Gigabits Galore: The
GEO-HTS Impact on Supply
Aug 1st, 2016
by Blaine Curcio,
NSR
In the 8 years since NSR coined the phrase HTS,
High Throughput Satellites have gone from being a
rarity to being commonplace. Indeed, from the time
that the first all-HTS payload—Thaicom-4/IPSTAR—was
launched in 2005, until today, there has averaged
only around 1 HTS launch per year. As we move
further into the GEO-HTS era, the industry is being
turned on its head by more capacity launching than
ever before. NSR’s recently published Global
Satellite Capacity Supply & Demand, 13th
Edition delves into this industry shift in emphasis,
with significant analysis and forecasting of current
and future capacity launches. Overall, the trend is
undeniable that the satellite industry is now
reaching the point where HTS is the norm.
As the chart below shows, when all capacity is
converted to Gbps (with traditional FSS TPEs using a
1.5 bits per hertz ratio), the period of 2005-2014
saw around 400 Gbps of traditional FSS capacity
launched. This compares to around 950 Gbps of
GEO-HTS capacity, with the caveat being that much of
this GEO-HTS capacity is large, consumer-broadband
focused satellites, with the three biggest currently
being ViaSat-1, EchoStar 17 (AKA Jupiter-1), and
Eutelsat Ka-Sat. When taking out these high
volume-low margin satellites, NSR nonetheless counts
around 200 Gbps of GEO-HTS capacity launched from
2005-2014, or around half of the amount of
traditional FSS capacity launched.
Moving forward, however, this trend will very
clearly reverse, with GEO-HTS seeing significantly
more overall capacity launched, even when taking out
programs such as NBN Co. in Australia and
ViaSat-2/Jupiter-2 in the U.S. (which are not
included in the “Non-Broadband” HTS Capacity).
Indeed, 2015 saw around 80 Gbps of Non-broadband HTS
launched, with 2016 expected to see nearly 200 Gbps.
Thus far, there is around 250 Gbps of non-broadband
GEO-HTS capacity announced for launch in 2017, or
alternatively, more than the amount launched between
2005 and 2014.
While video markets will remain more or less
insulated from this capacity due to the real value
in point-to-multipoint via widebeam capacity, data
markets will see changes come about in a big way due
to what is an exponential increase in the amount of
supply available. NSR has for some time discussed
the pricing implications of this new capacity, and
from an operator perspective, it is a precarious yet
logical path to drive down price points in order to
expand addressable market. GEO-HTS payloads see
dramatically lower CAPEX per Gbps, which should
allow for lower pricing, and operators will need to
invest in new ways to sell this capacity moving
forward. With that in mind, in some instances, even
negative revenue growth could lead to positive
growth in operating cash, due to the aforementioned
lower CAPEX per Gbps of supply to launch. Put
another way, if a satellite operator can replace 3x
$300M FSS satellites with 1x $500M GEO-HTS satellite
on a like-for-like basis in terms of capacity and
demand profile, then lower total revenues could
still spell a solid return on investment, and
stronger cash flows.
This will, if nothing else, be a highly delicate
balancing act to be performed by operators, as
GEO-HTS becomes the norm and as price points come
down significantly. Anecdotally, Telesat referred to
this phenomenon in their recent Q2 earnings calls,
during which time Telesat referenced a recently
agreed-to contract for pre-launch capacity on
Telstar 19 Vantage, which the company noted was at a
lower price point and was for a customer that had
previously been with a competitor. Beyond this,
Intelsat’s Q2 earnings call referred to major
disruptions being brought by EpicNG pricing to
markets where Intelsat itself is a major player.
Bottom Line
GEO-HTS has been around for over a decade now,
and up until approx. last year, the technology did
not disrupt traditional FSS data markets in a very
meaningful way. However, this is beginning to
change, with 2015 being the first year since IPSTAR
in 2005 in which more “non-broadband” GEO-HTS was
launched than traditional FSS, and it is unlikely
that we will ever again see traditional FSS capacity
growth out-pace GEO-HTS in a given year. Recent
earnings calls have made it clear that pricing
disruptions coming about from this trend are here to
stay, and that operators will need to swiftly change
their business models in order to capture new market
share and maintain revenues and market positioning.