASSETS 

I~, 

o J.:>76:!O) 

3:57620 

150:'33 

::!O1387 

38364 

o 

Z4:ir.') 1 

LIlHP ,,,,"",e SFNSING SYS lJ" 

,,,.rAl YFAleI I'AJ:-;' I'.,., .. 

FINANCIAL ~ECTILW5 

f'fiOJECTED 1tAI,ANC£ StEErs 

... FISCAL YEAkS 

1 W6 19t11 I YtJO 1'109 

o ·'5:!~70 

452:.'10 

:!.~167 

2Z"l:.Ol 

3:.032 

o 

:!5~34 

o ~941--·· 

5'l410n 

~48150 

~4:>""'..>O 

445~ 

o 

::90505 

o ~~)"10 

b~~·A· 

:~ 

:!6:0-.... 

3 1.6d8 

o 

:?9671B 

n 

7~9670 

7 :!9670 

4~ 

3<)W::!O 

3~73 

o 

342693 

NtOUNJS r:JFi<£S5ED IN "..,.~ CIt- OHd'N1 

ftM 1ICL.LMI8, 6~ ... L". ION kAll: ......... 

1990 1.,.'1 1,"2 1""-; 1'9"4 

o 

IMOO::!O 

84v6:;.oo 

494687 

34533 3 

398:.'1 

o 

~153 

o 'l~t4() 

9~ 

5757!2 

Ai'l1::8 

46713 

o 

43:5840 

o 1(J0'K)40 

101\'9040 

657137 

351903 

:s:.:!1:.' 

o 

407115 

o I Or.!004v 

I'·~...--...n 

7~~ 

3'!6678 

47"ff'.:!. 

(\ 

!IM!:tIIO 

o 11190-...0 

1119040 

~ 

;;;!~ 40 

44904 

o 

~68 44 

____ .... __ __ .. ___ ;a;;;z.::a •• ...... _:..-.......... __ ....... __ .. ' .01&:&." __ r-- . a.;ar ... .. .... ;;;tl .. . ___ . a 

CAr' I1AL IlATIaN AND LIMILITIES 

CWITAL IlAT ION: 

CllNlIiJIU'~D CWITAL 

RE rAINED Hw(NIN(;S 

Cll1ULAllvE DI\'I:JENDS PAID 

Tor ... CIlf'ITAL IlATlON 

U)O.;G-l EMf DErol 

UIf;hl:Ni LlAIHL IT '':5 

75<100 

I~-:S 

o 

9(1003 

qo(·3 

15.3 -46 

75000 

3400:.' 

o 

10900:.' 

1361::.'1 

144D 

7~}IloO 

571)<96 

o 

13~6 

140"'...87 

178n 

75<)(00 

1M'K06 

o 

15~>6 

1::;::-;7 

t:-4r.i 

751'...00 

11682:5 

(, 

191825 

137719 

11149 

750(00 

1~7~ 

o 

23.... 7~ 

1384bO 

15'r-8 

75<)O(t 

~2878 

o 

277878 

13 <t::77 

18685 

7:Y.lo<.'U 

~.406 

o 

3"J4~ 

~~4 

T.!'~ 

r.;. .. oo 3(l3!;-;q 

- 1131;:.) 

2~419 

1(00000 

19161 

~..coOo 

!4~ 

- 110::<00 

~J)>II'l 

I()I~ 

1796:!. 

10rAL l. : .... ,.II ITIE~ 1~148 1505::;4 1584(,9 ~C 1!" ... 'l8.!a8 154308 1 5796:! 7~709 119161 11 7.,,,:: 

TOTAL LIAS AND LAt-HALIl __ TlON ::45751 ~'l!)36 ::w~.r-. :?96"18 4::~9 J 18:>153 4~ 407115 384:580 ~344 

FINANCIAl EXHIBIT 6.3.2 PRIVATE OWNERSHIP AND OPERATION 

.Jl. 

~g 

~~ Q? 

..., . .0-0 

C~ 

>n 

r- PI 

=i_ <W 

~ 
t: 

I 

I , 

~ 

:. 

I 

2) 

I F: .·:r.lf 1:1..:,,51.11' lIND ~Il.'\lI(]f! 

I r:.C'i lit" ... '1f<t 1 NO (.Hf' If At. • 

ltEl IOG!i 

11HIS HlIlCH 00 NOT F'f'OVIDE 

IIISE) NOi<1 I i«i • AI" IT Al. : 

01 r·r,E. IAT ION ftND AI1URT 

war,1 1rJr. CAf' AH'L lED TO OP£R 

fr ,'°;ENl or DIVI[)£Nf)Ci 

Af\OI T HlIfS TO £OoJlr1EI.T 

r,1 r., of: f I [if' IN L. T. DEBI 

; f,;l"F,£A;,t: IN NOf,I ING CAPITAl. 

:-.o. .. ·("FS IIF W(lF'I U16 • ..v." ..... : '~1 IIIl'rlio£ 

r-r.flCEto [,~ Ff'flI1 SALE Ot' CIS 

I ",1("n foS f ,,,," L. T • OCIH 

l!FC"~ H!:'.£ I N HIlf'I I Nt> CAf' I T o4l. 

1J""\"l;£~ 10 N(lf.1 %NG CAP I lAt • 

JJ""h£ !iEUoFCI-iE A~' 10 CI~

" ENT AS ~TS 

U.c(,'£A!.E IDECf,£A:;£' TO CUR-

.. lUI llAloIllTlES 

ItLRCASCIOCCRt:Ao;t;' I .. NIlf<t' INS 

rAf If At 

I~ 

I' 

-1~~':;3 

- ----- -.. - -l r ,o;::,3 

( , 

,}:;7b':'~ 

0) 

~!. tl " 

- -----.-- 3·) (·~ 

-:,-;z :;a ...;;~~ 

15M' S 

~..A-t"~,) 

1 ~o. _~ 

0 

--------- ~3ot.) ~· ·5 

.--=..:;;;;: .:.~=- c.~ 

..!o1 

'~. :'46 

2 Ol~ 

LrMO hFI1U1F SLNS lflb r;Y:j't- " N1CII .'" SE11"f,£!:aS. 0 IN lttlllbAOa.S r.- ~ .. ". r ': ·Clol Y£,"''!> • "'"Y, I ";" 

FINn!': •• -.: . f'f'WEC ~ .~:s 

F1':O.JFCII· O S lAlrrtUH ' 'li' ' X':!Ol:S 

Ir~ t- rtV\NClAl. HlSlll,;; • 

YEJtk DlLl~~, t.X I...-LATU" kArt. ~~~ 

... H!iUIL YEAo''S 

I .. Gb 1'107 Iq~ 

-- - ------ - --- --- -- ----- -- --

0 .. <, 

-78::;;~ 119:.9 3 -.. (td"' .... " 

- -- .- - -- -------- - -- -- -~

7C~ 3 - 11'1383 -4('5.."'" (I I. v 

94b::-.o 1418~o l~ ·.J 

368:? (I I!~' 

(, ::>114 (I 

- -- ------ -------- ------ --- 197'18 : 15M. ::433'> :.~ :;z~:& __ a= ~~ _; ;L~ a w~r;~:~-~ 

10,}99 :?3094 ::7010 

0 .... bb 0 

1399 " 65 .. -"'" 

--------- ---- ---- - 1'1., .. 0 :'7'5.6v 3:(' 

=..:~=_~~~= _~~ ~L~= ~ _ =.-.::::c..;:; 

- ~~.!2 

-'1::3 

-1399 

...,.,- ..... ~~ 

3 4(19 

~ ".4 

-I~,: 

- 4 547 

-6!.::O 

196" l'i9v 1'1'01 I'N~ I'M'; • .,.,4 

--------- --------- --------- ----- --- ---------

0 0 \) .... 0 (I 

~ - "48;8 -ti1:!=:5 -81:!~ -t:' :-:'5 -:;7=:' 

--------- --------- ---- - -- ---.------ --- -- .-- --------- - 4')S5(, -"4tt38 81~ -e12~ -61:-:-::' ~ .. ,: -~ 

0 (0 0 (I II :>O :;7 110 

81.!>40 IVOSSO t :'--"":'-.l 4 ...... ~ 64001(00 ~4C oOV 

.... Il .. 806~:l ,i 0 

(I 41"" 41 :~ 51l ... • (t ,. 

--------- -------- - ------- - --------- 46790 :; .. :.81 41'j V , :"'5:11 7~, 4 :;ge7 _c~~~_a&a &~_ ~ _ _ ~~ •• ~.c._r_~ .;"t7_ .... _r.r 

~ .. ~.~~ .~ -- .-*~~-

191" 389 ... 47113 5t.5::'S .41 -:"'. 4 =149 

14 8:: 141 ... 7 0) .... :;16 

48'1 0 0 (> .. -nc. 177'1 " --------- ------- -- ------- -- --- --- --- 4e.TW' ::9:.81 J~;:u ~_'8 .,,~ "c9 .. ' =_ a;:a==_ ••••• a._. c~~_=, =-~ . ~2a ~";: ~2 ... = ... 8::&.2:&.- 

_ _ __ a .. a. 

