With the growing demand for satellite services across government capabilities and commercial sectors such as telecommunications, agriculture, climate monitoring, and disaster response, efficiently leveraging satellite technology is more critical than ever. The decision to lease or own satellites is a pivotal consideration for businesses and nations alike, particularly as the use of satellites becomes increasingly essential for national interests and security.
We spoke to Sethu Saveda Suvanam, Founder and CEO of ReOrbit, a company at the forefront of designing next-generation Low Earth Orbit (LEO) and Geostationary Earth Orbit (GEO) small satellites. Sethu’s extensive experience in the space tech industry includes a PhD in aerospace engineering, postdoctoral research focused on materials for deep space exploration, and positions at the Japan Aerospace Exploration Agency (JAXA) and AAC Clyde Space. His diverse background has provided him with insights into the space market, including the stagnation the sector has been experiencing, which he likened to the early days of computing and mobile technology. “Space has been stuck in the Apollo way of doing things,” Sethu observed. “Despite significant investments and talent, the industry has not been leveraging modern software intelligence to the extent seen in other sectors.”
Founded in 2019, ReOrbit aims to address this gap by developing software-defined satellites, treating hardware as a commodity and focusing on a flexible software backbone that can interface with various hardware components. This approach allows for the rapid development and deployment of satellite systems, similar to upgrading a PC by replacing its motherboard, resulting in better adaptability and accessibility – something Sethu envisions for the broader space tech industry.
The Satellite Leasing vs. Owning Debate
The decision to lease or own satellites hinges on several factors, including customer nature, financial considerations, and strategic objectives. For commercial customers, particularly startups with limited resources, leasing can be the more cost-effective solution. “Leasing allows companies to cut their capital expenditure and spread their resources more modularly,” Sethu explained. This model enables companies to avoid significant upfront costs, manage cash flow more effectively, and scale operations without long-term commitments. However, leasing also presents risks like data security concerns and strategic dependencies. As Sethu noted, “Even if you are leasing capacity from a very friendly country, that still puts a lot of leverage in the hands of other nations. It’s largely a geopolitical issue where you can become dependent on another nation for critical core technologies.”
In contrast, sovereign nations and large satellite operators often prefer owning satellites due to data sovereignty and security concerns. “Leasing means that all the data generated flows through third-party networks, which can compromise the sovereignty of nations,” Sethu stated. Additionally, while the initial investment in owning a satellite is high, it can be more cost-effective for entities with long-term requirements in the long run. Nations and large operators may find that the total expenditure of owning a satellite is equal to or less than leasing over the same period. Ownership also provides greater operational control, allowing for sensitive maneuvers and tailored mission requirements, which is crucial for critical communications.
Furthermore, owning satellites can stimulate local economies by fostering the growth of space-related startups and creating a robust ecosystem. “Owning satellites is a great place to start building a nation’s space economy,” Sethu explained, “Within six years of launching its first satellite, Finland has seen significant growth in its space industry, with several highly successful and rapidly growing startups and one nearing unicorn status.”
Cost Structures and Business Models
The cost structures for leasing versus owning satellites vary significantly. Leasing typically involves sharing infrastructure costs with other customers, significantly reducing the upfront investment required. Lessees make ongoing payments for satellite capacity over the satellite’s lifetime, usually ranging from 10 to 15 years for GEO satellites. This model provides predictable financial planning but may lead to higher total costs over time when compared to ownership. Additionally, leasing agreements can offer flexibility but also carry risks of changing terms or early termination by the provider.
When it comes to owning a satellite – the initial investment required for building and launching a satellite is substantial, often necessitating significant capital expenditure. However, Sethu notes, “If you look at the long-term horizon, then in terms of the total expenditure, owning the satellite could be cheaper than leasing the infrastructure itself as owning a satellite eliminates the ongoing leasing fees that can accumulate over time.”
Looking Ahead
The choice between leasing and owning satellites is multifaceted and influenced by financial, strategic, and operational considerations. For commercial entities, particularly startups, leasing offers a flexible and cost-effective entry into space technology. On the other hand, sovereign nations and large operators may find that owning satellites provides greater security, control, and long-term economic benefits.
Like having the choice to own or lease satellites, ReOrbit’s innovative approach to satellite design, focusing on software intelligence and hardware commoditization, exemplifies the modern trends in the space tech industry. By leveraging existing resources and fostering collaboration, companies like ReOrbit are paving the way for more accessible and efficient space technology solutions.
As the space industry progresses, the decision to lease or own satellites will remain a critical consideration for stakeholders. ReOrbit is working to help organizations make informed decisions like this that align with their operational and strategic goals, fostering a more dynamic and responsive space sector.
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