The small satellite market – Small is beautiful
Author: Anne Margaret Crow
Small satellites, ie those weighing less than 500kg, are increasingly being deployed to provide internet connectivity to remote and rural areas, to provide environmental monitoring services and to track assets. Widespread deployment requires changing the paradigm from expensive, bespoke satellites to platforms and payloads that can be manufactured and launched in their thousands. This report explores the drivers behind this revolution and profiles several of the key-players.
‘The fusion of terrestrial tech with space applications is changing and accelerating the economics of space. As satellites are getting smaller, smarter and less expensive to launch, our reliance on them is growing exponentially. These satellites and their vast data sets will ultimately underpin emerging new technologies that will transform industries over the forthcoming decades.’ Seraphim Capital
Edison theme
Internet-in-the-sky/eye-in-the-sky
Satellites have been used for several decades to provide connectivity to remote parts of the earth’s surface and for remote observation applications. Traditionally satellites have been launched into geo-stationary orbits (GEOs), where one large, complex satellite can cover almost one-third of the earth’s surface. More recently, satellites have been launched into low-earth orbits (LEOs), which are much closer to the earth’s surface. This removes latency issues when sending large amounts of internet data and makes it easier to capture detailed images of the earth’s surface. However, many more LEO satellites are required than GEO ones to provide similar coverage of the earth’s surface. This means that the cost of building and launching satellite platforms and their payloads needs to be substantially reduced for mega-constellations of LEO satellites to be economically viable.
Emergence of mega-constellations
Frost & Sullivan predicts that nearly 10,000 small satellites will be launched during the decade commencing 2020. This market growth is predicated on the deployment of mega-constellations, ie networks of a hundred satellites or more. While SpaceX has been grabbing the headlines with 480 LEO satellites in orbit as of early June 2020, established space communications companies are building LEO constellations too. Telesat intends to supplement its fleet of 14 GEO satellites with a network of around 300 LEO satellites, which will commence operation in 2022. LEO constellations are also being deployed for collecting images of the earth’s surface. For example, Planet Labs operates a fleet of over 100 imaging satellites.
Profiling companies that epitomise the new approach
This report does not attempt to provide an exhaustive list of companies involved in the small satellite market. Instead it provides profiles on three companies that epitomise the new approach required for success in this sector. These are AAC Clyde Space ,which provides nanosatellites, subsystems and satellite services; Mynaric, which provides part of the communications payload on satellites; and SpaceX, which provides launch services.
Companies mentioned
| Companies | Ticker | Market cap ($m) | Price ($) |
|---|
| Amazon | AMZN | 15,870,00 | 3,182.63 |
| FB | 698,780 | 244.50 | |
| Eutelsat Communications | ETL | 1,859 | 8.07 |
| ORBCOMM | ORBC | 281 | 3.57 |
| AAC Clyde Space | AAC | 336 | 52.4 |
| Mynaric | M0Y | 167 | 6.3 |
| SpaceX | – | – | – |
| Telesat | – | – | – |
| Planet Labs | – | – | – |
| SpaceX Starlink | – | – | – |
| Spire GlobaL | – | – | – |
Source: Refinitiv at 07 July 2020
Covering the entire globe
Satellites have been used for several decades to provide connectivity to remote parts of the earth’s surface including the oceans and to areas where the density of population makes it uneconomic to deploy terrestrial fibre broadband networks, as well as in situations where other communications networks have been destroyed by a disaster such as a hurricane. Initially satellites were used for TV broadcasting. For example, in 1972 Canadian communications company Telesat launched Anik A1, the world’s first domestic communications satellite, to transmit TV broadcasts to the northern parts of Canada. As technology developed and consumers’ communications needs became more demanding, satellites started to be used to provide broadband, voice, data and video services as well. For example, Telesat launched Anik G1 in 2013 to provide direct-to-home TV in Canada, additional capacity for broadband, voice, data and video transmission in South America and to support government applications across the Americas and much of the Pacific Ocean, including Hawaii.
