Satellite-Export Curbs Hurting U.S. Makers, Study Says
California’s commercial satellite industry, which has dominated the world market for decades, lost $1.2 billion in revenue, more than 1,000 jobs and significant market share last year, mainly as a result of stiffer export controls imposed by Congress, says a study to be unveiled today.
In one of the more sobering assessments of the industry since passage of the legislation two years ago, the report will also reveal that U.S. satellite companies’ share of the global market declined 30 percentage points in 2000 to an all-time low of 45%.
The decline has prompted fears that the U.S. satellite industry could permanently lose its leadership position after dominating the global market for nearly four decades, the study concludes. Except for the last two years, U.S. producers have accounted for an average of 75% of all commercial satellites in orbit for the last decade.
The results of the seven-month study are to be presented this morning in Washington to California’s congressional delegation, including Reps. Christopher Cox (R-Irvine) and Dana Rohrabacher (R-Newport Beach), two of the original supporters of the tighter export restrictions on commercial satellites.
A summary of the study was obtained Monday by The Times. The study was conducted by the Satellite Industry Assn. and Futron Corp., a Bethesda, Md.-based aerospace research firm. It was paid for by the California Trade and Commerce Agency.
There is little disagreement that U.S. manufacturers have lost significant business, though there is disagreement on the reasons. The State Department has maintained that the drop in market share is linked to increased competition and technical glitches by U.S. manufacturers and not solely to onerous government regulations.
Under the March 1999 measure, oversight for export of commercial satellites was moved from the Commerce Department to the State Department, and commercial satellites, along with related components, were reclassified as munitions.
The satellite industry is expected to use the study to urge Congress to reverse the law or find some significant remedy. Congress imposed the restrictions after allegations arose that China had stolen U.S. secrets in launching commercial U.S. spacecraft. But subsequent reports concluded that the information did not significantly aid China’s nuclear weapons capabilities.
U.S. satellite makers have complained bitterly that having commercial satellites classified with tanks, missiles and bombs has resulted in time-consuming and expensive licensing delays and denials, causing some customers, even U.S.-based companies, to turn to overseas suppliers.
According to the study, the restrictions have had the most dramatic effect on California, home of the world’s leading satellite makers, including Boeing Satellite Systems and Loral Space & Communications. In all, four of the world’s six largest satellite makers are in California, where 75% of all communications satellites that have been or are in orbit were built. Those companies employ 25,000 people in California.
But last year, the state’s commercial satellite makers lost out on $1.2 billion in contracts, many of which went to European competitors, the study says. The loss of orders equates to 1,000 lost jobs, the report concludes.
For instance, the study notes that California manufacturers of commercial geostationary satellites--the most popular type--announced only 13 orders in 2000, down from 16 orders booked in 1998, the year before the new export restrictions took effect. At the same time, orders for European-made satellites increased to 16 from six. The satellites can cost as much as $250 million and take up to 18 months to build.
The report concludes that U.S. companies have lost out on at least half of the publicly announced orders for commercial telecommunications satellites since Congress imposed the tighter export rules.
The study also found that California satellite makers are expending four to five times more effort and resources to comply with State Department export-control procedures compared with two years ago. In some cases, frustrated customers have dropped their orders and switched to foreign makers.
The study quotes an official of U.S.-based Intelsat, a communications satellite operator, who expressed frustration at dealing with the more burdensome State Department rules.
“Intelsat is prepared to select a non-U.S. contractor at a slightly higher price to get the access it needs to the manufacturer that will be chosen to build its . . . satellites,” Intelsat Director-General Conny Kullman is quoted as saying. “Difficulties getting basic information from U.S. contractors in the initial stages of a new satellite solicitation have exacerbated Intelsat’s concerns over using U.S. contractors.”
The tougher restrictions have also hindered California’s rocket-launch industry, which has already been hammered by a significant drop in business resulting from several high-profile failures of satellite-based telephone services.
“While it is impossible to attribute all of the lost revenue and market share to new export controls, the regulations are clearly having a negative impact on the ability of America’s commercial satellite companies to compete,” says Clayton Mowry, executive director of the Satellite Industry Assn., in a statement he is scheduled to deliver to the congressional delegation.
“Nothing less than our national security is at stake, as the Pentagon is increasingly reliant on U.S. commercial satellites for its global communications needs.”
