The Iris² project is a sort of Swiss space knife. A large constellation of telecommunications satellites capable of meeting government and private sector needs. On January 24, 2022, during the 14th European Space Conference, Thierry Breton reveals the outlines of his new idea. And its objectives are multiple: managing ultra-protected exchanges with embassies, emergency connections deployed in the event of natural disasters, or border surveillance. Above all, promises the European Commissioner, the constellation will be sovereign.
The initiative benefits from the anointing of Emmanuel Macron who, on February 16, 2022 from Toulouse, uttered the term “sovereignty” 22 times. That evening, the all-spatial of the pink city is full. The presidential address smells of billions in benefits for French industry. The total budget mentioned is 6 billion euros – at least. THE New Space, and its agile SMEs, is also delighted since Iris² guarantees them a good place. All that remains is the implementation. There is a saying in tech that execution eats up the best strategies (execution eats strategy for breakfast). There, Iris² looks like a feast: a great idea, but which already seems to concentrate all the risks of major European industrial programs.
Two approaches are possible for this type of operation. The public authority – in this case the European Commission – can play the role of order giver, setting the specifications, the timetable and the budget. It is then up to manufacturers to organize themselves to be the most competitive in all three areas. Major disadvantage, it is the sponsor who pays the bill. To avoid this, Iris² – short forInfrastructure for Resilience, Interconnectivity and Security by Satellite -, will be developed according to a PPP, a public-private partnership. “In the case of Iris², Europe only pays the part linked to communications and government services, explains a senior Commission official. Industrialists will invest a lot. This is why they will be responsible for the architecture. We set a deadline and a price.” The Commission underlines the virtuous nature of the PPP which, “with an investment of 2.4 billion euros for the sovereign part of Iris², allows for a powerful leverage effect. It is a new way of doing space in Europe”.
Problem is, the response to the call for tenders did not go quite as planned. “Normally,” says an industrialist from New Space, this kind of projects must have at least two bonuses [NDLR : un groupe de grande taille] accompanied by smaller companies.” In his speech in Toulouse, the Head of State was pleased to see around ten consortia potentially joining the ranks. This will not be the case.
Between yourself
A year after the Toulouse speech, a single consortium made an offer for all the components of the program, i.e. 100 or 200 satellites of different sizes and types. This group is led by the two French satellite construction giants, Airbus Defense and Space and Thales Alenia Space, and the operation part of the constellation falls to Eutelsat, Hispasat and the Luxembourg SES. Six other operators complete the team: Deutsche Telekom and OHB System (Germany), Orange and Thales (France), Hisdesat (Spain) and Telespazio (Italy), itself a 33% subsidiary of Thales. This is how industrial competition is going in European space: a single offer and three giants – Airbus, Thales, OHB – side by side. Next December, the consortium will submit its final offer for review, which should therefore be rapid, at the beginning of 2024.
The Commission has extenuating circumstances. First of all, like all European programs, Iris² is weighed down with a strong political burden. In this case, it was imperative for Thierry Breton to put the matter on track before the end of his mandate in October 2024, for finalization in 2027. Then, Brussels does not have the technical means to design an appeal for ‘offers so complex, especially within such a time frame. The executive therefore delegated the task to European agencies, the ESA and the EUSPA, “which are very close to the major industrialists in the sector”, notes a specialist in European public affairs.
As for the participation of companies in the New Space European, it is statutorily insured. The program provides for the participation of SMEs and SMIs in the Union to the tune of 30% of the contract, a proportion considered significant. On the other hand, relations between the giants and those who feel subjugated are difficult. “It’s hard to breathe under an elephant,” laments an experienced entrepreneur. Even independently of the Iris² project, the condescension with which the consortium rewards SMEs in the New Space European does not bode well. Everyone remembers their little bullying. A manager of one of them says that a contract obtained was initially supposed to bring him 2 million euros; once reviewed and corrected by its powerful protector, the flow was divided by four. Another was subject to such pricing pressure that the contract offered was below raw material costs. A third, who now sells his systems throughout the world, explains that he was summoned by a member of the current consortium to be told: “You’re in our business, there. So you stop.” In Europe, we love the excitement of New Space. As long as it doesn’t overflow.
Omerta
On the Iris² file, with the exception of the Commission, no one is speaking openly. First, because the game is not completely done. Brussels can still make significant adjustments in the process. Among the ten people interviewed for this survey, there are those who hope to return to the circuit, and the lucky ones, who keep a low profile. On the consortium side, they say they do not want to express themselves in an article that contains the slightest allusion to an agreement on this space program. So far, it is true, the group’s communication has succeeded in imposing the idea that “cooperation is better than excessive competition”, according to enthusiastic reports published in the press.
What he dreams of New Space European, it is an American-style system, explain entrepreneurs already established across the Atlantic. One of them says: “Public authorities, through competent agencies such as the Space Development Agency for the army, or NASA for the civilian sector, sets the needs of a project. Companies respond to them, whatever whatever their size. After evaluations, the buyer places an order for a specific component. He does not hesitate to bet on promising but not yet proven innovations, releasing financing throughout the stages. Finally, this process offers a triple benefit: it guarantees access to permanent innovation, accelerates the development cycle and lowers prices.”
“The European Commission has the feeling of having been manipulated by large European industrialists,” judges a participant from the private sector, who uses, for the occasion, more flowery language. A reading forcefully contested by Brussels. “Companies in New Space are not satisfied with the treatment inflicted on them either”, continues this business leader. Some point out that in the United States what looks very much like an industrial agreement would lead to a trial. “No chance in Europe, assures an entrepreneur. The consortium and the principal are protected from any legal risk due to the strategic and sovereign dimension of the program.” A lawyer specializing in European competition law confirms: everything is legally protected.
The profitability of the commercial part – that which will be ensured by private operators within the framework of the PPP – remains uncertain. Starlink, the SpaceX constellation that Iris² hopes to compete with, is just starting to make money. It has invested at least 10 billion dollars, and 20 more are planned within five years, all with a cost structure five to ten times lower than what European manufacturers can offer, according to an internal SpaceX document. And Elon Musk’s company had the advantage of being the first in this market. Today, with dozens of constellation projects of the same type planned before 2030, the competition promises to be brutal.