Surrey Satellite Technology (SSTL) has had operations in the United States for the past five years but just recently expanded their operations and ambitions, with plans to manufacture small satellites from their new office in Colorado, along with providing applications and services. Sensors & Systems (S&S) editor Matt Ball toured the new facility and spoke with Dr. John Paffett, CEO of SST-US, about the company’s approach, technology innovation, and prospects in the United States.
S&S: Why did you decide to launch Surrey Satellite Technology in the United States?
Paffett: Our whole ethos is to push the market, and that’s where our US entity comes in. We’re a small company, and while we were growing the business in the UK, the market has increased, and we’re focused on staying at the forefront of the market. Staying at the front became a challenge, so in 2008 we decided to create an entity in the US to address this market while staying small and innovative. The idea really is that we end up with sister organizations so that the group can continue to expand, but so that each of the organizations remain relatively small and agile.
The United States was the choice for several reasons. Our type of approach has always led to a huge interest from the commercial entrepreneurial customer base, and a lot of the world’s entrepreneurs are located in the United States. Historically, those entrepreneurs have gotten on a plane and come to Europe, because they have not been able to get ahold of the technology here in the US. Part of the reason that we’re here is to stimulate that entrepreneurial customer base. We’ve also done a number of projects with US customers, and it has been inefficient to do that from overseas.
S&S: What is the level of your commitment to the US market, and to Colorado in particular?
Paffett: This is not just a shopfront, we are growing our satellite engineering capabilities and will have end-to-end satellite manufacturing capability. We will be getting to the point where we have resistors, capacitors and integrated circuits coming in, and spacecraft going out.
I’m conscious that you can’t take a business model from one part of the world, stick it in another part of the world, and expect it to work. My job is to implant the DNA, and then grow a company that has the same ethos and culture, but is infused with the rest of the DNA here in the US to better address the US market needs and sensitivities. That’s why we settled down here.
Why Colorado in particular? I’m of the opinion that wherever we set up shop is going to be wrong. We have customers in California, Washington, D.C., and Mississippi. Wherever we are, we have customers elsewhere. A number of things about Colorado are the tax and legal environment, the low cost of business as compared to D.C., a good work/life balance, and the fact that it is central and well placed for us to address our customers. It’s also the number two space state, and we hope to make it number one.
S&S: What’s the history of SSTL prior to making the move to the creation of sister companies?
Paffett: Surrey has been in existence for 30 years, starting out as a university department and formed into a company in 1985. We have a track record of building and launching 41 successful small satellite missions. For the first 15 years, we pushed the idea of using small satellites for real-world applications, and it was quite a challenge for that first 15 years. A lot of the customer base were sitting back, saying they needed big spacecraft, and the whole of the industry was focused on the larger and more expensive programs.
We had good success in lower-profile areas, such as communications. We provided communications for one of the early Antarctic missions, where they had a pack on their back, and were using our spacecraft to communicate home prior to Iridium. We did a program with the Chilean Air Force to look at the ozone hole that is over that region. At that point, there were many niche applications.
It was about 15 years ago that we started flying the first multispectral sensors, with cameras that could do multiple bands, that people woke up and realized that we could do useful things with small spacecraft. That market continues to grow, and as we move forward, the role of the small spacecraft is becoming more important. That’s largely because every year the technology improves, with better computers and storage and payloads. The technological evolution improves, price points continue to come down, and now with a small 150 to 300 kg spacecraft for $10 to $20 million you can do what you were doing with a 1,000 kg spacecraft five to 10 years ago for $500 million.
S&S: That’s an amazing technology transformation in a short period of time.
Paffett: That’s really been what the company has been about, changing the economics of space, and stimulating the utility and application of small satellite solutions. If you had gone to Euroconsult (the international satellite business consulting company) twenty years ago, and asked them about the market for 100 kg spacecraft, they would have said there is no market.
S&S: What is the strategy behind the launch of the associated DMC International Imaging (DMCii) company that was launched with the remote sensing Disaster Monitoring Constellation of satellites?
Paffett: DMCii is an interesting case, because our goal is very much in the provision of small satellite solutions and applications, and the customer base is evolving. We used to sell satellite systems, and now customers are coming to us and talking about applications. They are interested in what you can do with the satellite, rather than having the satellite for the sake of having a satellite. Also, many customers have no interest in owning a satellite, they want a service.