-OU. 6948 b8'r ~ 050,. - {' :~ 

~~~ ::779 ~:":l'" 34' 0(' -~z·~ - 119Y 

-"4&9 .. 1,.9 41-5 5'00 ~.&b -1:-"" _'~5.~5-~ =_&_a.~~. &_~ ••• ~~ & .~== ~=z~ a2 ~&.~. == ~&&. ~.z _ _ ~. __ ~_~a ~s~ _.~~~. . ~& ~~_ ~ _ _ 

FINANCIAl EXHIBIT 6.3.3 PRlVATE OWNERSHIP AND OPERATION 

r 

y ~ .• " .. J;."n=-- . ml?----e. c:x _........... ....-: • 

0\ 

'" 
I , ~ 

 

I 

2) 

  

 

 

." 1\'(\1/ INCk!""oItlP AND l)FtT.AIIDN Lr"l0 f.Htllll: ~'4SING $YSIE" 

.. I SI::AI YEAf(S I ~~ 1994 

N1lJl.NI S EIr1<ESSED IN IH1JUS1N)5 01' ~NI 

Y£M DOlLMS, .1 INFLATION NHE ASSU£D 

WIVIOCNO OISIRllIUTiONS NOT INO..IIO£D' F INnNC IAI I "hUJfC flONS 

f"h'O.J£CIlD u\SH FdlW 

••• F ISl:AL .. EMS 

I~ 1'1& 1987 191:19 1'l89 I~ 1991 I"":: I""; 1994 

--------- --------- --------- --------- --------- --------- -- ----- - --------- - , 

Af 'F1. I CiH Ie .~S [If- CASU: 

,LT LOSS (I 0 0 0 0 0 (\ 0 r. 0 

ITnr. Will CII DO f.lOI H,DV I DE 

CA~t: 

I'tOf'f'1.C I A 1I ON 150 :'33 78533 IIY:ti ~ (.a:;.~ 4rOO"'..o b48~ 81=-.'5 8J~~ IU :::::' ~T: --8 

AODllIOt~S III FilED ASS£IS -: 576~\) - "4650 - 141630 -!#79 "'5-() -87b4v -IOO~ -Ir..o~ -44OroO . 6biX.o -.... " .. IILf<E ASC IN ACCOIlNfS ~C - J0691 I~ - 6818 8b93 653 -~" -Zll -6BOO 5848 :' : Y8 

lAX AOJUSI~IH -51(071 -5b9 -535'1 1U>410 14OM6 1~75 Z2942 49198 ;::17:;4 4111 

--------- --------- --------- --------- --------- --------- --------- --------- ------_. ~ --- -- -- TOll'ot AI 'f-1 I CAT 1016 01' CASH - 2'9:5149 -148::0 -'A6::4 O~9 1~1 -:?1 496 -2t.3l.7 ~4 s:L.:7 4.747 

------ -- --------- --------- --------- --------- --------- --------- --------- --------- StJUfW£S OF ChSH: 

' .. 1 IHCOItI. 15bo3 183 99 2 3-"l4I" 278111 31919 38941 47111 -.. ~:& 441 11 4 :'149 

!NCI<loASC IN Cl Jfdi£NT II Ali. 151 46 -931 34(19 - 4 3 47 -3::6 ::779 :!~1 l4<.l(o -:-9~4 . II"" TAX ftp.IUSTrtHH 0 r) '-' 0 0 0) ~"94:: -49198 -! ' -;4111 

--------- --------- -------- - --------- --------- --------- ------- -- --------- -.---- --- _. ------- l011'.l. SOI-"CES OF CASU ::0940 11466 ~bSc "l 4b 3 1 1!;92 417:'0 =:'9::& 10730 94:.6 6B78 

--- ------ --------- ---------- - -------- ----- ---- ------ -- -.-------- -------- --------- --- - --- ~ FlON __ aaa 

-::b42() __ sa I _~3;=zs=a 

::647 _K~ :.::£-01:?1 ~ a~zz~_a2~ 3 17::1 =& =. _=

30

~~ 

1 

__ .a~~

2f·=4 . ~a __ 4 ____

~I ___ ~_903:>3 ~_&a ~~u~~z_:tJ:: 

. ~~ ._&.a. 

~ 

TCfAL 

o I SCIJI .... T f-1'cESENT f1.;ESEJn Pfc£SENf 

MfE VALUE -A- VALUE -8- VALUE 

--------- --------- --------- --------- 0.1(. - 1 ::-01:;9 1983::8 

v.l!i -1446(19 01084 

il. ~r) -1::;0457 JOQ79 

·).~5 -le:S719 19441 

:: •• -:0 - 16E'Jl40 1'15::5 

D£fI: 10 CAPnALlliHIOH MTiD 

1'<£:1'_ ON ASS£IS 

I'<£: 'Uf'N ON ::AP If AL ilIA IIDN 

79170 

-4>3524 

-1~7" 

-14b277 

-1~;::16 

,'.58 

0.06 

0.17 

0.72 

<'.07 

0.17 

Ff<ES£NT VALLE OF "A- IS TtE H;E:SENf WIt UE 01' tHE CASH Fl.DM5. VEM 1 fN>OlJGtt 10 

Pfi£5£NT WtLUE 01' - .. - IS THE ~S£NT \MlUE 01' THE CASH FUIMS. YEM II ,..., _TO 

0.B3 

O.OB 

0.17 

1.17 

0.09 

co. 17 

I. ::7 

0.09 

0.17 

1.4<; 

0.10 

0.17 

.. 76 

0.11 

o • ., 

4 • .:.0 

0.14 0." 

:'.=::' 

(0. II 

0.17 

': .. 1= o. II 

0.17 

FINANCIAl EXHIBIT 6.3.4 PRIVATE OWfIERSHIP MD OPERATION 

; ' ~ M" ~d ·.··· '_ • ....... ------..... · .. ~ ;- c -::wr;:;;r: ----+ .-.. .....--

~ 

~i 

,,2 

0:2 

0 > 

::ur-

.0-:;: ,~ 

:-: ,''t 

!:: 

... 

~(J') -
I, 

~ 2) 

sce_lo • 3 Lrtl.jli f£I1O'c ~.~ .. ti 5.' !;iFn 

PRIVATE [MI;£FSHIP AND Of'E~TlIlN t= 1!iCA!... I£Ak5 1 '1lr.>-1 Y'l4 

NtDl .. "s Err~~ I .. ~ Of' a.H.H1 

YEAR Doll LARS, "'1 , .. LA T IIlN '"" I ( ASSlIrED 

u.s. GOVtr.rENI £af'£NDI rU<£s: 

I Nt-I1fd1A liON f'mlIlUCT S 

h55E' f'tJI'CHASC5 

Of'£r.:AT ION!'> cosnH HE. T OF fiEUtl~5E'1Ujr!'i 

k~ D COSTS 

t:VU1TY Clltnr<IKlTION 

SUliSIDY 

T01101. US ~'" T (Xf'£Ni)lT~~ 

u.s. &J\.'tT '~ "T REUIF'TS: 

h£CE IPl S Fhllrt LE("~ (GAD F~' 

'CoN fiOVEfd1ENT ilATA s.:lLES ..., 

hli{)Ulll) STAT IOH FEES 

ASSET foC!:OUF-nEfH 

-. Dfi'SS US£AGE f £lOS 

fi'OYAL I Y F£E~ 

TAl f\i:.\lt:NUE 

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., 

. 

~ 

. , - , 

~ " 

-

2 

.. 

ill 

• 

-
, 

, 

\ 

i 

• • 

I tel .. !,. "I IVl-LY r;HnflrERED. "..IVATELY ~D 

C'Jh"F.Jo:·fH ION 

ASSEIS 

F I XED ASStO l:i. 

GMlllNO SEliNE .. 1 

SF-OCE SEC-.ttE .. T 

TOrAL FIXED ASSETS 

LESS:I£OJt1Ul ATF.D DEf1(£CIATlON 

1M: T F IXtoD ASSE TS 

CUhhENT ASSET:> 

01Ht::1< CURf,Ern A5S£TS 

TOTAL ASSETS 

("APlfAl_IZATlnN AUIl LlA8ILITIES 

CAt-I TAlIZATHlN: 

CONHi:lftUT '~ O Cr .... ·ITAl. 

f<E IAINEIl £ ,Vi:N1f46S 

cuntA_ATJVE DIVIDENDS PAID 

TOTAL CN-I1ALIlATJON 

L()I\I6 TE~ DEIIT 

CI~'£,n llA{IIL IT IES 

I YO::) 

o :' 6:'O 

3576~ ... , 

1:'>0233 

·o.'07:!.87 

38.::64 

o 

Z4~151 

r..ooo 

1~3 

o 

'106&) 3 

1:9003 

15346 

• • 

LAl4D f<E:tOIE fif l4SIHfi !;YSJo. 

FI sc.~ Yi-I\f,!; 1~ 1~4 

F IHAHCIAL Pf\WECTJONS 

r1(o.J£CIED fo.'ILANa: StHTS 

... iY86 

<> 4 5 :-::70 

45:":!7u 

:!':':871.7 

~=3~ 3 

3603 2 

o 

:!5~36 

7'"~.o 

34002 

o 

10900:! 

136121 

14413 

FISCAL ~EARS 

1981 191.'" 

i. 

59411..0 

5941(·0 

3491~ 

:!4~95Ij 

44555 

o 

::!'K~ 

7':.uoo 

57096 

o 

13 :-oQ:, 

140587 

17822 

(I 

b5:-.) ) 

b5::'-' ~O 

~JO 

:':b1Q:;·' 

3 "S686 

<> 

296718 

7::;.. ... -..... 

849(>6 

o 

15990b 

1:?31.7,7 

13 475 

19B9 

i. 

7" 9670 

739670 

42'ftJ50 

3090~ 

~13 

o 

342b~3 

750 00 

1168:':5 

(I 

191B?. 

1 3 7719 

13149 

u.n .. ,s EIFfj£56ED IN JttDllSAM)5 OF 0 "''''1141 

VEAf( POlLNCSI 6); IN'LAlION AATE ~I) 

1'PKJ 

{\ 

84<0.-·;:0 

84Q("':!O 

494687 

34:' 3 

3982. 

o 

38515: 

75000 

1~765 

o 

lO 7b~ 

.384W 

15~ 

1'"1 

(' 

9b5(ot.) 

9b!>040 

57591:! 

~I:;:e 

.611: 

o 

4~to 

r..tIUO 

202878 

o 

2 77878 

':;"~77 

18605 

1992 

(I 

l o..f9(o4() 

.00'9040 

c.571 7 

:.5 I 9tH 

Z:!I'::! 

o 

4071.5 

7'5Ot)u 

~~ 

o 

3344'.>6 

)6::4 

;n,-0Q5 

19'9 ~ 

.. 10 750'40 

10 7" ... >40 

7 : .a--b:! 

3:~78 

47'9t.':! 

o 

384~ 

750() 'OO 

30 ~ 

- lI l l:'O 

=6541'9 

1<00000 

1'9lbl 

19'94 

.. 1.1"' .... ) 

III ""4':' 

~ 

:: : •• 4<) 

44'904 

o 

~ 

7:io ~O l 

3-4~ 

-17Ct ~ 

..a:; 

10..0000 

1~62 

TOrAL LIABILITIES 15:5148 1~ 1:l1t...,., 13681 ~ 15Q868 I~~ 1~~b2 727'-~ 119161 II N.= 

TOTAL l I ..... fH) CAF'I lALIlAl ION 24~751 ~953b 2<Kt505 296718 3 42693 385153 4-::i84.) 4011.5 384~ A>8 ; 44 

FINANCIAL EXHIBIT 6.5.2 LEGISlATIVELY-CHARTERED. PRI~ATELY-OWNEO CORPORATION 

..... 

~ 

~i 

~~ 2J1! 

.0" c> 

~C) 

r- (01 

~ 

-< 
, 

\ 

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2) 

llGI~ ATlVt:I. Y ('HAfHEtd:O. F1HVo\Tf"LY ONN£D 

!:r .... .,.·(lkA r HlN 

~\ND I<IKlIE SENS ING 5,' '''0::'' 

ol (. {fi.r.!; I';'r.'". 19'14 

'lWtUNTS En~SSt" IN "tOI~ OF ClJt(forMl 

''''' ..... 1iUL~~; 07<. .,. LAJllJH MTE ~"'D 

11!'C5 I'" WOF.I . INh Co# r Jr" .• NC T L(I~!j 

:1FI15 WlIICH 00 '101 f",,-nVI DC 

(US£ I HOld ltlG D'If- IT AL • 

IJEPr.:E C I r. TJ CH r oHll AI10R 1 

WORt It<<i C(..F AfH. lED 10 0f'1:r.: 

r 'AttiENI IT DIVJ()f-UOS 

ADDIl ION!J 10 EL-..llf11C.tT 

"£DlICT ION IN L. 1. Dl [If 

tr.::r.:EASI: IN WOf,I. 1I«i ClI,... j 1 f-, 

!.: ~ !f ~'r 5 OF WOh' I NG rAf-' 1 fAt. 

I.t: r I NCO! IF 

f"FIJI ::"05 I f.., ..... !;Ill E Of- CIS 

, HlIT CI.!> """Ott •.. 1. (lEL' f 

Of C. 'I:.ASE IN W(lM Ifa. CAf'1 rAL 

n1UY.l:5 HI WQf;1 ING CM' Il'\! , 

INrF£r.~" .D!:I '£A~'£1 TO CIIRf, .... N T {.!; ;'F" <: 

1 NC"I: ..1<;£ (lJcLh!:A!"'£ I Til n .. ,-

r,'!- N! L IA£<IL I TIE S 

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.. IUAN!. 1""- I"I<O.IEI I !'.e:; 

fMUtr:lt:!J !:o r r,I't1f"NT r,; '·'''A'';t-!i IN f I HIlla' Jr. Hr..IlIl::' 

••• r ~>C,.. YC,lf,S 

19t1b 198' 19, .. , 

r. t· '.' 

. 7lJ5 ~ - 11'i":'.o; -~~.A) 

.. -- -- -- - ----- - . - - -- -7&~ :; ~ 11? 3 - , •. t!G<. 

•• •• " q~ \ : '.' 1410:;" ::.;9:;0 

3.68~ " Il ~ 

0 '5114 

--------- ---- -- --- - ----- ---" 

1'97 '98 ~7~~ ' ~43.~o 

_= ;= ;a ~=: ~= _ ;= ~_: ~ 

10, ,9 

v 

'-:;9'1 

;::;; ... " 

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-4.oB:i(· 

. ... )()'"'..(. 

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076 .. 0 

r. 

---------" 

46/'9V 

:;;: .a _3: ;~~" 

191'9 

14: 0:! 

.. 89 

I~ 

0 

~48 ::!:I 

-':'48~ 

0 

100-::50 

0 

410'9 

--------- ~UU 

_:; ~_~;.z: 

'T-D94! 

7 .. 1 

(. 

I~I 1.,,,,-;: I~ J 

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-8 :;!;;:~ - A! ::':.:=,; 81 :- ~ 

--------- --------- ------- -- · 81:'::::; ··01 =:"5 · 81:.:5 

0 ., 1 I 1 1 :'t., 

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0 a3b!>-:: ,) 

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47 .. 3 

!lI7 

(I 

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~'9~7.!> 

4:B6 

--.-------

1994 

0 

7:: :.a 

--------- "': :;a 

:'1l~ 

.... ~ ...... 

CJ 

47 

~..:. --~ .;;:; 

" :-' 4'9 

.. 1 7'H 

- ---- --- :-::;''' •. 1'5 19798 ;:: 7~(J ':;' ":'~) 4679.. 3'9t.tH 4~:.... 5~.:1i '97t09S 4-'947 -= _ C - "' ;;;' Z' ''':' ~ ___ .. ~ .~ 

:!J-:L14 -:-"3":' ~ .. :-3 - 1(Ifl... l -IHb 69"to t.e-7:! ~ -:.: I t) - :"i98 

~: 4.!> "~ J 3 .. (>'9 . ~7 -~;::b :'77'? ;;:·,::'7 34(tU ~:' .. -II"" --------- ;::';0;" -1:'99 :ill 4 -!>::.~) - 489 4169 .. I::;:; :'1(.) - 4 -'& I~ 

• __ ~_~ ~ ==~~=~=; ~~~= ~~. ~ =~ =_~~ ' c~ =: .;a~ ~C~~L_az ~ ~: ~~ z_r =~ ~~~ _%~ _-&_= ~ -~_ _. ~_ 

FIhANr.I~L rXHIRiT 6.5.3 LEGISlATIVELY-CHARTERED. PRIVATELY-OWNED CORPORATiON 

.. £ - ..:;. "~~~*!t;'. . -r'S: ...-:-..,:+:- "--= -,. . 

..... 

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LEGISI,\1I'JFl Y ClWHEfiED ffilVtlTELY OWf£D 

CL~,'" or,,_ T I 01'1 

CDI\'IUEND DISTRI9UTJ(Wf5 NOT 1NCl.UD£D) 

LIMO Rtt10lE SCNSING SYSTEft 

FISCAL vC,.w.:; 1~85 19'14 

F U~:AL H<OJECTIONS 

~CTED CASH RON 

••• FISCAL VEI¥(S 

NtDUteTS £n~S5£D IN ltO~ OF aJJa:N' 

VEM Dca.HlItS, 6X .NFI AriON fIAT( ASSUI£D 

198:) 19& 1"187 1988 1989 1990 1991 1992 1"3 Ift4 

U'f'L I CATIONS OF CASH: 

NFT lOSS 

I1EHS Wltli:H 00 ICJT r'f''OYIDE 

CASH: 

DEr -f<EC I A TJ ON 

ADDITIONS TO FIXED ASSETS 

It«:REASE IN ACC~TS fiEC 

TAX ADJUSTtlENT 

TOTAL Af'PLICATJONS OF CASH 

SOI ~-CES OF CASH: 

NET INCOfE 

INCf~ASe; IN CLf(fCENT LIAS. 

rAX IoOJU3H1£NT 

o 

1~ :!13 

-3:576~ 

-30691 

-~7071 

-::!'r.5149 

1~'3 

1:5346 

0) 

o 

78533 

-94650 

1805 

-56'l 

14a~ 

18 ft 

- 9 3 3 

o 

o 

II 'l;tJ"l 

-1418:-~) 

- blU8 

-~:'5" 

46~4 

:!;'J'94 

3-~09 

~ 

(I 

4~ 

~79~) 

86~:; 

16646 

~~9 

27810 

-4347 

o 

o 

"')85I~ 

-876"" 

~ 

14846 

-31:!91 

31919 

-326 

o 

o 

648~ 

- IOO3:iO 

-~9 

195~ 

-:!1496 

38941 

2779 (I 

o 

1iI1:r.'5 

-I~~ 

~13 

:::!'942 

-:Z~lL7 

47113 

2757 

-2:!942 

o 

81:;::"5 

--44()0j", 

-6800 

491"18 

7'9(k!4 

:w.5::8 

3400 

-"'f I "18 

o 

81:!~ 

-6t.Oo.00 

~46 

:'11'::.4 

~""'tCl 

44133 

-::'924 

-31r-.... 

o 

::.~~ 

- 44090 

2 3" :;.111 

".,' 47 

"214~ 

- 11ft 

-~4111 

TOlAL SBJ<C£S OF CASH 30948 17466 26503 2::;46:3 31592 "I 7~ 26cr.:& .0730 94:0.. 6818 

CA!.H FUJW -2642')1 :!647 - 8121 31723 301 20Z24 561 9035.3 67.!8:' 56585 __ .•• c~ • . ________ a __ aaa:Ea= __ •••• :z::a ::a&aa:_. _______ ._ &8.a.ar a _____ •• ____ ~_ .&a~_. ¥.~ •••• _. 

TOTAL 

DISCOl .. T ffi!:cC:NT PRESENT PRESENT 

RATE VALlL -A- VALUE -8- VALUE 

0.10 -1::(0159 

0.15 -144b<)9 

0.:'0 -159457 

0.:'5 -165719 

O.-V - 168840 

190328 

81(084 

38079 

19443 

105::5 

DE&l 10 C~JTALllATION RATIO 

fiE TlIf'N ON ASSE rs ~ TUf<N ON CAPITALIZATION 

78110 

-63~24 

-1:'CH 79 

-146277 

-158316 

0.58 

0.(16 

0.17 

0.7:2 

0.07 

0.17 

0.01 

(\.08 

0.'7 

I. 17 Co. (.., 

0.17 

I. 27 

0.('" 

0.17 

1.49 

0.10 

0.17 

1.76 

0.11 

0.17 

4.60 

0.14 

0.17 

FINA~r,IAl EXHIBIT 6.S .4 lEGISl~TJYElY-CHARTfREO,PRIYATElY-OWNEO CORPORATION 

0.11 

0.17 

;;:.12 

0.11 

0.17 

...... 

0\ 

~I 

:=0.- ~~ 

0-0 

c:::> w 

r- m =i_ 

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, 

2) 

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. .., § . 

r-,rl '". ... d ... ! . LIIIIll J.UtUI£ ~ 1«, .... C; :~ " 

ltGI 5 IArl''£I. Y 0_T£k1:0 ...... 1.,,'.1£1.·. ~C, FiSCAl V£''''"!i 1?tr.. 1~4 

( .(]F.' (lkl\ 1 II .. Fa Hf.HC I AL FlflJJE C IIlUi 

f1((IJU: U 0 U.S, GOIoIt:"l1ENI CAt;t, fl nws 

1I. S. GrrJ(N'lENT E .... NOllIJk-ES. 

I NFOfcttA TI ON f1<1 10lII: I 5 

ASSCT f1It<OIt ·5£S 

or1:r' A1I01t; COS1:iCtLT or- hf;-

1"ltURSEI1E:1HS 

r..n) COSTS 

EC'lI1 • V corURI I<'JT ION 

saJEtSILY 

roTAL US GOV'T EXf£NOtTl!REfO 

U. S. GOV£Htlt£N( f\:ECElf TS. 

t<t:r:r::If·T5 FROI1 l EASE «linD FACI 

NIU-C,(J'JEN'lENT II'-H~ SALES tlND 

GMlIlND 5 1ATlflt4 FEES 

A5SE 1 R(T OUFrlEln 

1()(';!'S IIS£AG£ fEES 

ROV.4L TV fEES 

1 Ali r..-EVEIa£ 

IifVllIENlJS RECEIVED 

TOTAL US GOV'T k£CEIPrS 

NET US wv· r E)"F-ENIIlTlIRES 

19~ 

10 116' -

V 

o ("~"'-' 

:> 47~O 

1 "'0(0(..., 

::-. .... 'i'::6 

2 6100 

o 27~7 "J 

:;2;5 

(\ 

I) 

., 

·S.IO:'S 

- 1<:061,)5 

I ?Fob 

1.31 .. 0 

() 

o 100<.0(' 

o 

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lbSb3(· 

=6100 

V 

(0 

71 .34 

o 

o 

o 

3~:! '" 

3~3'i'6 

••• f 1SCAl. VU .. <5 

l'i'B7 19d8 

14 ~,zt 

( . 

( . 

t'-M"-"::, 

c· U:,fA ..... 

:! •• 4 -:s.-, 

26 HI() 

.. 

.. 77-:8 (t 

o 

(1 

338;'9 

17'-'4.'= 

1~1 '_ 1t 

.. 

(, 

.,_ ...... o 1::,. ",,-· 

1491 ~ 

:61(", 

,~ 

" 7:!le 

(I 

I . 

.) 

3~~ IO 

'i :O~~ 

1'I8Y 

14 ..<1(' 

o 

U 

00~1() 

o 1 :· .......... 10 

144300 

o 

o 

o 

6.,3:1 

o 

o 

" 

6.,:;5 

137'b5 

AftULIIfI!> EJrr·M: !<'""" IN T"' ~ Of- CU" .. ~NT 

Y£Nc f ..... lr.r.5, 6" IHHAilON '<AI(" .... ·:JiII'£D 

19'ro 

14~Q 

o 

I) 

I'x.o()o 

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17'il4O 

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~ 

1731-.85 

1991 

I n.:;;o o 

.(.-.. 0(, " 

(J 

IbV...v 

2078:)0) 

o 

,"l 

(. 

7t7" I . 

2:!94 ;> 

r, 

3041~ 

1 774 ;a 

""~· 

2("hto) 

" 

J,"' .... 

it 

~Iy ...... -. 

:!4J9t:k. 

() 

" ,. 9:!1)4 

(, 

4'11"" .. , 

::i84e:: 

.. )7 • ...e 

I,"~ 

= 4 :: 10 

( . 

" 10.....,. ... • 

I r..AfIi." -. 

:.'V9-::IU 

o 

c 

(> 

~52 

(0 

.3 7~ 

3L-:;Q 

7=fb~ 

1~:'75 

1'194 

27';40 (\ 

o 1 ",0(0() 

o ~\ 

192-:"·4 0\ 

o 

o 

o 

.168& 

.-. 4111 

Jr.1I 

4406Y 

1;;'767:: & .... ~_lIiO_ .o::._ :&-=_~~a ~~~_.o;:s;.:.::z~ :r;::&.~.a=#;;;, .. s ___ a-.aa~_ "._ .. 5--.._ a -... =-,.;; .. , ....... __ -.-:o..c.a. e 1. "a.a _..a- _&.:a:a. __ ~::a~ 

rOTAL 

PIsc:oe .. T r1<E~NT f~SENT F1<I:SL .. r 

AATF. VALLIE - A- IMU£ -8- VAl U£ 

0 . 10 

(·.15 

0.='-

(t.~ 

(t _ ~(t 

6861 /0 

-:~ ?14 

4H'=4C, 

~ .. li6 "3 

::t.. r~ 7iJ 

,,4,481 

18='i4~ 

8!:>YI~ 

4"'8~ 

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I. S~::, . 

7 .. '&(V.4! 

4 ':'61::':5 

3Nl 7 · \Q 

84-! ~ 

fH£S£"r ,.,AI UE OF - A- IS THE FRCSENT YHLIIE (IF Tt;E r:A:?f n.~"'i. "'AI( I Tt1f;UJGtt 10 

f'f;.ESEHT VALUE OF -.- IS THE F1'<£SENT VAt UE !IF 11£ CASH F1 :Jl':'. -,'!:M II UfO K I~ 

FINANCIAl EY.;H~IT 6.5.5 L[G'SLAT!VflY-r.~ARTFR~O. PRIV~T[lY-OWNEO COR~JkATION 

r - ' t -S II L.. ~ . .--%4"_ • _ ....... ==+= zz;;; 

..... 

..... 
• 

• 

• 

• 

• 

• 

• 

71 

7. NONFINANCIAL ISSUES 

A • .,eral overview iI presented in the followin. parA.rAphs of the numerous 

nonf1nanc1&J !Slues related to the establ1lhment of an operatlonaJ land remote 

senlinl system. The .. illues are not new havinl been d1lcul'fId for at least the 

lut haif-decade. Many of the iSlues still beina d1scuued were identified at the 

.tart of the fR TS/LANDSAT prolram over a decade alo, others that have been 

identified in recent years as more det. l.&ed propo .. l. for a permanent operational 

framework have been put forward [2,6, 1,12,13,19,37 .. 46]. 

Thla section beainl with an analy.iI of the philosophical and practIcal 

dimen.ionl C)f the land remote sen.ina debatel it addre .... the que.tion "why has it 

be., 10 difficult to develop a permanent framework for us!", this technoloIY?" 

Issuel are then d1lcuaed in term. of four broad cateloriell international and 

foreign policy, national security, leaaJ/relulatory And institution.l. FlnaUy. there 

is a leneral summary of the pollcy requirements which must be met for .uccess in 

creatlnl an effective permanent framework for U.S. land remote sensinl activities. 

7.1 Commercialization of Land Remote Sensing: A Persiltef'lt Political Question 

The experimental U.S. remote sensing prOlram has been underw~y since the 

late 1960s, with the first satellite put in orbit over a decade alol over $1.' bUllon 

has be., invested in the prolram to date. Over the past flve years, there has been 

an extended and complex debate over how best to brinl land remote sensing int~ 

operational status. Sunestions have inc luded I creating arl internationai con .. 

• IOrtium modeled on Inte1sat to own and operate the system; reconfiluring NASA 

as system operator; ** creating a new private corporation for earth observa .. ... 

tions; and, after extef'.ive revi~w durinl the Carter Administration, assilning 

the management role to the National Oceanographic and Atmospheric AdmL,lstra .. 

tion (NOAA) pending "event1~!'1 transfer to private sector ownership and opera .. 

tion •• *.. Now, the current Administration has decided to terminate a direct 

• 

•• 

••• 

•• *. 

Thla sunestion is contained in National Academy of Sciences, 22. £!! • 

This suggestion is contained in Augenstein, Shapley and Skolnikoff, 22· S.!!., 

and a biU introduced in 1979 by Senator Adlai Stevenson (0-111.>, S. 6~3, 96th 

Congress, 1 st Session • 

This suggestion is contained in a bill introduced in 1979 by Senator Harrison 

Sch,'1\itt (R .. N.M.), S. 87', 96th Congress, 1st Session • 

The Carter decision was announced in November 1979; it was contained In 

Presidential Directive '4. 
;; 

·1 

I 

-j 

! 

l 

~ 

79 

government role in operating the system as soon as possible, with land observation 

sateUltes to be taken over by the private sector, either in cumbination with 

it 

weather sate lUtes or by themselves. In stark contrast, in their respons~s to a 

Department of Commerce Request for Information 1n the tall of 1982, three major 

aerospace firms which have been intimately involved in earth observation programs 

suggested that the whole discussion of an operational s)'stem is premat~t';, and th:!.t 

any move to commercializlI.: land remote sensing at this time woulG undermine the 

long-term viabUlty u1 the enterprisel 

The point "'~re is not to analyze these specific proposals in any dete.lJ, out 

rather to suggest why th"re have been so rnany widely different answers to a single 

question: "How to assure that U.S. society gets the maximum benefits from its 

investment in remote sensing research and development to date?" If it reveals 

nothing else, the history of the discussion so far tells us that there is no one "right" 

answer to that question. 

Why is this so7 There are both practical and phi1osophic~1 reasons. They 

include: 

it 

• The lANDSAT demonstration program has not been a success, if 

succe~ is defi!ied a5 developing the information and experience required to make informed decisions with respect to the de~irabillty of 

public vs. private ownership and the form of private ownership 

• 

• 

There is a mismatch \)etween the capabUlties provided by land observation technology and the structure of both public and private sector 

organizations which might benefit frorn those capabUlties 

land remote ~ensing can provide a wide variety of benefits ranging 

from intangible public goods to high doUar value private returns; there 

are strong differences in political philosophy and values over which of 

these benefits shouJd be given priority in designing a permanent 

fra mewol'~: for operating the technology 

• In a related wa)', there are persister.: .': d'~ ~rences in perspective about 

the respecti'/e roles of governmen't 81:'1 the private !Jet:tor in prov~ding 

various services to societ)' and about how best to insure return to the 

public from its investments in government research and development 

programs 

• Finally, land remote sensing has inherently global dimenSions, it. only 

because it operates using resources which are recognized a~ global 

"commons"-outer space and the frequency spectrum. While it may be 

possible to design a framework for the technology on a national basis, 

there are inescapable international dimensions to the problem. 

Remote sensing poHcy under the Reagan Administration is reviewed in M. 

Mitchell Waldrop, "What Price Privatizing LANDSAT?" 3ciencC!, February 11, 

198.3, pp. 7'2-7'4. 

-. T'""'"i-

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o 

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• 

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• 

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80 

It is beyond the scope of this report to discuss al'y of these g"neral concerns 

in depth, yet they provide the context within which the specific issues are 

discussed below. The recent discussions of commerci~1ization, in particular, have 

been carried out against the backdrop of an expectation created early in the 

LANDSA T program that land remote sensing would create billions of dollars 

annually in benefits. * If indeed the technology, as soon as it was relatively mature, 

could have such an impact, and if the benefits could be provided as priv.l.te gouds, 

then clearly rapid commerciaHzation was a pl~usible objective and pNential 

operators should be struggling to be first in,Hr.e to have an opportunity to profit 

from remote sensing. 

That is clearly not the case. The market assessment presented in Section 4 

indicat~5 the limited size of the current market for LANDSAT products and 

suggests only moderate mid-term prospects for growth in proQucts for which 

specific users would be willing to pay a significant price. There may well be 

extremely high benefits !2. society from employing land remote sensing technoiogy, 

but it seems extremely difficult to provide those benefit.s in terms of privatp. 

goods. The bl'eakdown of potential benefit, given in Table 7.1 may be useful in 

understanding the mixed publlc good/private good results of the use of this 

capability; that understanding is in turn a key to recognizing why it has been so 

difficult to reach agreement on most of the issues under debate. 

In the end it is the political questions-the division of rol.,s an\. o'espol1si,-

biHties between the pubJic and private sector-which i:5 driving, and complicating, 

all of the discussions surrounding the permanent fl'amework for land remete 

sensing. In many ways the current situation may be considered unIque in that it 

involves a tt:chnology developed and demor.str~ted totally under public sector 

auspices and for which the federal government remains a major user, yet which has 

still been expected throu3ho.ut its development to be eventually transferred to the 

private secto:'. Current patterns of operation, with users both inside and outside 

the government, run the risk of being disrupted by a possible transfer of the 

*Por example, in 197; the value over a two-year period of information on 

wheat crops was estimated at $400 million to the United States and $1.7 billion to the rest of the world; benefits of a 198; operational system (fer 

information on wheat only) were estimated at $300 million/year for the 

United States and $1.5 billion/year for the rest of the world. American 

Institute of Aeronautics and Astronautics, Space: A Resource for Earth (New 

York, 1977), p. 28. 

~---.--- ,1- .• ,';: .:,' ~~ .... __ ... b ... fH ... '· __ ... _______________ 

._ ..... ____ . .- ,*, .. 
• 

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81 

~----------------------------------------,------'--------------~ TABLE 7.1 U.S. INTERESTS IN CIVIL REMOTE SENSING 

TEC~NICAL WTERESTS 

A. BASIC ~CmmFIC KNCilLEDGE ANt) UND£R'iTAtlDI~(I OF VARIOUS fE'\Tl!KES OF THE E.''''TIt 

C. fiLOBAL ~A?ACIih.) FOR OE,~LING IHTH UAT:ONAL ANO :~TERNI\TlOII,lL ,>nOB:',MS I~I AGRt· 

':lILTURE, E~ERr,V. ETi.. 

C. TECHNOLOGY DEVF.LOPMF.NT PROVIDING ADVAr~CEMENTS IN REfi(lTF. WISIlIG AND RELATED 

FIELDS 

~-- PUBLIC INTERESTS ------------------------------,------------------~ 

A. SPFClFIC feDERAL NEEDS AND FUNCTIONS WITHIN VARIOUS AGENCIES AND PROGRAt~MAnC 

P' .S 

B. PUBLIC INTEREST NEEDS AND BENEFITS FOR STA1ES, LOCALITIES, UNIVERSITIES AND 

GENERAL PUBLIC 

r.. SUPPORT FOR U.S. DECISION MAKWG BY PROVIDING INFORMATlOr. ON SUCH ITEMS AS 

CROP PRODUCTION IN FOREIGN COUNTRIES 

ECOPIOMI C INTEREST 

A. ECOtluMIC INTERESTS OF U.S. PRIVA':'E SECTOR tN A VARIETV OF FIELDS, I.E., OIL AND 

MlNEi<AL E~PL\)RP,TlON 

~. U.S. CO~ll'IETiTIVE POSlilCtI IN SPACE TECHNOL03Y INCLUDING MANUFACTUI\lfIG AND SERVIC· 

!NG OF EQUIPMF.~r. DISSF.MtNATION OF DATA, PROviSION OF TECHNICAL SERVICES AND 

ANAL.VSIS 

C. ~EDUCTION IN INFORMAllON COSTS fuR FEDERAL, STATE, LOC~L ~ND PRIVATE SOURCES 

D. CONTR I BunON TO GENERAL ECONOMI C GROWTH BOTH OF LOCs AND THE 'I/ORLD AS A WHOLE 

E. RETURN o:~ SPACE INVESTMENT WI: ,1 ECONomc AND OTHER KINOS OF BENEFITS FOR NOMINAL 

COST 

U.S. INTERNATIONAL WTERESTS 

A. 

B. 

C. 

D. 

E. 

F. 

SUPPORT FOREI~N POLIC~ THROUGH PROVISION OF INFORMATION AND RELATED SERVICES 

MAINTAIN U.S. LEADERSHIP WInI THIS TECHNOLOGY AS ILLUSTRATION OF CONTINUED LEADER. 

SHIP IN SPACE 

SuPPORT lI.5. POSITION WITH Lues HONOP.ltIG COMMITMENTS FOR TECMNOLCIGY ANO BUTTRESSING 

POSI':'ION IN NORTH/SOUTH DIALOGUES, THE U.N. ~ND OTHER F~RU~S 

suppor(j tN':'ERNATlONAI. (;OOI'ERATION tN ~P~CE VIA COII,MHM!::Nrs TO FOREIGN GROur.c STATIONS 

ANJ OTHER INVE.STORS FOR DATA c:mmNUIiY AND EVE~TUAL SYSTEr1S COMPATIBILITY 

PROMOTE OPENNESS THROIlGH THE TREAmENT 0': GENfP.AL IN::rIRMATION AS AN INTERNATIONAL 

GuuD 

GENERAL INTERNATIONAL COOPERATION AS MODEL OF EFFECTIVE WORKING RELATIONSHIPS AMONG 

NATIONS 

SOURCE: EARTH ItIFORMATION FROM SPACE BY REMOTE SENSWG, A REPORT PREPARED FOR OSTP BY 

ImiNOAUG£NSTElN, ""erIS SHAPLEY AND EUGErf£6. SKOLNIKOFF. JlINE 2, 1978, PP. 4·7. 

, 
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82 

system. Thus both poUtical interests and nrganizational inertia are involved in this 

transfer, makins the decision even more dU1icult. 

Successful commerciaJizl.tion depends on whether there are sufficil!'nt private 

benefits to lead to an eventual sat!.sfactory return on investment for a private 

operator, recognizing the existence of a continuing and su~stantial government 

