Directions 2010: It’s the Economy, Stupid

December 15, 2009  - By 0 Comments

At the end of every year, I devote this column to Directions 2010 in which I discuss significant developments, trends, technologies, and companies in the GNSS industry.

Two years ago, I wrote about the Year of the Who. Not GNSS technology; rather, the people and companies they run.

Last year, I highlighted 2009 as being the Year of the Other GNSS. The little brother of GPS…GLONASS.

I’ve thought a lot about this year’s column. Some have said that next year will be the Golden Year for GNSS with the launch of the first Block IIF satellite, possibly the launch of the first GLONASS-K satellite (broadcasting CDMA), launch of Japan’s first QZSS satellite, launch of a GAGAN geostationary satellite, yada, yada, yada.

The problem with this, as I see it, is that these developments will have very little impact on GNSS users in 2010. All of them have been on the drawing board for years, all have been vetted, and most of them are behind schedule. In a nutshell, it’s beating a dead horse. How many times can one talk about Galileo? Even I get tired of writing about the next satellite launch, the next signal to be broadcast, the next GNSS to be developed, etc.

From a GNSS technology perspective, do you know what excites me? Optimizing the current constellation of satellites that are already in orbit. That’s where the “rubber hits the road.” With a few tweaks of the GPS constellation, our “brownout” periods would largely disappear immediately. No waiting for new satellite launches, no waiting for new GPS receiver technology to purchase. Just like when Selective Availability (SA) was turned off…boom…an overnight difference. Of course, I know it’s not quite as easy as turning off SA, but I think you see my point.

However, even though it’s likely that the Air Force will reconfigure the GPS constellation to reduce the GPS brownouts in 2010, that’s not the focus of this column (although it’s a close second).

Nope. The statement that best defines the GNSS industry for 2010 is one I’ll borrow from Bill Clinton that he used during his campaign for the U.S. presidency in 1992…

”It’s the economy, stupid.”

Why? The current economy is beating the tar out of the GNSS industry.

Revenue for high-precision GPS/GNSS systems is down significantly. Revenues from Trimble’s Engineering & Construction division were down 22 percent in the third quarter compared to the same period last year. Revenues for Hemisphere GPS, a GPS manufacturer focused on the agriculture industry, were down 31 percent in the third quarter compared to the same period last year.

When revenue decreases significantly, companies typically react by cutting costs. Some of the first expenses cut are research projects that can lead to revolutionary developments. Companies also review personnel requirements and subsequently reduce headcount.

Decrease in corporate revenues also trickles down to the distribution channel. The GNSS distribution channel (surveying equipment dealers) have taken a big hit. Layoffs are prevalent and many dealers are reduced to operating with “skeleton crews.”

In the service sector, I’ve heard from several companies that bid pricing on construction projects is coming in at 20 to 30 percent less than the pre-recession period and bid competition for each project has increased. This results in a lower profit margin for the successful bidder and, as a result, there is less money available in capital equipment budgets for contractors.

On the flip side, the market for used surveying equipment is hot, GPS/GNSS equipment included. Companies and individuals looking to trade equipment for cash or going out of business altogether are pushing their equipment to the market, primarily using eBay. This flood of “fire-sale” surveying equipment contributes somewhat to the declining revenue for new GPS/GNSS equipment.

It’s a vicious cycle that’s difficult to recover from.

In 2005, economics Professor’s Hugh Patrick and David Weinstein from Columbia University and economics Professor Takatoshi Ito from the University of Tokyo wrote about “…a prolonged period of stagnation and malaise…Subpar growth, failing banks, plummeting real estate and stock prices, deflation, unprecedented unemployment, and huge government liabilities have persisted, despite extraordinary fiscal and monetary policy fixes.”

It reads as though they were writing about today’s U.S. economy, but they were actually writing about the Japanese economy which has been stagnant since 1991. Their book is titled “Reviving Japan’s Economy.”

It’s a little disconcerting to think about the U.S. recession lasting that long, but I do have a hard time seeing the light at the end of the tunnel. I think real estate prices will continue to depreciate and the effects of the commercial real estate market will reverberate through the economy for several years.

Let’s face it: high-precision GNSS receivers are a luxury item for the most part. In some cases, the argument can be made that the investment has a ROI (Return on Investment) that justifies the capital expenditure. But in many instances, companies and individuals might decide to save the cash and forego the efficiency that GNSS equipment offers or continue using their legacy GPS equipment that may not be the most efficient technology, but it does the job.

That, my friends, is the reason that the economy, and not a GNSS technology development or trend, will be the most significant factor in the GNSS industry in 2010.

 


From the Mailbox

We received a Letter to the Editor regarding my last column titled “As Loran Fades, Attention Shifts to DGPS and SBAS.” Following is the letter:

As I read the title of this month’s Survey newsletter column, “As Loran Fades, Attention Shifts to DGPS and SBAS,” it came to my mind that there are many people around the world who do not recognize the difference between a position, navigation, and time (PNT) system and an augmentation of a PNT system — a difference that was not clearly pointed out.  I have heard many PNT users expound on how good an augmentation is and, to my amazement, how the augmentation could provide service despite a GNSS outage. I’ve stopped being surprised. After all, I still remember the days when Galileo was being touted as a backup to GPS.

Unfortunately, the leadership worldwide has become decidingly less technical over the last decade, and without proper explanation from staffers (who have also become decidingly less technical), the point is lost.

The simple fact is that augmentations are of little or no use if the system they augment is unavailable. Perhaps this point should be made, and made loudly and strongly — particularly in the case of the scheduled termination of Loran. The same holds for the respective differences between real-time navigation, long-term positioning, and time and frequency — distinctions, again, that are lost to many. While WAAS, NDGPS, and even HA-NDGPS are admirable efforts that highlight what a group of talented, dedicated engineers can do, maybe what we need is a PNT 101 course/flash card set for those “technically challenged” so they can better understand the ramifications of their decisions. It took me and millions of others five years to get a bachelor’s of engineering degree; we cannot expect the leadership to learn engineering overnight.

I remember fondly the times when, as a junior engineer, I had five layers of management above me that all held engineering degrees. Today I ca
n’t go up to any level and find a single one. What went wrong?  I do not know, but I do not think it bodes well for the world.

In any event, best regards to GPS World, and Happy Holidays

— a wistful engineer

 

Thanks for the note.

I believe there are some very smart people in the federal government running these programs. Sadly, I think the demise of programs like Loran are largely the result of political efforts, or lack thereof, rather than a lack of technical understanding. If no one is going to fight for the program, most likely it’s not going to be funded. Furthermore, I think most people agree, engineering educated or not, that GPS is a venerable system. However, it’s debatable whether Loran is a suitable back-up or not.

Perhaps the title of my article was a bit misleading, too. I don’t think anyone would claim that GPS augmentation is a back-up for GPS. My point was that resources (energy and money) and focus would shift to GPS augmentation as it has become the replacement for Loran in the marine and aviation industries.

— Eric

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