Written evidence submitted by Avanti (SAT0026)

1. Background:

1.1.             Avanti Communications Group plc (Avanti) is a UK headquartered and listed (AIM - AVN:LSE) satellite operator. We are a pioneer in the application of Ka-band satellite technology to deliver broadband and other services. Avanti connects people wherever they are – in their homes, businesses, in government and on mobiles. Through the HYLAS satellite fleet and more than 160 partners in 118 countries, the network provides ubiquitous internet service to a quarter of the world’s population. Avanti delivers the level of quality and flexibility that the most demanding telecoms customers in the world seek.

1.2.             Avanti has invested over US$ 1.2 billion in a network that incorporates satellites, ground stations, datacentres and a fibre ring.

1.3.             Our first satellite, HYLAS 1, was launched in November 2010 and provides two-way coverage across inter-alia Europe. HYLAS 2 was launched in August 2012 and provides coverage over inter-alia Europe, the Middle East and Africa (EMEA). HYLAS 3 will be live for commercial service in 2017. The entire HYLAS 3 payload is steerable to anywhere in EMEA, so a customer may purchase the entire service and choose to move it. HYLAS 4 will launch in 2017 to serve the EMEA region.

1.4.             Avanti has a proven track record in developing PPP projects primarily with the ESA, in particular two significant PPP projects: HYLAS-1 a Ka-band satellite, which was successfully launched in 2010 and the HYLAS-3 Ka-band payload being hosted on the EDRS-C satellite.

1.5.             Avanti’s satellites and ground systems are designed with government security needs in mind. Avanti has also complied with the ISO 27001 security standard.  Avanti’s encryption, ITAR compliance, ISO standard and general level of security has proven to be strong advantages in selling secure satellite telecommunications and other services beyond just defence customers. 

1.6.             Avanti was awarded The Queen’s Award for Enterprise, the UK’s highest accolade for business success, in recognition of outstanding achievement in delivering growth in exports in April 2015.

Response

The following response addresses the themes raised by the Committee from the point of view of Avanti as a UK telecommunications satellite operator.

2. National Space Policy

2.1.             Avanti applaud the Government on the publication of the National Space Policy[1] published on 14 December 2015 and would like to recognise the sterling efforts of the staff of the UK Space Agency (UKSA) in developing this document and its recognition of the strategic importance of space to the UK because of the vault of space programmes deliver back to public services, national security, science and innovation, and the economy.

3.                 What satellite-based capabilities should the Government particularly support — telecommunications, navigation, earth observation, space science, or others — and how?

3.1.             The Government’s April 2014 National Space Security Policy provides a framework for ensuring that commercial opportunities related to this UK capability are fully exploited.  Avanti believe that helping the UK industry in the global space security market will help MOD and other Departments and Agencies get more cost effective services, as well as promoting exports. 

3.2.             Avanti further believe that Government should actively support the use of UK satellite systems to deliver services to HMG departments and agencies including those which are capable of providing reliable and vital national security services.

3.3.             For instance Government should take a cross-departmental anchor-tenancy role for procuring key satellite data and communication capabilities that enable opportunities for transforming public-sector services and improving their efficiency. This could be achieved by expanding the current modest UK Space Agency Space for Smarter Government programme.

4.                 What steps should the Government be taking to build markets for both new satellites and the ‘space services’ that they provide (such as space-based internet services or high resolution imaging)?

4.1.             Government needs to support the delivery of satellite broadband, which offers genuine solutions to solving “the digital divide” not just for consumers but for resilience, emergency services and a host of businesses and markets.  Ofcom’s “Connected Nations Report 2015” recognises that some 1.5 million premises - 10% of the UK’s households (48% in rural areas) will never be reached by fibre and for many other users, such as schools, healthcare and rural businesses not being able to access superfast broadband is a major issue. Satellite services can deliver 24 Mbps today, and some enterprise services are already able to deliver 30 Mbps or more.  This however needs additional satellite capacity to be delivered which requires Government to act across departments and engage with the satellite industry in a similar way to the work done with fibre provision.  Being connected is key to individuals and the UK economy.

4.2.             Whilst Avanti applaud the fact that the UK is on track to deliver superfast broadband to 95 per cent of the UK by the end of 2017, we are frustrated that it has taken over 5 years for HMG via the recently BDUK announced schemes to tangibly include satellite technologies in the supported technology portfolio to deliver the HMG’s broadband objectives objective. Avanti launched HYLAS 1 back in 2010 and launched HYLAS 2 in 2012.  Avanti have been able to provide ubiquitous flexible and affordable broadband services since 2010 to the rural and unconnected communities in the UK. These citizens and businesses could have been connected and accruing the socio-economic benefits accredited to increased broadband penetration and connectivity years ago.

4.3.             Avanti believe that high throughput Ka-band satellites have a role to play in enabling and supporting the digital infrastructure required to create the next generation of broadband and information services. Satellites services should form a key part of the fifth generation (5G) of converged telecom services.

5.                 What is the impact of the current UK regulatory environment on growth in the satellites and space sector? Is it conducive to new players, such as SMEs and start-ups, entering the market? Has the regulatory environment kept pace with innovations in satellite/space technologies?

5.1.             Avanti believes that all government stakeholders in the space and satellite sector should strive to ensure that the UK should be the best place to grow existing and new satellite applications and space businesses. Government should ensure that the UK has a regulatory regime that both promotes enterprise and investment and supports our national interest and economy, as well as providing a strong and internationally respected framework.

5.2.             Whilst the UK has already done much in this area to generally promote high technology business including those within the satellite sector such as competitive corporation tax, the patent box regime and the Enterprise Investment Scheme. Nevertheless, regulation is a highly competitive area and other developed and developing nations are working hard to reduce the regulatory burden on their own industries. It is vital that the UK government is equally assiduous in listening to industry concerns in order to ensure UK companies are able to maintain their competitiveness in a vibrant and fast growing global market.

