WEBVTT 1 00:00:02.130 --> 00:00:05.297 (gentle upbeat music) 2 00:00:11.980 --> 00:00:14.470 line:15% Hello, my name is Nic Desjardins 3 00:00:14.470 --> 00:00:17.220 line:15% and I am a portfolio manager with Canso. 4 00:00:17.220 --> 00:00:20.250 Before working at Canso, I served as an aerospace engineer 5 00:00:20.250 --> 00:00:22.010 in the Canadian Air Force. 6 00:00:22.010 --> 00:00:24.920 As such, I worked on various flight lines 7 00:00:24.920 --> 00:00:27.210 but was also employed at the Canadian Space Agency 8 00:00:27.210 --> 00:00:28.900 as a robotics instructor, 9 00:00:28.900 --> 00:00:31.080 where I taught astronauts and mission controllers 10 00:00:31.080 --> 00:00:32.530 how to operate the Canadarm 11 00:00:32.530 --> 00:00:34.340 on the International Space Station. 12 00:00:34.340 --> 00:00:37.290 I believe we have a very successful history of finding value 13 00:00:37.290 --> 00:00:39.613 and investing in space at Canso, 14 00:00:39.613 --> 00:00:42.520 and the reason behind that is we were quick to recognise 15 00:00:42.520 --> 00:00:44.160 that the industry is in turmoil. 16 00:00:44.160 --> 00:00:46.160 Because of the complexity and the costs involved 17 00:00:46.160 --> 00:00:47.710 with sending an object in orbit, 18 00:00:47.710 --> 00:00:49.440 space has traditionally been left 19 00:00:49.440 --> 00:00:52.160 to governments and traditional satellite operators, 20 00:00:52.160 --> 00:00:54.740 but things are changing very fast. 21 00:00:54.740 --> 00:00:56.740 For one thing, advancements have resulted 22 00:00:56.740 --> 00:00:59.390 in a significant reduction in the cost of satellites. 23 00:00:59.390 --> 00:01:02.850 This has obviously opened the door to new startups. 24 00:01:02.850 --> 00:01:05.810 Satellite launches have also become a lot cheaper. 25 00:01:05.810 --> 00:01:07.910 Between 1970 and 2000, 26 00:01:07.910 --> 00:01:10.180 the average cost to launch an object into space 27 00:01:10.180 --> 00:01:13.070 was almost $19,000 per kilogram. 28 00:01:13.070 --> 00:01:15.330 Because of advancements in launch vehicles, 29 00:01:15.330 --> 00:01:19.170 that cost has dropped to approximately $3,000 30 00:01:19.170 --> 00:01:21.413 and is even expected to fall to $500. 31 00:01:22.360 --> 00:01:25.250 Taken together, the combination of advancements 32 00:01:25.250 --> 00:01:28.260 and reduced launch costs have improved the feasibility 33 00:01:28.260 --> 00:01:30.420 of many space-based activities 34 00:01:30.420 --> 00:01:32.940 and revived investments in space. 35 00:01:32.940 --> 00:01:35.890 To that effect, the global space economy is expected 36 00:01:35.890 --> 00:01:40.890 to expand from about 1.1 to $1.5 trillion annually 37 00:01:40.930 --> 00:01:42.290 in the next 20 years. 38 00:01:42.290 --> 00:01:45.280 Naturally, some of this growth will be led by governments, 39 00:01:45.280 --> 00:01:48.300 but some of it will also come from commercial investments. 40 00:01:48.300 --> 00:01:50.170 In fact, investments in space 41 00:01:50.170 --> 00:01:52.450 have already hit record levels last year, 42 00:01:52.450 --> 00:01:56.240 reaching an all-time high of almost $9 billion, 43 00:01:56.240 --> 00:01:58.893 which is a 50% increase compared to the year before. 44 00:01:59.930 --> 00:02:01.160 Government budgets for space 45 00:02:01.160 --> 00:02:05.410 have also reached an all-time high of $83 billion last year, 46 00:02:05.410 --> 00:02:08.950 which is a 10% increase over 2019. 47 00:02:08.950 --> 00:02:10.940 Now to put those numbers into perspective, 48 00:02:10.940 --> 00:02:13.340 last year alone the FCC received requests 49 00:02:13.340 --> 00:02:16.670 for over 80,000 new satellites. 