demand for land remote sensing services. As one of its findings, the Subcommittee 

on Space and AppJications, of the HOIJse Committee on Science and Technology, 

concluded that 

The greatest negative influence on the evoltJtiol1 of an operational cIvU 

and land remote sensing system has been the inability to fully evaluate 

the relationship between LANDSAT and national needs to 'provide a 

long-range policy that is continuously reflected in the budget. 

AU in all, given the economic factors discussed elsewhere in this r>!port, the 

past history of the LANDSAT program and the current nonfinancial issues <1JsclJssed 

in this section, the task of dt!signing an appropriate long.ttwm framework for the 

land remote sensing system is about as chaUenging ~ t.:Ine could ever flnd. As 

mentioned earlier, it is obviolJs that the issues raised reflect fundamental dlf .. 

ference~, in politic/,i! philosophy which exist in the U.S. society; the. dominant 

philo~ophy at a particular time determines priorities and defines the appropriate 

role of government. All of these diff'!rences are the topic of continuing poUtlcal 

debate! and are unresolvable analyticaUy. Inevitably, au eventual decision on a 

permanent framework for the land remCite ~(.!nsing is going to be a political decision 

in which one set of value5 prevails over another. This report can make a 

contribution to informing tho~ participating in such debate, but it cannot 

substitute for the political process. 

7.2 International and Foreign Pollcy Is.!!:!!! 

The capability to make useful observa tions of all parts of the earth's land 

surface from orbit, using a U.S.-developed and operated sateUite system, has 

provided a foreign policy opportunity for the United States. It has also created 

international demands that the UnIted States, along with other potential operators 

of earth observation systems, be governed by a series of existing and emerging 

international obligations and principles related to remote sensing. These opportunities and obligations d~fine ar.. essential part of the context within which 

• *House Committee on St;ience and Technology, Civil Land Remote Sensing,~. fit., p. 4. 

--'------" y---=-'- , • I ", .' J. .A.,. t(I(!Io ,,,,, 

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~ ____________________________ ~L-'~_ 
83 

varioul scenarios related to a permanent U.S. remote sensit\g venture must be 

evaluated. 

Current U.S. government policy with respee. t to the international aspects ot 

remote sensing dates back to Richard Nixon's 1969 pledge before the U.N. General 

Assembly that "this program wiU be dedicated to producing information not only 

for the U.S. but abo for the world community." in the years since, the United 

States has put fcrth, and defended strongly Against critic1srn, a policy of open ~nd 

nondiscriminatory access on the 'part of all countries and the'..- citiz:ens to the 

products of the LANDSAT system. The United States has taken positive ~teps, 

ranging from aUowing other countries direct access to LANDSAT spacecraft with 

their own ground stations to providing t~chnical assistance to countries wishing to 

use LANDSAT information, to Implement Nixon's 1969 statement and it! open 

acces:. policy. Any attempts to reverse the policy, to change the expectations or 

to modify the patterns 01 use which have evolved over the past decade wUl be 

certain to create international tenslon. 

The current state of international thinking on remot.e sensing, at least on the 

governmental level, is per~aps best reflected in the report of the 1 ~82 Unispace 

Conference. That report noted that although remote sensing is st111 in c\ 

"preoperational" stage, "it 15 only a matter of time-and a short time-before this 

very lmportant application attains a completely operational status." Given this 

reaHty, tne report said "agreement should be reached on principles governing 

sateUlte remote sensing. Work to thJs efff!ct .... should be continued as a matter of 

priority, aimed at speedy agreement on such prinCiples." In addition to a 

framework of general principles, concern was expressed that 

SateJUte operators should give assurance about contin'Jity of data flows 

and provide indications about estimated lifetin,e [of] preoperational 

and operational systems in order tu help all r:uuntires, in particular the 

developing countries. CompatabiUty of various systems al't; data 

formats is another important aspect .... 

Since remote sensing can collect data from all countries, it is therefore 

possibJ~ to use shared or internationally-owned rernote sensing satelUtes .... 

It is suggested tha t a study be undertaken to asses, the need for and the 

viabl11ty of a worldwide remote sensing system. Such a study could 

considel' various ways of providjng remote sensing data-including 

regional, bilateral, multilateral and international arrangements-with 

the users bearing therefore the development, production, launching and 

operation costs of the satellites. Assuming that anyone of these 

systems could provlde assurance of continuity of data formats, avoid 

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84 

forced obsoleGCence of equipment, and enable the development and use 

of stand.ardlzed data analysis software, the study should in particular 

indicate the comparadve cost of such systems to the users vis-a-vis 

systems currently in operation and/or under development. 

A persistent issue in internatior.al dlscuulons is "a possible situation in which 

data are not available to the senHd State but are avallable for commercial Ili,d 

othe-r forms of exploitation by another country." At the conference 

Some delegat\ons expressed serious conce,'n rogardlng the disseminadon 

of data collected by remote sensing sate lUtes., While several developed 

and developing countries felt that such informatlon should be freely 

avaUable to any interested State, most delegatIons felt that the consent 

of the sensed State should be required before dsta could be reJeased to 

a third State organization or third party. Some developing nations feit 

that the consent of the sensed State must be obtaineu before ser.sing, 

even if the information was not to be disseminated beyond the 

concerned Statesl some felt that in no case should the lnformation be 

available to any State other than the sensor and sensed States. Most 

representatives expressing an opinion on the point vreed that priority 

1n access to data must be accorded the sensed State. 

The central points made by potential foreign users ** of land remote 5en~ing 

products, then, are: 

• The need for continuity In aperation and overall system characteristics 

• The need for guaranteed access at an acceptable price with provisions 

to avoid intrusions on national sovereignty. 

The United States has attempted to deal with these pressures from, the 

international community in ways that maximize these U.S. poli,=}, objectlves: 

** 

• Maintaining U.S. leadership in space technolcgy 

• Assisting the economic and social development of the developing 

countries 

• Promoting international cooperation as a means of achieving common 

objectives and as an example of the benefits of harmonious relationships among natIons 

• Ensuring U.S. abUlty to use space technology for its own national 

objectives, including operatIon of earth observatinn syst~ms by both 

civil and national security agencie$ 

The current debate is between the United States, as the country, farthest 

along in developing a remote senslng system, and countries witho>ut plans to 

develop their own systems. In general, other potential system operatorl.i, such 

as France and Japan, have moved to a position close to that of the United 

States on such issues as the need for prior consent of a sensed state. 

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Enhancing the development of the U.S. economy by fostering new 

industries, new employment opportunities and new marketl for U.S. 

firm!. 

In seeking to achieve the .. objectivel the U.S. govern,,,ent hal ('ntered 1nto a 

seriel of legal and poUtical obligatlonl. The .. include. 

• The provison, of the ()uter Space Treaty of 1967 which require "States 

party to the Troaty" tn ''bear international responlibUlty for nalional 

activities In outer space, ••• whttthftr such activitles are carrIed on by 

govdrnrraental a,enciel or by nongovernmental endUes,'1 .uch nongovernmental activitiel "require authorization an~ continuing supervision by the appropr'iate State party to the Treiity." 

• A series of agreements negotiated with other 80vernm~nts to permit 

them acce~s under mutually asreeabie terms to the u"tput of U.S. 

remote sensing sateUites usinS foreign owned and operated groulld 

station,. 

• Through our advocacy of the pollcy of open, nondlscri:ninatory access In 

UN forums and otherwise, ' fairly explicit obUgation not to create 

either formal or informal (such as unaffordable prices or continuing 

change!! in technical format of the system output) barriers to any 

country, organization or individual who wants to use the system, with 

ali u~ers receiving nondiscriminatory treatment. 

• Thf'ough negntiations in the International Telecornmunlcations Union, 

agreement not to use the frequencies allocated for commurdcat1.1! 

remote sensing data strl!ams to ground stations for any other purpose. 

Cilven this mf!lange of concerns, objec'tlves and obligations, a few of the 

international issljes which are suggestl!d include: ** 

Future International Negotiations 

Over coming years as remote sensing capabUl '-ies evolve, there are sure to be 

continuing international negotiations. These will take place in the United Nations, 

other permanent multilateral organlzations, ad hoc or informal multilateral groups, 

or on a bUatera1 basill. Plrtlcipation in these negotiations ma) vary, dependl.'8 on 

the framework adopted for U.S. remote sensing activities. t1 a private ~ector 

option is selected, what interrlational role, if any, will the private sector operator 

want the U.S. government to play? What role will U.S. government agencies 

believe is required to protect U.S publlc interests? 

* Treaty on Principles Covering the Activities of States in the Exploration and 

Use of Outer Space, Including the Moon and Other Celestial Bodies, 1967, 

Article VI. . 

**This discussion treats only the distinction between a government-owned 

system and a privately-owned system without attention to various scenarios 

for private ownership. Such treatment is provided in the comparative 

analysis in Table 8.2 

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86 

Evolution of International Principles to Covern Relnote Sensing 

After ten years of debate in the U.N. Committee on Peaceful Uses of Outer 

Space (COPUOS), there remain major differences. Prospects for consensual 

agreement (which is the standard practice for this committee) are dim. In a 

similar situation with respect to direct broadcast satemtes, a majority of countries 

.. reed to mO'ie the issue from COPUOS to the Pol1tical C " ,1mittee of the General 

Alsembly, which operates according to majority vote. The United States opposed 

this move, and the principles which resulted from it. Might the pt"s~ect of 

transfer to private sector operation stimulate a simUar attempt? 

Maintenance of Open Nondiscriminatory Access 

The interest~ of a commercial operator might sometimes confUct with the 

long-standing U.S. policy in this area, one way of increasing the value of remote 

sensing products is to llmit their dissemination. Another is by providing priority 

access to some users. The Department of Commerce Land Remote SenSing 

Satemte Advisory Committee recommended that there be a government requirement "that the operator, whether it be the government and/or the private sector, 

subscribe to the open sky pollcy-which prirnarily means that anyone, anywhere. in 

any countries can purchase the data at equitable prices." - The current government 

policy, as enunciated in President Reagan's space polley statement of July 4, 1 ~82, 

is to "support the publlc, nondiscriminatory direct readout of data from federal 

civil sy:stems to foreign ground stations and the prOVision of data to foreign users 

under specIfied conditons." -- The polley is sHent on requirements for non federal 

systems. 

One way to restrict access to remot~ sensing data is to adopt policies which 

are expllcitly discriminatory. Ar,other means is to price certain data (such as 

"quick looks") in ways that exclude some potentially interested users. ThiS 

possibility has been noted by the International community, for example, a 

Romanian spokesman told COPUOS this spring of his concern about "the relatively 

new question of considering satelBte remote sensing activities as operational, on a 

purely commerclaJ basis, with the immediate conseqlJence of augmenting by 

-Department of Commerce, Minutes of the Land Remote Sensing Satemt~ 

Advisory Committee meeting, November 1982. 

--The public statement of Administration space policy is contained in a White 

House Fact Sheet, "National Space Policy,'; July 4, 1982. 

•• •• ________________ ....... ---'fr-" _41..... •. __ " •• '.. .~·'!I~""."~5- - T.'; W'. "" 
81 

several times th. cost of remote sensing products. Under these conditions, 

effective access to the data is practicaHy possible only for developed countries." 

How wlU considerations of COlt recovery and even co,...\.,,~rcial profit interact 

with an open accelS policy as an operational system evolves? WlU system products 

be provided to poorer countries on a subsidized basis? What are the interactions 

"mong U.S. polley objfCtlve:s vill-a'!is deveiopil'S countries, th~ economic viabUlty 

I)t lin operational syst~1TI Ind the aeneral concern of avoiding ton.lon81 Although 

poorer countries may In the Ions term have ttae prospect of receiving the most 

oon,,11t5 from remote sensing, who wUI mike the investments required tor thom to 

be effective users, and thus a growins market for the syuem? In the short run, 

would more expensive products from a private commercial system drive away nonU.S. users1 

Meaning of U.S. Leadership in Space Technology 

Current policy is to "maintain United States space ieadel'~h'p," particularly in 

"critical aspects of space, appUcatJons and technology," in these areas, the 

ol,j.!t:tlves is "r»reemlraence." * The meaning of this poUcy with respect to remote 

s:nsing technology Is unclear. Ciiven the emerging foreign competition in the field, 

how wlU the U.S. government respond: by a continued program of R&D in the 

remote sensing area, keyed to 5taying ahead of competing systems; by reliance on 

the private sector to develop a superior system for the United Statest without 

continuing government R&D subsidies; by providing l5ubsidi~s or incentives beyond 

R&D to a commercial operator in order to help it best foreign competition and thu. 

bring the benefits of a growing remoto sensing industry (sales of equipment: 

training of non-U.S. personnel; consulting ~ervices, etc.) TO the U.S. economy? Or 

is cI',11 remotf' ~ensing not" "critical" area, and thus ""t on". which requires U.S. 

ieadership? Wh:.n wouJd be the! COst..s. ira term3 of mo .. ~\. ,J foreign policy or 

econom'c objectives, of a no.,-U.S. 5yst~1TJ dOl11lnQ·~ .. jg the world market for 

remote senSing? l'hls co.'Jld happen if no commercial ~j"stem is establlshed and the 

U.S. government withdraws from remote r. 

reaches the end of its lifetime, or if the U.S. C'J 

---; 

4Sct~vitv after I.ANCSAT 0' 

:;l,d vent,Jre is unsuccessful. 

The public statement of Administration spacl! pollcy is contained in a White 

House FiSct Sheet, "National Space Pollet," July .J, 1982. 

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• 

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Future of Non-U.S. Ground Stations 

It 15 likely that any future U.S. remote sensing system wUl use a data relay 

satellite to return data to U.S. ground station. Thu3 there will be no strong 

requirement, from a U.S. perspective, for direct readouts to ground stations 

outside the United States. For a number of yean, the U.S. Jlovernment has 

permitted, even encouraged, the development of such ground stations, mainly as 

means of underUning U.S. pollcy on open acc'.:ss and as a symbol of friendly 

relationships. Other governments have entered into agreements with the United 

States government with respect to access to LANDSAT and have ma<1e substantial 

investments in ground stations and related data proces:ling and interpretation 

equipment. The motivations of these countries have ranged from national prestige 

to Ii careful calculation of tangible payoffs frorTI the use of LANDSAT data. 

The role of foreign ground stations in an era of operational remote sensing 

systems is problematical. If cost recovery is the objective of a gov~rnment 

system, will the access fee and royalty arrangements have to increase to levels 

which foreign operators will find hard to accept? WiH the U.S. go\'ernment provide 

what is in effect subsidized acces! to foreign operators'? If a private U.S. system 

evolves, what changes will result in the relationship with non-U.S. entities, which 

negotiated their current arrangements with the U.S. government? Would some 

countries prefer to deal with a non-U.S. system rather than a U.S. system which is 

privately operated? Could non-U.S. gr'ound stations be effective in the role of 

regional franchised distributors of remote sensing products, operating in a commerical context? Iiow could any proprietary restrictions em remote sensing data, 

e.g., copyright, be policed and enforced when t~ere is multiple access to the 

system? 

Creating Dependency Relations 

To date few entities (including those in the Urjited States) are critically 

dependent on the availability of remote ~ensing data to achieve their important 

objectives. As the technology matures and its use becomes widespread, this 

situation could change. This has positive aspects from a U.S. perspective, since it 

would place the country in a position to exert som~ influence orl global developments because it controlled a technological resource with global implications. 

There are rlegative aspects as well; for example, countries which depend on reliable 

access to U.S.-supplied remMe sensing data rraay protest or retaliate if, for some 

overriding reason, the U.S. system should go out of service, charge excessively high 

~(ii) 

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39 

price!s, or provide products with degraded quality. By making remote sensing a 

critical tooi in the common task of managln~ the global ecosystem, the United 

States takes the responsibility of long-term, hlgh-quaJity performance of its earth 

observation systems. 

This discussion of the international aspects of land remote sensing has been 

extensive because the international charactC!r of the system presents ~xtremely 

dllfjc'JIt isuues to those attempting to iJelect a frarnework for' the U.S. oper:\tiolli:&l 

Gystem. This is especially the case when the general foreign pollcy issues discussed 

In this sectIon are examined together with those Issues more closely related to 

national security concerns. The next section is such an examination. 

7.3 National Security Issues 

It is a matter of public record that the United States uses earth observation 

satellites as one of its means of gathering inteHigence information with respect to 

other areas ... f the world; these satellites are assets of extremely high value to U.S 

national security interests. The capabilities of these sate11ltes have also be~n 

exten5jvely discussed; and in most parameters they clearly exceed those available 

lor <":1:/ ilian use. However, it is also reasonable to suggest that some information 

with intelligence significance can be extracted from existing clvilian land obser'vation satellites and that existing national security systems may not duplicate aU 

capabilities available in civilian sateHites (tor example, coverage in particular 

spectral bands>. 1"us there are unavoidable national security aspect:; to the routine 

operation at a civilian land remote sensing system. Ii' times of international 

tensions or crises, these aspects become more pronounced, and the U.S. government will want to ensure that its national :;ecuri'Cy agencies will be able to contro! 

all earth observation systems in that situation. 

Just as earth observation systems have both civilian and natIonal security 

appllcations, the technologies on which they are !lased have "dual use" characteri~­

tics. Capabilities developed initially for national security purposes have potential 

relevance to civilian uses, and the technologies involved in sensors, data processing, image interpretation, etc. are sensitive in terms of export control 

regulC'. dons. 

* For a discussion of the capabilities of various U.S. observation satellites, see 

Thomas H. Karas, The New High Ground, New York: Simon & Schuster, 1983, 

Ch.4. 

~~.' 40_ 

-~ .. - - ... - --.. -. 

, 
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Given these realities, the following national security issues are sllggested. 

"0 en Skies" Precedent and AbUit 

l.2D! 

One not quite incidental faUout from the U.S. polley of open, nondiscriminatory access to the products of governmf!nt earth observation systems 

operated for civUlan purposes is the creation of a cUmatc in which aU U.S. 

observation sateHites can function without drawing protests from the countries of 

the world. Any modification of an open access policy, particularly by a private 

opel'ator seeking competitive advantage or increased economic return, could 

change this situation. For example, in the wake cf the recent Administration 

announcemer~t of its intent to transfer ownership and operation of civiJian earth 

observation ~teUites to the private sector, one Canadian official indicated that his 

government was "very concerned," saying "we have a sateUite looking down at our 

country and we don't call it a spy sateJUte becau5e we hAve nondiscriminatory 

access to it .... But if we were charged 100 times as much by some company, then 

we might have to begin to wonder about this."· 

Tradeoff! Between National Security Interest and Economic Competiveness 

Concerns 

Under continued government ownership and operation of the land remote 

sensing satellite system, past patterns of coordination between national security 

agencies and civilian agencies such as NASA and NOAA would likely persist. Some 

civiUan sector objectives differ from those of the intelligence community, which 

has taken a conservative position on making available advanced sensor capabilities. 

On the whole, however, the relationship between the two sectors of the government has worked weH. The potential for the transfer of the system out of 

government control d,,'es create serious questions regarding the extent of government supervision necessa,'y and possible. National securlty-r~lated areas in which 

a possible regulatory regime might engage itself inchlde: spectral resolution, 

center frequency and tunable range; spatial resolution; geographic coverage; 

timeliness of data availability; tasking p"ocedures and controls; and data dissemination policies. 

The kind of quiet coordination which 15 possible within the government would 

be much more difficult to maintain in a relationship with a private sector entity. 

• Washmgton • Post, March 8, 1983, p. 1 • 

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In the instance of private sector operation of the system, it becomes very 

Important to recognize the need tu temper nation,,1 security consideratIons when 

designing an appropriate regulatory regime. Out. regard must be given to the 

international market in which the private entity Is operating, so that regulatory 

practices do not seriously erode the system's competitive position. A private 

operator may find, for example, that improved sensor characteristics may be 

required in order t~ k~p itself economicatly su!vel,t. 

From the national security point of vIew, those sensor characteristics may 

present problems "ither in terms of revealing sensitive U.S. technological capabUities or in terms of providing images of the Unit<!d States or other countries from 

which inteUigence information could be extracted. If sensor capabilities were to 

be improved, then the intelligence community might want to involve itself in the 

process of determining appropriateness of data for dissemination. 

Reaching a balance between considerations of national security on one hand, 

and the need to develop a high performance, economlcaUy competitive systern_ on 

the other, will continue to be a very difficult and complicated lssue as land remote 

sensillg s:t.te11ite teci'mology develops. Further aggrevating this ba.lance is the fact 

that U.S. national security interests and controls are in a large part derived from a 

different set of motivations and values than the potential security controls which 

might be applied to the French, European or Japanese systems. Thus there ls 

unlikely to be easy agreement among operators of remote sensing systems over 

what are acceptable limits on system performance from a national security 

perspective. 

Export Control RegulationI' and l..and Remote Sensing 

There is heightened concern in recent years tnat U.S.-developed technology is 

being acquired 'ly our adversaries and used as a major b3sis for their military 

•• capabilities. There is also recognition that the export .,f ilroducts and services 

based on advanced technology !s a major source of positive U.S. balance-of-trade. 

Creating an operational U.S. land observation system aimed at dominating the 

international :narket brings with it an export control issue: will the United States 

aggressively seek to supply all elements required for other countries to participate 

in such a system, e.g., ground stations, computing capability, image interpretation 

---;'Thls argument is made in, for example, Department of Defense, Soviet 

Military Power, 1983. 

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capabil1ty, or wlll concerns over the export of sensitive or dual-use technologies 

llmit the abUlty of the United States to capitallze fully on such a ml!&rketlng 

