- The Washington Times - Monday, August 19, 2002

This week's launch of the Atlas 5 rocket puts American companies into the commercial satellite-launch business a market that has failed to meet its expectations.
The failure of major new ventures like Teledesic and ICO has resulted in a flat market, and the addition of several competitors has left all scrambling to get their share of a smaller pie. As a result, the companies are having to rely on the Air Force Evolved Expendable Launch Vehicle (EELV) program, which won't start launching until 2004.
The EELV, started in 1995, called for awarding one contractor up to $2 billion in launch services over two decades. The Air Force decided to proceed with the two most-conservative designs, the Delta 4 from McDonnell Douglas (now part of the Boeing Co.) and the Atlas 5 from Lockheed-Martin.
"The original concept was to down-select to one contractor," said Air Force Lt. Col. Tony Taliancich of the EELV System Program Office. "Toward the end of 1997 the commercial market was booming. The government looked at assured access to space. 'Do we really want to go down to one contractor? What are the risks associated with that?'"
The Air Force gave each contractor $500 million as an investment toward the ultimate goal of decreasing launch costs. Each contractor invested roughly $1 billion of its own money.
Lockheed-Martin does have one key advantage over its competition: It's the first out of the gate. The maiden flight of the Atlas 5 is scheduled for 6:05 p.m. EDT Wednesday.
Any new launch vehicle is risky, and some launch vehicle owners will fly a dummy payload or give away the payload space to a university or small business that is willing to risk flying on an unproven vehicle because it's the only way they can afford to get into space.
The lucky 'guinea pig' for the first launch will be the European consortium Eutelsat's Hot Bird 6. Eutelsat intentionally purchased maiden flights at a hefty discount on three different launch vehicles: Atlas 5, Delta 4 and the improved Ariane 5 from Europe. Even if it loses one satellite, the consortium still breaks even.
After this week the near-term schedule plans the second launch for the end of the year and at least two firm launches in 2003. The first launch for the Air Force is scheduled for 2004.
Much of the logic was predicated on a steadily increasing market for satellite launches, but that increase never occurred.
The only significant new satellites are direct-to-home broadcast satellites in the United States and satellite radio only a couple of dozen new sales. Downward trends in the world economy, especially in Asia, and the failures of the startup-ventures that were supposed to seek the new services have also hurt.
"What I think bumped up a lot of projections, and therefore expectations, were these non-Geostationary systems like Globalstar, Iridium, ICO and others that took the absolute forecasts very high," said Eric Novotny, vice president of marketing for International Launch Services (ILS), which markets Lockheed-Martin's Atlas 5 and Russia's Proton commercially.
The U.S. Atlas and Delta, European Ariane, Russian Proton, Japanese H-2A and joint U.S.-Ukrainian-Russian SeaLaunch all compete for the same market. Also in the playing field is China's Long March and potentially India's Geosynchronous Launch Vehicle.
The crowded field means each company is lucky to get a couple of commercial contracts per year and cannot raise production to rates where economies of scale can be reached.
Mr. Novotny acknowledged that with the limited market, one or more competitors are likely to drop out, leaving a greater share for the remaining players in the field.
For its part, the Air Force awarded its first 28 launch service contracts in October 1998.
The Delta 4 of Boeing got the lion's share 19 launches worth $1.38 billion, including the heavyweight version of their launch vehicle and West Coast launches for satellites destined for polar orbits. In contrast, Lockheed-Martin's Atlas 5 got only nine contracts, worth $650 million, limited to the smaller and medium-size launch vehicles and only launches from the East Coast.
While its competitor got far more government launches, ILS notes that the Atlas launch vehicles and Protons have captured 50 percent of the commercial satellite launch sales. ILS will not talk about its launch prices.
"With a 50 percent market share, we seem to be competitive," Mr. Novotny said. "In some cases we're able to capture business because of values we bring to the proposition; we are not always the lowest bidder in all cases."
Lockheed-Martin officials acknowledge that they would do the Atlas 5 program differently in retrospect.

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