European R&D in the satellite communication user Earth segment

Space Policy 1994 10 (4) 290-306

European R&D in the satellite communication user Earth segment

Ahmed Bounfour

This paper refers to a study (specifically to its chapter 7) 1 carried out by Euro- consult for ESA on the key characteristics of European R&D in the satellite communications user Earth segment. The study was initiated by the Working Group on Satellite Communications Policy 2 of the Joint Board on Com- munications Satellite Programmes (JCB), which was established by the Director General of ESA in July 1990 to contribute to the European agency's response to the EC Green Paper. The working group specifically expresses the European space communications industry's point of view.

Client Studies Manager, EUROCONSULT, 71, Bd Richard Lenoir 75011 PARIS, France

The author warmly thanks ESA for permis- sion to publish this paper.

1The European R&D programmes in the Satellite Communications User Earth Seg- ment (ESA contract number 9952/NL/ MXD). This study has been carried out within Euroconsult by the following team: Marc Giget: scientific director; Ahmed Bounfour: definition of the study, telecom operators survey, overall analysis and conclusions; Ioannis Anastasiou: industry survey and conclusions; Jean-Pierre Cahier: ESA and EC R&D programmes assessment and conclusions. ESA study managers: Pierre Bartholome, ESA Brussels Office, Rapporteur of the Working Group on the Satellite Communications Policy; Thierry Eltges: Business Analyst, Tele- communications Missions & Systems De- partment, ESTEC. Final Report of the study could obtain from ESTEC (from Mr ELTGES), P.O. Box 299 NL, 2200 AG Noordwijk ZH, The Netherlands. 2Task no 2 of the terms of reference of the Working group.

Judging by preliminary surveys carried out by ESA executives on behalf of the working group, there appears to be a need to define a coherent European approach to R&D in the field of space communications. This is based on two observations. On the one hand, ESA's activities in satellite communications are very weak (about ECU 244 million, or less than 10 per cent of ESA's total budget for 1991 of which only half is related to commercial applications, with the remainder mostly concerning DRS), considering the economic stakes, and are limited to space segment technology. On the other hand, National Telecom Operators (NTOs) are orienting the bulk of their financing effort toward developing advanced technologies for terrestrial means. Hence, the existence of an 'R&D vacuum', specifically for the Earth segment, which is not now coverered by ESA or by any other European institution.

Yet the economic and industrial issues of the user Earth segment are of great importance to Europe, compared with those of the space segment. What is at stake is already important and could be considerable in the medium- and long-term future: mobile hand-held equipment and services; business communication equipment and services; digital TV services and H D T V terminals. There is potential for a vast increase in the needs for these products and services, and it is crucial to know if the European satellite telecom industry is prepared, specifically by considering its R&D needs, and also how these needs are covered by existing European programmes.

Objectives of the study ESA has assigned three objectives to this study:

• to review existing European R&D programmes in the satellite communications user Earth segment, in terms of objectives and areas;

• to assess their relevance in relation to the basic needs of key players (mainly the space communication industry);

• to suggest ways of distributing the tasks among the different R&D organisations (in particular ESA and the CEC).

290 0265-9646/94/040290-17 © 1994 Butterworth-Heinemann Ltd

aNational Telecom Operators. 4International Satellite Operators.

European R&D in the satellite communication user Earth segment: Ahmed Bounfour

Methodology

The study was conducted on the basis of quantitative and qualitative information taken from three sources:

• ESA R&D programme managers (ASTP, PSDE, Diana, Apollo and Prodat programmes).

• European Community programme managers, as well as public information available on these programmes.

• Interviews with the European space communications industry, national space agencies, NTOs, 3 ISOs, 4 software houses and R&D centres, on the basis of detailed questionnaires, specifically designed for this purpose by Euroconsult.

This study takes a 'bottom-up' approach, gradually presenting the various factors above, building up evidence on the European situation and steadily drawing conclusions by analysing these factors.

Figure 1 presents the areas of R&D covered by the present study.

Key characteristics of the European R&D effort in the satellite communications user Earth segment

Volume and modalities of financing

The European R&D effort in the satellite communications user Earth segment will be examined hereafter at two levels: the nature of major contribution, the nature of dominant applications.

Industry self-financing and ESA financing contribute to more than 53% of the total European R&D effort The European R&D consolidated effort for the satellite communications user Earth segment is situated at around ECU 94.6 million (average annual value 1990, 1991, 1992). The breakdown of total R&D effort shows that, at the European level, self-financing of the industry and ESA financing constitute the first two main sources of R&D spending. They total 53% of the consolidated effort (31% and 22.3% respectively). NTOs financing and European cooperative programmes financing constitute the third and fourth sources contributing 16.4% and 13.5% respectively.

Among the total funding, public funding (excluding NTOs) - that is funding from ESA, European cooperative programmes and National space agencies- constitutes 41% of total European R&D effort.

* including financing from national telecom admi- nistrations.

Table 1. Breakdown of European R&D effort in the satellite communications user Earth segment, average annual value, 1990, 1991, 1992.