opportunity? 

National security concerns such I" those em .. led in the last two issues 

discussed above, in the context of a pr!,vatcly-op;.eratcd system, must be addressed 

':'Iithln the framework of whatever regulato,"y regime 1s created to oversee such a 

system. Such legal and regulatory issues are discussed in the following sectlon. 

7.4 Regulatory and Legal Issues . , 

Most regulatory issues arise, almost by definition, in the case of private 

sector operation of a land remote sensing system. Since any private system 

a) carries with it the international and national security impUcations discussed 

above, b) will be based on publlcly-funded research and demanstration results, and 

c) wlU be serving a large variety of government needs, it is appropriate that the 

government take the measures required to protect the public interest with respect 

to private system operation. 

Convenely, a private system operator has the right to protection of its 

commercial interests; it should not be required to operate under conditions which 

prevent 01' inhibit success in developing a private sector remote sensing industry, 

and it may require various ferms of government protection or ass.istance to develop 

such an industry. 

Whatever kind of legal and regulatory framework i!' adopted at the initiation 

of a private sector land remote sensing venture, it must be flexible enough to 

evolve over time as the enterprise grows and adapts to a changing operational and 

competitive situation. There will also have to be a decision on how general/specific any regulatory framework should be. Most poten,tial private sector operators 

would probably prefer the most general kind of regulations which are pOlitically 

acceptable; give., the many facets of system operation which are candidates for 

regulation, however, publlc authorities may decide 'that a relatively specific set of 

regu.latory requirements will best ~;i,'utect the public ir-1:er'!st. 

One area of common cor"cern, whether the system is governmentally- or 

privately-operated, is that of proprietary controls over data a:'\d system products. 

If any kind of cost recovery is a system goal, then it appears tt.at some form of 

control, such as copyright, is required to prevent secondary duplication and 

dissemination of system products. 

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The issues discussed below, then, reflect a ~ecision to transfer land remote 

sensing re3ponsibUity to sorne term of pri"ate operator. 

Protection Against Competition? 

lhe key issue here is whether the land rernote senSing enterprise is a natural 

monopoly, and thus deserving of government protection from damaging competition, or whether over the next hw years various potential private suppUers of 

remote sensing services wiU emerge. In this latter case, the appropriate role for 

government Is to preserve a competitive environment and to prevent undesirable 

monopoly controi. The findings of this report suggest that, at least for each class 

of remote sensing products individually, only one commercial ventur~ can be 

successful, and thus that the situation does indeed resemble that of a natural 

monopoly. It is a sllghtly different question, however, whether that monopoly 

organization should be allowed to evolve through proving itself superior to any 

competitioli ov~r a period of time, or whether it should be established at the start 

through competition over the awarding of the remote sensing "franchise." 

Starting with the assumption that a private monopoly of remote senSing is 

abo In the public i1,tea"est, the question then becomes: "What public assurances are 

required to ensure that a private venture is economically viable, with a reasonable 

degree of risk?" This is as much a political as an analytici\l question, and thus must 

eventually be answered in the context of the policy de'lelopment and approval 

process. 

Possible Ar~as for Regulation 

In the discussions of this section, no distinction is made between the legal 

requirements which might be embodied in a contract between the government and 

a private sector operator and requirements which might be spelled out (~ither by 

Congress or by the designated regulatory entity basea on its general authority) in 

the form of actual reg'Jlations and regulatory policies. In practice, h~wever, this 

distinction will be important, as it i~ llkely to be easier to modify contract 

requirements on the basis of experience than to change formal regulatory requirements. 

Candidates for regulation include: pricing pollcies, conditions of service, 

conditions of access to system output, role of system operator in associated 

ventua·es, technical standards for various system products, requirements for coordination and complementarity with non-U.S. systems, adherence to international law 

an,d treaties, adherence to national security constraints, prOVisions for government 

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access or takeover in times of naUonal emergency, insider use of remote sernling 

information, export control constraints, etc. the list is long and the requirements 

complex and not alwaYIi co""i:. '.ent. The pubUc interests invoJved are significant, 

but the danger of overregulation IJndermining the viablUty of a private venture is 

real. Thus decisions on the nature and degree of regulation are likely to be 

difficult and subject to chal1enge. This is another reason for a flexible regulatory 

approach as the system evolves. 

Possible Areas for Covernment Assistance 

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Since currently the federal government acquires a large portion of the 

distributed information products, the fundamental assistance that the government 

can provide to a private operator is guaranteeing to meet government needs by 

purchasing remote sensing products from a single U.S. operator, rather than 

procuring them on a competitive basis from other U.S. or international providers. 

The time span ~f this guarantee and its specific provision wlU be a subject of 

negotiation as the private venture evolves. However, questions which will 

intwitably be raised includez 

• Can the U.S. government pledge to purchase a speCified amount of 

anything from a private suppUer well into the future, when the funds 

for such purchas~s have not been appropriated? Or must the pl~dge be 

to purchase aU of government's needs from a single suppHer, withfJut a 

guarantee of a minimum amount of business? 

• What wiU happen to government purchase requirements if the private 

operation is successful? Is un.successful? In ·the former case, wiU 

government incur a reduced purchase obllgation, or a reduction In 

price? WUJ there be any kind of profit-sharing? In the latter case, wiU 

there be "bail out" provisions which wiU increase the cost to government of assisting the system? What are the government's obligations to 

a falling system? 

In addition to long-term purchases of system products, government can 

provide a number of other forms of legal and regulatory assistance to a private 

operator. These include: 

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Providing copyright or other form of proprietary protection so that the 

private operator can control dissemination of remote sensing products; 

this protection would have to extend to the operation of foreign ground 

stations and purchases by non-U.S. uses. 

Waiving Freedom of Information Act proviSions so that the government 

does not have to provide to the general public cop~es of products which 

the government purchases for its own needs. 

Agreeing on terms for government use of its purchases. Will several 

agencies be able to share a single product, or must each agency pay for 

its own needs? 

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ProvidinS protection from legal actionl initiated by potential competItors. What wUl be the anti-trust contextln force 11 the government 

creates and maintains over time a monopoly relataonshlp with a single 

remute senlinS venture? 

Helping the private operator In market dovelopment vis-a-vis, on one 

hMd, such potential users al state and local governments and research 

institutions and, on the other, overseas markets which might result 

from U.S. 80vern~e.'t t",chnical assistance program~ or export pro- motion ,,11orts. 

P.rotectlr'g the U.S. operator against unfair foreign competition in 

third-cowitry markets or in the nongovernment share of the U.S. 

market. 

As the above discullion suggests, questions arising from the necessary 

relationship between the U.S. government and any private system operator wUl be 

persistent and multifaceted. In order to, carry out the govei'nment role in this 

partnership, an effective institutional mechanism or m!!chansims must be chartered. The foUow.lng section discusses this and other institutional Issues. 1.' Institutional Issues 

It should be clear at this point in the discussion that any p4rticular 

irlGtituth,lnal format chosen tor A land rem{'te., sensing sateUite system would be 

derived from answers to a series of question:s regarding the kind ot political, 

internadonal, legal/regulatory and national ser.urity implications identified above. 

Whether the system is government owned, quasi-governmental or privately owned 

by either competitive or nlonopollstlc entities, there is no doubt that there wUl be 

vested in it such organlzational devices as are deemed necessary by the government to assure that relationships between the system's operator and various public, 

foreign pollcy and national security interelllt.s are preserved. It is mast likely tha,t 

the ofRanizational framework for the U.S. land remote sensing ,ateUlte system 

whlcn is selected wiil be that which best; embodies the dominant set of poJitical, 

sodai and economic philosophies of the time, rather than a structure determined 

analytically to be optimum. 

Therefore, detailed attention is nut paid jn this section to an analysis of a 

variety of organizational alternatives. This is simply because institutional issues 

appear to be somewhat secondary when compared to other nonfinancial issues. 

GIven an agreement within Congress and the Executive Branch on what political, 

social and economic parameters should guide the establishment of the system, 

there is little doubt that a viable framework for the operational land remote 

sensing system can be designed. A historical example of such organizatioral 

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innovation was the creation ot the Communications Satellite Corporation 

(COM SAT). Once majority agreement was reached during the ,economic and 

political debate which occurred in the summer of 1962 over the appropriate 

framework for commercializing communication satelUtes, it was possible to design 

an imovadve organizational form which was sat1sfacto~y to most of the participants in the debate. There is no reason to think that in the case of the land remote 

"en sing sattfUite system the situation wUl be any different. Much of the 

controveny over various organizational forms in the case of both COMSA T and 

now land remote sensing, it appears, has actually been as a surrogate for debate 

over more fundamental issues of \1 ':onomic and poUtical philosophy. 

There are several comments which can be made with respect to institutional 

aspects of the remot.e sensing issue. One is that the structure of the federa! 

gov~rnment has proved Ul-matched to the task of developing and demonstra"ng a 

system which would lead to commercialization. A R&D agency, NASA, w&s 

res~onsible for the early stages of the U.S. land remote sensing program, and its 

actions in retrospect appear driven as ml.!ch by considerations of engineering 

development as by those of user requirements and market opportunities. The 

interim government operator of the system, NOAA, has had little opportunity to 

demonstrate whether it can be successful in creating a more user-oriented, 

operational style for the LANDSAT program. Many different f~deral agenCies, 

particularly Argiculture, Interior and the Central Intelligence Asency, are users of 

remote senSing data, but they have differing needs and priorities vif.i-a-vis remote 

sensing, and none seem wUling to make long-term commitments to data purchas~s 

and to using the output of the system in ways critical to their respective missions. 

This may be partly due to the lack of guarantee of continuity of service. A major 

argument against keeping remote sensing within a governmental framework (in 

addition to economic and political factors) is the limited evidence to date that this 

will result in a successful U.S. system in the long run. 

A second set of institutional issues relates to the government's role vi!3-a··vis 

any privately operated system. According to current policy; the Depa.rtment of 

Commerce (specifically, it would seem NOAA/NESDIS) will have responsibility for 

aggregating government requirements, specifying the conditions under which a 

private system will operate, and developing and implementing the regulatory 

*White House Fact Sheet, "National Space Policy." 

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framework for the systt:tm using the authority provided by Congreu AS part of the 

legislation transferring the operating franchise to a private entity. The point here 

is that NOAA has limited experience in any of these roles, and some sort of 

lnstitutiol,\&l and staff modUlcatlons are likely to be necessary to provide the 

capab111tles required. 

7.6 i!t .. eral Polley IS~J·~ 

Thl1 review of the vario'J' catego~lol of nQnflnancl:s1 issues has lod to the 

identif1eatlon t,)f several major pollcy concerns related to the viabUlty of the 

~'emot~ sensing venture, to the R&D requirements for the future success and 

continuity (If the systemJ and to the bahnce between public, governmental and 

private interests. 

In determining the appropriate institutional location for the permanent 

system, decisions must be made u to the extont of responsibUlty that the 

government wiU assume. For example, under continued government ownership and 

operation, commitments must be made to uses which may necessitate re-examlnafion C)f long-term budgetary requirements for affected agencies, Under private 

S~Cter cr.,ntrQi, cr it .. 'ria need to be set which wUl outUne the extent of the financial 

obligations the gO~t:trnment may have with the private sector entity, including 

provisions for possible failure of the systom due to successful competidve pressure 

or to general lack of demand for its products, For example, will g("'!rnment be 

asked to nationalize a failing venture because of its importance to national and 

societal interests, as well as to private interests? When a private venture is 

threatened by econornic competition from overseas systems, wi11 the government 

adopt protectioni.,t p\)llcies? Will the 81')vernrTIe"t's positive role include expanding 

international markets'? What steps and poJ1cy requirements would be raquired in 

th:! case of teehniCe'l1 !aUure; .. ,f the system? How much redundancy in the system 

wiU be required .,f Cl private operatur I .Jr oven a government-operated system, i" 

order to assure data continuity? WiU government retain the right to step in and 

laJnch its own satellites or to as!Sume some sort of managerial control over the 

private venture in the event of failure, economic or technif.:al, of the private sector 

operator? 

It is assumed that research on advanced remote sensing technology 'AliJJ 

continue to be carried out under government auspices, either through all active 

civiHan R&D program or in the context of meeting national security requirements. 
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Vet the extent and conditions for transfer of such government-developed technoiogies to a privately operated system ,I, Imelear. Covernment hll not yet made 

an explicit commitment t\~ continue R&D on seniOr and processing technologies if 

op~rutiun ('Ii ene land remote senSing systf!m 15 in comnldrclul hands. In the clue ,,1 

.:orr.munjcn~lons sateUltel. the United States withdrew from R&D In relatl:!:l,J 

technologies In the early 1970. on the arounds that ,ince the private sector w.\r. 

I,perating communications sateUites, they should also be responsible for the R&D 

required for future systems. This policy WI ", reversed under the Carter Admin"· 

tration, and NASA in recent years has resumed its communications sateJUte R&D 

efforts. The grounds given for this policy reversal was that the private sector wali 

not dOing the basic work required to keep the U.S. competitive vis-a-vis other 

industrial countries. 

This suggests that a program of continued government R&D cannot, in fact, 

be assumed; NASA priorities may weU point elsewhere. Other problems likely to 

characterize any continued relationship between government and a private sector 

operator in the ar~i~, of R&D pertain to how decisions on the R&D are to bC't rnz-de 

and by whom. For instance, who is to determine what areas of R&D are most 

important and who is to say when a new technology is "operational?" Also, what 

restr ictiuns are to be placed upon use within governrnent of products resulting from 

R&D efforts, since potentially these could undercut the gov~rnment market for 

existing remote sensing imagery. 

Of overriding importance is the recognition that there are both public and 

private Interests in land remote sensing and that the two do not necessarily alway~ 

coincide. It is important in Assellsing alternative sy~tp.ms to pay proper at~entlcn 

to determining the appropriate balance betwe\!n pubUc and private interests. This 

balance must be not only achieved prior to transfel', but should also be assessed 

throughout the subsequerlt Ufe of the system. 

In deciding on a strategy appropriate for transfer to private operation, it is 

important to keep in mind the fact that the public has invested well o\'cr Ii i,UJlon 

dollars 1n the developrnent of this capability to date. There arf! certain exp«.t;:.·, 

tillns, Im!sp~ctive cf recoupment con:siderations, about the cuntinued responsive~ 

ness of the lqstem to public interests. 'rhese expectntlons will persist whether the 

system is ha:\ded over to a monolloly, to competi'tlve enterprise or is designed In 

the formation of a public corporation. Numerous political difficulties and conflict!\ 

might arise if transfer to a private operator is attempted without some form of 

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m .. an1nsful competition. One reason tor thlt Ue. with b •• ic problems In de.ignin.a 

relul.tory",n'tlty whld\ i. effective in ics performance of lti public responslbUides 

and cauigr.e:t dutie.. If tran.fer i. thC'')uan ft noncompetitive, StJI..,·aourc:e Award, 

problema may develop as ca re.ult 01 ttle "eaotivity" '~at sometimes occurs when 1\ 

:l1nllle body functIons a. both user And relulator of the actlvitie. ot .... &ndu.try. 

On the other hand, the intereats of any prl\'ate s.ctor operatar of remott 

senllng mu.t also be protected. Various loreign policy, Internador.al. nationl~ 

security or domestic Intereat must be addrftss.d, yet regulati"nl should be 

tempered by cor.:ern» of commercial viability and econumlc stllnuladon. CAre 

mUlt be taken to enlure that the private entity I. not overresulatdd and Is able to 

operate over time in an efficient and profitable manner. 

1.7 PolicY Requirements • A Summary 

Whatever scenario is foUowed for creating a permanent operational framework for the U.S. remote sensing 5ystem, It seems that government policy deaUng 

with the foUowlnl mu.t be deveJoped by the cooperadve e!forts of Congress and 

the ExeC'Jtlve Branch. 

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• Relatjn~ a U.S. &ystern to other ~n.W!ls ~o n~-IJ.S. _4!.cr!!..~I2 

internafonaI poUtlcal and leaal fac!.~!:! - fRete is an Inescapi6!e anternational dimension involving cooperatIon, cQOrdinf.\tlon and competition 

to any remote sensing enterl'risC!. How InternatJ.onal aspects w111 be 

integrated into !y'tom operlltiol' will remain a continuing policy chalI'!nge. 

• O~'lelo in a re ulator framework for s stem 0 eratio'l· Any system 

cpftrator wU ave to m"nage a remote sens ng enterprise within limits 

and requirements set by gO'iernment. That framfltwork ~houJd reflect 

13lanced agreement with resl'ect to a variety of conflicting natl:ma) 

"oal.s, objectives ann intere3ts relevant to remote sens'ng acti~Itles. 

Reacf\ing agreement un such a p"Ur.y frame',\'ork. giv~n other financial and 

nonfinancial issu"s reviewed so far in rhl.'l repurt, wiJI require creative policy 

making and a willingness to compromise, negotiate and "satisflce" with respect to 

the rnany private sector and public sector interests connected to remote sensing. 

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The previoul sectl';I','1 01 thla report reviewed several .conarlo. for senlna up a 

permanent framework, with an eye to determ!nln, whether one or another 01 these 

scenarlos t!J Inore Ukely to facUltate the needed agreement. As has been ,aid 

'~veral timl!"~ In this section, many of the choices to be made ilrc cholr.es betwf!(\In 

confUctlnl ~,\)a'i W\d vaJues, and thul are the kb\d 01 choice, be~t made for socioty 

through lu legitimate politicol authorities. 
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8. OBSERVATIONS/CONCLUSIONS 

~ene!1 r and cost. effectiveness !tudle~ pfl!rformed over the pa~t necad" have 

concluded that the potential ber.eflts trcm a t.ANDSAT systern would be on th'! 

order of 'url~reds of mllilons to a billlon dollars annlJally (2b-29]. With thes~ 

'm'fle potential benefits an obvious question Is why has commerciaUzatic;'1 not taken 

place: A likely answer to this question Is that a pubUc sector underta1dng, such as 

the LANDSAT program, can be justifl~d if it can be shown that the potential 

bemefi·ts from the program exceed pr'ogram costs. The benefits are to the public at 

large and there need not be a convenient mechanism for charging for benefits 

provided. The public sect.or's objective is to maximize societal benefits. A private 

sector busin~s5 venture may provide the same public benefits but the benefits of 

concern are those obtained by the business venture in t!'\e form of profits. The 

private sector objective is profit maximi.zatior •• 

It is very often the case that the objectives of profit maximization and 

benefit maximization do not co\ncide. This is normally the case when there is a 

lack of priCing me'1anisms that relate to benefits. To illustrate, consider a system 

that improves emergency cornmunications in rural areas. Studies have shown that 

this could lead to thousands of lives saved annually having economic value to 

society of hundr:!ds of millions to billions of dollars. However, commercialization 

is not likely to occur specifically for this application because there does not appear 

to be a pricin~ mechanism that can be related to the value of lives saved. 

For a business to achieve a profit requires revenue which in turn implies a 

pricing mechanism. Unfortunately, many of the potential benefits from Jand 

remote sensing have not been linked by a priCing mechanism; in other words they 

are a public good. 'fo date it appears that pricing mechanisms have only baen 

established based upon budgets that have been developed over time for providing a 

service (for example, obtaining imagery that will assist in the location of mineral 

deposits, and collecting wheat yield data and producing crop forecasts)-the value 

of LANDSAT data has basically been equated with the cost of collecting similar 

data by other rneans. Generally, budgets have not been increased because of the 

"added capclbJjity" or added value of thE: information products to society. Thus thl:' 

markets to (1il.te for l.ANDSAT type products have been related to existing data 

collection budgets. New or increased markets will only develop as an appreCiation 

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develops for the added capabUlty and added value of the L\NOSAT type products. 

When budgc:ts are not increased to th., point where net benefits arc maximized 

~ht"C')ugh pri'/!.te sector actions, goverrment participation through ownership and 

operatil,n 01' l'ub8Jdizatlon may be ap~nCip:'iate in order to achieve the 50ciet:f.J 

beneilts that rnlght otherwise be foregone. 

The ob!\t"rvationr. and conclusions that may be arawn from the analyse'! 

r,!port~d i ... the Dre'itOUS pages have been grouped into thE: categC'rif!5 ~f OperatiC/ns, 

Financial and Nonfinancial. These are discussed below. 

8.1 ~bservations/Conclusio~: Op\!Irations 

LANOSAT n is currently providing land observation data. It has a finite 

life-possibly three years. \Vhen 0 fails it will he replar:ed with n'-this is not a 

certainty since launch reUabiUty Is not 100 percent. If 0' is placed into orbit 

successfully it is likely to last two to three years. If action is not taken swiftly, it 

is likely that both D and 0' will have faUed before a replacement is possible. This 

series of events, coupled with the expected competitive SPOT and other systems 

ilnd ':he need for uninterrupted service, poses a dilemma. 

Firs'!' tM need !or unintoerrupted service. Certain users (both U.S. and 

foreign) have come to rely on L.ANDSAT information products. An interruption in 

service may cause these users to revert back to pre-L.ANDSAT operations or to 

seek similar data from other sources, for example SPOT. Since the market 

(assuming uninterrupted service) for L.ANDSAT products is anticipated to be 

in;juffici~nt for commercialization, government support will be required to achieve 

a goal of commercialization. Therefore a 105s of any piece of the market (because 

o! an ir.terrupthm in serv,ce) can be significar,t 3.n'-' wl)uld have !I' be mQce up by 

additional government support. 

The dilemma is that the anticipated sequence of events dictates that rapid 

de~isions be made with resp~t ee, commercialization or retention. Insufficient 

information currently exists upon which to make the necessary informed decisions. 

Set::.mse of thf! magnitude of the costs and expenditures and procurement tirnes 

