A new era for satellite services

At a global level, space businesses are rapidly proliferating, with the escalating engagement of public and private actors interested in investing in programs for developing satellite services. Specifically, the past five years have seen steady growth in the downstream segment, i.e. the use of space technologies to support activities on Earth. This has led to the emergence of private demand for applications deriving from satellite services.

In order to fully understand the downstream space market, we mustn’t confuse satellite services with satellite applications. The first correspond to functions performed by technologies on board satellites, to include collecting and transmitting data that feed remote sensing, navigation, telecommunications and meteorology. The second, instead, involve integrating and processing satellite data to extract useful information to support Earth-bound operations. So satellite applications are not only based on satellite services, but also extend the use of such services by integrating them into processes, products, and services in non-space industries.

In recent years, technological innovation (on satellites and launchers) along with investments from the private sector have paved the way for progress in the commercial exploitation of satellite data. Looking more closely, the lower cost of space access and shrinking time-to-market of space companies targeting commercial demand are some of the considerations that whet the appetite of business angels and venture capitalists (especially in the US). All this has proven advantageous primarily in terms of disseminating the offering of Earth observation services and telecommunications. For example, a number of space industry leaders have launched constellations of small satellites (< 500 kg) in low Earth orbit to provide remote sensing services (Planet and BlackSky) and broadband connectivity (Starlink, OneWeb and Kuiper Systems by Amazon (coming soon)).

Naturally, in the transition toward private customers, companies are developing and positioning satellite systems based on the commercial service they need to provide, following a precise business model. At a global level, Earth observation companies are focusing on producing and selling medium-resolution images with data available on a daily basis, in keeping with what certain activities on Earth require. Instead the telecommunications strategy has managed to deliver low latency, high bandwidth connectivity services in remote regions of the planet to support (or substitute) land-based infrastructure both for B2B and B2C.

Space operators worldwide are embarking in different strategic directions (in particular at a technological level), driven by the needs (and by the weight) of the customers in their portfolios, which gives rise to heterogeneous commercial offerings. For example, in the Italian context, demand is essentially based on the requirements of public institutions, publically owned companies, and large private companies that invest in technological innovation. The composition of this target offers insight into understanding the business models of national space companies 1) high quality (and high cost) imagery with regard to Earth observation, and 2) a business-to-business orientation for remote areas (machine-to-machine, Internet of Things (IoT) and 5G for infrastructures) and business-to-government for urban areas as far as telecommunications.

In any case, in industries of strategic national importance (for instance, agriculture, energy, transportation, insurance and telecommunications), companies are starting to run pilot projects to ascertain the potential of satellite services and/or applications, and refine their compatibility with industrial requirements. Some agricultural companies, for instance, are working to integrate satellite data from Earth observation, supported by satnav telecommunications services, to do precision agriculture. And with considerable effort in terms of costs and competencies in research and development, industry operators are perfecting satellite applications designed to combine satellite data with information deriving from sensors on the ground, to monitor crops and make cultivation plans more efficient, optimizing the use of water, fertilizers, pesticides, and machinery. Another example comes from the insurance industry. Black boxes equipped with positioning and navigational systems enabled by satellite technologies make it possible to monitor mobile property such as cars, for example.

Looking to energy and transportation, companies are partnering with operators in the space industry to test out satellite applications to employ predictive maintenance systems on their infrastructures. The aim here is to switch from a cyclical maintenance model to one built on the actual needs of the transportation network, with benefits arising from cutting intervention costs and improving service safety. Lastly, telecommunications companies that already use satellites to offer connectivity services are exploring new market opportunities in areas that can’t be reached by land-based networks and by offering IoT integration services.

The initial results from the pilot projects demonstrate that economic, environmental and social advantages can arise from integrating satellite data in products and/or services and company processes by calibrating applications to meet the needs of industry. Increasing the efficiency of raw materials, optimizing the use of machinery and the work force, and replacing obsolete technologies are all ways to cut costs. Instead, upgrading the quality of existing products and services and creating new ones are ways to boost revenues. Along with these advantages come environmental and social benefits too. For example, precision agriculture minimizes the quantity of excess chemical agents, reducing the portion of contaminants that seep into groundwater and rivers. And monitoring extreme weather events makes it possible to implement more effective prevention and relative damage control. What’s more, extending connectivity to remote areas contributes to digital inclusion, with positive ripple effects on education, health and the economy. Finally, predictive maintenance for transportation infrastructures guarantees safer, higher quality service.

For companies, satellite technologies offer a data source that represents a support tool for digitalization. But for customers, it’s the development of commercial applications that will enhance their perception of value, especially if the focus lies on pinpointing needs to build applicative packets that can be modulated, customized, and easily understood and assimilated in technological systems of potential users (private and public). This complex activity calls for experimentation and learning, especially if needs are heterogeneous and if the resources and competencies of commercial buyers are limited in terms of comprehending the utility and usability of these applications. Indispensable will be collaboration between supply and demand to enable the industry to standardize satellite applications, which would lead to lower prices, and in turn foster wider circulation.

Despite this reality, in many industries, building such a relationship still depends (almost exclusively) on the inclination toward innovation of the industry players. In Italy, in fact, the pressure that market forces exert on commercial buyers of satellite services and/or applications is still not intense. (This pressure would come, for example, from customers who are willing to pay for the added advantages of satellite services and/or applications, or from competitors who have implemented the technology.) For Earth observation in particular, which at a commercial level is only a fraction of telecommunications turnover, the transition from public to private demand represents a complex challenge for suppliers of services and/or applications. Simply consider how difficult it is for agriculture businesses to communicate the added value of a given technology to the final consumer. On a farm, such technology might be adopted in the production phase to monitor the state of the crops. Or in an insurance company, technology could be used to assuage the concern of customers thanks to the observation via satellite imagery of industrial sites.

Although experimental phases are useful to calibrate applications, it seems that the national context still needs the impetus of public institutions to raise awareness among commercial customers and the general public regarding the potentialities of satellite technologies and to encourage their adoption. Promoting the commercial transition would mean on one hand giving buyers an additional competitive lever, and on the other, facilitating the scalability of the business of satellite operators, which would also allow them to achieve greater competitiveness at a national and international level.