Influx of Competitors Shakes Up Satellite Imagery Industry

Satellite image of the Pentagon (DigitalGlobe)
The military’s sole commercial provider of earth imagery is preparing to launch a new satellite that can photograph objects on the ground that are smaller than a home plate on a baseball field. The company, DigitalGlobe Inc., currently operates five satellites, and derives nearly half of its revenues from defense and intelligence agency contracts.
The Longmont, Colorado-based firm’s biggest competitor used to be another U.S. company, GeoEye. In 2010, both firms shared a $7 billion 10-year deal to provide satellite imagery to the National Geospatial-Intelligence Agency. But a government fiscal crunch slashed projected spending on imagery in half. Without enough work to keep two companies in business, DigitalGlobe and GeoEye merged in January.
But after surviving a bruising corporate battle to become the military’s exclusive supplier of satellite imagery, DigitalGlobe faces an onslaught of new competitors and a market that is rapidly changing.
A projected decline in spending on government-owned satellites means that defense and intelligence agencies will have to increase their reliance on commercial providers such as DigitalGlobe. At the same time, the company is seeing the emergence of new players, including foreign providers of satellite data and a growing field of domestic and international aerial imagery providers.
“We see tremendous international competition,” said Marcy Steinke, senior vice president of government relations at DigitalGlobe.
The company also finds itself at a disadvantage because it is not allowed to sell imagery with a resolution of less than 20 inches to non-government buyers. DigitalGlobe’s newer satellites offer far better resolution — the soon-to-be-launched WorldView 3 spacecraft will see objects as small as 12 inches — but those pictures can only be sold to U.S. government agencies or allies — with U.S. approval.
Steinke, a retired U.S. Air Force colonel, said she would like to see some relief from the restrictions. Aerial image providers are allowed to sell pictures with less than 2-inch resolution, she said in an interview. “We are hoping for some equality.”
The current restrictions date back to the 1990s. “The regulations move slower than the technology,” Steinke said. The aerial imagery industry already can supply much of the data that satellite providers offer. One advantage of satellites is their global coverage, whereas certain fly zones are off limits to aerial photography. “Some countries deny access,” Steinke said. Regardless, aerial imagery is rapidly gaining market share.
NGA Director Letitia A. Long recently touted the successful use of airborne remote sensing — specifically a project called airborne spectral photometric environmental collection — for disaster relief efforts. “It is the nation’s only civilian, 24/7 airborne, near-real-time remote sensing chemical, radiological, and imagery mapping capability,” Long said May 1 at the Defense, Security and Sensing Symposium in Baltimore. Such “rapid response” technologies are increasingly important to NGA’s mission, Long said. The agency worked with the EPA in the aftermath of a fertilizer plant explosion in Texas April 17 that killed 14 people.
Satellite imaging firms in the United States must not only contend with domestic aerial counterparts but also foreign competitors. Global players such as Astrium have become more dominant, Steinke said. Government restrictions on sales of high-resolution imagery are partly the reason why U.S. firms are losing ground. “We are trying to get government to let us innovate and grow,” she said. “Clearly we want to grow our commercial business and be less reliant on the government.”
DigitalGlobe officials have not been notified of any further cuts to its NGA contract — known as Enhanced View — as a result of government-wide automatic spending reductions mandated by Congress, said Steinke. The company for now plans to continue to operate its five imaging satellites, although the constellation will be shrinking in the coming years. Two of the satellites have exceeded their expected operational life and soon will be taken out of service. Two new satellites are under construction. One of them, WorldView 3, will be launched in 2014. The other, GeoEye 2, will be put in storage until it is needed.
The impact of U.S. government budget cuts on satellite imagery contracts came up during an April 26 hearing of the strategic forces subcommittee of the House Armed Services Committee. Rep. Michael Coffman, R-Colo., whose constituents include DigitalGlobe and other space industry firms, said he worries that Enhanced View will be targeted for further cuts as a result of sequester. “This is the only source of unclassified high-resolution imagery that can be immediately disseminated and shared with U.S. and coalition partners,” said Coffman. “This program was cut by 50 percent in fiscal year '13, and now there is only one U.S. vendor supplying this imagery.”
Gil Klinger, deputy assistant secretary of defense for space and intelligence, said the Pentagon “supports stability in funding that program [but] with sequestration going on and the fiscal, budgetary environment that we're in, many things are under review right now.”
A new study byEuroconsult, a market research firm based in Paris, France, projects that demand for imagery intelligence by defense and military agencies will grow globally over the coming decade, although U.S. procurement will decline. Because of the high cost of building and operating satellites, governments will increasingly depend on commercial suppliers. “The commercial sector is expected to make up a significant part of future demand for imagery intelligence,” said Adam Keith, director of space and earth observation at Euroconsult.
In 2012, 77 percent of the total $1.5 billion commercial data market was attributed to defense customers, and close to 50 percent was pegged to the U.S. government, a Euroconsult study concluded. A burgeoning market outside the United States will fuel growth, the company said. Revenues from commercial data sales to militaries worldwide are expected to grow to $2.2 billion by 2022.
Another emerging player is China, according to the Pentagon’sannual report to Congress on the military capabilities of the People’s Republic of China.
“China has developed a large constellation of imaging and remote sensing satellites,” the report said. Since 2006, China has launched 16 Yaogan remote sensing satellites. These spacecraft conduct scientific experiments, carry out surveys on land resources, estimate crop yield, and support natural disaster reduction and prevention. Additionally, China has launched two Tianhui satellites for scientific experiments and land surveys, the study said. China has three Huanjing disaster monitoring satellites currently on orbit. “China will continue to increase its on-orbit constellation with the planned launch of 100 satellites through 2015,” said the study. “These launches include imaging, remote sensing, navigation, communication, and scientific satellites, as well as manned spacecraft.”
Photo Credit: DigitalGlobe

Topics: Business Trends, C4ISR, Intelligence, Sensors, Space