In addition, from the very beginning of space flight, satellites have been used for remote monitoring applications. Sputnik 1, which was launched in 1957 and was the world’s first artificial satellite, transmitted data on the density of the upper layers of the atmosphere and the propagation of radio signals in the ionosphere. In April 2020 the Union of Concerned Scientists stated that there were 2,669 satellites in operation, 901 of which were being used for earth observation.
LEO networks solve latency problem
Until recently most communications satellites were located in GEOs. The laws of physics mean that to stay in the same place above the earth as it travels through space, GEO satellites must be 36,000km from the planet’s surface. At this height a single satellite is able to transmit signals to around one-third of the earth’s surface so very few satellites are required for global coverage. However, signals take around 540msecs to go from a ground station to a GEO satellite and back. This high latency rate is not ideal for internet transmission, particularly online gaming or stock trading and other real-time applications.
Exhibit 1: Using LEO satellites to expand 4G/5G network coverage
Source: Telesat
The solution to the latency problem is to locate satellites nearer the earth in either medium earth orbit (MEO),eg the GPS navigational satellites are at an altitude of 20,200km, or LEO, which is typically 400–1,400km above the earth’s surface. The latency period for a satellite in LEO reduces to around 25msecs for a round trip, which is similar to cable or fibre systems. However, because of their low altitude, a LEO satellite can only transmit and receive signals from a small area (about 1,000km radius) as it passes overhead, completing an orbit in around 90 minutes. This means that many satellites, known as a satellite constellation, need to be in orbit simultaneously to provide global coverage in real time rather than having to wait until a single satellite has completed its orbit and is back overhead. Some of the satellite constellations being proposed (see below) will deploy over a thousand satellites in order to cope with the volume of data being transmitted.
Being closer to the earth’s surface is also advantageous for satellites that are collecting images of the earth’s surface, eg for environmental or threat monitoring. The on-board detector electronics do not need to be as complex because the signals being detected are stronger. Similarly, the signal transmitting collated data back to earth does not need to be as strong.
Exhibit 2: GEO/LEO latency comparison
Source: Telesat
Small satellites: A new paradigm for the space industry
Deploying so many satellites in a single constellation has transformed the way the space industry needs to work. The emphasis has shifted from designing and manufacturing individual large, expensive satellites to deploying smaller, less expensive satellites that are manufactured in volume. So although small satellite technology was originally developed as a cost-effective way of giving academic institutions a mechanism for conducting experiments in space, it has become the preferred solution for constellations of large numbers of satellites.
The GPS III military satellites launched in 2015 weighed 3,680kg at launch, cost US$577m each to build and are designed to last up to 15 years. It takes two to three years to develop and launch a larger commercial satellite. A small satellite can weigh anything from less than 1kg for a picosatellite to up to 500kg for a minisatellite. A 10cm ×10cm ×10cm small satellite weighs around 1kg, typically costs around US$0.5m, is designed to last up to five years and can be developed and launched in less than a year. The transition to small satellite architectures substantially reduces the initial capital costs and enables network operators to start collecting revenue more quickly. While the relatively short satellite lifetime means that satellites must be replaced, this presents an opportunity for operators to upgrade functionality.
