The European Satellite Industry: Prospects for Liberalization
This paper evaluates the effects of liberalizing access to the space sector, as currently envisaged by the EC Commission. We undertake an econometric evaluation of the degree of scale economies in satellite operations and calibrate a Cournot model of competition in which the effect of liberalization is modelled as the segmentation of national markets that currently prevails. We conclude that existing players in the satellite operations industry would make negative profits under liberalization. We find that four players would break even and operate close to the minimum efficient scale (of about ten satellites). We also conclude that some consolidation is required in the production of satellites. In both cases it seems that intervention by a supra-national authority like the EC Commission would be useful.
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