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Marketable future of satellite services still up in the air.

Marketable Future of Satellite Services Still Up in the Air

A recent report on the satellite communications market depicts a struggling industry beset by mounting expenses and damaging setbacks. According to "Satellite Communications Services and Equipment Markets, U.S.," an industry report by International Resource Development Inc. (IRD), a New Canaan, Connecticut-based market research firm, satellite communication service vendors are currently reviewing their options to determine if the commercial market has a future.

Most noted among the series of repeated setbacks the industry has endured is the loss of numerous satellites during launch, which has escalated insurance premiums to 20 percent or more in construction costs. Moreover, the withdrawal of NASA from commercial launch activity has left the U.S. without its own launching facilities. Widespread reports of a glut in transponder capacity with near-ruinous predictions for the future (especially in C-Band) added fuel to the fire, as did the loss of substantial telephony revenues due to the more favorable economics and performance with optic fibers.

Ken Bosomworth, project manager for the 246-page report, says the barriers to entry and exit in this market are already high and getting even higher. "Now, there are not only formidable expenses in satellite construction (averaging $60 million, excluding launch costs), but insurance terms are making the $60 million more like $72 million, with the owner still undertaking considerable risk," he explains. Complicating the picture even more is the fact that the lifetime of working satellites is increasing.

The report does predict some "silver lining" opportunities to be grabbed, pointing to several important vertical VSAT markets as likely growth candidates. It also traces opportunities for entrepreneurs to acquire written-down satellite assets at fire-sale prices, then turn around and offer profitable services.

The report (#745) is available from IRD.

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Title Annotation:General news and notes
Author:Duda, Richard
Publication:Communications of the ACM
Date:Jan 1, 1988
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