The business of owning and operating satellites is a classical 'fixed cost' industry. Satellites cost between US$150 million and $300 million to build, launch and insure. Between deciding to purchase a satellite and finally completing the in-orbit testing takes at least two years - more normally - three. When finally operational, the Investment remains productive for another ten to 15 years. To add to this, satellites are not always purchased for purely economic reasons, with governments sometimes embarking on commercial satellite programmes with nationalistic or security motivations the key driver. In classical economics, this set of factors creates the potential for an unstable industry with large swings in the balance between supply and demand. It is no surprise then that the euphoria of the telecommunications bubble at the end of the 1990s has created a satellite industry with significant areas of oversupply. The mismatch between demand and supply has led to a number of firms struggling to cover their cost base; the reduction of pricing to, or in some cases below, cost as operators search to win customers; and, the continual talk of industry consolidation as firms seek to exit from today's tough business environment.
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