I have read with interest Jeff Foust’s article “The Space Industry Grapples with Satellite Servicing” and wanted to add the perspective of someone who has worked in this area for several years.
This requires that an overview and exposition of our experience in this field be discussed so that a proper context can be developed.
The article: http://www.thespacereview.com/article/2108/1
The key question in the realm of On Orbit Servicing (OOS) is touched on by Jeff Foust about half way through the article:
“The key question is whether satellite servicing is financially viable: can a company providing, say, basic refueling services sell them at a price that is attractive to the satellite owner and still profitable for itself?”
This is not just the key question, it is the only question that really matters! OOS will stand or fall on how successfully and cost effectively this question is answered.
When we founded Orbital Recovery Corporation (ORC) it was the result of an intense discussion with insurance industry professionals. We did not begin by talking about technology, but rather by examining if a cost-effective solution could be found.
A Business, Not a Technology
We began with the founding premise that in order to be successful, the company had to address an as yet unmet commercial market in space. Without that we would just become another government contractor, dependent on government customers and cost plus contracts in order to survive. Since GEO is the only commercial market of any size, we zeroed in on that. What we noticed is that in Europe and Asia there were a large proportion of inclined GEO birds, those who had exceeded their lifetime and who had abandoned north/south station keeping to conserve fuel and thus generate lower yet still valuable revenue streams. Our market intelligence indicated that the transponder fees for these birds were only a small fraction of the fees for a regular geostationary bird.
Our discussions with the insurance industry centered around whether or not these birds could be given a new lease on life, maneuvered back into geostationary orbit, and brought back into more profitable service. At this point we did a cost/benefit analysis between the operations of inclined birds and the increased profit potential of the same bird if it were life extended in GEO. After running these numbers, we came up with a pricing metric for a life extension service that would enable ORC to make a profit.
It is important for the reader to notice that up until this point the word “technology” has not been used. We initially were completely agnostic in this regard as we were a start up and did not have a large R&D operation that had to be fed. We did not have any metric of success other than to make a profit in a commercial market. This completely freed us from the slavery to the BAA/RFP/FAR world, where technology is everything and increasing the cost is what increases profits.
The metric, or in NASA terms, our second level zero requirement (after commercial focus), was to state that whatever we did for life extension, if it had yet to be ‘invented’, it had to be the lowest possible cost R&D activity that would get us into the market place the soonest.
The focus on the path of least resistance (R&D cost) for orbital life extension eliminated many of the technologies that most people are focusing on today. We eliminated advanced robotic arms for freeing solar arrays or antennas as the subset of satellites that have this problem is small and the R&D cost for implementing the capability is very high. We eliminated refueling for the same reason, and because the operators and underwriters that we spoke to about this were extremely nervous about it. Think about the ramifications of an accident in an orbital slot with seven satellites and you get the picture. The cost of R&D for this was also similarly high. At every instance, and at every decision point, the total cost of the system and how to reduce it was our focus. After whittling down the R&D to focus on simple life extension via a parent/child spacecraft pair, we reexamined the market to make sure that we still had a business which we did. Then we did a straw man design to bracket the costs and then hit the road to talk to the satellite operators.
Customers Not Contracts
In a 16 day whirlwind global marketing trip we met the vast majority of the global satellite operator community. At each stop, not only did we have acceptance, we had an audience that made several suggestions on how to improve our marketing approach. (We also had the expected suggestions on adding robotic arms, refueling, and other enhancements.) We assured each potential customer that after the first billion in free cash flow that we would implement follow on technologies. It was appreciated by our potential customers that we had a singular focus on providing the lowest cost, lowest risk approach to OOS.
After we introduced our concept at the Paris satellite financing conference in 2002 we were off and running and gained allies from unexpected places. We put out an RFP, based upon our requirements to the global satellite manufacturing community. While we did not expect responses from the incumbent GEO comsat manufacturers, we were surprised when not one single American manufacturer responded — not one! We did get responses in Europe however, and this precipitated our shift to European manufacturers. Not only did we get responses, we were offered technologies that had already been developed for our form of life extension from the German Institute for Mechatronics and Robotics near Munich. We formed partnerships with European manufacturers and even received matching funding for our idea from ESA’s ARTES-4 program.
Our first go around for system design did not meet our cost requirements and we shifted to a system based upon the successful European SMART-1 science spacecraft that flew a similar mission profile from GTO as a secondary payload (also a means to save money on launch).
The second go around, with a proven bus of similar capabilities to what we needed was much more successful and we were able to sign not one, but two comsat operators for our service.
The Best Laid Plans…..
With all of this behind us, why were we not successful? Completely unrelated to our Orbital Recovery Corporation business, our rapidly to become former CEO was arrested for tax fraud. That puts a crimp in your business plan. This was so completely out of left field that we were not able to overcome it. In practical terms we were unable to execute the changes in corporate governance that were required for continued investment and business execution. The reasons for this are complex and worth a book in and of itself, but the bottom line are these:
With our approach and our focus on the business, we were not only able to attract investment, partnerships, and customers, we were able to leverage a lower cost system design to provide a compelling solution to our customers that was accepted in the market place.
The focus on technology, on the hard, or even DARPA hard technologies is a faulty path for an emerging enterprise servicing a commercially dominated market. This is where many of the entrants or incumbents in OOS are being misled down a path toward non-success. If technology was the solution, then the DARPA Orbital Express mission would have been the touchstone of success. (In my opinion, Orbital Express harmed the perceptions in the commercial market. The $336 million dollar price tag was sufficiently high so as to give our commercial customers significant doubts that we could do this cost effectively.)
Today, the focus on refueling and other activities that require massive R&D does nothing to bring confidence of affordability to the commercial market (that is ten times larger than the government market) that OOS will be something that saves them money in the foreseeable future.
The Future of OOS
There is one group that gets it. Vivasat LLC (www.vivasat.com) and U.S. Space LLC has teamed up to pick up our fallen standard and is moving the low cost of entry concept that we at ORC pioneered forward. The key is what it has always been where Orbital Recovery left off. They believe, as did we, that this service can be built for a cost/price that brings value to the customer and a profitable business to the provider. It simply does not matter what companies think of their own gee whiz products, value to the customer is the only metric that matters. Those who focus on the government, must live or die by the government’s requirements, that lead to uneconomical systems.
In closing, OOS is absolutely a business who’s time has come. Those who realize that it is a business opportunity and not a science project are the ones that will open the doors to a completely new market space. The customers want it and are willing to pay for it, if it saves them money. That is the foundation of any successful commercial business, whether in space, or anywhere else for that matter.