PARIS, France -- Some 250 top space-industry executives from 20 countries met last week at a conference in Paris to discuss a satellite-launch market that most agree is more mature, competitive and complex than even a year ago.

"This year the different players of the industry are getting more realistic in their approach", said Rachel Villain, senior space consultant at Euroconsult, a group of analysts who organized this conference.

"In 2000, we'll have 16 launches. It may be the most active year for anycommercial launch vehicle company in history. We anticipate orders to easily exceed $1 billion this year, and of all the orders taken this year we have every expectation of getting 50 percent."
     

With the end of the Cold War and the breakup of Soviet Union, a vast collection of launch vehicles have appeared on the market. To accommodate the growing demand of on-orbit telecommunications, satellite operators are happy about competition that leads to better prices, but launch service companies worry there may not be enough business to support all them.

"Four to six years ago, we didn't have much choice in launch vehicles to get access to space. We were limited essentially to the Ariane 4 system and Atlas 2 series," said Gary Goodwin, director of launch services contracts at Space System Loral, one of the largest satellite operators in the world. "There is now the potential for abundance of supply and performance."

Newcomers include the European Ariane 5, the Russian Proton K (marketed by a joint-venture), Sea Launch (Russian-Ukrainian-US), Starsem's Soyuz (Russian-French) and China Great Wall's Long March systems.

"In the heavy and intermediate market (of launchers), there is clearly over capacity," said Mark Albrecht, president of International Launch Services (ILS).

ILS is the largest and oldest of the international joint launch ventures.

Thanks to a partnership that links the American firm Lockheed Martin, and the Russian Krunichev State Research and Production Space Center, and Rocket Space Corporation Energia of Korolev, ILS is able to market the Proton rockets and the Lockheed Martin-built Atlas series of launch vehicles.

"We are ready to compete, we understand the competition and we want to maintain our leadership role as the industry in general adapt to the market," Albrecht said. "In 2000, we'll have 16 launches. It may be the most active year for any commercial launch vehicle company in history. We anticipate orders to easily exceed $1 billion this year, and of all the orders taken this year we have every expectation of getting 50 percent."

Some analysts believe the price war has already started due to the competition. But others disagree. "I don't think there's any over capacity for reliable launchers," said Philippe Berterottiere, vice-president (VP) for sales, marketing and programs for Arianespace, the current world leader in launch services.

In terms of overall business, 1999 wasn't a good year for the world launch market. Only 15 geostationary transfer orbit launch contracts were in competition internationally, compared to 25 in 1998. Arianespace walked away with 80 percent of those contracts.

Yet Berterottiere defends the higher price policy of Arianespace. "Quality is directly affected by cost and I don't see how we can ever reduce costs without reducing the quality," he said.

As new geostationary-capable rockets are introduced on the market with delays due to technical difficulties, such as the Delta 3 and 4, the Atlas 3 and 5, the competitive leadership of existing launch vehicles like the European Ariane is reinforced. These American rockets (Delta 3 and 4, the Atlas 3 and 5), called EELVs (the low-cost U.S. Evolved Expandable Launch Vehicle), are built to cut costs and to cut into Arianespace's 55 percent market share.

For Dave Schweikle, a vice president for Delta launch services with Boeing, the oversupply of launchers will solve itself -- some companies will disappear.

"I think it will shake out, but how it will shake out? I don't know!"

Alexander Medevedev, deputy director general of Moscow-based Krunichev, foresees "a very tense competition" around 2004 when "specific costs are likely to go down between $10 and $12 per kilogram to geostationary orbit," about half of what they are presently.

A large Chinese delegation from China Great Wall Industry, lead by Liu Zhixiong, vice president for the government-owned company, was present at the summit. Since 1998, when the U.S. government began forbidding export of US satellite technology to China due to alleged illegal transfers of technology, the Chinese firm's international sales have been slumping.

"We have 18 consecutive mission successes in more than three years with Long March rockets," said Zhixiong.

He said that the more powerful Long March 2-F, currently being used for their human spaceflight program’s development phase, will be commercially available.

"We'll use that launcher to send a few more spaceships as a test flight," he said. "After that, if there is any customers for that, we'll be very happy to offer it for the market." According to experts, the first Chinese in space could be launched next year.

For new launch systems, it may take time to get good credentials.

For example, satellite operators, who commonly wait three years to get their satellites built, are very cautious in selecting a launcher.

"It's quite difficult for us to select a launch service which is in its early phase," said Roger Tinley, director of satellite systems at Telesat, the largest Canadian operator.

Launch reliability drives insurance costs, and good reliability brings these costs down. Failures push them up.

"There's no doubt that a system which has failed like Sea Launch will get a higher insurance rate because of the risk involved," said Guy Lallour, manager of the international department of business risk at AGF, the first launch service insurance company in the world. For him, "cheaper, faster is definitely not better!"

In recent years, a growing number of satellite operators are taking more and more insurance coverage beyond the launch in case the satellite fails after the high-risk ascent-phase.

In 1999, 79 launches occurred worldwide, and eight of them -- equal to 10 percent of that year’s launches -- failed.

After a good start, Sea Launch, which put satellites in orbit from a sea-floating platform on the equator in the Pacific Ocean, experienced a second commercial launch failure on March 12 due to a problem with the rocket’s second stage. Sea Launch is a joint venture between Boeing, the Russian firm Energia and Ukraine's KB Yuzhnoye/PO Yuzhmash.

"We have a new capability," said Amy Buhrig, vice president for marketing for Sea Launch. "We have teamed with AssureSat to have an in-orbit backup capability for our satellite operator to protect their business plan and their customers in the event of a launch delay or failure.

"In those cases, our customer has the opportunity to lease the AssureSat satellite which is already in orbit and which is able to provide services to the customers. We have exclusive rights with AssureSat."

According to Paris-based Euroconsult, the number of payloads put in orbit between 2000 and 2009 will nearly double. Compared to 630 satellites launched during 1990-99, they forecast 1,100 over the coming decade, including telecom, Earth observations, military and science missions.

But for launch providers and others in the space industry, the financial benefits won't be in proportion to this growth because lower prices will affect all the segments of the future market.

"Its market value is estimated at between $45.6 and $55.6 billion," Villain said.

At the same time, analysts believe more space-communication traffic won't translate automatically into more satellites. With the development of state-of-the-art technology, more efficient geostationary satellites allow more kilobits of data to be carried with the same number of satellites. So satellites are getting bigger and the 4-ton- to 5-ton-class-satellite is becoming more a requirement of the satellite operators.

"What is sure in this fast-changing launch and satellite industry is that the geostationary orbit (GEO) will remain the core of the business," said Villain. "In the meantime we can notice that the economics of the low Earth orbit (LEO) for global commercial services are coming under increasing suspicion after the bankruptcy of Iridium."

Even though launch service providers have proved they can efficiently and rapidly deploy satellite constellations, Iridium's $5 billion failure has discouraged a lot of investors and insurance underwriters.

"In a couple of years, almost nobody will speak anymore about constellation satellites in low earth orbit," said Pierre Madon, consultant and former top executive at Intelsat headquarters in Washington D.C., "and satellite builders will be looking at six and seven ton-class geostationary satellites."