50 00:02:16.670 --> 00:02:18.670 The first commercial satellite service mission 51 00:02:18.670 --> 00:02:20.100 was completed, 52 00:02:20.100 --> 00:02:21.420 the first private rocket 53 00:02:21.420 --> 00:02:23.960 reached the International Space Station, 54 00:02:23.960 --> 00:02:26.090 the C-band spectrum auction in the U.S. 55 00:02:26.090 --> 00:02:29.270 drove 13 new communication satellite contracts, 56 00:02:29.270 --> 00:02:32.370 and almost 1,300 satellites were launched 57 00:02:32.370 --> 00:02:34.750 compared to 800 the year before. 58 00:02:34.750 --> 00:02:37.190 Satellites can take many different forms. 59 00:02:37.190 --> 00:02:40.150 One way to differentiate between them is to classify them 60 00:02:40.150 --> 00:02:42.450 in terms of the altitude of their orbit. 61 00:02:42.450 --> 00:02:46.250 60% of operational satellites today orbit around the earth 62 00:02:46.250 --> 00:02:50.020 in a region called lower earth orbit, or LEO, 63 00:02:50.020 --> 00:02:54.300 which encompasses orbits up to 2,000 kilometres. 64 00:02:54.300 --> 00:02:56.350 This is where you will find Hubble, 65 00:02:56.350 --> 00:02:58.350 the International Space Station, 66 00:02:58.350 --> 00:02:59.800 and the former space shuttle. 67 00:03:00.820 --> 00:03:02.950 Given this proximity to the Earth's surface, 68 00:03:02.950 --> 00:03:04.400 LEO is also well-suited 69 00:03:04.400 --> 00:03:07.300 for weather and Earth observation satellites. 70 00:03:07.300 --> 00:03:09.610 Now, there's also a very special orbit 71 00:03:09.610 --> 00:03:12.580 at an altitude of 36,000 kilometres above the equator 72 00:03:12.580 --> 00:03:16.480 called the geostationary orbit, or GEO for short, 73 00:03:16.480 --> 00:03:18.560 where satellites appear to be stationary 74 00:03:18.560 --> 00:03:19.960 above a given point on earth. 75 00:03:19.960 --> 00:03:22.440 This is due to the fact that GEO satellites spin 76 00:03:22.440 --> 00:03:24.330 around the earth at the same rate 77 00:03:24.330 --> 00:03:27.120 as the Earth rotates on its axis. 78 00:03:27.120 --> 00:03:29.590 Therefore, to someone on Earth looking up, 79 00:03:29.590 --> 00:03:33.140 the satellite appears as a fixed point in the sky. 80 00:03:33.140 --> 00:03:35.490 Now, satellite TV providers were very quick 81 00:03:35.490 --> 00:03:37.940 to take advantage of this perceived fixed position 82 00:03:37.940 --> 00:03:39.840 by keeping their customers' antennas aimed 83 00:03:39.840 --> 00:03:41.370 at a fixed point in the sky 84 00:03:41.370 --> 00:03:43.830 instead of having to track a moving satellite. 85 00:03:43.830 --> 00:03:47.710 Finally, the region between LEO and GEO is referred to 86 00:03:47.710 --> 00:03:49.850 as medium earth orbit. 87 00:03:49.850 --> 00:03:51.740 There's very little to say about this region 88 00:03:51.740 --> 00:03:55.730 because it is pretty much a catch-all between LEO and GEO 89 00:03:55.730 --> 00:03:58.893 and does not have any real distinguishable properties. 90 00:03:59.750 --> 00:04:02.820 Obviously, the further away from Earth a satellite is, 91 00:04:02.820 --> 00:04:05.700 the better its view of our planet becomes. 92 00:04:05.700 --> 00:04:07.510 At 36,000 kilometres, 93 00:04:07.510 --> 00:04:10.530 a GEO satellite has a broad view of the Earth, 94 00:04:10.530 --> 00:04:12.260 while at under 2,000, 95 00:04:12.260 --> 00:04:15.510 a LEO satellite has a very limited view. 96 00:04:15.510 --> 00:04:18.900 So, for example, a well-placed GEO communication satellite 97 00:04:18.900 --> 00:04:21.660 can in theory broadcast over North America 98 00:04:21.660 --> 00:04:23.860 and South America at the same time, 99 00:04:23.860 --> 00:04:26.400 which would be impossible for a LEO satellite. 