We came up with the concept for DMC in the late 1990s for a constellation of Earth observation satellites on a small platform with 32-meter resolution, a three-band imager, at a price point that we could bring to fruition. At that point, it was a courser resolution to Landsat at the time, but with a lot of utility for disaster monitoring, agriculture, deforestation, and other needs.
We also took advantage of evolutions in technology to develop the payload that is a comparable resolution, but a swath width greater than anything done before. The first DMCii satellite generated an image of 600 km by 600 km. Historically spacecraft have delivered much smaller tiles. So, if you wanted a picture of the whole of the United States or the whole of the UK, you would have to mosaic multiple images, so it would be many months before you’d get an image. In this instance, you press the button and down comes a multi-gigabyte image. That part in itself was quite innovative, but then with five spacecraft, we can get the same picture of the same part of the Earth every day.
A large number of concepts of a satellite constellation never get off the ground because of the pure magnitude of the cost associated with those systems. We rapidly appreciated with the DMC concept that each of the spacecraft has a strategic value, so we approached a number of customers to fund each satellite. DMCii is the entity to drive the utility and application of that data to turn it into something of use.
We now have customers using this data for a number of different uses, such as illicit crop detection in Afghanistan, deforestation or glacier melts. That’s important for us, because that stimulates the user community’s interest in what they could buy or use a satellite for.
S&S: Your mission to change the economics of space seems to be timely. Are fewer funds for larger projects driving business your way?
Paffett: It will, rather than it has. In the long term it will. What you are seeing is a transition of the market from an institutional domain into a more commercial domain. The concept of business case is becoming more a prerequisite. When budgets were large, and when money was not one of the top evaluation criteria, the commercial mindset wasn’t really behind some of the programs.
Surrey has historically focused its attention on the commercial and entrepreneurial arena. It may be governments, but those that don’t have a lot of money. They have a need, and are interested in addressing that need with a finite budget.
We like to be seen as an organization that makes a difference to humanity, with almost an altruistic streak. Whether that is getting to price point where a country or customer can afford to have their own capabilities or to get to a price point to get a new system developed that does a specific job, those are the things that drive us.
In today’s budgetary climate the thing that is clear to me is that it won’t get better. If anything, people’s need will continue to grow, but the available budget will continue to be under pressure. Whether things grow in the future is another question, but the budgetary pressure will continue and get worse. The question becomes, how do we do more with less money.
The human appetite for technology and applications doesn’t go back. If someone said to you that there would be no more broadband Internet, and you have to go back to a 2.4 kb modem, you wouldn’t stand for it. That will continue to put pressure, and what I think it will do is make the customer base challenge their requirements and understand what they’re trying to achieve. They will also look closely on the appropriate solution to a given problem, figuring out and buying a solution that does what they need rather than being too big and ambitious.
S&S: When I think of your business model, I can see a relationship to open source software, where the development of your platform for specific customers also builds capacity that others can use and benefit from. Do you see that comparison?
Paffett: There’s a bit of a mixture in there. Some of our contracts are to provide customers with spacecraft that do a particular job. We recently provided a satellite platform into a Canadian group called exactEarth that put together a business model for ship traffic detection. We were an enabler for one of their flights. In that case, we’re providing a vehicle where they host their solution.
On the Earth observation side, we really provide a number of different business models. One of the best examples is with the Nigerians, we provided a spacecraft for their own land use and agriculture needs, but in that instance we’re also working with them through DMCii where we sell the imagery throughout the world and return a revenue stream to them. Not only did we provide a spacecraft, but we are providing a means for them to fund that spacecraft. That made it much easier for them to close their business case.
S&S: Making satellites viable seems important from your engineering expertise, because engineering innovations don’t become an innovation unless the satellite launches. So, you’re also spurring your own ability to innovate, right?
Paffett: Some of the innovation is on the technology level, looking how we can exploit technology development that has occurred across other industries. With DMC there is some innovation that occurred in the terrestrial camera arena, with growth in density of on-board storage devices, and we leverage those, and apply those to space to increase capacity.
We’ve also had to innovate in the contractual and programmatic level. We have customers now that don’t want to own or operate their own spacecraft. So, we’re looking at how to manage services where the customer wants a service, and we’re pulling together the business case to put that forward.