R&D effort (ECU million) Share (%)

European industry self-financing 29.3 31.0 ESA financing 21.1 22.3 NTOs* 15.5 16.4 European cooperative programmes 12.8 13.5 R&D centres self-financing 6.2 6.5 Financing by clients within contracts 4.3 4.5 National space agencies financing 4.5 4.8 Software houses self-financing 0.9 1.0

Total financing 94.6 100

SPACE POLICY November 1994 291


Applications and services

User requirement studies

• Economics of networks • Service characterisation • Identification of usages • User acceptance

VSATs network applications

• applications for data communication, office automation, teleconference

Mobile services

• Voice mobile services • Broadband mobile services • Data/messages

Quality image and sound

transmission

• HDTV broadcasting • Interactive TV • Digital Audio Broadcasting • Data Broadcasting

Application software

• Targeted applications • Packaged software • Software development platforms • Value-added services

Application protocols

• protocols for specific applications • X400, FTAM, Te le fax . . . through

satellite • link to proprietary application

architectures ( IBM-SAA.. . )

Application experiments

• demonstrators for fixed, mobile and broadcasting services

• experimental applications • satellite capacity for pilot projects • protocol validation

User equipment and local communication resources

Local devices

• Terminals for mobile services

• Terminals for fixed services

• Handheld devices • Wireless or inside

equipments • Personal communication

Equipment management

• Groundstation monitoring • Local security • Redundancy management • Fault tolerant systems

Networks

Network control

• Network management • Service quality/security • Satellite/terrestrial

network diversity management

• Hub sharing • Hubs for fixed services

network infrastructure

Specific network

infrastructures

• For fixed services • For mobile services • Satellite/terrestrial

network diversity management

• Mobile communication nodes

• Terrestrial impact of LEO satcom

Baseband equipment

• Modems, modem-codec interface

• Modulation and coding • Compression • On-board switching

terrestrial impact • Signal processing • Particular assembled

devices (for tuning, scrambling, c iphering.. . )

Interface to local user

network

• N- or B-ISDN interfaces • LAN communication

servers • Communication front-end

processors • Internet (LAN to LAN)

communications • Interface to PABX • Interface to CATV

distribution

Interface with terrestrial

means

• X 25, frame replay, PSTN. . . relation

• N-ISDN link • IBC/B-ISDN link • Linkto proprietary

architectures ( IBM-SNA.. . )

Protocols

• OSI level 1 to 6 protocols taking in account the specificity of satellite transmission

• Functional design • Protocol validation

RF equipment

• Amplifiers, converters • RF terminals • Signal processing • BEn performance

Antennas

• Flat antennas • Automated pursuit • Network antennas • Improvements at source

level • Mechanics and mobility

Satellite access techniques

• TDMA • FDMA • CDMA and time reference

problems

Simulation software

• Propagation simulation • Traffic flow analysis • Simulation methodology • Protocols simulation

Generic technologies

VLSI ] MMIC

Figure 1. R & D a r e a s f o r t h e s a t e l l i t e c o m m u n i c a t i o n s u s e r E a r t h s e g m e n t .

Source: Euroconsul t , 1992.

5Other than those of NTOs.

R&D of NTOs and R& D centres 5 is dominantly self-financed NTOs and the three R&D centres considered (DLR, IRT and VTT) are predominantly self-financed (75.6% and 81.5% of their total funding respectively). This situation is natural as these organisations benefit

292 SPACE POLICY November 1994


Table 2. Sources of financing of the European organisations carrying out R&D in the satell i te communications user Earth segment.

Self-financing ESA NTOs/National Tel. Adm. European coop. programs National space agencies Other (clients)

Total

Total R&D effort (ECU million)

Number of organisations having R&D activity

Average annual R&D budget (ECU million)

European R&D Software industry % NTOs % centres % houses %

46 75.6 81.5 46.0 19 5.7 4.7 41.0 13 14.9 8 1.5 1.3 2.1 7 2.3 12.5 7.8 7 3.1

100.0 100.0 100.0 100.0

61.4 17.2 7.6 2.0

15 8 3 5

4.1 2.1 2.5 0.4

from autonomous budgets. Pan-European financing (ESA, European cooperative programmes financing) for these two players is then marginal.

Software houses, on the other hand, are more dependent on external financing (mainly ESA financing). But their total effort is marginal (ECU 1.6 million per year, on average, for the last three years).

The European industry funds itself at an intermediate situation. If self-financing constitutes a major share of its R&D spending, its members also depend, to different degrees, on external sources (in particular ESA for 19% of its effort).