100 00:04:26.400 --> 00:04:29.770 GEO satellites, however, are very expensive. 101 00:04:29.770 --> 00:04:32.630 Including launch, a GEO satellite can cost upwards 102 00:04:32.630 --> 00:04:33.993 of $500 million. 103 00:04:35.000 --> 00:04:37.280 This means that it usually takes 10 years 104 00:04:37.280 --> 00:04:40.240 for a fixed satellite operator to recover their costs, 105 00:04:40.240 --> 00:04:43.433 which is why they're built to last 15 years on average. 106 00:04:44.430 --> 00:04:47.110 As a result, GEO satellites are contracted 107 00:04:47.110 --> 00:04:48.993 for their entire 15-year life. 108 00:04:49.990 --> 00:04:52.770 When one of these satellites approaches the end of its life, 109 00:04:52.770 --> 00:04:54.430 contracts are renegotiated 110 00:04:54.430 --> 00:04:57.250 and a new satellite is ordered to replace it. 111 00:04:57.250 --> 00:05:00.070 This entails that fixed satellite operator revenues 112 00:05:00.070 --> 00:05:04.293 and expenses are, or at least were, very predictable. 113 00:05:05.260 --> 00:05:07.840 However, along the way, something happened. 114 00:05:07.840 --> 00:05:10.490 Households found new ways to watch TV. 115 00:05:10.490 --> 00:05:13.020 This led to cable and satellite TV cutting, 116 00:05:13.020 --> 00:05:14.570 which in turn has destabilized 117 00:05:14.570 --> 00:05:16.700 the fixed satellite operators' business model. 118 00:05:16.700 --> 00:05:18.090 To make things worse, 119 00:05:18.090 --> 00:05:21.340 satellite constellations are also becoming more feasible. 120 00:05:21.340 --> 00:05:23.430 Now, simply put, a satellite constellation 121 00:05:23.430 --> 00:05:25.470 is a number of satellites working together 122 00:05:25.470 --> 00:05:28.230 to maintain complete coverage of the Earth's surface. 123 00:05:28.230 --> 00:05:29.940 The number of satellites required to do this 124 00:05:29.940 --> 00:05:32.020 depends on the constellation altitude. 125 00:05:32.020 --> 00:05:34.110 Because of their higher altitude, 126 00:05:34.110 --> 00:05:37.010 a minimum of three GEO satellites are required 127 00:05:37.010 --> 00:05:38.673 to maintain complete coverage. 128 00:05:39.520 --> 00:05:41.870 Obviously, the lower the altitude, 129 00:05:41.870 --> 00:05:44.010 the more satellites are required. 130 00:05:44.010 --> 00:05:46.590 In the 1990s, a number of satellite constellations, 131 00:05:46.590 --> 00:05:50.130 like Iridium and Globalstar, raised billions of dollars 132 00:05:50.130 --> 00:05:52.200 to launch hundreds of satellites in orbit. 133 00:05:52.200 --> 00:05:54.580 Sadly, these constellations went bankrupt 134 00:05:54.580 --> 00:05:57.110 because of one fundamental error. 135 00:05:57.110 --> 00:05:59.700 They all grossly overestimated the demand 136 00:05:59.700 --> 00:06:01.890 for satellite communication. 137 00:06:01.890 --> 00:06:04.810 Yet, despite these failures, it appears again 138 00:06:04.810 --> 00:06:06.750 as though a new generation of start-ups 139 00:06:06.750 --> 00:06:09.220 wants to relive the errors of the past. 140 00:06:09.220 --> 00:06:12.530 At last count, there are close to 10 proposed constellations 141 00:06:12.530 --> 00:06:13.670 vying to be the first 142 00:06:13.670 --> 00:06:15.720 to offer broadband internet to the world. 