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15 July 2019

Nanosats and new use cases will propel satellite IoT to $5.9bn by 2025

Very small satellites, and new use cases in the Internet of Things (IoT), are creating an expanded role for satellite players in the wireless market. But it may not be the traditional operators which take all the spoils.

While cellular and satellite communities bicker over midband spectrum allocations for mobile broadband, in lateral markets like rural backhaul and the IoT, satellite is carving out new service models which will often complement those of the MNOs.

The satellite IoT market, according to a forecast by Rethink IoT (RIoT), will be worth $5.9bn by 2025, including hardware and connectivity fees, with a base of 30.3m devices. It will take off in earnest from 2021, but incumbent satellite providers will come under pressure from a wave of start-ups, leveraging recent advances in smaller satellite technologies.

The cost of entry are far smaller than just a few years ago, thanks to improvements in the launch technologies as well as miniaturization of the satellites themselves, with Low Earth Orbit (LEO) designs now weighing just 10kg and some being no larger than two shoeboxes. LEO networks are able to provide lower power consumption for end devices, and they can be deployed in a modular fashion, expanding as more customers or funding become available.

However, this market is still around three times smaller than that for terrestrial low power WAN (LPWAN) for IoT, according to RIoT Research’s forecast, despite having higher hardware and connectivity revenues per device.

Connectivity is only between 10% and 20% of the total cost of ownership (TCO) for an IoT application, and so higher value applications can justify the higher connection costs of satellite or cellular options, which bring advantages such as global roaming – an issue not yet addressed by the LPWAN platforms. One of the strongest aspects of the satellite IoT story is that satellite is the only way to get truly global coverage.

While there are an estimated 2.5m satellite IoT devices deployed currently, we expect that 2021 will see a major jump in that figure, as the first few start-ups begin launching their constellations and supporting live customers. An initial leap will slow in 2020, before a period of prolonged growth settles in.

By 2025, we expect there to be some 30.3m satellite IoT devices deployed globally, representing a CAGR of just under 40% between 2018 and 2025. This growth will begin to flatten off in around 2027, due in part to the spread of terrestrial rivals for satellite IoT connectivity, and improvements in fixed and local networks that can be used as alternatives for the global satellite ones. In terms of usage, the leading sectors worldwide will be agriculture and industrial (manufacturing and supply chain).

On the backhaul side, new players are also investing in compact LEO satellites to extend the reach of cellular connectivity, including 5G, to support IoT applications that require ubiquitous coverage, like mining, as well as to backhaul mobile broadband for remote communities.

Two US billionaires, Elon Musk and Amazon CEO Jeff Bezos, are prominent in this race. Amazon’s Kuiper Systems unit recently set out plans to launch 3,236 LEO satellites over time, to offer broadband connections globally and to backhaul fixed and wireless network operators in remote locations.

“The Kuiper System will help bridge gaps in coverage by complementing the efforts of terrestrial fixed and mobile carriers and reaching some of the most remote and hard-to-reach areas, where it is often geographically difficult or cost-prohibitive for terrestrial service providers to operate today,” Amazon wrote in a filing with the FCC.

Musk’s SpaceX organization has Starlink, which plans to launch 12,000 satellites. “We think this could be really helpful to telcos by providing connectivity that they need for the most difficult-to-serve customers, as well as providing data backhaul services so that a telco could put down a 5G cell tower somewhere instead of digging a fiber trench over potentially hundreds of miles,” Musk said during a press briefing in May.

Other LEO-based Internet providers include Telesat, LeoSat and OneWeb, the last of these backed by Softbank and planning a fleet of 648 satellites.

These companies will be hoping to outdo the incumbent satellite ISPs, such as the USA’s Hughes Network Systems and ViaSat, because LEO technology is cheaper, more flexible and supports higher speeds than the older generation of satellites, which orbit 20,000 miles above Earth.

For more information about RIoT Research and the new satellite IoT forecast, please email Simon Thompson on [email protected].