Born out of the sheer need for superior high resolution earth observation (EO) data at the turn of the millennium, satellite based commercial EO industry has gained significant ground supported by improved technology, increased global coverage and reduced government restrictions on data availability and sale. However a decade after its inception, the industry continues to be state controlled and lacks the vision to organise itself as a market-driven industry thereby limiting its potential and reach. Geospatial World explores the dynamics of commercial EO industry in the backdrop of unsettling economic scenario and the way forward…
GENESIS AND EVOLUTION
Satellite based earth observation (EO), traditionally driven by national governments, found its footing commercially with the launch of IKONOS, world’s first high resolution earth observation satellite, in September 1999 by Space Imaging. This launch was preceded by US policy shift and reports predicting rapid market adoption for high resolution satellite imagery with significant short and long term growth. Soon, DigitalGlobe launched QuickBird in October 2001. Space Imaging was acquired by ORBIMAGE in September 2005 and was later renamed as GeoEye. It further launched GeoEye-1 in 2008 capable of providing sub-metre resolution imagery. After Quick- Bird, DigitalGlobe announced plans to build two nextgeneration, high-resolution imagery satellites, World- View-1 and WorldView-2, launched in September 2007 and October 2009 respectively.
The companies grew internationally, driven by the need for high resolution EO data within the US and around the world. However, the industry had difficulty proving its untested business models to non-defence civil agencies, state and local governments and the private sector. While the defence and intelligence community had a long heritage of using satellite imagery, the integration of a new technology into commercial markets took longer than anticipated. The US government backed the industry with ‘buy commercial first’ data policy allowing the two operators (DigitalGlobe and GeoEye) to emerge as market leaders for commercial EO data.
Close on heels in Canada, Radarsat-2, a follow-on to Radarsat-1 by MDA, was launched in 2007 to serve the world with SAR imagery. The trend of commercial EO satellites started in Europe with Spot Image (now a subsidiary of EADS Astrium), which operates SPOT series of EO satellites. RapidEye started a new trend with a constellation of five EO satellites in 2008. Taking full advantage of the fully-integrated combined resources of its Spot Image and Infoterra subsidiaries, Astrium Services’ GEO-Information division is providing EO products and services with exclusive access to SPOT, TerraSAR-X and TanDEM-X. The recently launched Pléiades 1A (first in the proposed constellation of four satellites along with Pléiades 1B, SPOT-6 &7) will put Astrium Services into the very high resolution club.
Technology played an important role in the development of commercial EO satellites, in particular the advances in optical and radar sensors made the development of smaller, cheaper and more agile satellites possible. Increased global coverage and reduced government restrictions on data availability and sale are increasing the appeal of satellite imagery in the private sector. Let us take a peek into how ingenious commercial EO satellite operators are getting in serving their customers and the changing dynamics of the industry in the face of stiff competition and unstable economic scenario.
PRODUCTS OVER PIXELS
With increasing number of sensors in space, there is a glut of EO data. With this, the onus is now shifting on to the commercial industry to educate the user on the utility of the data while simultaneously ensuring to keep the costs of storage low. Dr Kumar Navulur, Director-Next Gen Products, DigitalGlobe says, “We launched 8-band imagery. To make the user find value in using this imagery, we are developing products for bathymetry, change detection, land use/land cover etc. For the end users the idea would be to figure out what they are doing and we try to give them the answers rather than just throwing pixels. If you use a standard GIS software, you can actually ingest data automatically.”
DATA DISTRIBUTION/ DELIVERY MODELS
One significant factor supporting the distribution and delivery of data is speed of processing. Thanks to 3D gaming, graphic processing technology is catching up well. “We are gaining between 400x – 800x speeds by using graphic cards. The idea is one can either preprocess the data or process it on the fly. With the new technology, one can do both,” informs Kumar.
Another important model evolving is delivering data without the need for users to invest in expensive IT infrastructure. Cloud computing is proving to be a wonderful and cost-effective solution and companies are working on technologies for hosting and disseminating data to the end user very quickly using the cloud. However, Matt points out that for the government user, the added confidentiality and security of direct uplink and downlink is often very important. “While cloud offers so many advantages in terms of speed, economy and agility, one challenge of increasing importance in Web delivery is security and we are working together to figure out secure ways for effective data distribution through cloud,” he adds.
