The satellite industry has become as reliant on the promise of HTS (High-throughput Satellite) capacity as the survival of the cable market is on broadband growth, as players in both sectors grow desperate to stem the bleeding from pay TV losses.
This dependency on the launch of HTS in the coming years has been hyped up further this week, to the extent that the new technology is forecast to reach a market value of $17 billion by 2026, to offset an estimated $2 billion decline in FSS (Fixed Satellite Service) leasing revenues, according to the latest study from Northern Sky Research (NSR).
The Global Satellite Capacity Supply & Demand 14th Edition reports that global HTS revenues will increase tenfold from 2016 to 2026, and NSR claims that HTS will achieve this offset despite the lower prices of HTS Ka-band capacity, particularly across North America.
The demand for HTS capacity is certainly increasing at a rapid whip but launch schedules around the world are slipping behind – struggling to keep up with this demand. While we don’t challenge that HTS capacity is, and will continue to be, valuable, we believe NSR has understated the decline in FSS revenues.
The migration of data applications over to the lower cost and more efficient HTS payloads means that FSS will be left handling the majority of point-to-multipoint data applications, namely DTH video distribution.
The DTH market is approaching its peak, amid a time when more and more content is being consumed on demand, and it’s worth reminding our readers of the disruptive announcement made by Sky earlier this year, in which it will scrap new satellite additions by 2018, to deliver its entire channel portfolio over IP. This is a major trend setting move which will lead to more operators following suit – an element which NSR is unlikely to have factored in.
In addition, even in regions such as the Middle East and North Africa, which satellite firms are targeting as key growth areas, there is the threat to traditional satellite operators like SES from competing GEO-HTS service providers such as Avanti and YahSat – which have reduced average data pricing to around $2,000 per MHz a month for Ku-band, and $2,500 per MHz a month for C-band.
NSR also projects HTS capacity to exceed 17 Tbps by 2026, jumping from around 680 Gbps in 2015, with 60% of this capacity expected to come from one or more LEO-HTS (Low Earth Orbit HTS) constellations, while GEO-HTS (Geostationary Earth Orbit HTS) will make up 7 Tbps. LEO-HTS constellations have latency advantages over GEO-HTS, but cover smaller footprints per satellite.
The report also addresses a potential trend where satellite operators will increasingly forge partnerships with telcos, server providers and integrators – companies which have the infrastructure to shift the large capacity that will come with launching HTS with some ten times the throughput of their predecessors.
However, a quick look at the financial reports of one of those hardest hit by the changing face of the satellite industry, Eutelsat, reveals that revenues for its core FSS businesses were down across the board in the last quarter – dropping 4.1% for video, 12.6% for fixed data and 3% for government services.
The fact that its connectivity business contributed the only growth shows a clear direction – with fixed broadband revenues rising 36% in the quarter and mobile connectivity increasing 21.1%. These two sectors only represent 7% and 5% of Eutelsat’s total revenues, respectively, but the figures show a notable swing to less lucrative areas.
A report published by NSR earlier this year said that consumer satellite broadband will make $36 billion in revenues between 2015 and 2025 – a figure which Faultline Online Reporter calculated to only account for around 0.5% of total broadband revenues globally.
NSR analyst and report author Blaine Curcio, cited one example, “I believe that Softbank – one of the world’s largest telcos – investing $1.4 billion into OneWeb, and the company’s subsequent interest in Intelsat, is not the last time we will see a telco looking at a satellite operator as a strategic asset in a world increasingly based on global connectivity. Though it certainly is a vote of confidence for the industry.”
Curcio added, “Ultimately, this will expand the total addressable market for satellite, with verticals such as wireless backhaul, commercial mobility, and consumer broadband seeing exponential increases in demand. Even factoring in a significantly lower price point than today, there is huge revenue growth opportunity.”