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EO Sector Needs Support To Stand On Its Own

The commercial remote-sensing business is still on a rapid growth trajectory, but weaning the sector from military and government sales will be difficult, as German startup Rapid Eye has discovered.

Last month, RapidEye announced a search for a new investor to help sustain it until the business model for its system, mainly funded by the private sector (with no government pre-sales commitments), can be shown to be viable. Brandenburg an der Havel-based RapidEye was founded in 1998 to provide geo-information services and products directly to agriculture, forestry, energy, mapping, environmental and emergency users. Its five-satellite fleet, launched in August 2008, offers imagery in five spectral bands, with a five-meter-pixel size, and can revisit any point on Earth on a daily basis. It can map 4 million sq. km. (1,544,000 sq. mi.) a day (AW&ST Sept. 8, 2008, p. 40).

“We’re still convinced our business case is correct,” CEO Wolfgang Biedermann told the Euroconsult-organized Symposium on Earth Observation Business, in Paris last month. “But customers are proving very cautious in making long-term commitments [so] turning the industry into one not dependent on government and big business is going to take a bit longer than we thought.”

Biedermann says the quasi-privately held company is seeking $200 million in equity, either from a financial or strategic investor, mostly to fund new products and applications but also to begin designing a follow-on constellation that will have to be in place by 2014-15. “We need another two years of learning,” he says.

Despite RapidEye’s difficulties, the outlook for commercial remote sensing is bright. Euroconsult estimates that sales of commercial data have grown 27% per annum since 2007, reaching $1.1 billion last year, and could quadruple over the next decade. However, the industry remains highly dependent on government and defense use (see chart, p. 53). A number of issues will have to be resolved to curb this dependency, industry executives noted, including low pricing for value-added services, fragmentation of the service industry and assuaging doubts as to the future availability of Earth-observation satellite sources.

But the primary weakness the sector faces, according to many participants, is that it requires useful products to make remote sensing an invisible but essential link for users outside the space community, such as telecommunications. “Finding success in the industry will mean reaching customers who are not remote-sensing knowledgeable,” says John Hornsby, president of MDA Geospatial Services.

Some think the key will be in convincing such big commercial users as energy companies or geo-portal providers to become more involved. Russian gas giant Gazprom is reviewing bids for a satellite constellation—that could be in orbit by 2015—to monitor its vast pipeline network. French oil titan Total’s position is that the energy industry might be interested in investing in promising new remote-sensing capabilities such as hyperspectral sensors. But perhaps the biggest targets are Google and its large U.S. rival, Microsoft Virtual Globe.

Surrey Satellite Technology and Blue Planet, a startup spun off a year ago by French space agency CNES, are targeting Google and Microsoft as potential investors or anchor tenants for proposed high-accuracy microsatellite constellations that they think could drive down the cost of imagery by a factor of 10 or more (AW&ST Jan. 19, 2009, p. 31; Oct. 20, 2008, p. 36). SSTL says a single satellite in its system, dubbed ART, could map the entire Earth within three months at a color resolution of 0.6 meters for under $50 million.

Blue Planet’s concept, known as e-Corce, would use a powerful network of ground receiving and data processing stations meshed with a fleet of inexpensive microsats to provide weekly or daily updates of every corner of the planet in 1-meter (3.2-ft.) color resolution. The company is seeking €400 million ($538.5 million) to develop the ground segment, where the system’s intelligence will be concentrated, and to orbit an initial 13-spacecraft fleet. “If we can cut the cost per pixel by three or so, Earth observation has the potential to become one of the biggest space businesses,” says Jean-Jacques Favier, company president.

SSTL announced at the symposium that it will consider building a 1-meter-resolution third-generation Disaster Monitoring Constellation (DMC) that would offer commercial imagery capacity on a lease basis, the way telecom satellite operators do.

In the meantime, says Astrium Services CEO Eric Beranger, the industry is in transition. Astrium is funding two new Spot spacecraft out of its own pocket—the first time this has been done for a major remote-sensing project. But closing the business case without pre-sales commitments is likely to be difficult. “Commercial business is growing faster than government activity,” Beranger says, “but for infrastructure development we still need the government to prime the pump.”

Astrium’s vice president of institutional affairs, Gilles Maquet, told an industry gathering in Prague last week that the Obama administration’s decision to greatly increase government reliance on commercial imagery would serve as a good template for helping ride the shift to commercial from government leadership. The U.S. policy has led to a seven-fold increase in the amount of imagery available to the government and a 20-fold decrease in prices,” Maquet noted. “We need this kind of long-term support from European governments.”

On Aug. 6, the U.S. National Geospatial-Intelligence Agency (NGA) awarded GeoEye $3.8 billion for the new Enhanced View program, which is expected to double the amount of commercial imagery available to the government. A $3.5-billion award went to Digital Globe.

Although some of the money will go toward new capacity—GeoEye says the government will contribute $337 million to help defray the cost, estimated by some to be up to $800 million, of building and launching GeoEye-2—most of that for buying imagery and developing new products and services.

NGA’s director of commercial imagery, Karyn Hayes-Ryan, says a key aspect of Enhanced View will be a project known as RDOC to format products and services so they can be quickly available to all users, including operators and warfighters in the field, with full interoperability and around-the-clock updates, in a form they can readily use, which mirrors the commercial operators’ goal. Fully $700 million of the GeoEye award, and $750 million of the Digital Globe contract, will be dedicated to development of value-added products and services.

In addition to government support, imagery providers worry that data policies being adopted by various governments, particularly the European Union, could undercut the commercial business case. “Any policy that improves the availability of archived data will stimulate the market, says SSTL Chairman Martin Sweeting. “But I am concerned they might use government funding to make near real-time data available at no cost.

By Michael A. Taverna
Source AviationWeek