Earlier, it used to be weeks before a user could see the data from the time a satellite collected it. But now, satellite operators like DigitalGlobe are targeting to deliver data within minutes after collection. “We developed applications that can bring imagery on to an iphone or an ipad so that mobile users can get data within minutes or an hour after collection,” apprises Kumar.
EO data is a valuable resource for global change research and applications like agriculture, forestry, regional planning and environmental monitoring. Several UN and World Bank funded projects seek the continuous provision of EO data for long-term projects. The US’ Landsat has the longest record of continuously monitoring the changes in earth’s surface at medium resolution for close to 40 years now. The Landsat Data Continuity Mission (LDCM) will provide continuity to Landsat dataset with moderate resolution (15m-100m) data and is scheduled to be operational in 2013.
The European GMES (Global Monitoring for Environment and Security) is another ambitious initiative scheduled to be operational from 2014 promising information continuity. However, all such long-term initiatives in EO space are government driven. Commercial players are unable to make such long term plans feels Geoff Sawyer. “The lack of confidence in long term availability of data is one of the barriers to growth in the sector,” he opines. But differing with this argument Kumar underscores that commercial EO industry is in the business for long term, “We are a commercial business. We can’t just say that we would be around for 4-5 years. You are buying an electronic product and if you don’t know whether the company would be around for the next five years, why would you buy it?”
The commercial EO industry vouches that it is investing billions of dollars so that customers have assured data over the long term. GeoEye2 is on track for launch in March 2013 and Matt informs that once it is operational, the company will start working on GeoEye3. DigitalGlobe too has its plans afoot. WorldView 3 is planned for 2014 and the company is already thinking about WorldView4 while also opening up to options other than electro-optical sensors. “WorldView 3 will serve for about 10 years and so we are ensured of continuity till about 2024 already,” assures Kumar.
Bringing in the concept of ‘shared mission’ to ensure data continuity, Matt says, “There ought to be a shared mission where USA, Europe, India and any other nation build a satellite each and that mission should circle the globe. Each satellite might last for 6-7 years and then it goes from Americas over to Europe, Middle East, Africa and Asia and then America would come around again. In the backdrop of difficult financial situation, collaboration is the way forward.”
The last decade of 20th century has seen a number of satellite failures. However, in the last 8-10 years, EO satellite technology has proven itself beyond doubt by removing all technological hitches and the launch success since 1999/2000 is as high as 99 percent. With advanced technology, mature market and improved delivery, companies are lining up next-generation satellites.
GOVERNMENT VS PRIVATE USE
In the 10th year of commercialisation, there are less than 10 companies primarily marketing high resolution EO data directly to end-users and/or through data resellers or value-added services (VAS) providers. A dominant majority of data produced by commercial EO companies is consumed by defence agencies and there is a visible wedge between government and commercial applications. 2010 marked a peak in EO spending and number of launches with civil EO spending prominent for leading governments.
Euroconsult estimated the size of the commercial EO data market to be USD 1.3 billion in 2010 which is expected to approach USD 4 billion by 2020. This is the result of more capable satellites, better ground systems and networks (data interpretation, dissemination and fusion) and more users’ education and incentive. Of this, Euroconsult attributes 65% of sales to defence customers.
The expected number of satellite launches in the next decade also indicates the continuity in this trend (Table 1) where the government and military satellites will dominate the commercial EO satellites.
Table 1: Expected number of satellite launches in the next decade.
Discussing the European situation, Stephen Coulson, Head of Industry Section, Science and Applications Department, European Space Research Institute (ESRIN) of European Space Agency (ESA) indicates that the trend is similar in European market as well. A study (2008) commissioned by ESA on ‘The State and Health of the European and Canadian EO Service Industry’ points out that the largest customer group for EO services is public sector operational entities. According to the report, “strong constraints are still reported in accessing new customers and this is confirmed by lack of growth in private sector customers (during 2003-2008).” Differing with this argument, Adam Keith, Director-Earth Observation, Euroconsult apprises that leading commercial EO operators have had some success in diversifying client bases over the years. For instance, both DigitalGlobe and Geo- Eye saw their revenues pertaining to commercial (including non-US government and private industry) customers climb to 38% and 22%, respectively (Figure 1), Adam informs. Supporting the argument, Kumar informs, “DigitalGlobe is actively working with Google, Microsoft and other LBS partners. Government is a growth segment but LBS has grown significantly and are engaged with most of the players in the LBS.”
