State Of The Satellite Industry Report

1. �State Of The Satellite Industry� Report

2. SIA Overview/Mission Overview The Satellite Industry Association is a U.S.-based trade association providing worldwide representation of the leading satellite operators, service providers, manufacturers, launch services providers, remote sensing operators, and ground equipment suppliers. � The SIA is the unified voice of the U.S. satellite industry on policy, regulatory, and legislative �issues affecting the satellite business. Mission �To educate the public, the press, policy and lawmakers throughout the world of the critical role satellites play in our everyday lives�

4. Methodology The study is performed by Futron Corporation for SIA. The study is based on a survey that targets large companies operating in four satellite industry segments: Satellite Services Launch Industry Satellite Manufacturing Ground Equipment Manufacturing Survey questions are designed to gather employment and revenue information specific to each industry segment. Futron augments survey data with publicly available data to provide the complete industry picture.

5. Methodology Launch Industry data include launch services provided by private companies for both commercially-owned and government-owned payloads. Launch Industry data does not include Shuttle launches or ISS missions. Satellite Manufacturing data include manufacturing activity by private companies for both commercial and government customers. All Launch Industry and Satellite Manufacturing revenues are recognized in the year of launch, not the year the contract is awarded. All revenues are in then-year dollars (not adjusted for inflation).

6. Satellite Industry Overview

7. World Satellite Industry Revenues The world satellite industry revenues have grown every year since SIA/Futron began tracking the industry. Average annual growth during this time period is 13%. In 2003, the world satellite industry growth slowed to about 6%, lower than the 10% growth experienced in 2002 and significantly lower than the high of almost 30% recorded in 1997. The world satellite industry revenues have grown every year since SIA/Futron began tracking the industry. Average annual growth during this time period is 13%. In 2003, the world satellite industry growth slowed to about 6%, lower than the 10% growth experienced in 2002 and significantly lower than the high of almost 30% recorded in 1997.

8. World Revenues By Sector

9. Satellite Industry Findings The world satellite industry revenues have grown every year since SIA/Futron began tracking the industry. Average annual growth during this time period is almost 13%. In 2004, the world satellite industry growth was about 7%, slightly higher than the 6% growth achieved in 2003. Revenues from Satellite Manufacturing, Satellite Services, and Ground Equipment segments increased in 2004, while the Launch segment continued to shrink. The Satellite Services segment share of total revenues has grown over the study period, increasing from 42% of the total in 1996 to over 60% in 2004.

10. World Satellite Services Revenue The Satellite Services sector has more than tripled in size from 1996 to 2003. Subscription and Retail Services had the greatest growth of all industry segments in 2003, with a 15% growth rate. Direct-to-Home TV services continued to drive overall growth. Revenues for mobile phone services and remote sensing received a boost in 2003 from increased government spending due to military activities. Satellite Radio Services experienced over 400% revenue growth in 2003, although revenues still account for less than 1% of overall satellite service revenues. Transponder Leasing reversed a two-year decline and posted a 7% revenue gain in 2003, primarily due to increased government spending. The Satellite Services sector has more than tripled in size from 1996 to 2003. Subscription and Retail Services had the greatest growth of all industry segments in 2003, with a 15% growth rate. Direct-to-Home TV services continued to drive overall growth. Revenues for mobile phone services and remote sensing received a boost in 2003 from increased government spending due to military activities. Satellite Radio Services experienced over 400% revenue growth in 2003, although revenues still account for less than 1% of overall satellite service revenues. Transponder Leasing reversed a two-year decline and posted a 7% revenue gain in 2003, primarily due to increased government spending.

11. Satellite Services Findings Subscription and Retail Services had the greatest growth of all industry segments in 2004, with an 11% growth rate. Direct-to-Home TV services grew 10% and continued to drive overall growth. Satellite Radio Services experienced over 200% revenue growth in 2004, although revenues continue to account for less than 1% of overall satellite service revenues. By end-2004, XM and Sirius together had 4.4 million subscribers compared to 1.6 million the previous year. XM and Sirius revenues reached over $300 million collectively in 2004 compared to roughly $100 million in 2003. DigitalGlobe and Orbimage each won contracts for up to $500 million over the next 4 years from NGA as part of the NextView program. Transponder Leasing revenues dropped 4% in 2004, primarily due to continued declines in capacity pricing.

12. Satellite Manufacturing Revenues 2002 Revenues were 44% Commercial 56% Govt. 2003 Revenues were 26% Commercial 74% Govt.2002 Revenues were 44% Commercial 56% Govt. 2003 Revenues were 26% Commercial 74% Govt.

13. Satellite Manufacturing Findings Global Satellite Manufacturing Revenues grew by 4% in 2004, while U.S. Satellite Manufacturing revenues dropped more than 15%. The decline was due to: Reduced government spending Lower number of overall orders in 2002 In 2004, government payloads accounted for 72% of total payloads launched and 82% of total manufacturing revenues. This is about the same as 2003, when government payloads accounted for 75% of total payloads and nearly 84% of total revenues. This trend is expected to continue for 2005, with government payloads contributing to the majority of launches and manufacturing revenues.

14. Launch Industry Revenues 2002 Revenues were 25% Commercial 75% Govt. 2003 Revenues were 22% Commercial 78% Govt.2002 Revenues were 25% Commercial 75% Govt. 2003 Revenues were 22% Commercial 78% Govt.

15. Launch Industry Findings In 2004, global Launch Industry revenues fell by almost 13% over 2003 and declined 24% over 2002 as a result of an overall drop in the number of launches. Of the total global launches in 2004, 53% were government and 47% were commercial. In 2000, 66% of total global launches were government and 34% were commercial. In 2004 the U.S. captured half of total launch revenues compared to 66% in 2003, due to fewer high-revenue (Titan IV) launches. In 2004 there were 17 new commercial GEO launch orders (7 for Ariane, 7 for ILS, 2 for Sea Launch, and 1 for Starsem)

17. World Ground Equipment Revenues

18. Ground Equipment Findings Growth in the Ground Equipment sector was steady, growing by about 5% in 2004. Ground Equipment prices continue to decline and major infrastructure investments have been virtually flat. Despite declining prices for hardware, the number of units sold for end-user applications has been growing. Greatest revenue growth is in end-user equipment for DTH TV, high-speed Internet, satellite radio services, and mobile satellite services.

19. In 2004, the global satellite industry continued to grow, due to the strength of the Satellite Services sector. Government communications spending and strong consumer demand for video services were the key drivers of this growth, with deployment of new user applications and equipment in both markets. Despite falling prices and profit margins in most sectors, several trends indicate growth for the satellite industry over the next few years: HDTV and the opening of new and competitive consumer video markets around the world Continued strength in Government/Military spending Revival of satellite manufacturing orders

20. Emerging Services/Applications

21. Recent Industry Events

22. Multi-Year Support From Hill Language in HASC Reported H.R. 1815 - National Defense Authorization Act of 2006 Commercial communications bandwidth The committee recognizes the important contribution commercial satellite communications systems provide to military operations. The need for commercial bandwidth to supplement military systems will remain a requirement into the future. As a result, the committee believes a long-term commitment to the appropriate use of commercial satellite communications capacity is in the U.S. government's best interest. The committee believes a multi-year procurement strategy with the use of annual contract options would provide sufficient commitment to industry and provide the government ample flexibility to terminate work as necessary. The committee recommends use of this alternative to procure commercial bandwidth to support military operations for those cases where it is the most efficient and effective procurement method.