© MIT Engineering Systems Learning Center, 2003

MIT Industry Systems Study:MIT Industry Systems Study:

Communications Satellite ConstellationsCommunications Satellite Constellations

Prof. Olivier de Weck, Prof. Richard de NeufvilleProf. Olivier de Weck, Prof. Richard de NeufvilleDarren Chang, Mathieu ChaizeDarren Chang, Mathieu Chaize

Engineering Systems Learning Center (ESLC)Engineering Systems Learning Center (ESLC)Engineering Systems Division (ESD)Engineering Systems Division (ESD)

Space Systems Laboratory (SSL)Space Systems Laboratory (SSL)Massachusetts Institute of TechnologyMassachusetts Institute of Technology

Version 1.1 – released October 2003

Unit 1Unit 1““Technical Success and Economic Failure”Technical Success and Economic Failure”

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Outline

• Study Overview• Motivation• Unit 1

– Learning Objectives

– Technical and Business Case

– Iridium, Globalstar

– Technical Success and Economic Failure

• Critical Analysis• Readings• Stakeholder “Game”• Problem Set

gatewaysatellite

terminalconstellation

Low Earth Orbit (LEO)500-2000 km altitude

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Study Overview

Unit I. Technical Success and Economic FailureTechnical Success and Economic Failure Introduction to Aerospace and Telecommunications context. Explore potential

reasons for technical success and economic failure of Iridium and Globalstar

Unit II. Architectural Design Space ExplorationArchitectural Design Space Exploration Determine Pareto front architectures and trade-off between life cycle cost

(LCC) and system capacity. Computer simulation.

Unit III. Impact of Technology Infusion and Policy DecisionsImpact of Technology Infusion and Policy Decisions Quantitatively assess the impact of policy decisions and new technologies

(e.g. large deployable antennas and optical laser links) on system performance, capacity and cost. Simulation with technology/policy add-ons.

Module IV. Real Options and Staged DeploymentReal Options and Staged DeploymentReduce economic risks by deploying satellite constellations in a staged fashion. Embed flexibility into the system, allowing staged deployment and reconfiguration. Model demand uncertainty. Demonstrate value using a Real Options approach. Simulation.

Communications Satellite Constellations

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Motivation

• Iridium was a technical success but an economic failure:– 6 millions customers expected (1991)– Iridium had only 50 000 customers after 16 months of service (March 2000)

• The forecasts were wrong, primarily because they underestimated the market for terrestrial cellular telephones:

• Globalstar was deployed about a year later and also had to file for Chapter 11 protection

0

20

40

60

80

100

120

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Year

Mil

lio

ns

of

su

bs

cri

be

rs

US (forecast) US (actual)

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Motivation (II)

• Several questions need to be answered:– What went wrong?

– What could have been done to reduce risks?

– How would we architect these systems differently today?

• LEO constellations are complex engineering systems (many interconnected parts, technical and social complexity, high cost, long development time). – What are the architectural principles that could be gleaned?

• This study is principally focused on capacity planning, given uncertainty in future demand for LEO systems.– Are the results obtained applicable to other large capacity systems?

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Unit 1 – Learning Objectives

1. Explain history and basic technical principles

2. Quantify the business case and understand the underlying assumptions.

3. Summarize key technological and manufacturing innovations required to implement global communications satellite constellations in the late 1990s.

4. Understand the main reasons for economic failure of Iridium and Globalstar in their aerospace and telecommunications industry context.

5. Extract lessons learned for architecting and designing similar systems in the future.

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Technical Case

Choice of architecture/design drives system performance, cost, capacity and robustness.

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Business Case 101

,1

,1

1100

365 24 60

T T

ops ii

T

s f ii

kI C

CPFC L

Lifecycle cost

Number of billable minutes

Cost per function [$/min]Initial investment cost [$]Yearly interest rate [%]Yearly operations cost [$/y]Global instant capacity [#ch]Average load factor [0…1]Number of subscribersAverage user activity [min/y]Operational system life [y]

365 24 60min

1.0

u u

sf

N A

CL

CPFIkopsC

sC

fL

uNuA

1,200 [min/y]uA

TNumerical Example:

0.20 [$/min]CPF

3 [B$]I 5 [%]k 300 [M$/y]opsC

100,000 [#ch]sC 63 10uN 0.068fL

15 [y]T

But with 50,000uN

12.02 [$/min]CPF Non-competitive

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Traditional Lifecycle Approach