At the end, it comes to understanding customer needs as well as their difficulties in closing their business case. We try to find a solution that enables us to bring that program to fruition, with pricing, technology innovation, and with the right timeframe to take advantage of the market opportunity.
S&S: You were the technology supplier for the RapidEye constellation, and that went through a bankruptcy phase. Is that an example of the right technology at the wrong time?
Paffett: It’s an example of the difficulties of being the first to market. When Wolfgang [Biedermann] first came to us, the vision was very large, and we worked with him over three years to get to a point where we had the right balance with what was needed technically, and the price point. That was a hard three years, because challenging a customer’s business plan can be antagonistic if not handled the right way.
Eventually we got to the point where he was able to close his business case, and he was delighted. There are other elements to that story as well, but the difficulty for Wolfgang was that he was a pioneer where he saw a potential market for a particular solution with land use, agriculture and the insurance market.
You have to bear in mind that Earth observation is in the infancy of commercialization. If you think about space commercialization today, you think about geostationary satellite communications. That was a change that took 20 years, where it started out institutional, went to quasi-institutional, and then commercial. Earth observation will follow that same path, it’s just 20 years behind.
Wolfgang did the classic thing, with his business case in hand, and looking at the capacity and the uptake curves, and looking at how he’d be able to close the business case. The business case never survives the first encounter and that’s basically what happened when the market didn’t meet the curve. Unfortunately, the market didn’t come to fruition quick enough for him to survive.
The good thing is that he’s proven that there is a market for that service and solution. We’re waiting to see if there will be a RapidEye 2, and where that comes from. Certainly the application is there, so the customer base is there, and how does that move forward.
S&S: The timing with the global financial crisis certainly didn’t help, as I’m sure a lot of the institutional investors had much less patience than they would normally have had.
Paffett: An additional challenge is that it’s in a backdrop where some institutional systems are giving the data away for free. With Landsat giving data away for free, and the European GMES system and the Russians looking to do the same, it’s grand for the greater good, but you’re actually stifling commercial growth. People forget that the free systems actually cost money, so there’s no longevity in those systems, which is what Landsat is now finding.
The user community loves the data, and they would love to have more accurate and timely data, but somebody has to foot the bill. The government is now saying that their pockets are empty, and there’s not enough of a revenue stream to keep it going.
What will need to happen over the next few years with Landsat, and also with GPS, is that people will need to come to terms that these are key infrastructures. There’s no way on Earth that people will do without navigation as it’s so intrinsic with our lives today, and so much is reliant that we’ll never do without it. For Earth observation, certainly the weather and climate services will continue to grow, and Landsat will continue to grow as people learn what they can do with the data.
People will need to understand that these are infrastructures, but that the income streams from the business models aren’t as simple as the communication model. With the communication model, you sell a transponder and make some money, it goes in the bank and you can buy a satellite, a simple circle.
If the data is provided for free, how do you generate revenue and get sustainability in that system. The only way you can think about it today is that it’s a burden or tax, and there are so many more of those. Then we have to look at minimizing the burden, to put that infrastructure in place for less money. That mindset, and budgetary pressure around the world, will start to focus down on. People will understand that we need to do it, but with limited money. At that point the competitive landscape improves, and some of our solutions will come into their own.
S&S: I’ve spent the bulk of my journalist career focused on GIS, primarily the systems component. However, I recently launched Sensors & Systems because of the close alignment that now create dynamic systems to better understand change. It seems that the systems still have a ways to catch up, but the move toward more real-time views is rapidly increasing.
Paffett: That’s why I think we’re really at the dawn of Earth observation. If I had to forecast forward ten years, to think about what we’ll be using space-based systems for, I think the financial markets will be using them to look at sugar and coffee market yields; governments will use them to stop deforestation; water; mineral exploration; oil and gas; and a host of other applications that will start to exponentially grow. The software does need to improve on processing and delivery to extract useful information out of the data.
There are good examples of imagery suites that just haven’t come to market yet. We’ve done a program with hyperspectral imagery, with a community of 120 users globally and a program that was supposed to last a year and that lasted seven. We would love to do a follow-on mission, but nobody wants to pay for it. There are a host of applications where we can see the utility, but the revenue picture isn’t as clear.
There are technologies and applications that are in their infancy. As more people start to understand how they can make money on the insight and the back end of the data, then that will start to stimulate the demand. Ten years from now it will be a different horizon, where the applications will all find their need and spur new and different applications.