The Next Four Years Of
Gov & Mil Satcom Markets?
December 1, 2020 by Brad Grady | NSR
Many things in 2020 have
“defied norms” as it relates to the Space and
SATCOM Industry – mass shutdown of cruise and
aeronautical markets, significant increases in
consumer and cellular backhaul demand,
supply-chain disruption, and on-site
installation or commissioning access
restrictions. In addition to these COVID-19
related market factors, the United States will
also enter a relatively unfamiliar arena whereby
an incumbent presidential administration will
change hands before completing an 8-year term.
With the significant lead-times typically
associated with space-based policy and
acquisition initiatives, the industry is
rightfully worried about what the future holds
for the current direction of GovMil SATCOM,
particularly in the United States.
Already, the past four
years saw the creation of the U.S. Space Force,
significant acquisition reform, more
international collaboration on MILSATCOM
programs, and a steady recognition of
integrating commercial services on ‘day 0’. By
all accounts that will continue to remain the
strategic direction of GovMil SATCOM within the
United States. However, as NSR explores in its
most recent report on GovMil SATCOM Markets,
Government and Military Satellite
Communications, 17th Edition, there are plenty
of practical challenges facing industry over the
mid to longer terms. Chief amongst them will be
a realignment of budgets in a post-COVID19
environment.
With massive stimulus and
recovery spending occurring across the globe
today, eventually those checks will come due,
and typically the first budget area that gets
trimmed is military spending. NSR projects that
Retail Revenue growth over the next ten years
will be at an all-time low. Whereas previously
NSR’s growth projections ranged from 9.3% in our
2012 published 9th Edition to 6.4% in our 2017
published 14th Edition, growth in Retail
Revenues from 2019 to 2029 is now expected at
5.7% CAGR. While cumulative revenues will exceed
$90B over that time, spending challenges outside
the SATCOM Markets will influence the yearly
growth rates players across the value-chain
should expect.
Simply, players within the
value-chain should prepare for a slowdown in
platform and infrastructure acquisition. While
replacements are likely to occur, an expected
shift in spending priorities towards
social-welfare programs will result in the same
or fewer number of platforms tasked with more
jobs. Fewer manned ISR assets, fewer Navy or
Coast Guard vessels, and likely fewer
land-mobile vehicles or bases in the mid to long
term. Unmanned platforms will remain a
‘wildcard’ given their significantly lower
acquisition costs for the U.S. Military, but
they too are likely to see budget challenges
over the next few years. Yet, fewer platforms do
not directly translate into a ‘shrinking market’
– rather competitive pressures amongst GovMil
players are likely to intensify while demand for
per-platform connectivity increases.
Bottom Line
Technology adoption and
platform acquisition for GovMil markets are two
unique factors that influence the overall market
for commercial SATCOM services. Whereas the past
four years have seen a tactical strategy which
has favored both, COVID-19 is likely to force
players to prioritize platform acquisition or
widespread technology adoption/proliferation.
While the United States remains a significant
driver of market forces, they are not the only
End-user, and players should continue to see
growth in the ‘Not-U.S.’ opportunities. However,
spending today will need to be offset by savings
tomorrow universally – and, rather than the
two-pronged approach of bleeding-edge platforms
combined with bleeding-edge connectivity, the
market should expect connectivity to take
precedence over platform. Bottom line,
sophisticated adoption of connectivity
infrastructure enabling new mission profiles on
a slowly aging platform base.