Figure 2 illustrates clearly the flow of financing between organisations supporting R&D and organisations in charge of conducting it. This

Europ~n ~ w

N a ~ t

tnd~W s~ .r, mnc~,g

FINANCING SOURCES OF R&D Average ~mnual value, 1990-1991.1992, ECU MiUion

ESA 21.1

NTOs

15,5

The European satellite

communications industry 5 29.3

[]

REALISATION OF R&D Average annual value, 1990-1g~1-1992, ECU Million

ESA 21.1

7.6~ 1.9

I I The European s~tcom

industry 61.4

12..8

(1) RACE. ESPRff and COST p m ~ (2)- Tbb arnounl co*¢e¢~ * x ~ l y the R&D rmandng r,.:eived by the Eutspean companies (3)-R&D =SPpodM by dlem ~ IM I rmw~ d speda¢ ~acls

( 6 ) - c u ~ Rt, D b u ~ d vTr, m=~l DL~ (7)- R&D actkilb~ of software housl~ b Ihe salelS~ conwllunicalJons use¢ EmI~ segn~ am vm'y mmg~al. A ~ 15 ~ m ~ e ~ , i ~ g ~ ~ ~ , on~ throe companies dedared to cany o~ sore. p,&D,nold>ly wilh ESA suppo¢

i NTOs 17.2

Total R&D spending of Org~misations c,~ymg c~t R&D adivities

[ ~ Total R&D spending o~ fmandOrgar~ ~,D actk, illes

th~ suppod, o~side lh* salcom indus~y (univ*mi~s, public Ins,tmions, smal compankJs, ~ industries)

Euroconsult

F igure 2. The European R&D in the satellite communications user Earth segment: financing sources and realisation.

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6For instance, the following companies or universities who have benefited from ESA support, are not covered by the survey: Alcatel STK, Tandberg, Normarc (Nor- way); AlcateI-Espazio, PESA, Sema (Spain), Newtec, Cogemo, UCL (Belgium), MPR, Teltech, Spar (Canada), Touche Ross, Esys, CML-ERA (UK), CIR (Switzer- land), STI, Inisel, Siemens-Italy (Italy), Technical University of Graz, University of Salzburg (Austria).


graphic shows clearly that industry is at the heart of the process of financing and carrying out of R&D in Europe. It benefits from financial support coming from ESA, NTOs and to a lesser extent from European cooperative programmes.

This figure shows that the volume of R&D funding as identified does not correspond exactly to the R&D carried out during the period considered by the organisations interviewed (companies, R&D centres and software houses).

With regard to ESA, the difference that appears between ESA's R&D budgets and fundings declared mainly by the industry is due to a set of factors:

• all ESA partners are not covered by the survey (in particular small companies, universities R&D laboratories and companies not willing to contribute to the study); 6

• ESA data concern 'commitment authority' whereas companies data concern effective payment;

• a substantial part of ESA projects considered concern the year 1992 (and naturally payments for these projects are not yet transferred to contractors; on the other hand, some of these projects are probably carried out in 1993, even if their commitment took place in 1992).

These remarks are also of value at the level of NTOs and European cooperative programmes. Nevertheless, with regard to NTOs' fundings, the major difference between the amounts declared by the industry and those declared by - or estimated for - the operators concerns R&D projects carried out by the operators themselves. One leading telecom operator for instance does not have any technical cooperation with the industry in the fields considered.

Table 3 details R&D self-funding for all the organisations present in the satellite communications user Earth segment in Europe.

The European industry has a leading role among the organisations carrying out R&D Almost all the industrial companies interviewed have an R&D activity in the satellite communications user Earth segment. Nevertheless, their total spending is nearly concentrated on a few of them, as four of them - out of 15 - are responsible for 57% of the total R&D effort.

With few exceptions, telecom operators show a rather weak interest in the satellite communications user Earth segment. Emerging private operators do not have any R&D activity in the fields considered nor do they plan to have such an activity in the near future. The limited size of most of them and the fact that their present main concern is to ensure their survival, explain in great part their lack of interest in carrying out R&D or supporting it.

One of the leading NTOs in Europe is in the same situation, without any R&D present or planned. It relies only on R&D projects carried out within ISO (an activity which is small in itself). Among the major European countries, only French, UK and Italian NTOs have a - relatively - substantial R&D effort in the satellite communications user Earth segment (but their level of R&D is marginal compared to their total R&D spending in telecommunications). One should notice the relatively active role of Italian telecom operators, as the two organisations considered contribute to 28.7% of the total European NTOs R&D spending.



The low interest of European NTOs in satellite communications user Earth segment R&D appears very clearly when we compare their effort to that of a leading non-European telecom operator. Indeed, in Europe the average spending per NTO is around ECU 2 million, whereas, in comparison, this worldwide leading operator's spending is more than 5 times higher (ECU 10 million, and this amount does not cover all of its activities, specifically in mobile applications and networks).

If the three R&D centres considered (DLR, VTT and IRT) appear to be more active in the areas considered than NTOs, this is mainly due to DLR, which contributes to 80% of the total spending.

Software houses are aware of the necessity for them to adopt an R&D activity, but they are marginally present in the fields considered. Among 15 large software houses interviewed, only four have declared to have some R&D in the satellite communications user Earth segment, basically externally financed.

We can thus see that the players considered are involved differently in R&D for the satellite communications user Earth segment. The average R&D budget by type of organisation clearly shows it (ECU million: 4.1, 2.5, 2.1 and 0.4 for the European industry, R&D centres, NTOs and software houses respectively). These various degrees of R&D involvement will be globally confirmed when we examine R&D priorities.