143 00:06:16.580 --> 00:06:20.220 For example, Starlink has committed $10 billion 144 00:06:20.220 --> 00:06:23.810 to launch a constellation of 12,000 satellites, 145 00:06:23.810 --> 00:06:26.230 and Telesat has committed $5 billion 146 00:06:26.230 --> 00:06:30.140 to launch their very own constellation of 300 satellites. 147 00:06:30.140 --> 00:06:33.240 Now, if there is one thing that investors should recognize 148 00:06:33.240 --> 00:06:35.780 is that markets hate uncertainty, 149 00:06:35.780 --> 00:06:37.270 and I think no one can argue 150 00:06:37.270 --> 00:06:38.980 that there is not a lot of uncertainty 151 00:06:38.980 --> 00:06:41.570 in the commercial space sector at this time. 152 00:06:41.570 --> 00:06:44.120 However, investors should also recognize 153 00:06:44.120 --> 00:06:46.160 that with uncertainty comes a potential 154 00:06:46.160 --> 00:06:47.423 for outsized returns. 155 00:06:48.280 --> 00:06:50.210 The way I look at it right now, 156 00:06:50.210 --> 00:06:52.410 fixed satellite service operators are caught 157 00:06:52.410 --> 00:06:53.243 in a perfect storm 158 00:06:53.243 --> 00:06:56.230 between cord-cutting and constellation euphoria. 159 00:06:56.230 --> 00:06:57.510 For one thing, though, 160 00:06:57.510 --> 00:07:00.370 despite the cord-cutting phenomenon in North America, 161 00:07:00.370 --> 00:07:03.410 other parts of the globe are still relying on satellites. 162 00:07:03.410 --> 00:07:05.940 Countries that did not take part in copper cable 163 00:07:05.940 --> 00:07:09.330 and fibre optic cable laying over the last half century 164 00:07:09.330 --> 00:07:10.550 are now trying to catch up 165 00:07:10.550 --> 00:07:13.030 to their growing need for communications. 166 00:07:13.030 --> 00:07:15.800 GEO satellites are still a very viable option 167 00:07:15.800 --> 00:07:16.910 for these countries 168 00:07:16.910 --> 00:07:19.920 and have therefore been a focus of fixed satellite operators 169 00:07:19.920 --> 00:07:21.310 for the last decades. 170 00:07:21.310 --> 00:07:22.590 Fixed satellite operators 171 00:07:22.590 --> 00:07:25.080 have also responded to cord-cutting by launching satellites 172 00:07:25.080 --> 00:07:28.390 designed to meet our increased need for broadband, 173 00:07:28.390 --> 00:07:30.760 and this is where I think it gets fascinating because, 174 00:07:30.760 --> 00:07:34.370 outside of Telesat, not one fixed satellite operator 175 00:07:34.370 --> 00:07:37.270 has jumped on the LEO constellation bandwagon. 176 00:07:37.270 --> 00:07:40.320 So just like in the 1990s, the one industry 177 00:07:40.320 --> 00:07:42.650 that really should be driving this new initiative 178 00:07:42.650 --> 00:07:44.900 has decided to stay on the sidelines. 179 00:07:44.900 --> 00:07:46.750 Other than space being fascinating, 180 00:07:46.750 --> 00:07:48.700 given what has taking place in the industry 181 00:07:48.700 --> 00:07:50.080 in terms of advancements, 182 00:07:50.080 --> 00:07:52.580 our constantly growing need for communication, 183 00:07:52.580 --> 00:07:54.490 and the somewhat outdated business model 184 00:07:54.490 --> 00:07:56.330 of fixed satellite operators being pitted 185 00:07:56.330 --> 00:07:57.980 against a renewed interest 186 00:07:57.980 --> 00:08:00.320 for commercial satellite constellations, 187 00:08:00.320 --> 00:08:02.390 I hope that I was able to convince you 188 00:08:02.390 --> 00:08:05.020 of why space is a worthy consideration 189 00:08:05.020 --> 00:08:07.140 from an investment standpoint. 190 00:08:07.140 --> 00:08:07.973 Thank you. 191 00:08:07.973 --> 00:08:11.122 (gentle upbeat music)