5.3.             Specifically, we would urge the government to ensure that the UK regulatory regime allows UK companies to maintain and grow access to space and to spectrum.

5.4.             Avanti would like to put on record our appreciation for the support of the staff of DCMS, Ofcom and UKSA in the lead-up to the International Telecommunications Union (ITU) World Radiocommunications Congress (WRC) 2015 and at the WRC-2015 itself in realising a very positive outcomes on a range of issues. In particular, the WRC-2015 decision under Agenda Item (AI) -10 to not include the globally allocated Ka-band FSS frequency band at 27.5 – 29.5 GHz and at 17.7 – 20.2 GHz as frequency bands for study for accommodation of future IMT-2020 / 5G systems was particularly important. This WRC-2015 decision should allow Avanti, and other UK satellite operators, to secure the immediate future of billions of pounds of UK investments in existing and planned Ka-band satellite systems and to proceed with expanding Ka-band service delivery in the UK, Europe and globally within a relatively stable ITU regulatory framework relatively stable ITU regulatory framework. Avanti considers that HMG DCMS and Ofcom policies going forward for consideration and selection of frequencies for 5G / IMT should remain fully consistent with the above ITU WRC 2015 decisions both at the UK and European (EU/CEPT) level.

5.5.             Avanti are concerned that [some] current UK policies are however at the detriment of UK based companies. In particular, the UK Space Innovation and Growth Strategy 2014-2030 Space Growth Action Plan[2] published in November 2013 called for the UK to support those companies that significantly contribute to the UK’s economic growth. Subsequent HMG policy (as shown when the UK Government published its response to the Space Innovation and Growth Strategy 2013 – 2030 – Space Growth Action Plan[3] in April 2014) took policy directions that seems to encourage tax arbitrageurs who deliberately create no UK value and are now being accorded the equivalent regulatory support as given to bona fide UK companies. Whilst Avanti fully support any HMG measure to encourage real FDI inward investment into the UK, we feel that the direction taken by HMG does not encourage FDI into the UK.  Instead it actively encourages any satellite operator company that was perhaps considering establishing itself in the UK to now do so in one of the UK’s offshore territories, where they can pay less (or no) tax (Jersey for instance), have less regulatory burdens and still gain all the advantages of the UK regulatory regime and protection i.e. the use of the UK through Ofcom to secure satellite network orbital positions and spectrum at ITU and from the UKSA for its OSA licences. The UK will see no benefit or growth from this. 

6. What mechanisms are needed to encourage investment in UK space and satellite technology, and improve access to finance?

6.1.             As the UK’s only privately funded satellite operator and utilising David Williams, our CEO’s, previous banking experience Avanti have been instrumental in encouraging HMG to develop policies to improve access to finance for space sector companies. Avanti supported the British National Space Centre (BNSC) – the forerunner of the UKSA – to organise the “Case for Space Financing Conference”[4] in May 2006. This led to the formative work that witnessed the set-up of the UK Satellite Finance Network.

6.2.             More recently Avanti’s CEO, David Williams, has played a fundamental role on a pro-bono basis in the creation of the Seraphim Space Fund[5]  an £83m venture fund launching in 2016 focused on the fusion of terrestrial technology and space applications. It is backed by smart capital from 7 leading space companies: Airbus, Thales Alenia, Avanti Communications, Surrey Satellite Technology, Telespazio, Com Dev and e2v. The fund is also supported by the UK Space Agency and the European Space Agency. The fund invests in both downstream (software), and upstream (hardware) ‘New Space’ opportunities, along with technologies which rely on satellite data such as drones and the Internet of Things, or which have potential space applications such as artificial intelligence, robotics and nanomaterials.

6.3.             Avanti would suggest that HMG should make good on the action[6] identified in the UK Space Innovation and Growth Strategy 2014-2030 Space Growth Action Plan that the UK Space Agency with HM Treasury should develop a repayable investment funding mechanism similar in principle to the civil aviation “repayable launch investment” scheme that can provide support for innovative platform, payload, services and/or applications.

7. Is the Government striking the right balance between national and European/international endeavour? 

7.1.             It is very important to continue to maintain the level of support provided to the UK space industry through the European Space Agency (ESA). For instance, Avanti has a proven track record in developing Public Private Partnership (PPP) projects with the ESA, in particular two significant PPP projects: HYLAS-1 a Ka-band satellite, which was successfully launched in 2010 and the HYLAS-3 Ka-band payload being hosted on the EDRS-C satellite. 

7.2.             Export is key to the growth and success of the UK space industry. Avanti provides ubiquitous internet service and satellite services to a quarter of the world’s population satellite services through a network of more than 150 partners in 118 countries. Avanti’s export efforts were recognised when we were awarded The Queen’s Award for Enterprise, the UK’s highest accolade for business success, in recognition of outstanding achievement in delivering growth in exports in April 2015.

7.3.             Support from UKTI is needed to engage with key overseas territories, stakeholders and companies.

8. What are the key challenges facing the Government and industry in developing and implementing new space capabilities and services?  What are the technical barriers to further growth in the sector, including the lack of a UK launch capacity?

8.1.             We do not believe that the lack of a UK launch facility is necessarily a barrier to the growth of the UK space sector. Further we are concerned that overly prioritising the need for a sovereign spaceport will have a major impact on other HMG support and finances for the space/satellite industry in areas where there possibilities for substantial growth such as the development of new downstream applications of existing space data, encouraging greater use of space by Government(s) in bridging the digital divide, and meeting international socio-economic challenges will have greater effect.

January 2016