Fields and status of R&D

Predominance of user equipment and local communications resources Overall, the breakdown of total R&D effort in Europe shows the predominance of 'user equipment and local communications resources' (with 38% of the total). This is due to the predominance of ESA and the European space industry in the total R&D financing in Europe. As has been underlined earlier, applications and networks have, approximate- ly, the same contribution (30% and 25% respectively).

Compared to the overall R&D funding structure in Europe, slight differences appear if we consider the structure of spending by nature of organisation. These differences are due to two factors: (a) the technical and financial relationships between sources of financing and organisations benefiting from it (e.g. the industry and ESA), and (b) the nature of organisations' activities (networks are more important for NTOs than for the industry).

As a financing organisation, ESA, due to its position as hardware supporter, finances 'user equipment & local communications resources' (48.3% of its total spending), more than all other financing organisations. In contrast to this, EC cooperative programmes, appear more application oriented (41.4% of their total effort).

NTOs have a quite balanced structure, with a predominance of networks (36.6%), but with other areas of R&D being also important. It shows clearly that NTOs R&D activities are in fact autonomous. Major NTOs are defining and implementing their R&D projects, without taking into account what is developed or could be developed elsewhere. Moreover, these activities are basically conducted on a national basis.

Naturally, the industry structure of R&D activities is nearest to the ESA structure, as interviewed companies are basically hardware sup- pliers. Therefore, 'user equipment and local communications resources' contribute to 40% of the total industry spending. The other two main areas 'applications' and 'networks' contribute respectively 26% and 23.5% to the total industry R&D spending.



The effort of the R&D centres considered is primarily dedicated to applications (55.6%) and networks (28.3%). This is due to the nature of their basic activity, with the dominance of 'quality image and sound transmission' in applications.

With regards to software houses, their total R&D effort - marginal - is basically dedicated to applications (mobiles services, VSAT networks and user requirement studies).

Overall, NTOs are more research than development oriented, compared to the industry Programmes are classified as Research if they are not directly oriented towards the supply of a specific product or service; they are classified as Development, if they concern a preoperational or pre-industrial phase, directly implying the supply of a direct product or service.

For the industry, most R&D activities concern development, with some fields been concerned by projects of a mixed nature. This is natural, as the role of these organisations is primarily to develop products designed for the marketplace.

In comparison, NTOs activities consist of carrying out Research as well as Development projects, specifically for applications and networks. This shows the autonomous nature of NTOs' R&D activities in Europe. Most of them are present in applications, networks, user equipment and local communications resources fields, as well as, in some cases, generic technologies (MMIC, VLSI).

The profile of R&D activities of other research organisations considered (DLR, IRT and VTT) appear to be also of a mixed nature: Research or Development oriented.

A non-optimised technical cooperation between organisations financing R & D and organisations carrying out R& D Technical cooperation is considered here in very simple terms: the objective is to identify 'who is working with whom'. Overall, as far as organisations in charge of R&D are concerned, it appears that ESA is the first or second partner for all of them.

In terms of 'intensity' of cooperation, it should be noticed that basically there are two types of strong technical relationships in Europe: between ESA and the satellite communications industry on the one hand, and between the latter and NTOs on the other. All the other relationships appear to be average to poor in terms of intensity. This attests to the non-existence of a coherent and coordinated strategy between the main players in Europe.

In fact, with regards to the realisation of R&D in the satellite communications user Earth segment in Europe, it appears that three types of organisations are really involved: ESA, NTOs and the Euro- pean space industry. In fact two types of R&D (co)exist: (a) one supported by ESA at the pan-European level (but not all the key companies are involved), and (b) one supported by leading national telecom operators at the national level, with some overlapping with activities carried out within the European cooperative programmes. There is basically - with few exceptions - no interlink between the two types of R&D. Inconsistencies in R&D approaches and insufficient coordination should not be neglected.

The insufficient R&D coordination at the level of financing organisations is an important issue to be recognised. In fact, coordination



between ESA and European cooperative programmes (RACE, Eureka, Esprit, Cost) is very poor, as is that between ESA and NTOs (except in specific cases such as Telespazio, or Telefonica Systema), or between NTOs and European cooperative programmes. Nor does this technical coordination exist between the NTOs and national space agencies.

This clearly means that the R&D effort provided for the satellite communications user Earth segment in Europe is not really optimised, whatever its size. As we will see later, it is necessary to coordinate efforts in terms of objectives and contents of R&D programmes, and establish adequate mechanisms for this.

Key characteristics of R&D public funding in Europe

Insufficient presence in applications In 1992, the share of pan-European funding (ESA and cooperative programmes) for 'applications' amounted to some ECU 10 million a year. Not only ESA (ECU 4.5 million), but also the Eureka (ECU 1.2 million) and RACE (ECU 3.7 million) programmes have recently become present in the field, which is the focal point for technology transfers to users. It is also the focal point for validation and commen- surability between technologies developed and actual markets.

