The Huntsville Times August 03, 2003
Boeing rockets hurt by low demand for satellites
New technologies mean there are fewer commercial launches
By Shelby G. Spires
Some of the brighter stars in the aerospace industry a few years ago predicted a soaring future for the rocket business based on expected demands for commercial satellites to move telephone calls, TV signals and other data for an information-hungry world.
That was at least part of the reason Boeing Co. in 1997 built its $450 million rocket plant in Decatur, where 685 employees make Delta rockets designed to launch satellites for the military and telecommunications companies.
But the unforeseen expansion in the last few years of fiber-optic cable networks and cell phone towers, space analysts say, may be a bigger long-term concern for Boeing than its recent loss of $1 billion worth of Air Force contracts to launch satellites.
"Nobody saw this six or seven years ago," said Bob Sackheim, Marshall Space Flight Center's assistant director and chief propulsion engineer. "Technology has advanced too quickly on the ground for some of the space business to be comfortable with."
Because of the collapse of the commercial market, the launch industry "is completely upside down now," said John Pike, a military and space expert and founder of GlobalSecurity.org.
"I thought 10 years ago when (Boeing and Lockheed Martin Corp.) started the (Delta IV and Atlas V programs), it had a pretty clear story line in terms of what it was intending to accomplish," Pike said. "I would say the proposition of having the bulk of the government contracts completely stands the program on its head. It's opposite from what it was supposed to be.
"The original theory was if you could distribute the 'buy' across more U.S. users, you would have a better buy than foreign competitors," Pike said. "They are at the bottom of the market right now. This market goes up and down on a five-year cycle.
"Just like the stock market, the demand for launch vehicles will go back up."
Gamble costly
The collapse of the private space business, which includes the failure of global satellite networks, has caused Boeing to step back from using its Delta IV rocket to boost commercial satellites into orbit. On July 17, Boeing officials told stock market analysts the failing satellite market will cost the company $1 billion.
Boeing will now use the smaller, less expensive Delta II rockets for government and commercial launches. Since 2000, Boeing has been shifting the Delta II production work from Colorado and California to Decatur. Add to this the $1 billion in contracts the Air Force took away from Boeing last month and gave to rival Lockheed Martin, because of questionable business practices by Boeing, and satellite industry observers are left with a question:
Is there a need for the Delta IV?
"The issue here is that Boeing made a bad bet," said William Alderman, president and founder of Alderman and Co., a New York-based aerospace investment firm. "It's easy for us to say that today, but in reality, most of the best minds in the world made the same bet. And they are losing."
To date, it's a more than $7 billion bet.
That's how much Boeing has spent since 1996 in an effort to develop a space business. The company spent almost $6 billion in cash, stock and debt acquisition to buy Rockwell Aerospace in 1996 and Hughes Satellite Systems in 2000. Boeing and McDonnell Douglas Corp. merged in 1997.
"It's not just the Delta IV," Alderman said. "Boeing has made a substantial investment in space, and it just hasn't paid off for anybody like they thought."
The original idea was to develop a new rocket that would use improved designs; it would be built in factories to cut costs. Because of a guaranteed production run, commercial satellite companies would have cheaper launches, and the military would have a new rocket.
Launch costs for a Delta IV or a Lockheed Martin Atlas V run $90 million to $160 million, and about $50 million to $100 million for the smaller Delta II. That's still too expensive for the science and technology needs of smaller aerospace companies.
"What this industry still needs is a cheaper alternative - a cheaper way to get payloads to orbit that's not in the hundreds of millions of dollar a launch range," said NASA's Sackheim.
Sackheim said the U.S. government and launch industry need to rethink the rocket business from the ground up by developing a compact car approach. "This country needs a small, inexpensive launcher ... not a multimillion-dollar one," he said.
Business and government agencies such as NASA routinely need to launch inexpensive payloads into space for research and other needs. These payloads cost from $500,000 to $10 million, Sackheim said. "It makes no sense, and it can't be afforded, to put those cheap payloads on an $80 million rocket.
"If you design a reusable or cheap expendable rocket to carry smaller payloads, it will create a market and then spur investment in the larger payloads that a Delta IV could use or even create a need for a reusable launch vehicle," Sackheim said.
No satellite work
The explosion of fiber optics and cheap cell phone calls may have torpedoed plans for constellations of satellites that would have moved data and connected people on satellite phones.
Robert Villanueva, a spokesman for Boeing's Delta program, said the collapse of demand for satellites means the company won't do commercial launches until 2009.
"The work's just not there, and that's what drove the decision to pull Delta IV out of the commercial launch market," he said.
That's an abrupt turnaround from three years ago. In 2000, there were 35 satellite orders for the entire launch industry from communications companies around the globe. (Specific figures for Boeing were not available.) In 2001, the number of orders dropped to 29. In 2002, the bottom fell out; there were just seven solid orders for satellites.
This year, the Satellite Industry Association predicts, there will be about the same number of orders.
David Cavossa, a director with the satellite association in Alexandria, Va., said the satellite sales market is going to stay flat for a couple of years. This is because telecommunications satellites last longer, he said, and new computer data technology allows the satellites in orbit to be used more efficiently.
"Fifteen to 20 years ago, satellites were lasting at the most a decade, more like five years. Now, with new technology and improved components, they last almost 20 years," Cavossa said. "Add to that, manufacturers can now put five to six channels on one transponder with data compression, whereas you only could get one per transponder" in the past.
But Cavossa said there could be a bright spot in the next few years as communications companies improve their equipment.
By 2006, broadcast and cable networks will have to broadcast in high-definition television, or HDTV, which will require new digital and satellite transmission equipment. Along with that, the demand for satellite radio and faster Internet broadband connections will help the launch industry.
"I don't think you will ever see the claims of the late 1990s come back, though," Cavossa said. "Those were just dreams."
© Copyright 2003, The Huntsville Times
