PARIS — Leading launch service providers say emerging companies developing a generation of dedicated small-satellite launchers will struggle to compete in the marketplace and will ultimately lose out to the bigger players.

Speaking at the World Satellite Business Week in Paris Sept. 12, top executives of the world’s five leading launch service providers agreed that the future small-satellite launch market will favor ridesharing and customized services on larger launch vehicles rather than tailored launches by the newcomers.

“At SpaceX, we started with a small launch vehicle,” said SpaceX President and COO Gwynne Shotwell, whose company has launched its Falcon 9 rocket 13 times since last September’s on-pad fueling accident destroyed a Spacecom’s Amos-6 satellite. “We really wanted to make a business of Falcon 1 … we just could not make it work.”

United Launch Alliance CEO Tory Bruno, whose company operates the Atlas 5 and Delta 4 rockets for a U.S. government-dominated customer base, said some of the newcomers may initially succeed in the market only to be taken down by the big players later on.

“I think it’s a function of time,” Bruno said. “Initially, they will begin and they will try and service the small satellite launch market. But as that becomes a real market, that attracts the rest of us. I think the real economics will favor rideshares as a solution so then it flips to the other side.”

ILS President Kirk Pysher, whose Reston, Virginia-based company operates Russia’s Proton rocket for commercial customers, agreed.

“I believe that the most effective and reliable ride for them is with us who are sitting here today,” he said referring to the five members of the panel that also included Arianespace CEO Stéphane Israël, China Great Wall Industry Corporation (CGWIC) executive vice president Gao Ruofei and Ko Ogasawara, vice president and director of space systems business development at Mitsubishi Heavy Industries.

“But there could be a niche market out there for small launchers,” Pysher added.

Virgin Orbit CEO Dan Hart, speaking the day before on a panel with Blue Origin’s Clay Mowry, was understandably more bullish on the prospects for dedicated smallsat-launchers — at least for the air-launched LauncherOne under development at Virgin Orbit’s Long Beach, California, factory.

“We’ll get up into flight in the first part of 2018, and then we will be ramping up quickly. We are going into commercial operation next year, and then doubling our launch rate in 2019, and doubling again in 2020,” he said, adding that the company “will have customers on flights number two and three.”

Small satelites, big opportunity?

Small satellites, the panelists said, are playing an increasingly important role for their respective businesses, especially as the industry has seen a decline in the number of geostationary satellite launches. This year has seen just four new GEO satellite orders, down sharply from the 20 or so orders usually seen annually.

In 2016, 60 percent of the 220 satellites launched weighed less than 500 kilograms, underscoring a trend towards smaller and smaller spacecraft, according to conference organizer Euroconsult.

Adjusting to the changing demand is both a challenge and an opportunity for established launch providers, the panelists said.

“We have a significant technical project, which is not a GEO satellite anymore,” said Israël, a reference to Arianespace’s role as launch provider for the OneWeb and O3b non-geostationary-orbit constellations.

“The LEO and MEO constellations are very important projects. This is why I consider this (the metric of GEO satellites) totally irrelevant.”

Pysher said ILS is also seeing a lot of interest from small satellite operators and is looking for ways to offer more affordable prices. The cost of launch is currently a major hindrance for smallsat operators. According to Pysher, it is frequently more expensive to launch a small satellite than build it.

“By being able to accommodate the smallsat market, we can reduce the launch cost of the primary customer that is going to GEO,” he said. “We can also provide the small satellite with a reliable and effective ride, which is a challenge for them today.”

ILS conducted its second Proton launch of the year Sept. 11, delivering Hispasat’s Amazonas-5 satellite to geostationary transfer orbit. A Sept. 28 launch is planned for AsiaSat-9.

Under pressure

The launch providers expect the pressure for lower and lower prices to continue shaping the industry.

“It wasn’t that long ago when we were charging $100 million for a commercial launch,” Pysher said. “Today, we are somewhere with numbers that start with 5s and 6s so we are talking about a 40 to 50 percent reduction in the launch price.”

Ridesharing, Pysher said, would be the most efficient way in the future to achieve the further price decreases some customers are demanding.

“We are frequently asked what type of technology are we implementing for our launch vehicles to get the price down to $25 million per launch,” Pysher said. “My answer is ‘none.’ The only way to achieve that is to have a shared launch and then also developing satellites that perhaps don’t have the 15-year life span anymore. Maybe a five-year life span.”

Shotwell agreed: “To get to $30 million per launch, you may get there with reusability but you for sure get there by dividing $60 million by two.”

Vertical integration

The rocket makers also said that the requirements to reduce cost is driving them to manufacture more of the rocket components in house instead of sourcing sub-systems through a wider supply chain.

“If you want to have more control over the price structure of your product, that drives you towards the higher degree of vertical integration,” Bruno said. “Producing more of the content of the rocket, more of the components in house.”

SpaceX’s Shotwell commented: “We started this way from the beginning, we found that the aerospace supply chain had too long time lines, very expensive components so we ended up producing most of the rocket components in house, we ended up taking in much more of the rocket than we originally expected.”