Generally speaking, however, projects undertaken are too small in size. The industrial transfer of the Prodat programme, which is repre- sentative of this 'applications' area, owes some of its problems to the smallness of the project's size, the lack of influential industrial partners, and lack of fitness to market needs (all of these aspects being inter- related). The few projects started up under Eureka (which is otherwise a highly suitable framework for transfers toward industry and markets) hardly mobilises public-sector partners.

This ECU 10 million presence in the applications field is weak, especially in view of the variety of fields where a helping hand could be given to semi-industrial applications (eg for fixed or mobile services, voice, sound, image and data). It must be seen as clearly inadequate, considering the existence of critical thresholds that are necessary for the following developments to take place:

• for testing, demonstration or semi-industrial applications to become technically viable and convincing;

• for European users to be made sufficiently aware, at the right time, of the possibilities of advanced applications, with full-scale tests and demonstrations conducted in a sufficient number of fields;

• for the value-added services industry to get its bearings.

Public-sector investors should give priority to stimulate the applications R&D sector, thus guaranteeing openings for other R&D efforts in technology. This entails augmenting and coordinating efforts already under way, starting up one or more large-scale projects, and devoting more thought to strategy.

In particular, the 'user requirements studies' theme is insufficiently treated (ECU 1 million), even by ESA (ECU 0.5 million) considering the importance of the issue. Clearly, sweeping changes are going to affect medium- and long-term uses of satellite communications and upheavals can already be expected in the near future. Overall, space will come closer to users and become easier to access with lighter-weight, lower-cost terminals, as part of a revolution that might be compared to the one which microprocessors brought about in computer techniques



and uses. At the same time, the integration of services on broadband networks, and the prospects for mixed satellite/terrestrial networks for communications, will change the shape of telecommunications. Yet fundamentally, little is known about the nature of these changes or of the social, economic and professional acceptance of expected innova- tions. For lack of visibility, there is a risk of investing in communications payloads (such as those intended for certain types of mobile or fixed communications) that do not correspond to, or that run counter to, market needs.

Look ing f o r a strategy Public organisations involved - or that could be involved - in R&D projects do not show great coherence. The lack of affirmation of clear research guidelines is a common feature of EC and ESA programmes. Consequently, the public-sector R&D effort is being dispersed over too many niches and little expertise is being acquired in any of them. The notable exception to this rule is the RA CE programme, which strongly links EC investment to a unique unifying concept and goal, though unfortunately, placing insufficient emphasis on the satellite.

An analysis of the public effort shows that the dearth of funding and the lack of clear drive go hand in hand with a broad dispersion over all fields. The few areas of specialisation or complementarity that appear between the programmes under consideration are fortuitous in most cases. Public-sector investment by EC member states and institutions seems to be torn between two tendencies:

• a relatively incoherent approach, scattering or accompanying certain industrial efforts with varying success, which is further accentuated by European industry's inability to keep up in certain major markets of the sector;

• the need to forge an autonomous European drive in this sector and a strategy aimed at orienting and stimulating R&D. This presupposes a better understanding of industry's orientations and needs, as well as the reconciliation and hierarchisation of several guidelines or guiding principles as a function of the resources marshalled. Particular attention must be devoted to the following points:

- improved understanding, anticipation, orientation, and stimulation of users' needs;

- R&D support to the European equipment industry; - R&D support to the European services industry; - R&D support to European telecommunications operators; - the search, among the various players, for a mutually acceptable

assessment of the balance between terrestrial and satellite-based communications;

- great coherence between Space and Earth segment R&D.

Judging by the quantitative and qualitative profile of the projects undertaken, public-sector funding for European Earth segment R&D appears to have no overall strategy for surmounting these contradic- tions. ESA, which is the biggest contributor of public-sector funds, and which is at present in applications as well as in technologies, is in a position to propose the development of an overall strategy. (Naturally, this does not mean that ESA must take repsonsibility for the entire strategy in terms of projects and project financing. Other players, such as the member-states and the EC must assume their share of responsibil-


Tab

le 4

. R

&D

pri

ori

ties

as

ind

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ed b

y th

e o

rgan

iaat

ion

s ca

rryi

ng

ou

t R

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rop

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sp

ace

ind

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ry

pri

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b

1 m

obile

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2 ne

twor

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llite

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cess

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chni

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4 m

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an

d po

rtab

le

devi

ces

5 ba

seba

nd

equi

pmen

t 6

VS

AT

ne

twor

ks

7 m

obile

sp

ecifi

c ne

twor

k

8 an

tenn

as

9 in

terf

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to l

ocal

us

er n

etw

orks

IO

MM

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11 a

pplic

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n ex

perim

ents

12

use

r re

quire

men

t st

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s

NT

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prl

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1 in

terf

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to l

ocal

us

er

neO

Nor

k

2 ne

twor

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obile

se

rvic

es

3 ap

plic

atio

n pr

otoc

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4 V

SA

T

netw

orks

5

mob

ile

serv

ices

6

appl

icat

ion

expe

rimen

t

7 sa

telli

te

acce

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tech

niqu

es

IS0

pri

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1 m

obile

se

rvic

es

2 ap

plic

atio

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fhva

re

3 qu

ality

im

age

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4

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t.

