Space has become the final frontier for investors, but expenditure in the market is forecast to expand eightfold by 2045, due to technological advances and falling production costs.
Developments in areas such as reusable rockets, affordable in-flight WiFi, weather forecasting and environmental monitoring will help drive the sector’s size to $2.7tn over the period, according to Bank of America Merrill Lynch.
Governments and the military still account for much of the investment in the sector, but tech billionaires — such as Elon Musk and Amazon’s Jeff Bezos — are gaining a toehold, as are private equity and venture funds.
Private investment in space totalled $3.4bn in the year to June 2018, according to Seraphim Capital, a venture capital company that focuses on the sector. Mark Boggett, its chief executive, says: “In the past few years, investor interest in space has gone crazy.”
A big growth area is using satellites to deliver broadband to commercial aircraft and high-speed terrestrial internet to the 4bn people globally who still do not have access.
Inmarsat, the UK-listed company, has joined Deutsche Telekom, Vodafone and Nokia, to build the European Aviation Network (EAN), which it says will create $30bn worth of extra revenues for airlines by 2035. Other companies are working on similar projects to introduce in-flight broadband over the Americas.
In the past few years, investor interest in space has gone crazy
Viasat says it has invested about $1bn in the two satellites that already provide in-flight broadband to airlines including JetBlue, Virgin America and El Al. Mark Dankberg, Viasat’s chief executive, says the company is likely to spend the same again on the ViaSat-3 satellites it plans to launch from late 2020.
“The complexity of satellite broadband technology lends itself well to collaboration,” Mr Dankberg says. Viasat has a €68m partnership with the European Space Agency to develop components for the ViaSat-3 system with European industry. The company has also formed a joint programme with Esa to provide €30m in funding to support organisations developing products and services that make use of high-capacity satellite broadband.
OneWeb, a US-based start-up with backers including SoftBank, Airbus, Qualcomm, Virgin, Hughes, Intelsat, Grupo Salinas and Coca-Cola, aims to provide universal internet by 2027.
Airbus is building OneWeb’s 900 low earth orbit (LEO) satellites as part of the project. Nicolas Chamussy, head of space systems at Airbus, says the project has created “a complete change in culture and mindset” in satellite design and supply chains.
“With a constellation of satellites [as with LEO] you can accept that some components will fail — something you couldn’t do with a mission to Mercury or Jupiter,” Mr Chamussy says.
“But we are hoping to get the best of both [worlds] by doing things in a smarter way. For example, using lower-grade devices and designing the architecture of spacecraft differently so that they can cope with failures and recover.”
Using these new designs, Airbus is now producing as many satellites in one day — up to four — as it would previously have done in a year. The company has also created a standardised version of the initial OneWeb design, Mr Chamussy says, and is in discussions with potential partners about using it in areas such as gathering tracking data from ships and aircraft.
Airbus is one of Seraphim’s investors along with several other big sector names including, SES, Telespazio, Surrey Satellite Technology and Teledyne e2v. They are effectively collaborating by co-investing, says Mr Boggett. In addition to profit, their goal is to gain insight into what is happening in the start-up market, he adds.
“They want that visibility because they want to become customers and partners of those companies, and to acquire them to make sure they retain their cutting edge.”
Competition will be fierce. OneWeb could undermine EAN and other services by letting airline passengers continue to use their network operator on their personal tariff rather than having to sign up for an expensive in-flight tariff from another network provider.
Richard Deakin, global head of aerospace at PA Consulting, says other potentially disruptive technologies include lasers, which can deliver data faster. Another is balloons flying at 60,000ft-80,000ft — roughly twice the height of a commercial airliner, but low enough to provide high data speeds.
Competition may also come from high-altitude long-endurance drones, says Mr Deakin. “Launching balloons and drones is far cheaper than satellites and they are relatively inexpensive to get down and repair.”
Investors run the risk of failed launches, safety concerns and changes in regulation. Winning will be as much about commercial innovation as technological, says Mr Deakin. “Also crucial will be locking into new developments around the internet of things and the need to share real-time data.”
Mr Boggett agrees. “The value from Earth observation will be in the application of artificial intelligence to these giant data sets which will increasingly be almost real-time,” he says, citing insurance, logistics, construction, and oil and gas as potential beneficiaries.
The traditional space industry will begin buying up interesting start-ups, says Mr Boggett. “In addition to acquiring technologies and business models, they will be gaining people who have a different DNA from those in the traditional space industry,” he notes.
“I would guess that in 10 years’ time the majority of revenues from some of these players will come from business lines that don’t exist today.”