associat'!d with remote sensing, inappropriate deCisions rnay not be reversed for " 

tiecade or m:Jre. On the other har.d, inf'):'l1Ied decisions imply time delays while tht! 

neces!!ary In{ormatlon i3 ()btained upr,n which to base these decisions. Delays 

in(~rease the likelihood of service ir"t·.:e!"rl'~'tion. Therefore, informed decisions 

imply the need for all additional spacecraft to backup LANDS/IT 0'. This must be 

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initiated immediately if there is to be a high likelihood of continuity of service. It 

should be noted that doing rlothing implies either phase-out or interruption in 

service-bo~r. are good for competitive systems. 

The inability to be specific ahout launch vehicle cost is a contribution to the 

uncertainty s\Jrrounding a possible commercial venture. NASA has not establisheo 

de finitive plan5 with respect to the support of the DELTA launch vehicle beyono 

FY 86. Commercialization of the DELTA and other expendable launch vehicles i., 

uncertain. Shuttle pricing pollcy for WTR launches has not yet been established. 

Ariane is a possible alternative. This uncertainty with respect to the availability 

and cost of launch vehicles will affect private sector investn,ent decisions. 

8.2 Observations/Conclusions: Financial 

There arc many possible business systems that may bp. consider~d 8.S 

commercialization of the civil land remote sensing program. These range from 

short duration flights of Space Shuttle launched instruments with marketing and 

sale of collected data, to a combined land and weather remote sensing operational 

system with marketing and sale of information and value added products. Because 

of time constraints only one business system was considered in this study and this 

was not necessarily the best. The speCific business system was based upon 

providing uninterrupted ~ervice resulting from the continued use of LANDSAT 0 

and 0' phasing in, slightly before the demise of 0 ', new satellites with 80M and 

later 30M serls-ors having stereoscopic capability. The following commercialization 

0" retention options wert: evaluated and compared under the above business system: 

• Continued ownership and -:>peration by the federal government (planned 

phase-out) 

• 

• 

Continued ownership and operation by the federal government <establishment of the necessary budgetary line items) 

Wholly privately-owned and operated by an entity competitively 

selected 

• Phased private ownership (government ownership and operation with 

private sector marl(etin~) 

• t.e~islatively-r.hartered. privately-owned corporation. 

"rhe analysir. .Jf these scenarios was developed based upon the same demand 

forecast and ~he same schedule of events. Government net cash flows were 

developed in all cases. For the private sector scenarios, financiaUy viable business 
104 

initiated Immediately if there is to be a high llkellhood of continuity of service. rt 

should be rj~ted that doing nothing implies either phase-out or interruption :n 

"er\'~ce-t:n~h ::ore good for competitive systems. 

T:-te inabitity to be specific about Launch vehicle cost is a I':ontribution to d~e: 

unc,-"r'tD.inty s\Jrrounding a possible commercial venture. NASA has not estabhsh~d 

dcfli1it\ve plans with respect to the ~upport of the DEL T.' launc:h ""hicle beycmd 

FY S6. Commerd.l1tlatior" of the DELTA and other expendable taunch vehicles is 

uncertain. Shuttle pricing policy for WTR launches has not yet been estabJished. 

Ariane is a possible 3lternative. This uncertainty with respeoct to the olva;!abiHty 

and cost of launch vehicles wHl Clffect private .. ector investment decisions. 

8.Z Observations/Conclusions: Financial 

There are rnany possible business systems t"at may be consid(;!'ed J:lS 

commerciaUzatlon of the civil land remote sensing program. 'rhese range from 

short duration flights of Space Shuttle launched instruments with markedng and 

sale of coUected data, to a combined land and weather remote sensing operational 

system with marketing and sale of inform.ulan and value added products. Secause 

of time con~traints only one business system was considered in this study and this 

was not necessarily the best. The specific business system was based upon 

providing uninterrupted sei'vice resulting from the continued use of LANDSAT D 

and 0' phasing in, slightly before the demise of 0', neVi satellites with 80M and 

later 30M sensors having stereoscopic capability. The following commercialization 

or retention options were evaluated and compared under the above business system: 

• 

• 

Continued ownership and operation by the federal government (planned 

phase-Qut) 

Continued ownership and operation by the federal government (establishment of 'the necessary PlJdgctary Hn~ 1 terns) 

• WhoUy privately-owned and operated by an entity competitively 

selected 

• Phased private ownership "oovernment ownership and operation with 

private sector marketing) 

• 'I.egislativcly.chartered. pl'ivately,·owned cClrporatlon. 

The analYSIS of these scenarios wa.ii d'~"~loped based ~pon th~ same demand 

forecast and the same schedule of events. Government net c.ash flows were 

developed in all cases. For the private sector scenarios, finanCially -'liable business 

-..., 

~-'- -. -,0 ,_~;-

-, -. ,-; . 

~ I 

. -~ ... ,.' - -

, 'iI' fk"!: .. 

.-.Jollt.....-_L.-' - -------.. 
• 

• 

• 

• 

• 

'e 

r. 

• 

• 

:. 

ventures were developed based upon achieving return on capital and other financial 

measures deemed necessary to achieve financing. The required rates of return 

were obtah~ed through the use of government subsidies. 

Undf!':'Jyin~ all of the commercialization or retention scenarios i!» a rnarl(et ')r 

demand forecast that is characterl:zet.i by great uncertainty. Thi$ is due to an 

insufficient understanding of the relationship of demand to information produc:t 

attributes such as price, resolution, and number and location of spectral band&. 

Ciovernment actions with respect towards emphasizing or enco'Jraging the use of 

land rernote sensing information may significantly influence demand. This is 

extremely important since there appears (for the busine'is scenario considered) to 

be insufficient demand for commercialization to take plar:e without 3ignificant 

government involvement through ownership and operation, subsidization or a 

combina tion of both • 

A basic decision that has to be made is whether or not the government will 

continue to participate thro'Jgh ownership and operation and/or subsidi; :ation or 

will withdraw from the remote sensing scerle. Withdrawal implies a contin~ing cost 

dither through the acquisition of information products or through benefits foregone. Withdrawal decreases the likelihood of commercialization which in turn is 

likely to result in price increases from SPOT or other systems thi"ough reduced 

competition. Government withdrawal (Phase-out) can be the lowest cost alternative if potential benefits are not significantly larger than costs and the cost of 

information products does not rise significantly. 

Figure 8.1 SlJmmarizes the present value of government cash flo'w and 

average annual government cost associated with each of the considered commercialization or retention scenarios. The cash flow and costs take into account 

government expenditures such as payments for information products, operations 

costs, R&D cost, subsidy payments and equity purchases. These may be offset by 

receipts (from the private sector) in the form <.If lease payments, asset recoupment 

payments, TDRSS fees, profit sharing or royalty on 'iales, generated tax revenup. 

and dividends. It is clear~ for the business scenario considered, that government 

phase-out can be the lowest cost (from a direct budgetary point of view, not 

necessarily t::"'Jm a benefits point of view) alternative. When considering continuation of LA~i DSA T, the continued government ownership and opera.tion scenario 

results ir. the lowest cost approach. The government costs increase, though not at 

:::J. __ • 
i 

ti 

106 

.. 1.5 io .~ISO - "s ;j 

... ::. 

iJ , -.J- .. S " ~~ .,.. . V; 1.0.~ ". 

·"'100 8 •• I, . ... -::- .... ... i~ .. , -- " .... 

~ ~ -- - - -- ~'. ,..-- ~---...:-. r. e! ~ 

~e 0.5·", - P~~SENT VALUE l-'io 

! a.a:a ANNUAL COS T I ~ i ~ ~ ~ ... .~ 

0 ') 

.... , a. !\i .. ~ ... '0; 

~ .. - ... ~t: c 

I ;. 

~I ;& ~. 

a. ~i ... .. .. is • _oa: Q ~ I ~6 ~! , ... 

c:.. ... ~ :.! I; 0-- "" ~I= f :0- ;; fj ... ;r =! .. Po> c a 5 =;: "f .. ••:::~ c ... ~~ "" ... ;. '" !"" s~ "' S I.JI! 8.£ c.. 

FIGURE 8.1 PRESENT VALUE OF GOVERNMENT CASH FLOW AND GOVERNMENT 

AVERAGE ANNUAL COST AS A FUNCTION OF COMMERCIALIZATlON 

OR RETENTION SCENARIO (FULL GOVERNMENT RECOUPMENT) 

what might be considered a significant rate, as private sector involvement 

increase5 and govel'nment operationa.l in\'olvemf,mt 1ecree.!Ii~s. It should be n\)tect 

that!! private sector operations can be conducted more efficiently than !liimHar 

government operations then the indicated costs would be rl!ducl!d as private sector 

involvement increased H.e., the slope of the dashed lines decreases and th~ lines 

pivot about the cnntinued government ownership/operation costs). It should also be 

notec1 that, in ~eneral, a~ the private sector involvement increases 50 does thO! 

significance and complexity of nonfinancIal issues. 

Governrnent CI)SU associ~ted wl'th continuation of land remote ser,sing~ <ll".! 

anticipat~d to vary only Rlightly with the cornrnerc.ializati"n or rete:ntion scenarios. 

It is anticip~ted that government annllal costs will average on the order of $70 to 

$80 million (FY83$) through, and possibly beyond, 1994. The effect of asset 

~fU 

L.. .... _'-I1fI::::-::::::::::.:....-_-_-_-_-:~_-_".-O<_-_ .. _ .. -__ .. _____ ~ ........ L_IiL __ ----.=_=. --...W"~ -----..e"!':!'~ -~_ ,('''' #. ____ _wm Tin vrnw 

.-.......~- • II. .. 

_
• 

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I r. 

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107 

transfer and recoupment poUcy appears to be minimal. For example, for the 

private own<·rship and operation scenario, the present value of government costs is 

$1200 mHll',',I', with full f'Jpe.yment (recoupment) for government assets utiH:t.ed by 

r.he il~i·t'ate AC!Ctor vs. $1193 million wl'c.h 1'0 rfJcoupmcnt. Ave:rage I!.nnu:,l! 

government co:st (constant FY83$) is $82 mUllan 'Nith recoupment v ... $81 milH:m 

wich'.)ut rr.coupment. '1le effect 01 return on equity and cost of borrowing 11\ 

somewhat more significant though not a major factor. Reducing required return on 

equity and the cost of borrowing by approximately 20 percent (from return on 

equity of 17 p.:rcent and cost of borrowing of 11 percent to 14 percent and ., 

percent respectively) reduces average annual government cost from $82 miUion to 

$7' mUlion (constar.t FYS3$) for the private ownership and operation scenario. 

Sased upon the financial results, it is poslSible to make a plaus!!;,le case that 

full transfer to the private sector with the expectation of a viabJ.e, self-sustaining 

enterprise is premature by a number of years. Thus, if it is desired t~ continue 

land remote sensing then it is possible to argue that either 

• There is a justification for unusual degree of government support fill' 

transfer recognizing the high value of land remote sensing irtforr!1adon 

prodUCTS, the possible lack of pricing mechanisms tha t reflect tr.is value 

and the resulting high risk character of transfer to the private sector, 

0.1" 

• !her e is a need for continuing government leadership in this area with a 

limited but possibly gradually increasing private sector role. 

In addition to examining government costs, the alternatives to government 

!'~tention were s',udied from the perspective of a potential private seCTC" investor, 

In order to attain an acceptable rate of return, the alternatives to government 

retention involve either significant subsidy, or if the private sector takes on the 

marketing function, continued government ownership and operation of the space 

and ground segments. Of the private sector options considered, the latter appears to 

be the most attractive from the standpoint of financing (size of investment); 

h~'we'i~r, ~.U of the r)ptions to government retention share a cornplex set of 

Itonf.i.nancial prcblerns. On the ether ha.nd, should the governmen't choose to phaseJut LANDS,l·.r oper::&ticns, from a Ilul'ely financial 5tandpo1nt, it is not Hk",ly that 

tr.e private ~,ec:tor in trll! U.S. will s'U!P in ~d provide the same services that are 

currently fllmished by the federal governrnent without some form of subsidy. 
" 

1 

j 

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• "'t5lJOltS c,"I\'lUI~a IIOYI~"'UT "'U ,'IIOtllAII • r.luT" ~[CTO~ GIIA"ANT£f\ A ,41~r. 

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---------~--.------------~~--.------------.~ 

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110 

8.3 Observa tlonI/Conclusi~n:n Nonfinancial 

The many nonfinancial iSlues assume differing degrees of importance or 

significance for each of the commercialization or retention scenariol. These are 

summarized in Table 8.1. 

Major nonfinancial iSSUl" are related to international, foreign policy and 

national s-.curity factors. Earth observation i8 a particularly sensitive activity 

internat!nnally because nations tc.lke the concept of ~overeignty seriously. Information ootained on national re&ources is recogni~ed as increasingly valuable. All 

of this implies that Ilny framework selected for comml!rciallzation should include 

maximum assurance that no international confHcts will be created and no U.S. 

security or foreign policy intrrests unnecessarlly compromised. Thus, any private 

system wl11 need fairly close government oversight with respect to its international 

aspects. Otherwise, siRnificant potential exists for international problems. 

The history of earth observation as ~overnment-developed technology and 

mix~ publlc good/private good character of benefits from remote sensing combine 

\0 make trallSition to successful nongovernmental fr3.mewcrk for operation particulariy ditlicu:t. flequirements for commercial success may include pollticaUy 

fragUe government guarant~es and pollcy actions. Thus, maximum flexiblllty to 

revise public/private relationship and conditions under which system operatar 

functions should be retaIned I.n designing the initial framework for the system • 

as ! , snrm .. .~ .I. .... _~ __ ~ ____________ -..L_ .. ___ ._ ... __ ~ 
G 

• 

• 

, 

• 

• 

• 

• 

• 

111 

9. RECOMMENDATIONS 

The following recommendations are presented based upon the premise that 

commercialization issues wUl persist. 

Because of the importance of decisions relating to cl)mmerciaUzatiol'l, and 

the compressed timeframe * for making these decisions which have long-term 

impUcations, it is recommend~d that a number of actions be immediately Initiated 

so that informed decisions can be made. It should be noted that initiation (by the 

government> of procurement of another LANDSAT sateJUte (beyorlo Of) would 

extend the window available for making the critical commerciaHzatlon decisions 

and allow more time for insuring that correct decisions ate made. 

It is recommended that analyses of the mechanisms of carrying out the 

transfer of remote sensing systems to the private ,;ectOI' continue. Specifically, it 

is recommended that: 

to: 

• An in.depth quantitative market analysis be undertaken that will lead 

to definitive market forecasts and provide an understanding of derr.and 

relative to information product price, resolution, number and location 

of spectral bands and other important product attributes. 

It is also recommended that the analysis techniques r~ported herein be tJsed 

• 

• 

• 

Continue the analysis and evaluation of other scenarir,)s for com· 

mercialization of civil land remote sensing systems and to consider the 

impact of other rnarket forecasu 

Analyze and evaluate potential value-added business scenarios olnd tt.' 

develop an understanding of their impact on and inclusion in commerciallzation scenarios 

Analyze and evaluate scenarios for the commercialization of tlt~ 

meteor-ological remote sensing system 

• Analyze and evaluate scenarios for the commerciaHzation of a C'JInbined civil land remote sensing system and a meteorological remote 

sensing system. 

It is also recomme,ded that, in anticipation of the need to competitively 

select a commercialization alternative, evaluation criteria be developed against 

which commercialization proposals may be evaluated and then compared on 

* Driven by the timing of anticipated events such a!) the launch, opt-ration and 

demise (after several years, if everything goes according to plan) ~f 

LANDSAT D' and the time re~uired to acquire another LANDSAT sateUite 

and have it available for launch as a backup to Of. 

_~ -.....,.--, --"'nt -ji;:~- '" ___ ~ _____________ """'--,,_,_,_,, __ ~____ _" .. ~1'.1., 1fT~ ... 

(

J
112 

a common basis. The selection of criteria can have a signiticant effect on which 

alternative w&U be selected. Such criteria u minimizatJon of govp.rnment sul,sidies 

and maximIzation of societal benefits should be considered-these will mOlt I1kely 

lead to the selection of significantly dUferent alternatives. As part of this eUort, 

sufficient analyses should be undertaken so that typical scenariol are developed In 

responSft to different postulated evaluation criteria. 

Since it is Uke!ly that ther,,, Is room for only one system for each major 

product clas5, and the NAtiction of the "'.vrong" s(ltern may ellmlnat~ the 

possibiUty for .. decade or more of achieving the "right" system, It Is also 

recommended that an analysis be performed of the impact that ncar-term dec!slons 

may have on long-term options. 

FlnaUy, since tt.e analysis and evaluation of pro~.,osals for commercialization 

wUl lead to the selection of a desired alternative, it is recommended that an indepth analysis be performed of each proposed alternative to establish estimates of 

the Ukelihood of success (both technical and economic) since faUure will at a 

minimum necessitate a government baU out, a discontinuity In Sftrvice or, In the 

wrJrst C3S~, the total eHmination of the ~c"vice. 
• 

• 

• 

• 

• 

il3 

SIBllOCiRAPHY 

[ 1] NASA News, Press Kit No. 82-100, lANDSAT D. 

[2] OUice of Technology .'\ssessment, Congressional Board of the 97th Congre~, 

Civilian Space Pollcy ar,d AppHc_~t1on~, June 1982. 

[3 J Communicationc SateUlte Corporation (COMS;',T), Commercialization ot 

Civil Remote Sensing, Volume II Response to Request for lrilnrmation, 

October 22. 1982. 

(4] , Commercialization of CivU Remote Sensing, Volume II: Supplementary Materu,ls, July 14, 1982. 

[.5] U.S. Department of Commerce, National Oceanic and Atmospheric Administration, National Earth SateHlte Service, "Some Thoughts on Commercializtng Land Remote 5.!nsang from Space," January 6, 1982. 

[6] Interagency Task Force: National Aeronautics and Space Adminlstration, 

Department of Commerce/National Oceanic and Atmospheric Administration, Department of Interior, Department of Agriculture, Department of 

Defense, Environrnental Protection Agenc)" U.S. Arrny Corps of Engineer:; 

and Department of State, "Private Sector rnvolvement in Civil Space Remote 

Sensing," Volume 1: Report, June ", 1979. 

(7] "Private Sector Involvement in Civil Spa::e Remote Sensing," Volum(! 

2: Appendices, June 1', 1979. 

(8] McElroy, John H., "Commercirallzation of the Civil Space Remote Sensing 

Systems - A Review," September 1982. 

[9] U.S. House of Represri1tatives, Ninety-seventh Congres~, Second Session, Ac! 

H.R • .5890, f.l. 97-3.t'j, signed October '" 1982. 

[ 10] U.S. Senate, H.R. '890,Octobel' 1982. 

[ 11] U.S. House of Representatives, Committee on Science and Technology, 

Ninety-sixth Congress, First Session, HearinglS before the Subcommittee on 

Space Science and AppUcations, "Earth Resources Data and Information 

Service,"Ma;- 2 and 3, 1979. 

[ 12] U.S. House oil Representatives and U.S. Senate, Joint Hearings before the 

Subcommittee 01' Space Science and AppHcations of the Committee on 

Science and Technolog}, and the Subcommittee on Science, Technology and 

Space of the Committee on Commerce, Science and Transportation, Ninetyseventh Congress, First Session, "Civil land R~mote Sensing Systems," July 22 

and 23, 1981 • 
[ 1) ) U.S. House of RepreMnta'Uves, Subcommittee on SpAce Science and Applications, Committee on Science and Technology, Ninety-seventh Consreu, Fint 

Session, "Civil Land Remote Sensins System," Decembw. 1981. 

(141 MacLeod, Norman H., "The Advanced Earth Resources Observations System 

(AEROS)-A Private Socfnr Civil Earth Observations Operational Progre.m," 

American Science and TechnololY Corporation. 

(., J u.S. Department 01 Commerce, NatIonal Oceanic and Atmolipheric Admirllstradon (Michel T. H~1bCJu\y, Chairman, Land Remote ~nsing S.t~111te 

Advisory Committee), Recommend'ltio"s of th,= Land Remote Sensing SatelUte Advisory Commhtee on the Subject of CommftrdaUzation of th~ Land 

and Weather Satelllte Programs, November 18, 1982. 

( i6) U.S. Department of Defense (Major General Earl G. Peck, U.S.A.F.) and 

National Aeronautics and Space Administration, Goddard Space FUght Center, (Kathleen Charles), Reports of the Ad Hoc Government Interagency 

Panels on Civil Operational Remote SensTrii -ratelUte Commercial1zation, 

November la, i982. 

(17] ORI, "Report of i .... e Private Sector Involvement Land Remote Sensing 

SateU1ttt Workshop," prepared for the National Oceanic and Atmospheric 

Adminlstration, Goddard Space FUght Center, National AeronalJtics and 

Space .~dministratlon, under Contract No. NAS'-26264, held at Howard 

Johr.to.·,'s Convention Center, Plainview, Long Island, New York, April 21-22, 

1 ~a". 

(181 U.S. House of Representatives, Committee on Sclence and Technology, 

Ninety-seventh Conr-ess, Second Session, Hearings before the Subcommittee 

on Space ScIence and Appl1cations, "1983 NASA Authorization (A NOAA 

Landsat Authorization for 1983)," Vol. 0, No. 98, February, " 9, 10, 12, 13, 

U, 22, 23, 24, 2' and March 2, 3, 4, 1982. 

[ 19] U.S. Department of Commerce (N'.1tional Oceanic and Atmospheric Administration, SatelHte Task Force), "P!:.nni"B for a Civil Operational Land Remote 

Sensing SateUite Syste. l A Dls(.ussion of Issues and Options," June 20, 1980. 

(20] U.S. Department of Commerce' (National Environmental Satellite, Data and 

Information Service, National Oceanic and Atmospheric Administration), 

"Transfer of the Civil Operational Earth Obser't'ation Sate1Hte~ to the ['rivate 

Sector," January 1983. 

(21] l).S. Department of the Interior/Geological Survey, Studying the Earth from 

~~, 1~77. 

(22] National C3nf1!rence of State Legis1atu~es Remote Sensing Project, A Legislator'S Guide to LANDSAT. 

(23] Unknown Author, "Description of the LANDSAT -0 Mission," Enclosure 3. 

[24] Generai Electric, Landsat-D. 
I, 

f t 

1 , , , ,j 

, ! 

• 

• 

• 

[2'] FY 1983 EROS Data Center Basellne LANDSAT Data Handling and Processing 

Activities, EROS Data Center. 

[26] Earth Resources Benefit Cost Study, E.arth Satellite Corp. with Booz-Allen 

Research Corp., 1974. 

[ 27 ] The Economic Value of Remote Sensing of Earth Resources from Space, 

ECON, Inc., 1974. 

[28] A Determination of the Value of Improved Performance in Sensors for an 

Earth Resources Satellite, ECON, Inc., 1980. 

[ 29 ] Benefits, Risks and Cost$ of a Civilian High Re~lution Multi-SpectraJ 

SatelUte-Based Earth Resources Sensing S)':.tem, Abt Association, 1981. 

[30] A Summary of Worldwide LANDSAT Data Demand for Calendar Year 1981, 

Prepared for The LANDSAT Data Distribution Working Group, Washington, 

DC, October 28, 1982, Department of the Interior (EROS Data Centc.ar). 

[31] OAO Corporation, "Analysis of the Private Market for Landsat Products a.,d 

Applications," Final Report to Oifice of Spac~ & '!'errestria! Applications, 

NASA Headquarters, March 31, 1981. 

[ 32] French Centre National d'Etudes Spatiales, "Satellite-Based Remote Sensing 

System." 

[ 3.3] French Marketing Services of SPOT Satellite Network, Aviation Week and 

Space Technol'2&l, January 11, 1982. 

[34] Spann, G. William, Nancy J. Hooper, Daniel J. Cotter, "An Analysis of User 

Requirements for Operational Land Satellite Data," pres ... mted at Fifteerlth 

International Symposium on Remote SenSing of Environment, Anr: Arbor. MI, 

May 1981. 

[ 35] Natural Resource Information Systems Project, National Conference of Statf.' 

l.egislatures (Paul A. Tessar, Loyola M. Caron and Jane Germano), "A Sllrvey 

of State Applications of, and Investments in, l.ANDSAT Technl'logy," May 1~ 

1981. 

[ 36 ] Willard, Matthew R., "Under3tanding the l.ANDSAT Market in Developing 

Countries," Report No. 30, Contract NASW.3204, November 1980. 

[37] Angenstein, Bruno, Willis Shapley and Eugene Skolnikoff, "Earth Information 

from Space by Remote Sensing," rep<Jrt prepared for Office of Science and 

Technology Policy, Executive Office of the President, June 1978. 

[38 ] 

[39 ] 

U.S. Department of Commerce, "Minutes of the l.and Rernote Sensing 

Satellite AdvIsory Committee Meeting," June 7-8, 1982. 

, "Minutes of the Land Remote Sensing Satellite Advisory Committee ~--:- Meeting," November 18-19, 1982. 

__ --___ -_" ~."" .•. ~. _, ________ , ___ ~ .. __ ....... _ .... -_ Wk-:_~"'!" .... --!itIIi!'P.!:..~ ..... -~: 

-

. 

" 
116 

( 40] liouse Committee on Science and Technology, Earth Resources Information 

System, Hearings, 9'th Congress, 1st Session, June 21, 22 and 23, 1977. 

[41] Senate Committee on Commerce, Science and Transportation, Earth Resources and Environmental Information System Act of 1977, Hearings, 93th 

Congress, 1st session, May 24, 23; June 13; 14, 1977. 

(42] Hause Committee on Science and Technology, Operational <;ivU Remote 

Sensing System, Hearings, 96th Congress, 2nd Session, June 24, 2'; July 29, 

1980. 

[43] Senate Committee on Commerce, Science and Transportation, £t!!.I....BLf'Q2!! 

Sensing Sate111te System, Hearings, 96th Congress, 2nd Session, June 26 and 

July 24, 198Q. . 

[44] House Committee on Science and Technology, Worldwide Space Act1~., 

September 1977, U.S. Government Printing Office, 1977, p. 607. 