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VS

AT

ne

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6 m

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se

rvic

es

7 us

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requ

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stud

ies

8 ne

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9 m

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face

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cal

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ne

hvor

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6 g?

3 E

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1 qu

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a T

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the

ba

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of t

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eds

as d

ecla

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by t

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aver

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annu

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valu

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93-7

.

z b

Prio

ritie

s (f

ive

max

imum

pe

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as i

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by

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riorit

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(fiv

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ity, and other cooperative arrangements, such as Eureka and RACE, are well suited to this purpose.)

A proposing role would virtually oblige ESA and all public-sector partners to downplay partial or specialised viewpoints on the Earth segment (such as ESA's 'space' viewpoint stressing communications satellites), and instead, to tackle R&D in a more all-encompassing way:

• sticking as closely as possible to foreseeable market needs (stressing applications-oriented R&D); and

• considering technological R&D (user equipment and networks), as a function of thematic gaps pointed out by industrial players.

Necessity to optimise R & D funding and to have a coherent approach The size of R&D spending, specifically at a pan-European level is one aspect of the story. The way in which R&D public funding is spent is another important aspect, not solely for ESA, but also for European cooperative programmes and other sources of public funding.

As far as ESA's R&D effort is concerned, the efficiency of its support is still to be measured, that is how it is 'valorised' by companies into the marketplace (the concept 'valorisation' is taken here to mean an enhancement of the economic value of R&D activities in the marketplace). It should be meaningful, for instance, to determine the ratio R&D costs/related sales for the main projects financed, as some national organisations have calculated it for many years.

The process by which European companies are valorising their R&D effort in the marketplace is in fact still a 'black box'; its analysis should lead to the identification of the success/failure factors of R&D carried out within companies benefiting from ESA support, but also in other contexts.

Beyond this analysis, return of information to public funding organisations on the commercial success of R&D programmes could be made more systematic, as is already the case in most R&D support organisations, in the USA, Japan and Germany.

The issue of R&D efficiency raises the question of partners: are the companies selected capable of going into the marketplace and 'valorising' R&D public fundings, or are they solely established companies, dedicated to benefiting from captive public fundings?

It also raises the question of the optimum number of participating companies in selected projects. In some projects, the number of participants appear high, when compared to the size of financing. One wonders whether R&D budgets are spent instead on project management and meetings, resources for tackling the real content of projects being insufficient.

Future priorities and financing them

Organisations carrying out R&D in Europe - industry, NTOs, software houses and R&D centres - have been asked to define their priorities for the future (maximum five priorities per organisation), for which an urgent effort should be provided for the years 1993-1997. These organisations have also been asked to define the amount of financing necessary at their level.

Mobiles are unanimously quoted as number I priority R&D priorities are hierarchised on the basis of the size of their financial needs. The number of priorities indicated are notably dependent upon



the number of interviewed organisations. Therefore, they are more numerous for telecom industry than for NTOs or R&D centres (Table 4).

On the other hand, priorities are rather consistent with the basic activity of organisations. For instance, satellite access techniques appear to be priority number 3 for the industry, whereas it is number 7 for NTOs. Baseband equipment is a relatively key priority for the industry (no 4) and R&D centres, whereas it is not quoted by NTOs. The same remark could be applied to antennas. For software houses, priorities are mainly in applications.

Beyond these differences, some communality does exist between R&D priorities.

(a) mobile applications are generally considered as a key priority of R&D for the future. Three particular fields are given specific focus: mobile services, network for mobile services, and mobile and portable devices.

(b) other fields of applications appear to be important priorities, specifically: • VSAT networks, notably by the industry and NTOs; • application protocols; • applications software; • applications experiment; • quality image and sound transmission; • user requirement studies.

(c) fields related to networks, eg: • network control (the second priority for the industry); • interface with terrestrial means (first priority for NTOs) • satellite access techniques

Recommended activities are basically 'Development' oriented The dominant status for R&D priorities is development for almost all the organisations interviewed. This contrasts with the present situation where there is a coexistence of research and development. It means that market constraints will become the leading forces for these organisations during the years ahead.

Mobile services, mobile and portable devices and network control are among the main priorities Data, relating to priorities as indicated by organisations carrying out R&D, cannot rigorously be compared to their present spendings, as each of those interviewed has been asked to focus on five priorities, as a maximum, and their related financial needs for the period 1993-7. Data provided do not prejudge their means of financing, in particular concerning the share that will be supported by the company itself. The quantitative information provided corresponds to respondents' own future needs, and not to the total amount of financing needed to bring Europe up to a high level of worldwide competitiveness.

As indicated earlier, the nature (and number) of priorities, as well as the volume of suggested financing depend upon the nature of respondents and their multiplicity.

