Watch this space

Watch this space

When a rocket explodes, the technical term in the industry is that the vehicle experienced a “rapid unscheduled disassembly”. The term has all of the hallmarks of what might be called euphemism by technical overstatement. It’s in the same category as a used car being called a “certified previously-loved vehicle”, but with a much, much less impressive explosion.

Well, according to a new report by the World Economic Forum, the space industry is in for the opposite: a fairly rapid, scheduled assembly. The report finds that the space industry is about to – sorry, irresistible – take off. Currently, the industry is worth about $630 billion and that will increase to $1.8 trillion by 2035, serving an increasingly connected and mobile world, the report says.

Often these reports I find are slightly rooted in boosterism and massively overstate the longer term outcome in order to impress and capture the news-cycle. But weirdly I think this estimate might be an understatement. I’ll come back to that, but first, it’s worth just recapping some of what has been happening in the industry in the recent past.

The first thing to notice is that the pace of rocket launches world-wide is just absolutely (honestly, you just can’t help yourself) exploding, and the simple reason is that the cost of getting into space is plummeting and the expertise required is broadening. Econ 101. Ten years ago, there were three orbital launches during the year. Last year there were 211 successful launches. So far this year, there have been 65, roughly 20 a month, so another record seems likely to be broken this year.

One day during this past week, there were three SpaceX launches due to happen on the same day – in fact, it didn’t happen, one was scrubbed because of the weather and took off the next day. But the point is that the SpaceX launch schedule is now being held up not by the lack of rockets but the lack of seaborne landing platforms, which is technically not a huge problem to fix.

Although SpaceX is the clear international leader, others are not insignificant. China has launched 15 rockets so far this year, Russia 5, Japan 3, India and Iran two. The countries to watch I suspect are not the regulars, the US, Russia, and China, but the newcomers, especially Japan and India, for the simple reason that success breeds success in this industry.

What is driving this increase? This is where I find the WEF report so interesting. The first is the decrease in launch costs. It’s now about ten-times less expensive to launch a satellite into space than it did 20 years ago.

Second, commercial innovation, and this is not just in building rockets, but on the ground too, with the construction of smaller, more powerful satellites, better software, and more applications. There has been a very rapid increase in private sector investment, which the report estimates were about $70 billion in 2021 and 2022.

Third, with the increase in commercial innovation there has been a concomitant increase in potential investment applications, and by far the most important of these is communication. Up till now, satellites were all about spying, because they are a more efficient way of observing the earth than flying supersonic planes all over the globe. That will continue of course.

But now, possibilities are (sorry!) dropping out of the sky; space tourism is the most obvious, but the one that I think could be very interesting is space-based earth observation (EO). The applications here in agriculture, disaster management, traffic management, crime prevention, weather observation are just kinda endless. The report says the cost of real-time space-based EO is now dropping fast, and the quality is now incredible. I’m not sure what this means, but a resolution of 15 centimetres is now available, and images are now much more affordable price because the per pixel cost has continued to drop.

Fourth, the report says, the industry is being propelled simply by excitement. A whole host of the launches are about returning a human presence to the moon after a 50 year gap. There is now a new race to land probes on the moon, but the idea is really to build a permanent moon base, and you can easily see that becoming a major “soft-power” geo-political propellant. The state sector is obviously still crucial here, but there are plenty of earth-bound opportunities.

For example, Thailand, the report records, launched a five-year plan in 2022 to conduct Thai-based satellite design and development research, starting with its TSCPathfinder satellite for Earth observation. Its also developing a domestic launch site to support launch demand in Asia.

To this list I would add a fifth aspect: competition. One thing we have not seen much of yet is Amazon’s Project Kuiper, but I just think you should never underestimate billionaire competition in life. The project is backed by Amazon, and will focus on the “PNT” industry, (positioning, navigation and timing),  EO and crucially communication. At the moment, Elon Musk is winning this battle hands down, but if there is one thing we know about Amazon’s founder Jeff Bizos is that he is persistent.

So why do I think the august writers of the WEF report, in this case, WEF MD Jeremy Jurgens and McKinsey Senior Partner Ryan Brukardt, might be under-estimating the potential? I suspect it has to do with the astounding success of SpaceX’s Starlink project, which provides internet access to remote areas. It’s technically aimed at areas that ground-based internet connection is not possible, because it’s just too expensive to compete with fibre. But you can tell by the urgency that SpaceX is applying to its larger rockets, which will launch larger satellites in larger numbers, that the cost/income equation might be on the verge of changing.

And then there is the possibility of direct to satellite from cell phone connections. If and when that happens, well then we have a totally new game, because at that point the $1-trillion annual income of the global mobile phone operators becomes a target – or perhaps they become partners! It’s possible satellite comms becomes the wholesale provider to the mobile phone industry.

How this plays out is still to become clear, but what we know is that Starlink’s planned second-generation satellites will be able to provide mobile provider T-Mobile in the US with 2-4Mbit/s capacity per sector (a sector is about 15km/sq). So the initial plan is that T-Mobile will support text messaging but not  high-bandwidth applications like voice calls and streaming video.

But trust me, this is just the beginning. Watch this space.

Reference: The Maverick Newsletter

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