Northern Sky Research (NSR) has published its Satellite Capacity Pricing Index (SCPI) for Q1 2016, which takes a somewhat ‘sitting on the fence’ stance with its summary – stating that the industry is somewhere in between crashing and chugging along nicely.
NSR’s SCPI reports that some regions and applications are experiencing price drops over the past 5 years of 5% annually, while others are experiencing “more resilience”, and in some fairly rare cases even price increases.
The Middle East and North Africa are some of the regions hit hardest by competing GEO-HTS (High Throughput Satellites) services from Avanti and YahSat, which has reduced average data pricing to around $2,000 per MHz per month for Ku-band, and $2,500 per MHz per month for C-band.
A GEO-HTS is one that is in a geostationary orbit, but which can support lots of tiny spot beams, which reach an area the size of perhaps 100 kilometers in diameter, as opposed to continent wide footprints which Geo satellites support today. This creates the equivalent of small cells for cellular, in that the same spectrum can be used from the satellite in another spot beam, in a non-overlapping region. Collectively these satellites can deliver over 100 Gbps across all of their spot beams, using up to 300 transponders.
The report also finds that at a high level, Enterprise Data has been affected most by new capacity over the past few years. NSR says this is due to increased FSS (fixed-satellite service) capacity, particularly when launched by newcomers in the industry, as well as an increase in GEO-HTS capacity. It is these factors that are reportedly “wreaking havoc on the current pricing paradigm” in the Middle East and North Africa, particularly in the video markets, but having a far less noticeable effect in Western and Central Europe in the European Union.
In November 2015, NSR cited that outside sources had spoken about pricing coming down by as much as 75% upon the launch of Ultra-High Throughput Satellites (UTS). This time around, NSR quotes airline connectivity provider Gogo, which claims that satellite bandwidth costs have dropped by 60% in the past two years.
Gogo has capacity deals with satellite providers SES and Intelsat, and says its Ku-band 2Ku technology enables it to flit between providers until it stumbles upon the best deal, which differs from Ka-band systems offered by competitors such as Viasat.
The SCPI highlights that the emergence of GEO-HTS and eventually Non GEO-HTS are pouring excessive amounts of capacity into regions that simply do not have sufficient demand to cope with the supply – which is causing rapid change in the satellite telecom industry. As a result, the stress on pricing has been relatively slow and steady up to now, but NSR states that an alternative is for satellite to remain expensive and therefore witness the market continuing to wither in this period of bandwidth commoditization.
NSR concludes, “It’s extremely hard to grow the market—from a revenue perspective—when pursuing a strategy of driving down cost.”
In other satellite news, Intelsat has made a slight shares recovery this week, currently sitting at around $2.30, up from $1.88 from when we reported on its downgrade by Moody’s last week. However, Intelsat’s fall from grace still looks almost certain to be irretrievable – having fallen from $12.93 over the past year to $2.32.
Intelsat won’t go down without a fight, as the fleet operator has been busy this week, coming close to signing a contract with Orbital ATK to launch the satellite equivalent of tug boats to extend the lifespan of aging satellites. The space tugs will use their own propulsion systems to maintain an orbit of around 22,000 miles, in an estimated 15-year project to begin in 2018.
Intelsat is also set to power Gogo’s new in-flight connectivity technology through its multi-layered Ku-band capacity on the Intelsat EpicNG high throughput GEO satellites, in partnership with OneWeb’s low earth orbit (LEO) fleet of satellites.