Business

The opening up of outer space needs help

BY ANNA COAST AND BOB FRANKLIN

Wednesday, October 30, 2019

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On 20 July 1969, 500 million people around the world sat up and watched a shadowy black and white TV picture in awe as Neil Armstrong became the first person to walk on the moon. The excitement that gripped the world was as enormous as the cost of getting him there.

Space exploration, digital communication and finance have moved on since then.

Fifty years ago the space sector was the domain of governments and public sector agencies. They were responsible for exploratory missions and satellite launches for communications, national security and navigation. National agencies mostly worked independently of each other, but later collaborated on, for example, the International Space Station. The manufacturing of rockets, probes and satellites was carried out by just a few large aerospace contractors.

Today the private sector is increasingly involved in space and collaborates with public sector space agencies. Satellite operators now provide footage direct to home TV as well as support mobile communication and navigation.

Billionaires are willing to take the commercial risk of operating in and exploring space, with projects such as Elon Musk's SpaceX, Jeff Bezos's Blue Origin, and Richard Branson's Virgin Galactic. Others are launching new, low-orbit 'small and cube satellite' services for Earth observation and communication. Europe alone boasts 850 space companies.

Everyone on the planet should benefit in some way from the exploration of space. As our understanding expands, the financial impact and benefits of the sector could be as big as that very first step onto the surface of the moon.

One 2017 estimate put the space sector's market revenue at US$348 billion, with the satellite business accounting for US$269 billion of that. The main segments of satellite include television, ground equipment, and service applications such as navigation and Earth observation.

But what does it all mean for us, the ultimate consumers on Earth?

The search for revenue from space is not just about finding new markets; it is also about developing new products and services, and enhancing existing ones, at affordable prices for potential consumers. We now exist in a world of digital technology, which is transforming services and has a large financial impact.

Huge increases in data about the Earth and the environment, coupled with mobile telecommunications such as 5G, cloud systems and data analytics, all point to a new world of big data and massive transaction volumes, with lower unit costs and more customer choice.

SIZE MATTERS

Accountants involved in forecasting space markets and technologies know that the sector's growth is uncertain, but other markets offer us some clues. An analogy can be drawn here between the space sector and the maritime industry, both of which embrace exploration and transportation.

Five centuries ago explorers would set out on occasional voyages of discovery in a handful of tiny ships; today, huge volumes of goods are being moved around the world at any given moment in thousands of ships that could each comfortably hold Christopher Columbus's Santa Maria, Ferdinand Magellan's Vittoria or Francis Drake's Golden Hinde many times over.

The space industry has a growing need for 'big, yet small' solutions, such as miniaturised cube satellites, that could allow operations to scale up as they have done over the years in the maritime sector.

There is also a financial measurement and commercial challenge: how to provide ways to transport and deliver ever-greater capacity at lower cost, while competing in global markets and improving profitability.

A massive debt is owed to the scientists and entrepreneurs who have already done so much for space exploration, but we also need to encourage the key players who are taking the sector forward, including businesses and the investment community.

Governments need to do their bit by developing innovative policies for the space sector; supporting research programmes that will deliver societal, environmental and economic benefits for everyone; and deciding who will pay.

And accountants also have a key supporting contribution to make by improving the measurement and reporting the financial impact of space exploration – Neil Armstrong's father, an auditor, would have approved.

Authors: Anna Coast FCCA and Bob Franklin FCCA run Telcoconsulting, which advises on finance, regulation and accounting in the communications and space sectors.


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