More than 50% of capacity revenues for fixed VSAT (very small aperture terminal) satellite applications will come from consumer broadband in the 2015 to 2025 timeframe, according to the new VSAT and Broadband Satellite Markets 15th Edition, from Northern Sky Research (NSR).
It forecasts that consumer satellite broadband will make $36 billion in revenues over the ten-year period, however, this implies a broadband population of somewhere in the region of 4 million. This only accounts for around 0.5% of total broadband worldwide, but even to reach this minimal fraction of market share, the satellite market faces some major obstacles.
NSR believes that the majority of consumer satellite broadband will come from demand aggregation points independent of MNOs, such as WiFi hotspots in regions where connectivity is especially poor or non-existent. An additional 25% of capacity revenues in this period will come from other consumer oriented offers, with the report citing partnerships with cellular and telecom operators as an important route for the survival of companies in this market.
Pointing out operator partnerships as an essential business move is NSR stating the obvious, but in truth, we are already witnessing major operators distancing themselves from satellite service providers.
Only last week, Sky in the UK announced its plans for a broadband-only Sky Q service, in which it will scrap new additions to satellite dishes by 2018 to deliver its entire channel portfolio over IP. This spells bad news for Luxembourg-based SES and its Astra satellites, as it enables Sky to tap into 6 million additional European homes, without the assistance of a single SES satellite.
As this trend continues and urban areas become further out of reach, satellite services providers will look to target purely rural areas, particularly isolated islands where laying undersea cables be would unnecessarily expensive and time consuming. O3b, as one example, commenced a project last year to deliver improved connectivity to 100,000 residents living on the islands of Kiribati in the Central Pacific, in partnership with Speedcast.
O3b provides the satellite network and Speedcast supplies its VSAT satellite-based broadband access services. O3b’s MEO satellites orbit at 8,062km and has a latency of less than 150 msec – 25% that of GEO satellites.
Having said this, it’s difficult to see how satellite service providers can target the mass consumer markets that NSR believes are there for the taking. Focusing on rural areas seems like a safer bet, but the financial rewards from regions such as Kiribati will be far smaller.
The North American market is reportedly forging a path for the commercialization of satellite internet in retail, while Europe is far behind, with increasing adoption and declining prices of HTS (high-throughput satellites) Ka-band capacity. That was until major retail consolidation entered the European market and standards increased, states the report.
North America today accounts for around $2.5 billion of the $6.5 billion in revenues for the broadband satellite market, which NSR forecasts to rise to some $5 billion of a total market size of $15 billion in 2025.
The growth of satellite internet in urban regions of Latin America and Eastern Europe has been hindered due to a lower average income and the cost of financing a terminal, which often comes with a long-term contract, a serious put off for consumers, NSR reports.
In a nutshell, there are some major challenges to be faced by satellite providers and the associated technology vendors for bringing satellite broadband services to both urban and low-income rural areas – but with the latter comes an estimated 3.9 billion people who are still offline.
NSR says expansion of ground networks is slowing down and satcom can now provide answers for 3G and 4G backhaul, but 5G has a much shorter latency requirement so we’re not sure there is much option for 5G backhaul, and as the roll out of future 5G technologies proliferates in major cities, satellites may get a lower market share, not higher. But backhaul will still bring important capacity revenue streams for fixed VSAT applications, coming in second behind consumer broadband with a 24.2% share – bringing in $16.95 billion in the ten-year period, according to NSR.
Additional capacity revenue earners for fixed VSAT applications during the 2015 to 2025 timeframe in the report include social inclusion with 9.1% ($6.37 billion), retail and hospitality with 3.5% ($2.47 billion), military and government with 2.6% ($1.8 billion), banking with 2.5% ($1.73 billion), and finally, energy with 2.1% ($1.47 billion).
Faultline Online Reporter once again reached out to NSR for comment, but our queries have been left unanswered.
The report, in attempt to shake off old labels, stated: “Mobile Network Operators (MNOs) have their own internal dynamics, and it is usually very hard to remove the old beliefs of satellite being an expensive, inconvenient and low-speed solution. Fighting invalid and old stereotypical beliefs as well as influencing MNO investment priorities (network densification vs. network expansion) are some of the stronger barriers for satcom in this promising vertical.”