~~~, United States Civilian Space Programs 19'8-1978, 97th Congress, 

1st Session, 1981. 

[46] National Academy of Sciences, Remllte Sensing from Space: Prospects for 

peveloping Countries, 1977. -
• 

• 

• 

• 

• 

• 

• 

• 

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• 

• 

117 

APPENDIX A 

ANAl. YSIS OF SATEl.l.ITE. AND LAUNCH REQUIREMENTS 

SateUite and launch re·quirements are determined by the demand for operational on-orbit sensors, the nurnber of previous successful launches and the number 

of sensors that have failed due to random and wearout phenomena. Since failures 

occur randomly, the number of launch attemp.ts as a function of time is not known 

deterministically, but must be described in terms of a probability distribution. 

A simulation model * has been developed to assist with the programmatic 

evaluation of alternative approaches to establishing and maintaining a specific 

desired mix of operational sensors on spacecraft in geocentric orbit. Tne program 

enables the assessment of the effects of operational rectuirements and reliability 

(spacecnft support subsystems, sensors and transportation systems) on the timephased co.lits of alternative approaches to satisfying mission requirements. The 

prugram is specifically designed to allow for the explicit consideration of reliability and cost uncertainties. in order to perform this evaluation, the launch 

systems and spacecraft (support systems ** and sensors) are ccr,sidered in detail 

from the points of v iew of reliability and cost. AU costs are treated as uncertainty 

variables where ranges of possible values are considered as well as subjective 

estimates pertaining to the form of the uncertainty (the probability distri!lution) 

within the range. The input to the program consists primarily of a set of numbers 

which d'·:scribes the demand for various operational sensors in "rbit as a function of 

time, the mix of sensors available per spacecraft type, the transportation system 

to be used for each spacecraft type as a function of time, spacecraft subsystem, 

sensor and transportation system reliability, subsystem and sensor nonrecurring 

costs including cost spreading and explicit quantitative uncertainty assessments, 

spacecraft and transportation system costs including explicl'i:!y quantitative uncertainty assessments and cost learning rates. The output from the simulation 

program consists of a set of probability distributions associate:d with costs and 

events (i.e., number of launch a~tempts, etc.) as functions of time and the 

----; 

** 

Greenberg J.S., "The Economic Implications of Uncertainty," Proceedings of. 

!he Annual Reliability and Maintainability Symposiu,!!l., January 1976. 

Greenberg, J.S. and G.A. Hazelrigg, "Methodology for Reli",oility-Cost-Risk 

Analysis of Satellite Networks," Journal of Spacecraft and Rockets, Vol. II, 

No.9, September 1974. 

'rhe group of support systems is frequently ,i:ferred to as the spacecraft bus. 

~([U 
, 

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118 

probability distribution of the present value of total recurring plus nonrecurring 

cost. 

The reliability, un1certainty and risk \15sessment capability embodied in the 

simulation model allows for: 

• Sp«ifl::ation ,.f the mix of operational sensors required in geocentric 

orbits as a funl::t1on of time. 

• Consideration of multiple spacecraft which are defined in terms of the 

reliability of the major support subsystems, the mIx of on-board sensors 

and their reliability and spacecraft cost. 

• 

• 

• 

• 

Consideration of spacecraft subsystem and sensor failure models wrlich 

aHow for both random and wearout failures. 

SpecifIcation lInd consideration of multiple transportation systems which 

may consist oi current or new expendables or the Space Shuttle. The 

transportation systems may also include (as necessary) orbit-to-orbit 

shuttles or propulsion modules (for example, Agena, Centaur, Space 

Tug, etc.). The propulsion modules may be expendable or reusable and 

may be used for placing spacecraft in orbit and retril!ving spacecraft 

which faU and require replacement. The speCification of the transportation systems include cost and reliability assessments. Reliability is 

considered at the major subsystem level. 