Figure 1: Government Vs commercial (including non-US government and private) revenues in 2010. Courtesy: Derived from Euroconsult data
Adam also senses an opportunity for commercial players in this trend of dominant government spending (for defence and civil government). “There is still high potential for sales to international governments to support defence applications. Numerous governments have image intelligence requirements but high resolution imaging capacity remains the domain of just a few countries. More short-term revenue gains are likely to come from sales to such governments,” he opines.
Despite significant progress, commercial EO data is still not exploited to its fullest potential owing to policy-related challenges faced by commercial operators. Each satellite operator has its own national regulatory regime and is subject to commercial policies that are often not harmonised with other operators. Achieving common licensing and distribution terms that can apply to multiple providers has proven complex. The processes and mechanisms required to order data from different satellites are not standardised, making it difficult for users to create and submit requests that meet their needs.
Paulo Bezerra, Managing Director, MDA Geospatial Services Inc., recommends the establishment of a common framework to address these challenges. Speaking at the High Level Forum on Global Geospatial Information Management (GGIM) under the aegis of United Nations, he suggests that the common framework should aim to harmonise the national satellite remote sensing regulatory regimes; harmonise commercial data policies; standardise data ordering protocols; standardise product formats and product delivery protocols.
However to be successful, Paulo opines that the framework requires appropriate representation from governments, industry and large users to be successful and should be based on the experience accumulated in efforts such as the Committee on Earth Observation Satellites (CEOS), Group on Earth Observations (GEO) and the Global Monitoring for Environment and Security (GMES) programme.
STRATEGIES FOR EMERGING MARKETS
The trend in relaxation in policy environment dealing with EO data in these countries is also contributing positively to data uptake from commercial players. India has recently revised its policy governing remote sensing data and according to Kumar, “Policies like these will help more commercial businesses to come to India. Previously there were many restrictions, but now it is easy to do business in India for data over 1 m resolution.”
Regional distributors and resellers too are showing keen interest in working with global companies. For instance, Japanese Space Imaging Corporation (JSI) is pursuing the 3C strategy – Change , Challenge and Collaboration. Describing its strategy, Yoichi Kamiyama, CEO and President says, “Understanding the changes in the technology evolution, local market needs and policies, we are identifying and working on the challenges and ably devising ways by collaborating appropriately with global/domestic companies, technology partners and governments.” JSI is actively seeing public-private partnerships (PPP) as an effective mode for working towards success.
On the basis of distribution and partner agreements with global operators, Russian company ScanEx has been distributing high and very-high resolution images acquired by IKONOS, GeyEye-1, QuickBird, WorldView- 1/2, KOMPSAT-2, FORMOSAT-2, RADARSAT-2, ALOS and TerraSAR-X satellites. It entered into definitive distribution agreements in 2011 with MDA for RADARSAT imagery and with GeoEye for IKONOS imagery. The scope of these new agreements underscore the international commercial market’s increasing demand for high-resolution satellite imagery and services.
PASCO became the first distribution partner of Infoterra GmbH for the TerraSAR-X radar data products in 2005. “PASCO has not only secured the exclusive distribution rights for the Japanese market as well as a substantial data contingent, but also the opportunity to receive TerraSAR-X data directly from the satellite since late 2006 as a Direct Access Partner (DAP). PASCO also has nonexclusive data distribution rights globally case wise,” informs Youichi Sugimoto, CEO & COO of PASCO Corporation. Today, PASCO distributes imagery of 14 commercial EO satellites.
The requisite infrastructure for earth observation sector is built/ launched by about 30 companies worldwide. This excludes the government funded and built satellites. Major players in this segment include EADS Astrium, Ball Aerospace, Thales Alenia Space, Lockheed Martin Space Systems and Surrey Satellite Technology Ltd (SSTL). Owing to technology innovations in bus and instruments, satellite systems are getting increasingly capable with reduced cost trends. National security, technology transfer and economic concerns are increasingly prompting countries to have their own satellite systems driving business for the manufacturers.