By taking into account these preliminary remarks, some conclusions can be formulated relating to the needs of financing as expressed by type of organisation. First, important differences appear in the volume of financing.

The industry suggests a combined annual budget of ECU 103 million



per year, in several selected areas, compared to its total present-day budget of ECU 59.5 million covering all areas combined. The breakdown by area of R&D is the following: user equipment and local communications resources (34.3%), networks (32.3%), applications (22.1% ) and generic technologies (10.8%). As already stressed, mobiles appear to be the highest priority for the future, when taking them into account at all three levels together: applications, networks and user equipment. The combined annual budget which would be needed amounts to around ECU 28 million per year.

For NTOs, the total amount of financing considered by the five telecom operators is less important: ECU 12.3 million per year (compared to ECU 17.2 million for all areas of R&D at the present time). This attests again to the preference of these organisations to terrestrial means, rather than to satellite communications services. Some leading NTOs (as indicated earlier), are basically relying on R&D carried out elsewhere (within ISOs, namely an R&D which is very limited in size). Some other small NTOs in Europe do not consider R&D in satellite communications Earth segment as a priority.

Emerging private satellite operators, who could be interested in developing such services, are very small organisations relying exclusively on existing solutions, equipment and systems. Their main concern for the future is to ensure their survival in an environment dominated by NTOs. Thus, the limited size of their financial resources do not allow them to carry out any R&D.

The total amount considered as necessary by software houses at their level appears very high, compared to their present funding (ECU 1.7 million). Furthermore, these needs are expressed by only three organisations. These very significant quantitative estimates suggest that these organisations are aware of the necessity for them to develop their specific products and services, and progressively to rely less and less on a project approach instead.

Comparing future R&D priorities to their present R&D efforts gives some insight into the fields not sufficiently covered today. As indicated earlier, this comparison should not be considered in rigorous terms, as future priorities are limited to five items maximum; therefore, they do not constitute projections of future spendings for all the areas and fields considered. On the other hand the responding organisations are not exactly the same.

Nevertheless, some R&D fields in which future efforts should be reinforced appear to be:

• For applications: mobile services appear to be a clear future priority specifically for the industry and NTOs (as well as user requirement studies). For R&D centres on the other hand, application fields are not considered as a priority.

• For networks: network control appears as a key priority for the industry. Mobile specific networks appear as a field to be reinforced for NTOs as well as for the industry.

• For user equipment and local communicat ions resources: mobile and portable devices are considered as a key field which is not sufficiently covered, while NTOs are exclusively focusing on an interface to local user networks.

E S A is expected to play a leading role among other players

If we exclude some NTOs, almost all players expect ESA to play a



leading role. This role goes beyond the simple technical and funding support to R&D programmes. It consists more importantly of helping all the players - and namely the European space industry - to identify opportunities and to define and implement their overall strategies. These expectations result from the existence not solely of an 'R&D vacuum' but more importantly of a 'strategic vacuum' needing to be filled.

Indeed, Satcom companies interviewed would unanimously like ESA to take the necessary steps to help them tackle outside competition. In this framework, it is particularly significant to notice that many players expect ESA to provide the information needed for planning and decision-making (eg market surveys, economic and prospective analy- ses). These expectations raise the issue of the commercial maturity of these players, that is, their capacity to develop 'autonomously' in the marketplace, as well as their level of knowledge of communications markets.

The same expectations are expressed by software houses and research centres, notably to bring technology into a pre-development phase. ESA is expected to intensify its cooperation with other players.

But is this ESA's role? We would suggest that this is rather the role of these players themselves, as they are nearer to the marketplace and capable of identifying opportunities and therefore of supplying products and services that are adapted to market's needs. Naturally, in so doing, they would need financial and, possibly, technical support from ESA. However, ESA's role is to support active players in their effort to be more competitive, and not to substitute these players. All these expectations raise the question of the European satellite communications Earth segment industry's optimal size, particularly regarding its capacity for going to the marketplace and valorising R&D, for which it benefits from public support.

This unanimity, however, does not appear in NTOs' comments and expectations. As has been emphasised earlier, NTOs expectations could be split into two groups: the first insists on the necessity for ESA to concentrate its activities on space segment technology; its Earth segment activities should consist mainly of developing equipment and subsystems interfacing directly with satellites. In networks for instance, NTOs expressing this option do not expect any action from ESA, as this is not its 'job' as one of them said. This option is expressed by both small and large NTOs.

The second group, on the other hand, which mainly includes NTOs who usually work with ESA, expressed views similar to that of the industry. As the operators activities are basically dedicated to satellite communications, it is then 'natural' that they expect strong support from ESA.

High economic stakes Earth segment is an important field for valorising R&D efforts in Europe. It is at this level that interfaces with the marketplace are organised in order to detect market opportunities ('market pull'). Earth segment has been particularly neglected, though it represents a large economic value: ECU 2.2 billion in 1990 worldwide, compared with ECU 1 billion for the space segment.