Speciflclltion of transportation systems to be utilized for pJacing 

different spacecraft into orbit as a function of time. Changing the 

specification of transportation system-spacecraft assignment as a function of time allows performance capability (such as allowable mission 

modes and reliability) and cost variations to be considered. 

Explicit consideration of muLtiple time periods thus aUowing for annual 

co:;ts to be established. 

• Consideration of cost learnmg curves. 

• AU costs to be treated as ur.cer't.ainty variables. 

The simulation model, taking into account the required numb.:!r of sensors as 

a function of time, number of operational sensors in orbit (as determined from 

spacecraft subsystem and sensor reliabHity characteristics) and spacecraft and 

launch costs, determines a near optimal mix \Jf spacecrdt Jaunchp.s as il function of 

·time. Since the simulation is based upon Monte Carlo techniques, it is possible to 

establish the probability distributions of pertinent performance measures, which 

allows alternatives to be compared by considering both expected values of 

performance measures and the chance of variatkm (i.e., the ri.'ik) of the 'Ialue of 

the measures. SpecHicaUy, the simulation m;)dei establishes the probability 

distributions of: 

• Pertinent quantities by year (for example, number of launch attempts, 

number of spacecraft required, numbel' of propulsion mpdules required, 

number of propulsion module refurbishments, etc.) 

~rru 

, 

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119 

• Launch, spacecraft and total costs by spacecraft type and by year 

• Bus and sensor nonrecurr ing costs 

• Present value of recurring pl'JS nonrecurring costs. 

The sensors mix as a function of time, as c,tabJished from Figure 3.1, was 

used as the sensor demand in a simulation analysis. The purpose of this analysis 

was to obtain insight into the number of spacecraft that should be prncur"d in 

order to achieve a reasonable likelihood of continuity of service and the number nf 

launch attempts that are likely to be required. The scenario described In 

Figure 3.1 was simulated or flown 1,000 times taking into account sensor and 

spacecraft support system ralldom and wearout failures and the p,·obability of 

major launch events being successful. The assumed demand for sensors is 

iUustrated in Table A.l, the assumed sensor and subsystem reliabiJities are 

indicated in rable A.2 and the launch vehicle (Delta) assumed rel1abiJities are 

indicated in Table A.3. 

Since an expendable launch vehicle is utilized, the probability distribution of 

the number of launch attempts and the probability distribution of the numlJer of 

spacecraft required are the same. These are summarized in Tabie A.1i a$ a 

function of time in terms of expected values and standard deviation. 

The results of the simulation analysis indicate that a minimum of two 

spacecraft of each type will be required. The likelihood of continuous service with 

the purchase of two spacecraft is not high and a third spacecraft acquisition ma}' 

be desirable. 

TABLE A.l ASSUMED SENSOR DEMAND (NO. OF REQUIRED SENSORS IN ORBIT) 

SENSOR FISCAL YEAR 

'85 '87 '89 '91 '93 

MSS (80M) 1 1 , " " " 0 " 0 ~ , TM (30M)* " " " " " " 13 13 13 " MLA (80M) 13 13 13 1 1 1 1 1 " 13 MLA ( 3Of4) " " 0 0 13 13 13 1 1 1 

* LAUNCH DOES NOT TAKE PLACE UPON FAILURE OF THE THEMATIC MAPPER. 

'''..- ~ W4'#.r"" -p:. ';;.:-" -----..i. ... ____ ~ - . ---- --
120 

T.\DLl h.2 ASSlIMED SENSOP AND SUBSYSTEr~ RELIABILITY 

/'lEAN· r I ME· TO· Ei.PE.CTED VARIABILITY OF SEN$ORISUaSY~TEM FAILURE (MTBF) Io:EAROUT WEARQUT LI rE· 

(YEARS) L1H (VEAII!') (YEARS) 

r~s~ 20 3 .5 

TM 10 3 .5 

MLA i30M) 25 5 .5 

r'ILA (30M) 20 5 .5 

POWER 30 Ii .5 

AVCS 3G S .5 

COMII,UrH C:~ TlONS 30 5 .5 

TUC 30 5 .a 

STRUCTURI:: 40 5 .5 

• STANOARD DEVIATION 0): IoIEAR0ur L:Ft::. 

TABLE A.3 LAUNCH RELATED RELIABILITIES 

ITEM VALUE - I • FROOABILITY OF ~PACECRAFT FUNCTI0~ING 0.95 

PROPEPL1 ~HfN PLACED IN FINAL ORBIT 

• PROBABILITY OF BOOSTER SUCCESS 0.98 

• PROBABILITY OF UPPER STAGE SUCCESS 0.98 

• PROBABILITY OF ORBIT INJECTION SUCCESS !J.98 

TABLE A.4 LAUNCH ATTEMPT STATISTICS 

r--- -- --- . SPACECRAFT TYPE ---------- rISr,\L YEAR 

'~5 '67 '9? '91 '~3 

--- '-- t • I 

-~ I t . . , 

LANDSAT E (~L~/80M) 

1 EXPECTED ~O. OF r. " ;') 1.20 0.19 0.22 0.25 ,ua " i) 

LAUNCH ATTEMPTS 

• STD. ~EV. OF NO. " " " 0.84 0.44 0.47 0.50 0.61 

OF LAUNCH ATTEHPTS " " 

- LANDSAT F (MLA/3m~) 

• eXPECTED NO. OF " a " ~ 0 " " 1. 11 0.17 0.19 

LAUNCH ATTEt-1PTS 

• STD. OEV. OF NO. a " " " 0 ;') 0 0.65 0.39 J.4i 

J~ L~UNCH ATTEMPTS 

. .". 
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121 

APPENDIX 8 

SUPPORTING DOCUMENTATION FOR INPUT 

DATA TO FINANCIAl.. ANAl.. YSES 

(1) Revenue - Supporting data is presented in Section 4.4, Market Forecast. In 

panicular, reference is made to Figures 4.' and ~.6. AU data in these figlJres 

are in constant 1983 dollars. A 6 percent inflation rate was used to escalat~ 

the figures to 198' and following years. 

(2) Additional Federal Purchases - Corresponds to the annual subsidy that is 

required in order to achieve a desired annual return on assets. The subsidy is 

determined through an iteration process wherein the value h adjusted untIl 

the desired rate of return is achi~ved. 

(3) Processing Cost/Scene-80M - Processing costs include those costs involved 

with the processing and handling of data trom the moment of receipT at 

GSFC until its expedition to EDC. For MSS data, the primary activIties are 

to make radiometric corrections~ indicate the n"Jed for geometric corrections 

and record the data on high density tapes 'Nhich wiU be used to transmit th.., 

data via sateUite to E.DC. For TM data, the functions performed at GSFC' 

include receipt and recording of data on high density tapes (to remain at 

GSFC until transfer to federaJ archives) plus creation of photographic 

negatives and computer compatible tapes (CCTs) from these high density 

tapes, which wiU be mailed to EDC. The foUowing determination of the 

processing cost/scene for 80 meter information products is based upon data 

provided by NOAA and is based upon processing 1.36 scenes daily. 

Cost Category Cost ($1.000) 

Operations and Maintenanc:! 

High Density Tapes 

Computer Compatible Tapes 

Computer Tape Drive 

Performance Assessment 

Photo Support 

Total Annual Cost (FY83$) 

Total Annual Cost (FY85$) 

7,148 

215 

20 

20 

...1.50 

8,353 

9,.385 

Processing Cost/Scene (80M) = Total Annual Cost x Cloud Factor = $270.30 

Scenes/Year 
; .. 

, ' , 

(4) 

122 

wlth a cloud factor equal to 1.1f3. The cloud factor (see Note 6) multipUer i.1 

used to account for the fact that the financial model is driven by scenes sold 

and not scenes processed. 

Processing Cost/Scene-30M - The following determination of the processing 

cost/scene for 30 meter information products is based upon data provided by 

NOAA. The processing cost 15 the inr,;remcntal COSt of p"ocessing '0 

30 meter scenes dally in imagery and tl!n scenes nally on tape, given that 136 

MSS SO meter scenes are being processed daUy. (Refer to Note 3 for a 

description of what l~ included in the current processing C08tS.) 

Cost Category Cost ($1,000) 

Total HOT & CCT Tape & Handling 

Photo Support 

Ground Segement Operations 

& Maintenance 

Total Annual Cost (FYS3$) 

Total Annual Cost (FYS'$) 

2,6'2 

',632 

6,328 

Processing Cost/Scene (30M) = Total Annual Cost x Cloud Factor = $49'.80 

·Scenes/Year 

with a cloud factor equal to 1.43. The cloud factor (see Note 6) rnultiplier is 

used to account for the fact that the financial model is driven by scenes sold 

and not scenes processed. The above cost per scene is based upon 18~2.50 

scenes per year. . 

(,) Pro,£essing Learning Factor - It is assumed that processing cost for repetitive 

functions will tend to decrease with time because of learning. A typical 

learning equation, as indicated below, has been utilized to predict future cost 

reductions. 

1..(I) ~~ ~!l~ear 1 = l[1og10(CA1..R) - 2.01/.301 

Cost case 

The learning factor, 1..(1), indicates the cost in the Ith year reiative to the 

current or base cost. The assumption i:; that costs are reduced by 100-CA1..R 

percent every time the number of years doubles. CA1..R represents the 

cumulative average learning rate (%). The processing learning factor is based 

upon a 90 percent learning curve. The specific values utilized are presented 

below along with learning factors based upon other learning rates. 

. -- -7'" 

~-~-- ,--"'-,~ 

,... ",,=~,~= ~! -,..,-,-",""-,, ~ 
• 

I • 

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ie 

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II 

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123 

. LEARNING FACTOR, L(I) 

FISCAL YEAR LEARNING RATE, CALR ~-

95% 90S 85S 80% 

'85 1.00 1.00 1.00 1.00 186 .95 .90 .85 .80 

'87 .92 .85 .77 .70 

'88 .90 .81 .72 .64 

'89 .89 .78 .69 .60 

'90 .88 .76 .66 .56 

'91 .87 .74 .63 .53 

'92 .86 .73 .61 .51 

'93 .85 .72 .60 .49 

'94 .84 .70 .58 .48 

(6) Proces!ling/Sales Factor - Thls f.actor accounts for the difference t,etween 

scenes archived and scenes sold, since archived scenes may be sold more t"an 

once while other scenes may not be sold at all. 

Processing/Sales Factor = +~!:f ~:~:: ~lcrt~1yst2~og~~I~::tor 

The cloud factor represents an adjustment since scenes with significant cloud 

cover are handled in a somewhat different manner. Scenes received at 

Goddard Space Flight Center are flagged during processing to high density 

tape if the cloud cover is great enough to render the scene obscure. Although 

these scenes are currently processed for archiving at EOC, it is assumed that 

a decision will be made not to further process these obscure scenes, which 

are estimated at about 30 percent of the total. Therefore, the number of 

scenes processed (at GSFC) equals the number of scenes transmitted from 

White Sands, but scenes archived * at fOC will be reduced from scenes 

processed by a "cloud factor." It should be noted that: 

No. of Scenes Transmitted from White Sands = No. of Scenes Processed at GSFC 

No. of Scenes Archived = No. of Scenes Processed/CF 

No. of Scenes Sold = No. of Scenes Processed/(CF x AF) 

CF = Cloud Factor = 1.4.3 

AF = Archival or Processing/Sales Factor = 0.'2 

* Scenes with too much cloud cover will be recorded on the high density tape 

(HOT) and retained in the archives, but it is assumed that further processing, 

such as producing a film master, will not be done. 
124 

The c',oud factor of 1.43 is based upon 30 "bad" scenfts out of 100 scenes (i.e., 

70 "good" scenes). Therefore, to get 70 good scenes it il necessary to process 

100 sc' ,es or 1.41 times the 70 scenes. To go from scenes processed to good 

scenes it is necessary to divide by 1.43. . . (7) Archival Cost/Scene-SOM - Archiving costs are costs incurred in receiving 

data at EOC, proces:ling data into format required for archiving and 

maintainins the archi,,~s. I., the calle of MSS data, atter the receipt of data 

from GSFC it is recorded on high density tapes. Scerles from the high density 

tape are processed to film images which are sent to the photo lab and a 

master made. The high density tapes and fUm masters are then archived. 

When EDC receives a TM film image frl)m C;SFC it makes a master fUm 

image for storage in tho archives. The CCT it receives is 5tor~d in the 

archive after a copy is made for the cllent. TM archiving costs include the 

cost of making the fUm master plus cost of receiving and cataloging the data 

and maintaining the database. 

Cost Category 

Da.ta Receipt c5c Catalog 

Data Processing & Archive 

Creation 

Archive Database Maintenance 

Total Annual Cost (FYS3$) 

Total Annual Cost (FYS'$) 

Cost ($1,000) 

669 

1,3'8 

.J.!t! 

2,17' 

2,44' 

Archiving Cost/Scene (80M) = $49.70 

(based on archiving 49,27' scenes/year) 

(8) Archival Cost/Scene-30M - Since data is not currel,tly available on aU f.)f the 

TM archiving costs, ilpproximations are necessary and are based upon :scaling 

of MSS costs 35 follcws. (Refer to Note 7 far what is included in archiving 

costs.) from Note 7, the average cost of I'ecelpt and catalog ($669,000) and 

archive database maintenance ($14S,000) is $S17,000 for MSS scenes. This 

reduces to $16.(;,0 per scene. Sincl' the number of items (film images or 

computer compatible tapes) should be about 1.7' times greater (TM has seven 

spectral bands whereas the MSS has four spectral bands) than produced for an 

MSS scene, it is assumed that the cost of receipt, cataloging and archive 

database maintenance for TM data is 1.7' times that of MSS data or $29.00 

per scene. An approximate cost of making a working fUm master for storage 

~- . 7' .:-? 'f 

_---_.-__ ~_~~ __________ ~_"'_, .. L __ h'_~~ 
• 

• 

• 

• 

• 

• 

• 

in tho archive is $79.40 per TM scene. Therefore, the average cost to archive 

a TM scene is $108.40 FY8.3$ or $121.80 FY8'$. 

(9) Archival Learning Factor - A learning rate of 90 percent has been assumed. 

Soe Note' ::or detaUs. 

(10) £.ost of Sales/Unit - Sales costs are those costs involved in reproducing 

scenes for sale to the public, and distributing the scenes. FUm images are 

made from the fUm master which is stored in the archives. CeTs are mAde 

from the archived high density tape in the case of MSS data, and from the 

CeTs received from GSFC for TM data. 

MSS estimated cost for reproduction and sale of approximately 78,7'0 fUm 

scenes is as follows I 

CQst (S 1 ,00.22 

Product Generation'" Dissemination 1 ,480 

Customer Interface 64:> 

2,m 

Thls results 1n MSS film cost of $27.00 FY 8J$ or $30.30 FY 8'$ per scene. 

MSS estimated cost for reproduction and sale of approximately 4000 CeT 

scenes is as foUc.lw:s: 

Product Generation'" Dissrnenination 

Customer Interface 

Cost ($1,000) 

43' 

215 

6'0 

Thls results in MSS tape cost of $162.'0 FY83$ or $182.60 FY8'$ per scene. 

TM costs are estimated to be 7/4 (tne ratio of TM spectral bands to MSS 

• spectral bands) times the MSS costs. Therefore, TM film and tape costs are 

estimated a. $'.3.10 and $.319.60 FY8.s$ per scene, respectively. 

• 

• 

• 

(11) Cost of Sales Learning Factor - A learning rate of 90 percent has been 

assumed. See Note , for details. 

(12) !!!S!lrect Lab2r., - Indirect labor costs are those costs that are independent of 

the number of scenes processed and include managemt'!nt, spacecraft mo·· 

neuvering and positioning, and building operations and maintenance. These 

costs are as follows: 

Cost Cate82Q'. 

Building Operations'" Maint. 

Spacecraft Orbital Element 

NOAA Management 

Cost ($1,0001 

1,651 

120 

2,500 

~ ; .. 

. 
i 

•• ,j 

! 

, 

(D) 

126 

Communications-Telex Link 

to Foreign Stations 

8uUding 28 Local Communication 

NOAA Administrative Costs 

at EOC 

Total Annual Cost (FYI3$) 

Total Annual Cost (FYS,$) 

110 

4' 

32 -

R&D· It is usumed that NASA w111 continue to ulld~rt.ake r"S'!:uch and --

development relating to new sensors and rel3t.ed technologies Ilnd new 

info, mation c!xtraction techniques. It is assumed that the government ~~J) 

expenc:aitures will be on the order of $10 rnUUon per year. It 15 assumed that a 

private sector business venture (Scenario 3) wUl undertake R&D to improve 

computational efficiency and inf",'m,Uion products. It 13 estimated that the 

cost (fully burdened) of a profeulonal involved in the R&D is $90,000 per 

year. It is assumed that the R&D organization should include approximately 

ten professionals ($900,000/year) and wUl increase as sales buUd over time 

and ;,chieve a level of. 4 p~!'t:~nt of tales,. Therefore, R&D costS will be 

$900,000 per year or 1£ percent of sales. whichever is greater. 

U 4) Marketing, Advertising & Promoti0'l. Marketing, advertising and prornotion 

includes customer interface, mark~t development and applications engineerlng as well as the other sal~s-orie=nted f!.lnctions. ~t is assumed that the 

average cost per salesperson 15 $"8,000 ($4',000 in compensation multiplied 

by 2.' for overhead and G&A, plus $4',000 in expenses). It is assumed that 

there are 1.' protessional persons supporting each salesperson at a CO!lt of 

$n,OOO-$8'~OOO per year. Therefore, the effective cost per sale:rperson 15 

$278,000 per year. 

As a minimum, it is aSluJmed that one salesperson ~ required for toreign raaies 

(mainJ, keeping and getting new ground stations), one sa.lesperson is required 

for federal sales, two salespersons are required for industria! and state/local 

government/academic sales. Therefore a minimum market organization is as 

foUows: 

4 salespersons 

6 professional support 

1 management 

($6',000 x 2.') 

__ -';0 

} $1,110,000 per year 

} $ 160,000 per year 

$1,270,000 per year 

ii_-"" _______________ -->''''-Io. -'--- .-••• -.~ 
• 

• 

• 

• 

• 

• 

• 

r • 

• 

~ 

I 

r • 

• I 

127 

H is allumed that this marketing organization wUl increase with sale. 

reaching an expenditure level of , percent of sales. Therefore, Marketing, 

Advertising & Promotion Costs wUJ be $1,42.',000 FYS,$ per year or 

, percent of sales, whichever is greater. 

(U) Communications Costs (TDRSS) - Thls represents the cost of transmitting 

data through the Tracking Data Relay SateWte Systern from LANDSAT to 

the White Sands ground receiving station. Charges are based on a per minute 

rate depending on type of access. 

A typical transmission lasts approximateiy 26 minutes and consists of a mix 

of the different types of access. This occurs approximat~ly 20 times per day. 

During each 26 minute intllrval seven MSS and flve TM scenes (on average) .. are transmitted. The average cost for a typical transmission is 

Access 

Single Access 

Multiple Access Forward 

Multiple Acce". Return 

Therefore, 

I!m! 

14 minutes x 

2 minutelll x 

10 minutes x 

Cost per Minu..!!. 

$91 

~2i 

Total COlit 

Per Event 

$1,274 

40 

60 

$17»4 

$1,374 = 7 x cost of transmitting MSS scene + .5 )( cost of transmitting TM 

scene 

It is estimated that the cost to transmit a TM scene wUl be '.67 times that of 

.. 