In the backdrop of slowing economic growth, companies are devising cost-effective solutions and innovative business models. They are expanding but with caution to stay robust. One of the interesting activities in this direction in EO sector is the evolution of business models so far followed by geostationary communications satellites, where most operators lease their transponders on hourly, daily, monthly basis to suit the customers’ needs. SSTL has proposed a constellation, initially of three EO satellites of 1m resolution, and offered that as leased service to make best use of the geographic distribution offered by the orbiting satellite. Speaking at the 3rd Symposium on Earth Observation Business, Sir Martin Sweeting, Chairman, SSTL, informs, “This arrangement minimises the capital expenditure for those who wish to have the capacity but not necessarily own the whole satellite/constellation. We are pleased to sign the first customer who has leased 100% capacity of the first three satellites on the constellation. We look to add more satellites to the constellation of even sub-metre resolution in the due course.”
Cary W Ludtke, Vice President and General Manager, Ball Aerospace says the company is exploring several cost-effective solutions to meet the demand and one of them is employing distributed architectures, especially with constellation of earth observation satellites. This involves a number of advantages including the substitution of complex satellite systems with distributed (different) instruments of small satellite platforms making use of data fusion and increases time resolution and daily coverage depending on the number of satellites within a constellation. This also enables easy replacement of a satellite within a constellation or formation due to the relative low costs of a single satellite.
As budgets pinch, it is imperative for companies to look for affordability while consolidating on performance. This is leading to innovation in technology. Companies are investing in improvements in diverse fields of technology including optics, mechanics and materials, electronics and data processing, simultaneously bringing business innovation. Companies like Astrium (Spot 6 and Spot 7) and Lockheed Martin are taking pioneering strides in this direction. The trend to move to smaller satellites is well supported by these technology improvements. These trends are visible in optical space borne systems as well as microwave systems like SAR, redefining the economics of space and increasing the tempo of space exploitation. Manufacturers are also eying low earth orbits as a cheaper option to launch EO satellites. Europe’s Vega and India’s workhorse PSLV are excellent examples in this category. At the component level, global supply chain is key to companies’ operations. Says Ed Irvin, Vice President International of Lockheed Martin Space Systems, “We are working closely with our global supply chain to maximise the affordability and ensure mission success. To ensure business in the long run, we are working with universities. Our customers are looking for evolutionary role under a constrained financial environment. So, we are taking a disciplined approach in leveraging partnerships and concentrating on being relevant through innovation and performance.” Collaboration is another buzzword in the satellite manufacturing industry. Experts opine that in the next 5-10 years the industry would witness lot more international collaborations as a means to cut costs and optimise data utilisation by standardisation of data obtained.
MARKETING AND BUSINESS DEVELOPMENT
As countries are moving to knowledge-based economies, a rapidly growing market for satellite imagery and related information analyses and value added products is emerging worldwide. However, there is a clear gap in exchange between space agencies, NMOs and commercial players. This evidently is putting a limitation on the usability of high resolution imagery and its reach and affordability. UN-GGIM is a recent initiative to bridge this gap. One might also want to ponder over the limited success of commercial EO operators to make satellite imagery a part of dayto- day life despite brilliant ‘virtual earth’ initiatives by companies like Google and Microsoft.
With new and innovative imagery products, the onus is now shifting to commercial operators to educate the customers on the utility of their imagery beyond traditional applications. Companies are nurturing prospective verticals like LBS but beyond that, efforts in creating awareness and developing the market are far and few. This can be viewed as a challenge associated with a fledgling industry.
Indicating the way forward, DigitalGlobe says that the ability of satellite operators to connect allows them to move the industry to the next phase. Customers are looking for value out of data and information analysis and the ecosystem the industry needs to create with partners is one that can create value to the customers.
Reposing faith in the dynamism of the sector, Geoff Sawyer underscores that this dynamism is the strength of the sector – encouraging and making it possible for new companies to find finance to develop their own businesses, to find their own business models rather than prescribing themselves to any one business model to move forward. There are large companies that are ready to support, to work with, or to buy out, smaller companies, and to give an exit to a business plan.