In Europe, television and mobiles are two major market segments that should be particularly considered: the first, because it represents



the main part of the European market, and will still be dominant in the medium term; the second, due to the high economic and technological stakes related to the advent of systems with worldwide coverage (in particular satellite-based Personal Communications Networks Ser- vices).

It is then important for the European industry to be competitive in the satellite communications user Earth segment markets and thus to alleviate possible technological bottlenecks, notably by using public support.

Key technological developments are opening possibilities for integrating space solutions in telecommunications

Alongside the economics of the issue, thinking on the future of all aspects of the Earth segment (equipment, telecommunications and applications) must not ignore the basic technological changes set to occur over the next ten years.

Key space segment technologies, such as on-board processing and low-orbit satellites, are far from being the primary determining factors. In the final analysis, options to consider for the space segment will depend on weightier technological developments that are occurring on the ground, in direct contact with the markets. Two major developments are now becoming clear.

Integration of services: the key issue of the decade for telecommunications technologies The integration of services is dramatically altering the ground rules for the main categories of services studied here (fixed services, mobiles and broadcasting). The first wave, the integration of narrowband ISDN services, is now being transferred to applications (1990-2000). The second phase - broadband ISDN services - should be transferred to applications between the years 1995 and 2005.

Europe is committing considerable resources in an effort to position itself forcefully and credibly in this key technological sector. It enjoys a slight advance on the Integrated Broadband Communications Network (IBC) concept, which automatically integrates mobile communications and the communication of moving images.

European R&D in this field seems to be well coordinated in terms of equipment, networks and applications, thanks mainly to the RACE programme, which is only one part of the efforts undertaken by governments and telecommunications carriers. At first glance, the integration of services would involve a budget of some ECU 1 billion a year for R&D, and probably more, considering the National Telecom Operators' investments needed for terrestrial network infrastructure in order to support a widespread transfer of this technological jump.

Television is the main vector by which satellites can reinforce their penetration in the field of terrestrial communications The TV technologies of tomorrow (HDTV, compression, digitalisation, interactive capability, reception from several satellites using a single antenna) will become a more integral part of telecommunications technologies.

The combination of this tendency and the integration of services should set the stage for the emergence of new services, and thus new markets, among individual and corporate users (such as mobile multimedia terminals).


Fin economics, the 'fleet effect' (effet de parc) refers to the impact of the introduc- tion of new technologies on existing fleets, here on DTH stations fleet. It could be necessary to replace the existing fleet rapidly, as the new technology makes it obsolescent, or, a contrario, the gener- alisation of the new technology may be progressive, as the replacement of the existing fleet takes a long time.


R&D activities towards the supply of multimedia services are particularly stressed by key players both inside and outside Europe, as priorities for their development, notably for the supply of high quality video, sound and data broadcasting services.

Therefore, thematic priorities recommended hereafter should be considered by taking into account three essential fields in order to gain a complete picture of R&D in communications Earth segment. These fields are:

• television - the dominant application - and its related equipment (TVRO);

• multiservices integration, in which it is necessary to include the activities of the National Telecom Operators, requiring a deepening of the content of certain European projects (RACE);

• digital signal compression, as a major technological break from the Earth segment (notably the importance of its 'fleet effect'7).

Inadequacy o f R & D efforts, considering the economic and technological stakes

Efforts made by ESA and European programmes are inconsequential in view of the stakes at hand.

In comparison with the high economic stakes described above, actual expenditure is rather slim, at only ECU 94.6 million a year for all players involved, including industry's self-financing. Public-sector funding in this area does not exceed ECU 40 million a year, of which ECU 21 million is managed by ESA. The fact that funding is limited means that European R&D does not hold a position of strength in any of the twenty-odd fields considered. It also means that European R&D is hardly in a position to enter the 'virtuous circle' whereby R&D undertaken would enable the European space industry to establish itself in the market, especially as projects are generally small in size.

ESA devotes only a marginal share of its budget to the satellite communications user Earth segment (about 1% of the total), and that effort is divided among a host of fields and applications. Excluding the Prodat/Prosat mobiles field, which commands a budget of more than ECU 20 million over ten years, the smallness of the effort stems from the nature of the participating countries (importance of low-level contributors to ESA budgets). The countries least involved (France and Germany, in particular) are channelling most of their funds to terrestrial IBC and high definition TV. The optional nature of ESA's R&D programmes, and the rules of geographic return, neither facilitate the opti- misation of funds committed, nor promote the durability of efforts made.

NTOs' involvement is also very weak, compared to their investment in terrestrial means. Their overall spending is around ECU 17 million for eight organisations among the leaders in Europe, whereas, in comparison, one leading worldwide operator alone is spending approx- imately the same amount.

Software houses, as they are adopting specific project approach, do not carry out any R&D. Nevertheless, they are aware of the importance to them to have an R&D activity in the field considered (as the importance of the R&D needs for the years 1993-7 show).

Despite the loss of several positions in the Earth segment, the European satellite communications industry continues to invest substan- tially in the field: ECU 60 million a year, 46% of which comes from cash flow (essentially by four corporations).

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European R&D in the satellite communication user Earth segment

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