•• 

•• an MSS scene. The cost to transmit an MSS scene is therefore $.38.90 

(FY83$) or $43.70 (FYS'$). Tnis must be multiplied by the cloud factor (refer 

to Note 6) so that the total cost per MSS scene is $62.'0 (FY 8'$). Similarly, 

the total cost (including the cloud factor) for transmitting a TM scene is 

$3'4.10 (FYS'$) • 

The analysiS is based upon the use of rates for nongovernmental users rather 

than rates that will be charged to NOAA, because the former is likely to be 

more representative of the true costs of u,ing TOR SSe 

TM data is trar ted at the rate of 8' mf'~abits per c;ecJnd and MSS data at 

the rate of 1· -"abits per second. Both require 24 seconds for a scene to 

arrive at Whlte Sands (net of any time that the satellite Isn't collecting 

usable data) • 

ksWSi' ... ''<' --,..--.,. '*' I..L ____ ~ ___________ ._..lo.__~ ______ .... _ 
128 

(16) Communications Costs (OOMSAT) - Thl.l repr.tsents the COlt of transmitting 

data via the Oomest\c Communk.ations Satelllte System. 60th TM and MSS 

dwta are transmitted from White Sands to GSFC using the DOMSAT '0 megabit link. MSS data Is sent to fOe from GSFC on the DOMSAT 20 :negabll 

llnk (TM data i. maUed). 

(18) 

The cost of using the L)OMSAT '0 megabit Hnk b $J.'O/minute. Includ'''8 

It 

set-up and other overheAd time. it take. an 'ucimated 48 stfconds for • ., MSS 

scene and 72 seconds for a TM scene to arrive at GSFC. Therefortl

, MSS 

DOMSA T cost ill 

MSS DOMSAT Cost. 0.8 minutes/sr:ene x $J.'/min I: $2.S0/scene (FYS3$) 

It is assumed that the cost to transmit an MSS scene to EDC from CiSFC 1. 

approximately the same as transmitting from White Sands to GSFC, $2.80. In 

addition, an inventory tape (GHIT) la communicated by phone to EOC Md this 

costs about $.90 per scene; therefore totQl cost to send an MSS scene from 

White Sands to EDC Is $6.'0 (FYS3$) or $7.l0 (FYS'$). This must he 

multiplied by tt • .: cloud factor (ref~r to Note 6) so that the total C~!lt per MSS 

~c~ne is $10.40. 

The cost to send a TM scene from White Sands to CSFC is: 

TM DOMSAT Cost:: 1.2 minutes x $3,'/mln :I: $4.20 (FY83$). 

Adju'ting to FYS' and multiplying by the cloud faeter yields $6.70 per scene 

(FYS'S). 

,LDRSS Lea~e Costs (AnnY!.1l - Thla represents the tease costs associated with 

the Tra",klng Data Relay SateHite System which arc independent of usage. 

S1.nt:e TDRSS c~sts have been assumed to be directly proportional to scene" 

~ld, this fixp.d annual cost hu been HIt equal to :fefO. 

DOMSAT L.ease Costs (Annual) - Thl,! represents the leQs,", costs associated ._----....... - --- with the DOMSAT communication system which are independent of usage. 

Since DOMSAT costs have been a'5umed to be directly proportional to scenes 

sold, this fixed annual cost t.css been set equal to zero. 

--* rime during which the system ls turned on but not coUecting useful data. 

w

(C};:JIRlI',::;\ 

~uu 'I 

.L __ : ______________ ""'--... ._-- ._ ... _- ... .;;; -----, .. r-~ ...... _=-___ .......... _, --IIIIII!!'!!!!"!I!II_ •.______ - •. ~
I 

~ ( 

• 

I 

, 

F 

• 

• 

• 

129 

(19) Lease Costs (LANDSAT 0 and 0') - It is assumed that for Scenarios 3 and " 

LANDSA T 0 and 0' are transferred to the pr ivate Gaector business venture. 

Different recoupment payment policies are considered. tease costs are zero 

for Scenarios t, 2 and 4 since it is assumed that transfer of these assets is 

through non lease arrangements. 

(20) Lease Cost:, (Ground Facl1iti~s-GSFC, fDC, White Sands and Nongovernm~.ll 

It is assumed that, initially, ground facility assets are leas\1!d from the 

government (operating leases with no transfer of title). It is assumed that in 

1989 all faci11ties are consolidated at White Sands at which time ledses are 

entered into with nongovernment organ1zations. It is a~sumed that the lease 

policy is to recoup a fraction (0 to 1.0) of the book value of the leased asset 

through an annuity such that the present value of the annuity is equal to 

c5 )( Book Value where c5 is the fraction of the book value recouped and bO.Jk 

value, BV, is given by 

BV = Acquisition Cost x [usefuL Life us~r~rUfe ~rvir.:e ] • 

And the value of the annual annuity payment, A, is given by 

A - c5 x B V )( r /100 

- 1-1/(l+r/100)M 

Where r = cost of capital 

M = number of payments for establishing lease rate. 

The following schedule is assumed: 

FY 

' 86 '88 '90 

GSFC L

GSFC IOGSFC LGSFC LGSFC 

EOC LEOC LEOC LEor; LEnc 

WHITE SANDS L~IS LwS LwS LwS Lws LWS LwS 

NONGOVERNMENT LNG LNG LNG 

'92 

LWS L~IS 

LNU LNG 

'94 

Lw: 

LrjG 

" 

" 

q 

'i 

'1 -i 

~~ J 
,! 

130 

The venture initiaUy leases facUities (CiSr-C proces~ing facilities, cDC 

processing and archiving facUities, and White Sands tracking and communications facilities) from the go~ernment. The5e lea,e rates are l.CSFC' l.EDC 

and l.WS• ~ her consolidation the venture leases similar equipment to be 

located at White Sands. It is assumed that the lease r~te of White Sands 

eI',Juipment is smaU relative to that at GSFC and EOe. Th~ lease ra~e of the 

equipment to ~e acquired and located at White Sands 13 appro"imat~d as 

follows: 

where E is an efficiency factor relating to the consolidation of the EDC and 

CiSFC data processing faCilities, I. is a learning factor (it is assumed that 

both processing algorithms and equipment improve with time) (refer to Note 

, for a discussi"n of learning factors) and IGSFC is the effective lease rate 

paid on equipment not require .. d at the combined facility. 

A 90 p~rc~nt iearning rate is ~ssllmed. Therefore 1. = 0.78. It is assumed 

that ~he cost of computers to thf! government has a profit built in for the 

private ~~ctor. When the commercial entity leases a computer from the 

private sector there is also a profit for the private sector. It is assurned that 

these are basically the same on a percentage basis. NOAA has estimated 

equipment costs at GSFC to be approximately $101 mi11ion and EDC has 

estimated equipment cost associated with LANDSAT at EDC to be approximately $14 million. 

The following lease rates have been es'timated and used in the analysis: 

a V(GSFC) = ~ 1 f.I i miUion x r 8 yrs. useful life - 2 y.,'s. eri2r...!£~~art of lea~.] ." L 8 yrs. usetul hte 

BV(EDC) = $14 million x lr-8 yrs., useful1ife .. 4 yrs. p~ior to start of lease] 8 yrs. useful hfe 

A t a cost of capital of 10 percent, 

LGSFC = 101 x (88~) x .10/[ 1-1/1.10)4] = $23.9 million 

LEDC = 14 x (884) x .10/[ 1-0/1.10)4] = $2.2 million 

l.NG = (23.9 + 2.2) x .78 x .90 -2 = $16.3 million 

:. 

..... ~ ___ ~ ___________ --..It.-_ .. _._ ._ •... _.-,. 
• • 

< t 

131 

where E = .90 and ICSFC = $2 million. 

Since the lease at White Sands starts in 1989, LNG must be adjusted from 

FY83 to FY89 dtll!o\r:. by multiplying by 0.06)6. The result is 

LNG = $23.12 million FY89$ in FY89 and beyond. 

(21) Assets: Ground Segment - It is assumed that all ground segment equipment is 

leased. Therefore the asset value of the ground equipment is zero. 

(22) Space Segment - The following is a summary of the launch costs and the 

availability of launch vehicles. LANDSAT D consists of the NASA standard 

Multi-Mission Modular Spacecraft (MMS) and a mission-unique sensor module. 

LANDSA T D was launched into a nominal 42' n mi sun synchronous polar 

orbit by a Delta 3920 launch vehicle from the U.S. Western Test Range. 

The MMS is designed to be compatible for launch from both the Delta and the 

Space Shuttle Orbiter. However, the long (14' length) and narrow (7' width) 

configuration of LANDSAT D is not optimum from a cost standpoint for 

Shuttle launch. As the MMS is designed for compatibility with the Delta and 

Shuttle, it wiU also be compatible with the Ariane launch vehicle. These 

three launch vehicles constitute the primary candidates for further launches 

of LANDSAT spacecraft in the configura tion of LANDSAT D. Other expendable launch vehicles such as proposed commercial versions of the AtlasCentaur or Titan could also be used; however, the use of these launch 

vehicles would n.ecessitate d(.~ign modifications in the spacecraft. Moreover, 

there are no plans at the present to achieve a near polar orbit capability with 

the commercial TItan. 

For the purpose of o!ltaining launc:h cost information it was assumed that the 

future LANDSA 1" spacecraft would be similar :n physical characteristics and 

orbit requirements to LANDSAT D. Launch dates of January 1987, January 

199 I and Jan'Jary 1996 were used to solicit launch cost information from the 

operators o{ the Ariane, Delta and Shuttle. 

The results of these enquiries indicate that the launch vehicle area is in a 

state of flux and it is difficult to obtain costs that can be used with a great 

deal of certainty for the prospective launches. At the present time the Delta 

Program Office does not plan to continue to supply the Delta launch vehicle 

after its use for two GOES missions in FY86. In response to this enquiry, 

~cru 

-- .-,-, ~:-. 7".~--;_:;~.;ri:;;flIij"_.~~.;r*!ft- ;: L..~~ __ ~ _________ ._~_~IL __ " __ >- - ... --

. 1 il".> >.-=~_, ~
. .' 

, . 

. ' 

: 

! 

(23) 

132 

NASA quoted a cost of about $" million In FYS' dollars for a Delta launch 

prior to the termination of the program in FYS6. NASA was unable to quote 

costs beyond this date because of the planned termination of the Delta launch 

vehicle. Informal discussions of the proposed launches with NASA Shuttle 

marketing personnel indicate that NASA has not yet formulated a pricing 

policy for WTR launches. Moreover. the published Shuttle pricing policy does 

not extend beyond FY 88. In the absence of a pricing policy tha t extends to. 

tlte time .,eriod of inter~st for WTR, it was ~uggested that the piicc of a 

Shuttle launch from WTR would be aoout the same as that from ETR. 

Because I)f the spacecraft configuration, weight and orbit requirements. 

LANDSAT would probably require a dedicated Shuttle launch. The suggested 

price for a dedicated Shuttle lEaunch from WTR was about $40 mUllon in 197' 

dollars. Discussions with Arianespace indicate that the L.ANDSAT launch 

would require the Ariane 40 vehicle. Funding for the development of the 

Ariane 4 series of launch vehIcles was approved in 1382 and it is expected to 

be operational in 1986. . Discussions with Arianespace indicate that the 

budg~'tary price frJr an Ariane 40 launch is $60 million to $6' million in 1982 

dollars. 

On the basis of this brief survey, it is clear that the Shuttle will be supported 

from WTR. On the other hand, it is not cleEar that any of the current U.S. 

e·"",endabie launch vehicles will be supported from WTR post FY86. One 

possible sce~ario for this time period might postulate competition between 

two or more U.S. launch vehIcle, ana perhaps the Ar.iane. Although NASA 

now indi.cat~s that it will not suppor~ the Delta in the post FY86 time period; 

it is posswle that competition wi!! drive the price of competing lallnch 

syst~rTls tl) that quoted for the Delta, or that a commercial version of tl-,e 

Delta wiIJ be developed as one of the competitors. In view of the dear price 

advantage of the Delta 391.0, the price of the Delta 3920 was used as the 

basis for estimating launch costs for the prospective LANDSAT launches. 

Assets: Space Eguipment - The space equipment assets include L.ANDSAT 0, 

0', E, E', F, F', G and G'. These are procured at different point!. on time with 

both D and D' having already been procured. 

Data from GSFC indicates a total cost of $361 million for 0 and 0'. It is 

assumed ·that this cost is divided evenly between 0 and 0'. Therefore 

.o

--'-'--, -., -"1 ~ .•• --

}I. ... ~l ... '\r''-''' ...... '" '!
• 

& 

• 

• 

• 

• 

• 

• 

• 

• 

• I 

133 

LANDSAT 0 Book Value = (180 + 3'] x 

= $71.7 million [3 yr. Ufe-2 yrs. used by '8'] j yrs. lIfe 

LANDSAT 0' Book Value = (180 + 3' + 33] x (1] 

= $248 million 

where it has been assumed that the Delta launch cost is $35 million and D' 

storage cost is $33 miUlon. 

The following cost estimates (in millions of dollars) have been made for the 

post-D'sateUites: 

LANDSAT 

f. E' F F' 

SPACECRAFT 40x(I.06)5 40x( 1. 06)~ 40:«1.06)6 6 40x(1.06) 

MLA (80M) 50x( 1.06) 10x( 1.06) 

MLA (30M) 75x( 1.06)~ H4TEGRAT ION/TEST 20x( 1.06)~ 30X(1.06)~ 35X~ 1.06t 

20:«1.06)6 

LAUNCH COST 

TOTAL COST (10"S) m 35#1·~W m 101 (VB6S ~~t- ~~w 

Since costs are spread over time, the above table is an approximation but 

deemed acceptable. 

LANDSAT E is estimated as a two and one-half to three year program with 

expenditures of 20 percent, 50 percent and 30 percent 1n each 01 the years (as 

per GSFC). LANDSAT F is estimated as a five year program with expenditures of 15 percent, 20 percent, 30 percent, 20 percent and J. 5 percent in 

each of the years (as per GSFC). These values have been adjusted to re-flect 

the launch cos··~· Thus, as indicated by the "Construction In Progress," the 

cumulative expe:llditures add up to 100 percent when launch occurs. 

Without knowledge of what G and G' will comprise, annual expenditures have 

been estimated and are based upon the previous history of expenditures. 

(24) Cash RequirernJm,.t in Days - It is assumed that 15 days of cash are required 

as measured against total revenlJe (i.e., 15/365 x total revenue). 

(25) A/R ReqUirement in Days - It is assumed that accounts receivable arp. an 

average of 60 days old. Average ac:col,lnts reccivabl~ balance is equal to 

approximately 1/6 of revenue (i.e., 60/365 x revenue). 

(26) Current LiabilitY Requirement in Day~ - Current liabilities are assumed to be 

paid within 30 days. 

~ i:o.l_~ ___ ~ ____________ ~L_" ___ ._ ... _. ~ 
)34 

(27) Contributed Capital - Contributed capital for the private sector financial 

projections are assumed to be an initial capitalization of $7' mUlion. The 

capital investment remains constilnt over the ten year period. 

(28) ~o5t of Borrowing - Long-term borrowing rates are assumed to be 11 percent 

over the ten year projectior.. ,.he 11 percent borrowing rate is predicated 

upon the 6 percent inflation rate "Jsed in thl! projection. '''!though current 

long-term borrowing rates are currently higher than J I percent, it is as:5umed 

tnat by 198', the first year of the projection, that long-term rates will be in 

the 10-12 percent range. 

(29) Federal and State Tax Rate - A '1 percent combined federal and state tax 

rate has been used to calculate prOVision for taxes on net income (46 

percent federal, , percent state). 

(30) Investment Tax Credit Sal! - Property quaJlfying for the investment tax 

credit is reflected for calculation purposes. All space segment property both 

fuJly constructed and in process during the year are included in the 

investment tax credit base. 

til) !Qvcstment rax Credit Rate -.A. 10 percent investment tax credit has been 

apptied to aU quaHfied property. For tax purposes, a five year ACRS life has 

been assumed. For depreciation purposes, a , percent reduction to the basis 

of aU depreciable property has been applied. 

(32) Equity Participation by the U.S. Government - It is assumed that for the 

legislatively-chartered, privately-owned corporation scenario, the U.S. 

government's equity participation wiU be 33 percent. The percentage 

participation used is arbitrary, and is used for iUustrative purposes. 

(33) Research .!I'd Development Tax Credit Ra~ - A l' percent R&D tax credit 

~ate has been assumed although the predse rate may vary. The exact rate 

aPl'lied will be depefldent upon the nature of the R&D, a,verage annual 

expenditures and type of R&D (in-house research expenses vs. contract 

research expenses). 

(34) Royalties-Ba~e Fee. This amount reflects the minimum guaranteed royalty 

or licensing fee paid ~ the U.S. government under the private sector 

marketing scenario. A minimum base fee of $33.' million fllr the exclusive 

marketing rights to LANDSAT data is assumed. 

(3;) Royalties as a Pe!£~n.lage of Sales· It is assumed that a minimum royalty of 

80 percent of LANDSAT sales would be paid to the U.S. government if 80 

percent of sales exceed the guaranteed minimum of $33 • .5 million. 

• 

, J 

I 

I
~ r .-'" 

, 

~ , < 

, 

, 

" 

, . 

~ 

, 

• 

(36) Government R&D Expenditures - Current government R&D expenditures re-

• lating to the current land remote sensing system are not currently accumulated in a manner conducive to used for' projection purposes. A $10 

million per year R&D expenditure by the U.S. government has been used for 

projection purposes in aU scenarios other than planned phase-out. 

• 

• 

• 

• 

• 

• 

(37) Direct Costs - The equations used for the computation of processin~, archiving and sales costs are as foUows: 

Processing Cost (I) = [M1S(J) + MFS(I)] x K x PMSS(I) 

+ (11S(I) + 1FS(I)] x K x P1M(J) + IOU) 

Archival Cost (i) = [(M1S(I) + MFS(I)) x AMSS(I) 

+ (115(1) + 1FS(I» x A1M (I)) x AF x LA (J) 

Sales Cost (I) = (M1S(I) x SMSS1(I) + MFS(I) x SMSSF(I) 

+ 11S(I) x S1M1(I) + 1FS(I) x S1MF(I)] x LSm 

+ (M1S(I) + MFS(I) + 11S(I) + 1FS(I)) x clm 

K = CF x AF 

where 

MFS(I) = 

MTS(I) = 

TFS(I) = 

T15m = 

PMSS(I) = 

PTM(I) -

10m = 

AM5S(I) = 

ATM(I) = 

LAm .-

SMSST(I) = 

SMSSF(I) = 

STMT(I) = 

Number of MSS film scenes sold in year I 

Number of MSS tape scenes sold in year I 

Number of 1M film scenes sold in year I 

Number of 1M tape scenes sold in year I 

Per scene cost to process MSS data at Goddard 

Per scene cost to process 1M data at Goddard 

Indirect costs associated with processing MSS and TM data 

at Goddard 

Per scene cost to archive MSS data at EDC 

Per scene cost to archive TM data at EDC 

Learning rate associated wjth the archiving procedure 

Per scene cost of reproducing for sale an MSS tape scene 

Per scene cost of reproducing for sale an MSS film scene 

Per scene cost of reproducing for sale a TM tape scene 

• ;, ' ...... -a. .. 

L-....o.....-_____________ ......It.-._ ..... _._ ._ •••. _.~ 

j

, 

.
STMl'U> = 

LSU> = 

CI = 

AF = 

CF = 

136 

Per scene cost of reproducing for sale a TM fUm scene 

Learning rate associated with reproducing for sale 

Per scene cost of customer interface 

Archival factor (see Note 6) 

Cloud factor (see Note 6) 

(38) £gr."munlcs.tons Cost· The f::t;tuatlons used tor th~ computation of T!)RSS and 

COMSA l' costs are as tollows: 

TDRSS Cost (I) = [ MFS(J) + MTS(l) j x K x T MSS(I) 

+ [TFS(I) + rTS(I)] x K x T TM (I) 

DOMSAT Cost CI) = [MFS(I) + "~TS(I)] x K x 0MSS(I) 

+ [TFS(I) + TTS(I)] x K x DTM(I) 

where 

TMSS(I) = 

'!' TM~I) = 

°MSS(I) = 

Per scene cost to transmit MSS via TORSS (satellite to 

White Sands) 

~er ~cene cost to transmit TM via TDRSS 

Per scene cost to transmit MSS via OOMSA T (trom White 

Sands to Goddard, and frt')m Goddard to eOC) 

Per scene cost to transmit TM via DOMSAT (White Sands to 

Goddard) 

and other ~erm5 are as defined in Note 37. 

(

. i 

I 

_ .... ~.-"",--~"""",,---=-..... --.~ ________ -~