‘Internet-in-the-sky’ potentially connects half of the world’s population
Exhibit 3: Internet users as a percentage of regional population
Region |
2018 |
2023 |
|---|---|---|
| Global | 51% | 66% |
| Asia-Pacific | 52% | 72% |
| Central and Eastern Europe | 65% | 78% |
| Latin America | 60% | 70% |
| Middle East and Africa | 24% | 35% |
| North America | 90% | 92% |
| Western Europe | 82% | 87% |
Source: CISCO Annual Internet Report (2018-2023)
Around half of the world’s population do not yet have internet access. CISCO’s Annual Internet Report, which was updated in March 2020, predicts that the number of internet users globally will rise from 3.9bn, equivalent to 51% of the global population in 2018, to 5.3bn, or 66% percent of global population, by 2023. The fastest growth,10% CAGR from 2018 to 2023,is expected to occur in the Middle East and Africa (see Exhibit 3).This growth cannot be achieved simply by installing more fibre optic backbone as this is uneconomic for areas of low population density or only a few connected devices and may not be feasible if the terrain is inhospitable because of natural causes such as mountain ranges or unhelpful human activity ranging from warfare to simple pilfering of the optical cable. Relaying communications signals via a constellation of satellites overcomes the problems associated with laying optical fibre.
Asset tracking applications require global coverage
The CISCO report cited above notes that the number of connected devices globally is expected to grow faster than the world’s population between 2018 and 2023 (10% CAGR vs 1% CAGR) and the number of internet users globally (6% CAGR). Growth is being driven by the development of new machine-to-machine (M2M) applications including smart meters, video surveillance, healthcare monitoring, transportation, package tracking and asset tracking. The report predicts that M2M connections will rise from 33% of all connections in 2018 to 50% by 2023 representing 14.7bn M2M connections by 2023 and a 19% CAGR during the period. This growth will contribute to demand for internet connectivity, some of which will be satisfied via satellite networks. Some of these applications, eg asset tracking, require global coverage. LEO solutions are ideal for these. Firstly, the satellite coverage is global, complementing terrestrial internet of things (IoT) networks. Secondly, because the satellites are relatively close to the earth’s surface, the transmitters do not consume a significant amount more power or cost more than those for terrestrial networks.
Exhibit 4: Monitoring crop growth using earth observation imagery
Source: Planet Labs
Coronavirus pandemic highlights need for reliable connectivity
During the COVID-19 pandemic, broadband connectivity became a lifeline for many people. Global communications giant Nokia reported that one week after lockdown it saw weekday peak traffic increases of over 45% and weekend evening peak traffic increases of over 20–40% compared with pre-lockdown levels. Video-conferencing usage increased by 350%, Netflix streaming by 58% and Facebook usage by 27%.
As it seems likely that work patterns will change permanently in the wake of the pandemic, with employees spending more time working from home rather than in an office and taking fewer business trips, it is probable that video-conferencing usage will not go back to pre-pandemic levels. This topic is explored in a recent interview with SpaceX veteran Bulent Altan, who is a member of the management board of Mynaric, a specialist in free-space laser communications.
Scaling the market
According to market research specialist Frost & Sullivan, 873 small satellites were launched in the three-year period between 2015 and 2018, out of which 499 were commercial. The firm estimates that the decade commencing 2020 will see nearly 10,000 small satellites launched, over 9,000 of which will be launched by entities that have already started launching.
It forecasts the total number of satellites to be launched between 2019 and 2033 to be 20,425, This market growth is predicated on the deployment of mega-constellations, ie networks of a hundred satellites or more such as Amazon’s Project Kuiper and SpaceX’s Starlink. According to an analysis in a report published by Northern Sky Research in November 2019, communications applications will account for the largest number of satellites launched between 2020 and 2028.The report expects earth observation satellites to be the second largest application.
Small satellite constellations
The rapid growth in the number of small satellites in orbit described above is based on the successful launch of mega-constellations. Some of the most significant of these are described in this section. These include ‘internet-in-the-sky’ proposals from global giants Amazon and Facebook. We also profile some smaller, less well publicised and potentially lower-risk projects by established space communications and imaging companies. These constellations are summarised in Exhibit 6. Constellation operators must gain approval from the relevant organisation administering spectrum allocation. In the US this is the Federal Communications Commission (FCC) for non-governmental applications. For constellations with global coverage the FCC or its local equivalent, then obtains approval from the International Telecommunication Union (ITU)which provides the basic framework for the global coordination and management of the radio-frequency spectrum.