• Decide what kind of service should be offered• Conduct a market survey for this type of service• Derive a set of system requirements• Define an architecture for the overall system• Conduct preliminary design• Obtain regulatory (FCC) approval for the system• Conduct detailed design• Manufacture and launch the system• Operate and replenish the system as required• Retire once design life has expired

Time10-20 years

Incr

easi

ng

$ c

om

mit

men

t

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Existing Big LEO SystemsIridium Globalstar

Time of Launch 1997 – 1998 1998 – 1999

Number of Sats. 66 48

Constellation Formation polar Walker

Altitude (km) 780 1414

Sat. Mass (kg) 689 450

Transmitter Power (W) 400 380

Multiple Access Scheme Multi-frequency – Time Division Multiple

Access

Multi-frequency – Code Division Multiple

Access

Single Satellite CapacityGlobal Capacity Cs

1,100 duplex channels72,600 channels

2,500 duplex channels120,000 channels

Type of Service voice and data voice and data

Average Data Rate per Channel

4.8 kbps 2.4/4.8/9.6 kbps

Total System Cost $ 5.7 billion $ 3.3 billion

Current Status(2003)

Bankrupt but in operation

Bankrupt but in operation

Main Contractor Motorola Loral

IndividualIridium Satellite

IndividualGlobalstar Satellite

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Technical Successes

• Deployment and integration of large satellite constellations with 40-80 satellites– Iridium launches flawless, 72 satellites, 3 countries, 15 months

– 12 gateways in 11 countries

– Initial Operational Capability (IOC) in November 1998 (Iridium)

• First “assembly line” manufacturing of spacecraft– 28 day manufacturing cycle time (vs. 18 months) at Lockheed

– One new satellite every 4.5 days

– Extensive use of COTS parts and industrial practices

• Developed new cutting-edge technologies– Intersatellite links and in-space networking

– “lightweight” compact dual-mode user end terminals

– Phased array antennas, spot beam switching etc… etc …

– Over 1000 patents

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Business Failure

• Overestimated market potential• Problematic Market introductory period• Highly leveraged financing (debt)

Iridum customer number: prediction vs. reality

1000

10000

100000

1000000

10000000

Nov-98 Feb-99 May-99 Aug-99 Dec-99 Mar-00 Jun-00 Oct-00 Jan-01 Apr-01

Time

Cu

sto

mer

nu

mb

er

Expectation

Reality

Expectation

Actual

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Critical Analysis, Readings

• Why did this happen? – Superficial reasons

– Deeper root causes

• Who is to blame?• What could/should have been done differently?• What can we learn about architecting similar systems?

ReadingsReadings

• Unit 1 – Summary• Selected references and additional material• Specific web resources, e.g. www.iridium.com• Problem Set 1 • FCC Database of 35 system filings (Excel)

Critical AnalysisCritical Analysis

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Stakeholder “Game”

• Break the class up into stakeholder groups:– LEO communications satellite industry, e.g. “old” Iridium

– Potential Buyers

– Competing terrestrial cellular network provider

– U.S. Government (Federal Communications Commission)

– Foreign Government (with gateway)

– Subscriber Community (oil rig operators, shipping …)

– Launch Vehicle Industry

– Investors and creditor Institutions (…Banks)

– Radio Astronomy Community and other Bandwidth “Users”

• Read short description of your group• Negotiate post-bankruptcy recovery of Iridium (Dec. 2000)

– Discuss internally first – 10 min

– Send representatives to other groups/crosstalk – 5min

• Report out of each stakeholder group – 2min/group

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Conclusions – Unit 1

• The goal is not to rewrite the history of LEO constellations, but to learn from this “boom and bust” experience– Technology “push” can be dangerous

– Understand the true needs of the customer base

– Allow enough time for testing and fine tuning before going “live”

– Large delay between initial idea and operational deployment can “kill” your business plan

– Initial assumptions and “doing the right things”

• How could we architect similar systems in the future?– Upfront architecture analysis and synthesis

– Integrated Modeling, Simulation, Optimization

– Risk Reduction via Staged Deployment

– Shorten Development Time

– Embed flexibility to reconfigure the system as needed

– Real Options approach to decision making