IMPACT OF ECONOMIC SCENARIO
Today, commercial satellite EO industry is primarily driven by government defence and intelligence agencies. Most of these agencies have put in money to support the birth of commercial satellite companies. For instance companies like Geoeye and Astrium were funded by governments. DigitalGlobe started as a true private company without any funding from the US government, but ended up looking at defence as its prime market. GeoEye and DigitalGlobe are very much controlled by US DOD and the same has been providing indirect leadership and direction. The arrangement served very well for both sides until the going was good. 2010 saw NGA awarding contracts worth USD 7.3 billion to GeoEye and DigitalGlobe under its Enhanced View programme, promising a great future to the commercial EO industry.
However, the unsettling economic environment in 2011 brought in several changes in the outlook of the patron government organisations and consequently the commercial players. NGA announced budget cuts to the proposed Enhanced View programme raising doubts and concerns over the sustainability of the involved commercial players. These issues relate primarily to the US operators; operators elsewhere are perhaps less influenced by one single customer, in this case the NGA. Touching on this issue, Adam Keith says, “If theoretically the US government changed its policy to support the commercial industry, and procurement from the NGA was significantly reduced, then yes this would clearly impact the US operators and the sizing of the commercial data market as a whole. However, the commercial sector existed before this support and it would still do so if it stopped. The market for commercial data would surely be reduced, but it should be recalled that the main global growth drivers last year, and moving forward are high-resolution commercial data sale to international governments and the emerging LBS market. Therefore long-term prospects would still remain positive.”
Cognizant of the implications of economic volatility, commercial EO operators are devising ways to stay buoyant. Matt O’Connell feels the environment will augur more and more sharing of imagery and sharing of revenue a la cellphone roaming charges. The industry is seeing a period of economic uncertainty that might slow it down for a year but Matt feels it is but inevitable that the industry will continue to grow because use of imagery makes every decision maker more efficient.
By design satellite remote sensing has been more a national pride than a business and commercial players are unable to get out of the government mindset yet. The sector continues to largely remain state controlled and suffers from lack of commitment from governments to support it with enabling policies. However, the industry is quite optimistic over its prospects as it starts reaching out to new markets with latest imagery products, gets innovative in trying financial times and starts educating and training the customers.
There are several issues of concern with regard to satellite- based commercial earth observation industry today. Some commercial EO data companies have traditionally been conservative and have always looked at defence and civil governments as the major markets to cater to. At the same time, few enterprising EO companies have made efforts to stimulate commercial applications, but their efforts may at best be termed halfhearted.The slowing economic situation and the consequent budget cuts have drastically reduced the promised EO spending in defence sector. This has put a question mark over the financial viability of commercial EO companies which have banked on defence contracts for long. Their stock prices have plummeted, robbing investors’ confidence and leaving the future of the industry in jeopardy. This doesn’t make good business sense nor in any way secures the business needs of professionals who rely on earth observation data. It also leaves the future of many existing long-term projects in a limbo and reduces the confidence of commercial users.
Not being exposed to hostile economic environment and market driven realities so far, commercial EO companies may find it challenging to explore new avenues and opportunities. One way out could be that defence agencies that have significant control over these companies can motivate security giants like Lockheed Martin to purchase these companies and continue to provide them satellite imagery. But such acquisitions may make the EO companies captive who may stop nurturing the commercial utility of EO data. Poor prospects for commercial market may lead to entry barriers and denial of competition and alternative solutions for users, reducing further investments and innovation in the industry.
Second situation could be wherein geospatial majors like Trimble, Hexagon and probably Esri may like to invest in these companies. This could augur well for the geospatial ecosystem as these companies are market driven, understand the value of imagery and can make significant contribution to drive EO industry and leverage on individual strengths to explore the commercial utility. The satellite based commercial EO industry may like to explore several other alternatives like entering into strategic partnerships with major companies catering to mainstream economic industries including energy, exploration, insurance, real estate, architecture and construction, telecommunications and navigation to develop into a robust, viable and market-driven industry.
Having said this, it is appropriate to acknowledge that the commercial EO data has tremendous prospect in the long run and its true value as a tool to manage global resources remains to be harnessed. The commercial EO industry could be appropriately positioned to contribute in managing the same more effectively and appropriately. The commercial EO industry may be going through a challenging time at the moment, but it has adequate stake holding and potential in evolving into a self-stimulating, market-driven business story.